Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.68

AGREEMENT

This Agreement (the “Agreement”), dated as of November 18, 2007, is entered into by
and between Syntroleum Corporation, a Delaware corporation (together with its successors, the
“Company”), and Fletcher International, Ltd., a company domiciled in Bermuda (together with
its successors, the “Purchaser”).

The parties hereto agree as follows:

1. Purchase and Sale. In consideration of and upon the basis of the representations, warranties and agreements and
subject to the terms and conditions set forth in this Agreement:

(a) Subject to satisfaction or, if applicable, waiver of the relevant conditions set
forth in Sections 13 and 14 hereof and subject to the provisions of Section 7(a) hereof,
Purchaser agrees to purchase (the “Initial Investment”) from the Company, and the
Company agrees to issue and sell to Purchaser on the Initial Investment Closing Date (as
defined below), in accordance with Section 3, that number of shares of the Company’s common
stock, par value one cent ($0.01) per share (together with the associated common stock
purchase rights under the Second Amended and Restated Rights Agreement dated as of October
28, 2004, the “Common Stock”) that may be purchased with Three Million Dollars
($3,000,000) at a price per share equal to the Initial Investment Price. Purchaser shall
have the rights with respect to such shares of Common Stock specified in this Agreement and
in the Warrant.

(b) Subject to satisfaction or, if applicable, waiver of the relevant conditions set
forth in Sections 13 and 14 hereof and subject to the provisions of Section 7(a) hereof,
Purchaser agrees to purchase from the Company, and the Company agrees to issue and sell to
Purchaser (each a “Later Investment”), from time to time, in whole or in part, that
number of shares of Common Stock that may be purchased with an aggregate purchase price of
Nine Million Dollars ($9,000,000) (the “Aggregate Later Investment Commitment”) at a
price per share equal to the Later Investment Price on the date of the relevant Later
Investment Notice (as defined below). To effect any Later Investment, Purchaser shall
deliver a written notice substantially in the form attached hereto as Annex A (a “Later
Investment Notice”) to the Company from time to time during that period commencing on
and including May 18, 2008 and ending no later than November 18, 2009, subject to extension
as set forth herein (the “Later Investment Period”). Subject to satisfaction or, if
applicable, waiver of the relevant conditions set forth in Sections 13 and 14 hereof, the
closing of each Later Investment (each, a “Later Investment Closing”) shall take
place at 9:30 a.m. New York City time on the date that is three (3) Business Days following
and excluding the date of delivery of the Later Investment Notice or on such other date as
Purchaser and the Company shall mutually agree (each such date and time being referred to
herein as a “Later Investment Closing Date”). Subject to the provisions of Sections
1(d) and 11(c) hereof, prior to the expiration of the Later Investment Period, Purchaser
shall have consummated Later Investments in an aggregate amount equal to the Aggregate Later
Investment Commitment, and each Later Investment shall be in an amount of not less than two
million dollars ($2,000,000), unless that portion of the Aggregate Later Investment
Commitment then remaining to be purchased by Purchaser is less than two million dollars
($2,000,000), in which instance, such Later Investment shall be for such lesser amount. For
the avoidance of doubt, subject to the provisions of Sections 1(d) and 11(c) hereof, the
Aggregate Later Investment Commitment shall be reduced on a dollar-for-dollar basis by the
Investment Amount paid (or in the case of Cashless Exercise (as defined below), deemed paid)
on each Later Investment.

 

 

 

(c) The Later Investment Period shall be extended: by two (2) Business Days for each
Business Day:

(i) that the Registration Statement (as defined below) is not effective and
available for the issuance of all Common Stock issuable under this Agreement; or

(ii) occurring during the period (x) commencing on the earlier of the day on
which the Company restates or announces its intention to restate any portion of the
Company Financial Statements, and (b) ending on the date on which the Company files
quarterly or annual financial statements that constitute a Restatement on a Form
10-K, Form 10-Q, Form 8-K or any other filing with the SEC (and if the Company makes
multiple filings of a Restatement with the SEC, the last of such dates) (the
“Restatement Filing Date”).

To the extent that the Company (i) restates or announces its intention to restate any
portion of the Company Financial Statements (as defined below) or (ii) fails to maintain the
effectiveness and availability of the Registration Statement for the issuance of all Common
Stock issuable under this Agreement, in either case, within sixty-five (65) Business Days of
the expiration of the Later Investment Period, the Later Investment Period shall be extended
to a date that is at least sixty-five (65) Business Days after the later of the Restatement
Filing Date or the remediation of the failure described in clause (ii) of this Section 1(c).

(d) If the conditions set forth in Section 13 hereof are not satisfied or waived on or
prior to 9:30 a.m. New York City time on the relevant Later Investment Closing Date or if
the Company fails to perform its obligations on any Later Investment Closing Date (including
delivery of all shares of Common Stock issuable on such date) for any reason other than the
Purchaser’s failure to satisfy the conditions required by Section 14 hereof, then in
addition to all remedies available to the Purchaser at law or in equity, the Purchaser may,
at its sole option, and at any time, withdraw the Later Investment Notice by written notice
to the Company regardless of whether such condition has been satisfied or waived as of the
withdrawal date and, after such withdrawal, shall have no further obligations with respect
to such Later Investment Notice. Upon any such
withdrawal, the Aggregate Later Investment Commitment shall be reduced on a
dollar-per-dollar basis by the Investment Amount (as defined below) set forth in the
withdrawn Later Investment Notice (each such reduction, a “Withdrawal Reduction”)
and the Purchaser shall no longer have an obligation to consummate a Later Investment with
respect to such Withdrawal Reduction, but rather, at any time during the Later Investment
Period, Purchaser may deliver a Later Investment Notice to effect a Later Investment with
respect to any part or all of such Withdrawal Reduction in the Purchaser’s sole discretion
at a price per share equal to the Later Investment Price computed as of the date of such
subsequently delivered Later Investment Notice.

 

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(e) In addition, the Company shall issue to Purchaser on the Initial Investment Closing
Date a warrant in the form attached hereto as Annex B (the “Warrant”) evidencing
rights to purchase from the Company, subject to the terms and conditions set forth in the
Warrant, up to a number of shares of Common Stock as set forth therein. Purchaser shall have
the right to exercise rights under the Warrant in the manner, and subject to the terms,
specified in the Warrant.

(f) As used herein,

(i) “Business Day” means any day on which the Common Stock may be
traded on Nasdaq or, if not admitted for trading on Nasdaq, any day other than a
Saturday, Sunday or holiday on which banks in New York City are required or
permitted to be closed;

(ii) “Common Shares” means the Common Stock issuable pursuant to
Section 1(a) and Section 1(b), upon exercise of the Warrant and all
other shares of Common Stock issuable under this Agreement or the Warrant;

(iii) “Daily Market Price” means, on any date, the amount per share of
the Common Stock (or, for purposes of determining the Daily Market Price of the
common stock of an Acquiring Person, the common stock of such Acquiring Person),
equal to (i) the daily volume-weighted average price, calculated to the nearest ten
thousandth (i.e., four decimal places (.xxxx)), on the Nasdaq or, if no sale takes
place on such date, the average of the closing bid and asked prices, calculated to
the nearest ten thousandth (i.e., four decimal places (.xxxx)), on the Nasdaq
thereof on such date, in each case as reported by Bloomberg, L.P. (or by such other
Person as Purchaser and the Company may agree), or (ii) if such Common Stock (or the
common stock of an Acquiring Person, as defined in Section 11 hereof) is not then
listed or admitted to trading on the Nasdaq, the higher of (x) the book value per
share thereof as determined by any firm of independent public accountants of
recognized standing selected by Company and reasonably acceptable to Purchaser as of
the last calendar day of the most recent month ending before the date as of which
the determination is to be made and (y) the fair market value per share thereof
determined in good faith by an independent, nationally recognized appraisal firm
selected by Purchaser and reasonably acceptable to the Company (whose fees and
expenses shall be borne by the Company), subject in each case to adjustment for
stock splits, recombinations, stock dividends and the like.

 

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(iv) “Initial Investment Closing Date” means any Business Day during
the Initial Investment Period selected in the sole discretion of Purchaser.

(v) “Initial Investment Period” means that period commencing from and
including March 24, 2008, and ending no later than April 8, 2008.

(vi) “Initial Investment Price” means the price per share equal to (x)
the average of the Daily Market Prices of Common Stock on the Nasdaq for the period
of ten (10) consecutive Business Days ending on the date that is three (3) Business
Days prior to and excluding the Initial Investment Closing Date plus (y) sixty cents
($0.60).

(vii) “Investment Amount” means, with respect to the Initial Investment
or any Later Investment or exercise of the Warrant, the aggregate amount paid or to
be paid by the Purchaser or by the Holder (as defined in the Warrant) (or deemed to
have been paid in the case of Cashless Exercise (as defined herein and in the
Warrant)) on the relevant Closing Date or exercise of the Warrant).

(viii) “Later Investment Price” means the price per share equal to (x)
the Prevailing Price minus (y) twenty cents ($0.20); provided that if a
Later Investment shall be consummated within twenty (20) Business Days after and
excluding any prior Later Investment Closing Date, the Later Investment Price of
such subsequent Later Investment shall be an amount, as determined in the
Purchaser’s sole discretion, equal to (A) the Later Investment Price of the
immediately preceding Later Investment or (B) the Later Investment Price that would
otherwise be applicable without reference to such prior Later Investment Price.

(ix) “Material Adverse Effect” means any material adverse effect with
respect to (A) the business, properties, assets, operations, results of operations,
revenues, prospects or condition, financial or otherwise, of the Company and its
subsidiaries taken as a whole, (B) the legality, validity or enforceability of the
Agreement, the Warrant, Registration Statement or Prospectus, or (C) the Company’s
ability to perform fully on a timely basis its obligations under the Agreement or
the Warrant.

(x) “Nasdaq” means the Nasdaq Global Market, but if the Nasdaq Global
Market is not then the principal U.S. trading market for the Common Stock, then
“Nasdaq” shall be deemed to mean the principal U.S. national securities
exchange registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) on which the
Common Stock, or such other applicable common stock, is then traded, or if such
Common Stock, or such other applicable common stock, is not then listed or admitted
to trading on any national securities exchange, then the OTC Bulletin Board.

 

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(xi) “Person” means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.

(xii) “Prevailing Price” means the price per share equal to the average
of the Daily Market Prices of Common Stock during the period of forty (40)
consecutive Business Days ending on the date that is three (3) Business Days prior
to and excluding the date of the relevant Later Investment Notice, but not greater
than the average of the Daily Market Prices of Common Stock for any three (3)
consecutive or non-consecutive Business Days (determined in Purchaser’s sole
discretion) within such period of forty (40) consecutive Business Days.

2. Documentation Closing. The execution and delivery of this Agreement shall take place initially via facsimile on
November 18, 2007 (the “Signing”). On or prior to November 20, 2007 (the “Agreement
Closing Date” and together with the Signing, the Initial Investment Closing Date and the Later
Investment Closing Dates, each a “Closing Date”), a document closing shall take place (the
“Agreement Closing”). At the Agreement Closing, this Agreement and the documents required
by Sections 13 and 14 shall be delivered to Purchaser and the Company, respectively. The
deliveries specified in this Section 2 shall be deemed to occur simultaneously as part of a single
transaction, and no delivery shall be deemed to have been made until all such deliveries have been
made.

3. Initial Investment Closing. The closing (the “Initial Investment Closing”, and together with the Agreement Closing
and each Later Investment Closing, the “Closings”) of the sale of the Initial Investment
shall take place, subject to satisfaction or, if applicable, waiver of the relevant conditions set
forth in Sections 13 and 14 hereof, at 9:30 a.m. New York City time on the date that is three (3)
Business Days following and excluding the date of delivery by the Purchaser of a written notice
substantially in the form attached hereto as Annex C (an “Initial Investment Notice”) to
the Company. The Initial Investment Closing shall be via facsimile on the Initial Investment
Closing Date in the manner set forth below; provided, that the Warrant shall be delivered
by hand to Purchaser as Purchaser instructs in writing. At the Initial Investment Closing, the
following deliveries shall be made:

(a) Common Stock. The Company shall deliver to Purchaser, at the Company’s
expense, that number of shares of Common Stock that may be purchased with Three Million
Dollars ($3,000,000) at a price per share equal to the Initial Investment Price. Such
 shares shall be issued in the name of and delivered to the Purchaser via the
Depository Trust Company’s Deposit and Withdrawal at Custodian (or DWAC) system.

 

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(b) Purchase Price. Purchaser shall cause to be wire transferred to the
Company, in accordance with the wire instructions set forth in Annex G hereto, Three Million
Dollars ($3,000,000) in immediately available United States funds.

(c) Closing Documents. The closing documents required by Sections 13 and 14
shall be delivered to Purchaser and the Company, respectively.

(d) Warrant. The duly executed Warrant shall be delivered to the Purchaser by
the Company on the Initial Investment Closing Date.

The deliveries specified in this Section 3 shall be deemed to occur simultaneously as part of
a single transaction, and no delivery shall be deemed to have been made until all such deliveries
have been made.

4. Later Investment Closings. Each Later Investment Closing shall take place initially via facsimile on each Later Investment
Closing Date in the manner set forth below. At each Later Investment Closing, the following
deliveries shall be made

(a) Common Stock. The Company shall deliver to Purchaser that number of shares
of Common Stock as set forth in the relevant Later Investment Notice, at the Company’s
expense. Such shares shall be issued in the name of and delivered to the Purchaser via the
Depository Trust Company’s Deposit and Withdrawal at Custodian (or DWAC) system.

(b) Purchase Price. Purchaser shall cause to be wire transferred to the
Company, in accordance with the wire instructions set forth in Annex G hereto, the
Investment Amount set forth in the Later Investment Notice in immediately available United
States funds; provided that if (a) the actual number of shares of Common Stock
issued under this Agreement and the Warrant and the number of shares of Common Stock
issuable under this Agreement and the Warrant (which number shall be calculated assuming
consummation of the Initial Investment and all Later Investments and exercise of all
Warrants, in each case at an Initial Investment Price, Later Investment Price or Warrant
Price, as the case may, that has been determined in accordance with the terms hereof or the
Warrant, as the case may be or, if not yet determined, at the relevant price per share
computed as of the date on which the Initial Investment Notice, Later Investment Notice or
Warrant Exercise Notice (as defined in the Warrant), as the case may be, is delivered)
exceeds Nine Million Three Hundred Twenty Nine Thousand Two Hundred Ninety Three (9,329,293)
without regard to the Maximum Number then in effect or (b) the Registration Statement is not
effective or otherwise not available or (c) the Purchaser shall have received a Change of
Control Notice from the Company (as defined below) or an event shall have occurred that
would require the Company to deliver to the Purchaser a Change of Control Notice, then the
Purchaser may elect a Cashless Exercise. “Cashless Exercise” means, with respect to
the Warrant, Cashless Exercise as defined therein, and with respect to this Agreement, a
Later Investment in which the Purchaser may elect to not make the cash payment set forth in
the Later Investment
Notice and the Company shall sell and deliver a reduced quantity of shares of Common
Stock (the “Settlement Stock”) equal to “X” where:

 

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X = [(N x D) — (N x P)] / P

N = the gross number of shares of Common Stock that would have been
issuable on the relevant Later Investment Closing Date if the
Purchaser had not elected Cashless Exercise

D = Daily Market Price on the third (3rd) Business Day before, and
excluding, the Later Investment Closing Date

P = Later Investment Price with respect to such Later Investment
Notice.

Upon receipt by the Purchaser of Settlement Stock in connection with any Cashless Exercise,
(i) that amount of Common Stock that would have been issuable on the relevant Later
Investment Closing Date if the Purchaser had not elected Cashless Exercise shall be deemed
sold by the Company and purchased by the Purchaser and (ii) that amount of cash that would
have been paid by the Purchaser on the relevant Later Investment Closing Date if the
Purchaser had not elected Cashless Exercise shall be deemed paid by the Purchaser and
received by the Company.

(c) Closing Documents. The closing documents required by Sections 3 and 14
shall be delivered to Purchaser and the Company, respectively.

The deliveries specified in this Section 4 shall be deemed to occur simultaneously as part of
a single transaction, and no delivery shall be deemed to have been made until all such deliveries
have been made.

5. Representations and Warranties of the Company. The Company hereby represents and warrants to Purchaser on the date hereof, on each Closing Date
and on the consummation of each Warrant exercise, as follows:

(a) The Company has authorized the sale and issuance of all shares of Common Stock
issuable under this Agreement or under the Warrant (the “Offering”). The Offering,
and any subsequent issuance of shares of Common Stock upon exercise of the Warrant, has been
registered under the Securities Act of 1933, as amended (the “Securities Act”)
pursuant to the Company’s Registration Statement on Form S-3 (Registration No. 333-62290) as
amended or replaced (the “Registration Statement”).

(b) The Company has been duly incorporated and is validly existing in good standing
under the laws of Delaware or, after the relevant Closing Date, if another entity has
succeeded the Company in accordance with the terms hereof, under the laws of its
jurisdiction of incorporation.

(c) Except as otherwise contemplated by this Agreement, the execution, delivery and
performance of this Agreement and the Warrant (including the authorization, sale, issuance
and delivery of the shares of Common Stock issuable
hereunder and thereunder) have been duly authorized by all requisite corporate action
and no further consent or authorization of the Company, its Board of Directors or its
stockholders is required.

 

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(d) This Agreement has been duly executed and delivered by the Company and, when this
Agreement is duly authorized, executed and delivered by Purchaser, will be a valid and
binding agreement enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights generally and to general principles of equity.
Other than as set forth on Schedule 5(d), the issuance of the shares of Common Stock
issuable hereunder and under the Warrant is not and will not be subject to any preemptive
right or rights of first refusal that have not been properly waived or complied with and
will not trigger any antidilution or similar rights that have not been properly waived.

(e) The Company has full corporate power and authority necessary to (i) own and operate
its properties and assets, execute and deliver this Agreement, (ii) perform its obligations
hereunder and under the Warrant (including, but not limited to, the issuance of the shares
of Common Stock issuable hereunder and under the Warrant) and (iii) carry on its business as
presently conducted and as presently proposed to be conducted. The Company and its
subsidiaries are duly qualified and are authorized to do business and are in good standing
as foreign corporations in all jurisdictions in which the nature of their activities and of
their properties (both owned and leased) makes such qualification necessary, except for
those jurisdictions in which failure to do so would not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on (i) the business affairs,
assets, results of operations or prospects of the Company or any of its subsidiaries, or
(ii) the transactions contemplated by, or the Company’s ability to perform under, this
Agreement or the Warrant.

(f) No consent, approval, authorization or order of any court, governmental agency or
other body is required for execution and delivery by the Company of this Agreement or the
performance by the Company of any of its obligations hereunder and under the Warrant.

(g) Neither the execution and delivery by the Company of this Agreement nor the
performance by the Company of any of its obligations hereunder and under the Warrant:

(i) violates, conflicts with, results in a breach of, or constitutes a default
(or an event which with the giving of notice or the lapse of time or both would be
reasonably likely to constitute a default) or creates any rights in respect of any
Person under (A) the certificates of incorporation or by-laws of the Company or any
of its subsidiaries, (B) any decree, judgment, order, law, treaty, rule, regulation
or determination of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or any of its subsidiaries or any of their respective
properties or assets, (C) the terms of any bond, debenture, indenture, credit
agreement, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, lease, mortgage, deed of trust
or other instrument to which the Company or any of its subsidiaries is a party, by
which the Company or any of its subsidiaries is bound, or to which any of the
properties or assets of the Company or any of its subsidiaries is subject, (D) the
terms of any “lock-up” or similar provision of any underwriting or similar agreement
to which the Company or any of its subsidiaries is a party or (E) a any rule or
regulation of the Financial Industry Regulatory Authority, Inc. (successor entity to
National Association of Securities Dealers, Inc.) (“FINRA”) or the Nasdaq;
or

 

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(ii) results in the creation or imposition of any lien, charge or encumbrance
upon any shares of Common Stock issuable hereunder or under the Warrant or upon any
of the properties or assets of the Company or any of its subsidiaries.

(h) When issued to Purchaser against payment therefor, each share of Common Stock
issuable hereunder and each share of Common Stock issuable upon exercise of the Warrant:

(i) will have been duly and validly authorized, duly and validly issued, fully
paid and non-assessable;

(ii) will be free and clear of any security interests, liens, claims or other
encumbrances; and

(iii) will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company.

(i) The Company satisfies all continued listing criteria of the Nasdaq Global Market.
No present set of facts or circumstances will (with the passage of time or the giving of
notice or both or neither) cause any of the Common Stock to be delisted from the Nasdaq
Global Market. All of the Common Shares will, when issued, be duly listed and admitted for
trading on all of the markets where shares of Common Stock are traded, including the Nasdaq
Global Market.

(j) There is no pending or, to the best knowledge of the Company, threatened action,
suit, proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its affiliates that would affect
the execution by the Company of, or the performance by the Company of its obligations under,
this Agreement or the Warrant.

(k) Since January 1, 2005, none of the Company’s filings with the United States
Securities and Exchange Commission (the “SEC”) under the Securities Act or under
Section 13 or 15(d) of the Exchange Act, including the financial statements, schedules,
exhibits and results of the Company’s operations and cash flow contained therein (each an
“SEC Filing”), contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not
misleading. Since January 1, 2005, there has not been any pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the Company or
any of its subsidiaries that will or is reasonably likely to result in a Material Adverse
Effect except as disclosed in the Company’s SEC Filings on or before the date immediately
prior to and excluding the date hereof. Since the date of the Company’s most recent SEC
Filing, there has not been, and the Company is not aware of, any development or condition
that is reasonably likely to result in, any material and negative change in the condition,
financial or otherwise, or in the business affairs, assets, revenues, operations or
prospects of the Company and its subsidiaries, whether or not arising in the ordinary course
of business. The (x) Company’s SEC Filings made before and excluding the Closing Date and
(y) Company’s disclosures to the Purchaser described on Schedule 5(k) fully disclose all
material information concerning the Company and its subsidiaries.

 

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(l) Immediately prior to the Closing Date, the authorized capital stock of the Company
consists of One Hundred Fifty Million (150,000,000) shares of Common Stock, par value $0.01
per share and Five Million (5,000,000) shares of preferred stock, par value $0.01 per share.
As of November 14, 2007, (i) Sixty-Two Million One Hundred Ninety-Five Thousand Two Hundred
Eighty-Six (62,195,286) shares of Common Stock were issued and outstanding, and Twelve
Million Three Hundred Sixty-Two Thousand Forty-Seven (12,362,047) shares of Common Stock are
currently reserved and subject to issuance upon the exercise of outstanding stock options,
warrants or other convertible rights, and (ii) no shares of Common Stock are held in the
treasury of the Company. All of the outstanding shares of Common Stock are, and all shares
of capital stock which may be issued pursuant to outstanding stock options, warrants or
other convertible rights will be, when issued and paid for in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and non-assessable, free of any
preemptive rights in respect thereof and issued in compliance with all applicable state and
federal laws concerning issuance of securities. As of the date hereof, except as set forth
above, and except for shares of Common Stock or other securities issued upon conversion,
exchange, exercise or purchase associated with the securities, options, warrants, rights and
other instruments referenced above, no shares of capital stock or other voting securities of
the Company were outstanding, no equity equivalents, interests in the ownership or earnings
of the Company or other similar rights were outstanding, and there were no existing options,
warrants, calls, subscriptions or other rights or agreements or commitments relating to the
capital stock of the Company or any of its subsidiaries or obligating the Company or any of
its subsidiaries to issue, transfer, sell or redeem any shares of capital stock, or other
equity interest in, the Company or any of its subsidiaries or obligating the Company or any
of its subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement or commitment.

(m) Amendment to Rights Agreement. The Company has taken all action necessary
to amend that certain Second Amended and Restated Rights Agreement of the Company, dated as
of October 28, 2004, in the manner set forth in Annex H hereto.

(n) Solvency. The sum of the assets of the Company, both at a fair
valuation and at present fair salable value, exceeds its liabilities, including
contingent liabilities. The Company reasonably believes it has sufficient capital or access
to capital with which to conduct its business as presently conducted and as proposed to be
conducted. The Company has not incurred debt, and does not intend to incur debt, beyond its
ability to pay such debt as it matures. For purposes of this paragraph, “debt”
means any liability on a claim, and “claim” means (x) a right to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y) a right to
an equitable remedy for breach of performance if such breach gives rise to a payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to any such
contingent liabilities, such liabilities are computed at the amount which, in light of all
the facts and circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.

 

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(o) Equivalent Value. As of the Closing Date, the consideration that the
Company is receiving from Purchaser is substantially equivalent in value to the
consideration Purchaser is receiving from the Company pursuant to this Agreement. As of the
Closing Date, under the terms of this Agreement, the Company is receiving fair consideration
from Purchaser for the agreements, covenants, representations and warranties made by the
Company to Purchaser.

(p) No Non-Public Information. Except as set forth on Schedule 5(p), Purchaser
has not requested from the Company, and the Company has not furnished to Purchaser, any
material non-public information concerning the Company or its subsidiaries.

(q) Restatement Notices. As of the date of each Closing, the Company has
provided Purchaser with all Restatement Notices required to be delivered following a
Restatement (as defined below).

(r) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s charter documents or
the laws of its state of incorporation that is or would become applicable to the Purchaser
as a result of the Purchaser and the Company fulfilling their obligations or exercising
their rights under this Agreement and the Warrant, including, without limitation, as a
result of the Company’s issuance of the Common Stock issuable hereunder and the Purchaser’s
ownership of the Common Stock issuable hereunder.

(s) Backdating of Options. The exercise price of each Company option has been
no less than the fair market value of a share of Common Stock as determined on the date of
grant of such Company option. All grants of Company options were validly issued and
properly approved by the Board of Directors of the Company (or a duly authorized committee
or subcommittee thereof) in material compliance with all applicable legal requirements and
recorded on the Company’s financial statements in
accordance with U.S. generally accepted accounting principles, and no such grants
involved any “back dating,” “forward dating” or similar practices with respect to the
effective date of grant.

 

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(t) Placement Agent’s Fees. The Company shall be responsible for the payment
of any placement agent’s fees, financial advisory fees, or brokers’ commissions, in each
case payable to third parties retained by the Company, relating to or arising out of the
Offering pursuant to this Agreement. The Company shall pay, and hold the Purchaser harmless
against, any liability, loss or expense (including, without limitation, reasonable
attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for
fees arising out of the Offering pursuant to this Agreement.

(u) No Integrated Offering. Neither the Company, nor any Person acting on its
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 cause the Offering to be
integrated with prior offerings by the Company for purposes of the Securities Act or the
rules and regulations of FINRA or the Nasdaq.

(v) Absence of Certain Changes. Except as set forth on Schedule 5(v) or
disclosed in SEC Filings since January 1, 2005, there has been no material adverse change
and no material adverse development in the business, properties, assets, operations, results
of operations, or financial condition of the Company.

(w) Regulatory Permits. The Company possesses all certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct its business, except where the failure to possess such certificates,
authorizations or permits would not have a Material Adverse Effect. The Company is not in
violation of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to it, except for violations which would not have a Material Adverse Effect.

(x) Foreign Corrupt Practices. Neither the Company nor any director, officer,
agent, employee or other Person acting on behalf of the Company 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.

(y) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, 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 a
Material Adverse Effect.

 

12

 

(z) Transactions With Affiliates. Except as set forth on Schedule 5(z) or
disclosed in the Company’s SEC Filings, and other than the grant of stock options and
restricted and non-restricted stock grants disclosed that are required to be publicly
disclosed, none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company (other than for ordinary course services as employees,
officers or directors) required to be disclosed pursuant to Regulation S-K Item 404,
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, which such transaction would be required to be disclosed.

(aa) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses in which the Company is engaged.

(bb) Employee Relations. The Company is not a party to any collective
bargaining agreement. The Company is 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 reasonably be expected to result in a Material Adverse Effect.

(cc) Intellectual Property Rights. Except as disclosed in the Company’s SEC
Filings: (i) the Company owns or possesses adequate rights or licenses to use all
trademarks, trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, trade secrets and other intellectual property rights
(“Intellectual Property Rights”) necessary to conduct its business as now conducted; (ii)
the Company does not have any knowledge of any infringement by the Company of Intellectual
Property Rights of others, nor does the Company have reason to believe that the Company has
infringed or would infringe on the Intellectual Property Rights of others, the enforcement
of which would result in a Material Adverse Effect on financial conditions; (iii) there is
no claim, action or proceeding against the Company regarding its Intellectual Property
Rights; (iv) the Company has no knowledge of any infringement or improper use by any third
party of any of the Company’s Intellectual Property Rights; (v) the Company has taken
reasonable security measures to protect the secrecy, confidentiality and value of all of its
Intellectual Property Rights; (vi) the Company shall own all right, title and interest in
all Intellectual Property Rights, which the Company owns as of the date of this Agreement.
Notwithstanding anything in this Section 5(cc) to the contrary, the Company may consummate a
spin-off, enter into partnership, license and collaboration agreements and other similar
arrangements.

 

13

 

(dd) Environmental Laws. The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct its
respective businesses and (iii) is 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 (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.

(ee) Investment Company. The Company is not, and is not an affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as
amended.

(ff) Tax Status. Except as would not have a Material Adverse Effect, the
Company (i) has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations 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.

(gg) Internal Accounting and Disclosure Controls. The Company maintains a
system of internal accounting controls sufficient to provide reasonable assurance that in
all material respects (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. The Company maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 under the Exchange 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 Exchange 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 to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the
Exchange 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.

 

14

 

(hh) 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 the Company’s SEC Filings and is
not so disclosed or that otherwise would have a Material Adverse Effect.

(ii) 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
Offering 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.

(jj) 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 Offering or (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases for the Offering.

(kk) Subsidiaries. As of the Closing Date, the Company has no directly held
subsidiary other than those listed on Exhibit 21 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2006. The Company is the beneficial owner (and the Company
or a subsidiary is the record owner) of all of the equity interests in the Company’s
subsidiaries and holds such equity interests free and clear of all encumbrances except as
are imposed by applicable securities laws.

(ll) Anti-dilution Provisions. Other than as set forth in Schedule 5(ll),
there is no anti-dilution provision under any agreement to which the Company is party or to
which any assets of the Company are subject that is or would become effective as a result of
the Purchaser and the Company fulfilling their obligations or exercising their rights under
this Agreement and the Warrant, including, without limitation, as a result of the Company’s
issuance of the Common Stock issuable hereunder and the Purchaser’s ownership of the Common
Stock issuable hereunder.

6. Registration Provisions.

(a) The Company will keep the Registration Statement continuously effective through the
end of the Later Investment Period and for so long as any Common Stock continues to be
issuable upon exercise of the Warrant. In the event that the Company fails to maintain the
effectiveness and availability of the Registration Statement at any time during the period
described above, the Company will promptly provide notice thereof to Purchaser.

(b) The Company will prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus used in connection with the Registration
Statement (as so amended and supplemented from time to time, the “Prospectus”) as
may be necessary to comply with the provisions of
the Securities Act with respect to the issuance of all shares of Common Stock issuable
to Purchaser hereunder and under the Warrant.

 

15

 

(c) The Company will cause all Common Shares to be listed on each securities exchange
and quoted on each quotation service on which similar securities issued by the Company are
then listed or quoted.

(d) The Company will provide a transfer agent and registrar for all Common Shares and a
CUSIP number for all Common Shares.

(e) The Company will otherwise comply with all applicable rules and regulations of the
SEC, FINRA and the Nasdaq Global Market and any other exchange or quotation service on which
the Common Stock are obligated to be listed or quoted under this Agreement.

7. 19.99% Limit on Shares Issuable.

(a) In no event shall the total number of Common Shares exceed Twelve Million Four
Hundred Thirty-Two Thousand Eight Hundred Thirty-Eight (12,432,838) shares (the “19.99%
Limit”) except that in the event of a Change of Control, the total
number of shares of common stock of the Acquiring Person issued or issuable hereunder shall
not exceed a number equal to nineteen and ninety-nine one-hundredths percent (19.99%) of the
outstanding common stock (or other, most widely-held class of security) of the Acquiring
Person. From and after the time that the total number of Common Shares shall equal the
19.99% Limit, the Company shall no longer be obligated to issue shares of Common Stock
hereunder and Purchaser shall no longer be obligated to purchase shares of Common Stock
issuable hereunder. In the event of a Cashless Exercise, the determination of whether the
19.99% Limit has been reached shall be made based on the number of shares of Settlement
Stock actually issued in such Cashless Exercise.

(b) The aggregate number of shares of Common Stock issued, as of a particular date,
hereunder and issuable pursuant to this Agreement and upon the exercise of the Warrant shall
not exceed the Maximum Number as of that date. The “Maximum Number” shall initially
equal Six Million Sixty-Four Thousand Forty (6,064,040), or, in the event of a Change of
Control, shall equal nine and three-fourths percent (9.75%) of the outstanding common stock
(or other, most widely-held class of security) of the Acquiring Person as of immediately
after the consummation of the Change of Control, and thereafter shall be automatically
increased upon expiration of a sixty-five (65) day notice period (the “Notice
Period”) after (i) the Company delivers an Increase Notice (as defined below) by nine
and three-fourths percent (9.75%) of the Increase (as defined below) set forth in such
Increase Notice or (ii) the Purchaser delivers a notice (a “65 Day Notice”) to the
Company designating a greater Maximum Number. A 65-Day Notice may be given at any time.
The Company shall deliver a notice (an “Increase Notice”) stating the aggregate
number of shares of Common Stock outstanding as of the last day of the preceding month and
the second preceding month and the increase, if any (the
“Increase”), from the second preceding month (or in the case of the last day of
the month immediately following the Agreement Closing Date, the number of shares outstanding
specified in Section 5(l)) to the preceding month. From time to time following the Notice
Period, Common Stock may be issued to Purchaser for any quantity of Common Stock, such that
the aggregate number of shares of Common Stock issued hereunder is less than or equal to the
Maximum Number.

 

16

 

8. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to the Company on each Closing Date:

(a) Purchaser has been duly incorporated and is validly existing under the laws of
Bermuda.

(b) The execution, delivery and performance of this Agreement by Purchaser have been
duly authorized by all requisite corporate action and no further consent or authorization of
Purchaser, its Board of Directors or its stockholders is required. This Agreement has been
duly executed and delivered by Purchaser and, when duly authorized, executed and delivered
by the Company, will be a valid and binding agreement enforceable against Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights generally
and to general principles of equity.

(c) Purchaser understands that no United States federal or state agency has passed on,
reviewed or made any recommendation or endorsement of the securities issuable hereunder.

(d) Purchaser (i) has had no position, office or other material relationship within the
past three (3) years with the Company or Persons known to it to be affiliates of the
Company, (ii) is not a, and it has no direct or indirect affiliation or association with
any, FINRA member as of the date hereof and (iii) will not, after giving effect to the
Offering, alone or as part of any “group” (as such term is defined by Rule 13d-5 promulgated
under the Exchange Act) of which Purchaser is a part, in connection with the Offering
acquire, or obtain the right to acquire, 20% or more of the Common Stock (or securities
convertible or exercisable for Common Stock) or the voting power of the Company.

9. Future Equity Issuances.

(a) If the Company engages or participates in (or intends to engage or participate in)
any discussions with any Person regarding any sale or issuance to any Person (other than
Purchaser or its affiliates) of any shares of, or securities convertible into, exercisable
or exchangeable for, or whose value is derived in whole or in part from, any shares of any
class of the Company’s capital stock subsequent to any Closing Date, other than an Excluded
Issuance (a “Future Equity Issuance”), the Company shall (i) promptly notify
Purchaser of the existence of the Company’s intentions or discussions with respect to the
proposed Future Equity Issuance
and (ii) in connection with such notice, inquire whether Purchaser desires to be
informed as to the substance of such intentions or discussions. If Purchaser notifies the
Company in writing that Purchaser elects to become informed with respect to such proposed
Future Equity Issuance by 11:59 p.m., New York City time, on the third (3rd) Business Day
after and excluding the date on which the Company so notifies Purchaser, the Company shall
use its best efforts to engage in good faith discussions with Purchaser regarding the
proposed Future Equity Issuance and shall not consummate such Future Equity Issuance for
three (3) full Business Days after and excluding the date of Purchaser’s election. For
purposes of clarification, nothing in this subsection shall obligate the Company to allow
Purchaser to participate in a Future Equity Issuance.

 

17

 

(b) From and after the date of this Agreement until 11:59 p.m., New York City time, on
June 30, 2008, the Company shall not announce or consummate any issuance of debt of the
Company or any of its Subsidiaries together with any shares of, or securities convertible
into, exercisable or exchangeable for, or whose value is derived in whole or in part from,
any shares of any class of the Company’s capital stock at a per share conversion, exercise
or exchange price that is lower than the Daily Market Price as of the date of such issuance
(or, if earlier, the date on which the Company agrees to effect such issuance), in one
transaction or any series of related transactions, unless all such transactions individually
and in the aggregate constitute a Specified Issuance.

(c) If, within One Hundred Thirty-Five (135) days following the Initial Investment
Closing Date, any Later Investment Closing Date or the closing of any exercise of the
Warrant (the “Prior Period”), there is (i) a public disclosure of the Company’s
intention or agreement to engage in a Future Equity Issuance, or (ii) a consummation of a
Future Equity Issuance, in each case at a price per share below an Initial Investment Price,
Later Investment Price or Warrant Exercise Price (as defined in the Warrant) previously paid
by the Purchaser (or deemed to have been paid in the case of Cashless Exercise (as defined
herein and in the Warrant)) at any time during the Prior Period, then the Company shall
notify Purchaser and each Holder (as defined in the Warrant) of each such disclosure and
each such consummation, which notice shall include a copy of such disclosure or the terms
and date of such consummation (the “Equity Issuance Notice”), no later than one (1)
Business Day after each such disclosure and each such consummation.

(d) On or after the date of delivery of an Equity Issuance Notice (or on or after the
date on which a disclosure or consummation described in Section 9(c) has occurred that
requires the Company to deliver an Equity Issuance Notice), then:

(i) the Exercise Price (as defined in the Warrant) shall be reduced as set
forth in the Warrant; and

(ii) in the case of a Future Equity Issuance disclosed or consummated within
One Hundred Thirty-Five (135) days following any Initial Investment Closing Date,
any Later Investment Closing Date or the closing of any exercise of the Warrant, the
Company shall promptly issue and deliver a number of shares of Common Stock to
Purchaser equal to the positive difference, if any,
with respect to each such Closing Date and each closing of any exercise of the
Warrant during the Prior Period, between (x) the quotient of (A) the Investment
Amount with respect to such Initial Investment, Later Investment or such Warrant
exercise closing divided by (B) the Later Issuance Price (as defined below) and (y)
the number of shares of Common Stock issued on such Closing Date or such Warrant
exercise closing.

 

18

 

(e) “Excluded Issuance” means any of the following: (A) issuances pursuant to
any stock split, dividend or distribution payable in additional shares of capital stock to
holders of Common Stock, (B) sales or issuances to employees, consultants or directors of
the Company directly or pursuant to a stock option plan, employee stock purchase plan or
restricted stock plan, or other similar arrangements related to compensation for services,
(C) issuances issued upon the exercise of any options or warrants to purchase capital stock
outstanding on the date hereof, in each case in accordance with the terms of such options,
warrants or securities in effect on the date hereof, (D) Common Shares issued or issuable
pursuant to this Agreement or the Warrant, (E) issuances described on Schedule 9(d), or (F)
any Specified Issuance.

(f) “Later Issuance Price” means the lowest price per share of Common Stock
paid or payable by any Person in the Future Equity Issuance, including, in the case of
options, warrants, convertible preferred, convertible notes or other securities convertible,
exchangeable or exercisable into or for Common Stock, the lowest price per share at which
such conversion, exchange or exercise may occur on any future date.

(g) “Specified Issuance” means the sale or issuance in one or more transactions
completed on or before June 30, 2008 to any Person or Persons (other than Purchaser or its
affiliates) of debt of the Company or Dynamic Fuels, LLC in an aggregate amount equal to or
less than Seventy—Five Million Dollars ($75,000,000) for all such transactions; provided
that such sale or issuance shall include in whole or in part the sale or issuance to all of
such Person or Persons of warrants exercisable into not more than an aggregate of Eleven
Million Two Hundred Fifty Thousand (11,250,000) shares of Common Stock at a price that is
lower than the Daily Market Price as of the date of sale or issuance (the “Specified
Issuance Warrants”); provided further that such debt securities shall not be convertible
into, exercisable or exchangeable for, or have any value that is derived in whole or in part
from, any shares of any class of the Company’s capital stock.

(h) In the event of any Specified Issuance, the Company shall issue to Purchaser within
five (5) Business Days after and excluding the later of (x) the public announcement of the
Specified Issuance and (y) the public announcement of the closing of the Specified Issuance,
warrants that are identical in all respects to, and subject to the same terms and conditions
as, the Specified Issuance Warrants to purchase an aggregate number of shares of Common
Stock equal to the product of (i) twenty-five percent (25%) and (ii) the positive amount, if
any, by which (A) the maximum number of shares of Common Stock that may be issued at any
time under the Specified Issuance exceeds (B) One Hundred and Fifty (150) shares of Common
Stock per $1,000 of Specified Issuance
debt securities, provided that if the Specified Issuance Warrants contain variable or
multiple exercise prices or terms of time during which they may be exercised, the warrants
issued to Purchaser will have the lowest possible exercise price and the longest possible
term permitted in any of the Specified Issuance Warrants; provided further that the warrants
issued to Purchaser shall be in all respects no less favorable to Purchaser than those
Specified Issuance Warrants that are most favorable to the Persons to whom they are issued.

 

19

 

(i) No Integrated Offering. Notwithstanding the foregoing, the Company shall
ensure that no Person acting on its behalf shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security that may be integrated with the
Offering for purposes of the Securities Act or the rules and regulations of FINRA or the
Nasdaq.

10. Covenants of the Company. The Company covenants and agrees with Purchaser as follows:

(a) While the Later Investment Period is in effect and for so long as any Common Stock
is issuable under exercise of the Warrant and for a period of one (1) year thereafter, the
Company will (i) maintain the effectiveness of the Registration Statement, (ii) use its best
efforts to maintain the eligibility of the Common Stock for listing on the Nasdaq Global
Market; (iii) use its best efforts to regain the eligibility of the Common Stock for listing
or quotation on all markets and exchanges including the Nasdaq Global Market in the event
that the Common Stock is delisted by the Nasdaq Global Market or any other applicable market
or exchange; (iv) use its best efforts to obtain a listing on another national securities
exchange or Nasdaq Capital Market if the Common Stock is delisted by the Nasdaq Global
Market; and (v) cause the representations and warranties contained in Section 5 to be and
remain true and correct, except those representations and warranties which address matters
only as of a particular date, which shall be true and correct as of such date.

(b) If a Restatement occurs, the Company shall deliver to Purchaser a Restatement
Notice within three (3) Business Days of such Restatement.

(c) The Company will provide Purchaser with a reasonable opportunity, which shall not
be less than two (2) full Business Days, to review and comment on any public disclosure by
the Company of information regarding this Agreement and the transactions contemplated
hereby, before such public disclosure.

(d) The Company will make all filings required by law with respect to the transactions
contemplated hereby.

(e) The Company will comply with the terms and conditions of the Warrant as set forth
in the Warrant.

(f) For so long as Purchaser owns any shares of Common Stock or shares of Common Stock
issuable upon exercise of the Warrant, within five (5) Business Days after the filing of
each of its quarterly reports on Form 10-Q with the SEC, the
Company shall deliver to Purchaser a certificate of the Chief Executive Officer and
Principal Financial Officer of the Company stating that, based on their knowledge, the final
consolidated unaudited financial statements including the footnotes thereto contained
therein fairly present in all material respects the financial condition in conformity with
accounting principles generally accepted in the United States, results of operations and
cash flows of the Company as of and for the periods presented therein.

 

20

 

(g) The Company shall cause the Common Shares to be eligible for book-entry transfer
through The Depository Trust Company (or any successor thereto) at all times from and after
the Closing Date.

(h) The Company shall at all times reserve for issuance such number of its shares of
Common Stock as shall from time to time be sufficient to effect the issuance of all Common
Shares.

(i) Unless expressly waived by Purchaser, the Company shall deliver an Increase Notice
to Purchaser on or before the tenth (10th) day of any calendar month for which an Increase
Notice is required to be delivered pursuant to Section 7(b).

(j) The Company shall, within one (1) Business Day after and excluding any Closing
Date, publicly distribute a press release disclosing the material terms of such Closing and
shall, within three (3) Business Days after and excluding such event file a report with the
SEC on Form 8-K with respect to the same.

11. Change of Control.

(a) If the Company is a party to any transaction which results in a Change of Control,
Purchaser and its assigns shall have the rights set forth in the Warrant regarding Changes
of Control in addition to the rights contained in this Agreement. The Company agrees that
it will not enter into an agreement with an Acquiring Person resulting in a Change of
Control unless such agreement expressly obligates the Acquiring Person to assume all of the
Company’s obligations under this Agreement and the Warrant including, but not limited to,
the share registration and other provisions regarding the Common Stock contained herein and
therein and thereafter all references to the Company herein shall be deemed to be references
to the Acquiring Person.

(b) On or before the date an agreement is entered into with an Acquiring Person
resulting in a Change of Control, the Company shall deliver to Purchaser written notice that
the Acquiring Person has assumed such obligations. The Company shall provide Purchaser and
each Holder (as defined in the Warrant) with written notice (a “Change of Control
Notice”) of any proposed transaction resulting in a Change of Control as soon as the
existence of such proposed transaction is made public by any Person. Thereafter, the
Company shall notify Purchaser promptly of any material developments with respect to such
transaction, including advance notice at least ten (10) Business Days before the date such
transaction is expected to become effective.

 

21

 

(c) In the event that a Change of Control Notice is delivered (or an
event shall have occurred that would require the delivery of a Change of Control
Notice), on and after the date of delivery of such Change of Control Notice (or the date of
the event that gives rise to the requirement to deliver such a Change of Control Notice),
the Purchaser shall not be obligated to consummate any further Later Investments, but rather
shall have the right to consummate any Later Investments in its sole discretion.

(d) In the event that a Change of Control Notice is delivered (or an event shall have
occurred that would require the delivery of a Change of Control Notice) prior to the
commencement of the Later Investment Period, the Later Investment Period shall commence upon
and including the Business Day that immediately follows the date that the Change of Control
Notice is delivered (or the date of the event that gives rise to the requirement to deliver
such a Change of Control Notice).

(e) Between the date a Change of Control Notice is delivered (or an event shall have
occurred that would require the delivery of a Change of Control Notice) and the effective
date of the Change of Control, the Purchaser shall continue to have the right to submit to
the Company a Later Investment Notice and consummate any Later Investment, in the
Purchaser’s sole discretion, in accordance with the terms and conditions of this Agreement.
In addition, the Purchaser at its sole option may elect to submit to the Company a special
notice (a “Contingent Later Investment Notice”) to effect a Later Investment for all
or part of the remaining Aggregate Later Investment Commitment in connection with such
Change of Control; in which case, notwithstanding the provisions of Section 4:

(i) the effectiveness of such contingent exercise shall be conditional upon the
effectiveness of the Change of Control;

(ii) the Purchaser shall have the right to deliver a notice to withdraw such
Contingent Later Investment Notice until the effective date of such Change of
Control; and

(iii) if such Contingent Later Investment Notice shall not have been withdrawn,
then on the effective date of such Change of Control, the Purchaser shall receive,
upon payment of the price designated in the Contingent Later Investment Notice, the
same consideration, in the form of cash, securities or other assets (the
“Acquisition Consideration”) per share of Common Stock issuable to any other
holder of shares of Common Stock in connection with such Change of Control based
upon the number of shares of Common Stock which the Purchaser would have held if the
Purchaser had consummated such Later Investment on the Business Day immediately
preceding the date on which such Change of Control occurs. If the Acquisition
Consideration is in the form of cash, the Purchaser shall not be required to tender
the price specified in the Contingent Later Investment Notice, but shall receive an
amount in connection with such Change of Control equal to the Acquisition
Consideration applicable to the Purchaser based on the number of shares of Common
Stock the Purchaser would have held had it consummated the Later Investment on the
Business Day immediately preceding the date on which such
Change of Control occurs, less the price specified in such Contingent Later
Investment Notice.

 

22

 

(f) “Change of Control” means (i) acquisition of the Company by means of merger
or other form of corporate reorganization in which outstanding shares of the Company are
exchanged for securities or other consideration issued, or caused to be issued, by the
Acquiring Person (as hereinafter defined) or its Parent, Subsidiary or Affiliate (each as
defined in Rule 12b-2 of the Exchange Act), restructuring by the Company where outstanding
 shares of the Company are exchanged for shares of the Acquiring Person on a one-for-one
basis and, immediately following the exchange, former stockholders of the Company own all of
the outstanding shares, (ii) a sale of all or substantially all of the assets of the Company
(on a consolidated basis) in a single transaction or series of related transactions, (iii)
any tender offer, exchange offer, stock purchase or other transaction or series of related
transactions by the Company in which the power to cast the majority of the eligible votes at
a meeting of the Company’s stockholders at which directors are elected is transferred to a
single entity or group acting in concert, or (iv) a capital reorganization or
reclassification of the Common Stock pursuant to which the shareholders of the Company
immediately prior to such reorganization or reclassification do not beneficially own at
least sixty-five percent (65%) of each class of voting securities of the Company outstanding
immediately following such reorganization or reclassification. Notwithstanding anything
contained herein to the contrary, the change in the state of incorporation of the Company
shall not in and of itself constitute a Change of Control.

(g) “Acquiring Person” means, in connection with any Change of Control, (i) the
continuing or surviving Person of a consolidation or merger with the Company (if other than
the Company), (ii) the transferee of all or substantially all of the properties or assets of
the Company, (iii) the corporation consolidating with or merging into the Company in a
consolidation or merger in connection with which the Common Stock is changed into or
exchanged for stock or other securities of any other Person or cash or any other property,
(iv) the entity or group acting in concert acquiring or possessing the power to cast the
majority of the eligible votes at a meeting of the Company’s stockholders at which directors
are elected, or, (v) in the case of a capital reorganization or reclassification of the
Common Stock pursuant to which the shareholders of the Company immediately prior to such
reorganization or reclassification do not beneficially own at least sixty-five percent (65%)
of each class of voting securities of the Company outstanding immediately following such
reorganization or reclassification, the Company, or (vi) at Purchaser’s election, any Person
that (A) controls the Acquiring Person directly or indirectly through one or more
intermediaries, (B) is required to include the Acquiring Person in the consolidated
financial statements contained in such Person’s Annual Report on Form 10-K (if such Person
is required to file such a report) or would be required to so include the Acquiring Person
in such Person’s consolidated financial statements if they were prepared in accordance with
U.S. generally accepted accounting principles and (C) is not itself included in the
consolidated financial statements of any other Person (other than its consolidated
subsidiaries).

12. Restatements.

 

23

 

(a) If a Restatement (as defined below) occurs on or before the first year anniversary
of one or more Closing Dates or the closing of any exercise of the Warrant, the Company
shall:

(i) deliver to Purchaser and each Holder (as defined in the Warrant) a written
notice in the form attached hereto as Annex D (a “Restatement Notice”)
within three (3) Business Days of each Restatement, stating the date on which a
Restatement has occurred and including the documents in which the Restatement was
publicly disclosed; and

(ii) promptly following receipt of a Restatement Adjustment Notice, (A) issue
and deliver a number of shares of Common Stock to Purchaser equal to the positive
difference, if any, with respect to each such Closing Date and each such closing of
any exercise of the Warrant, between (x) the quotient of (1) the Investment Amount
with respect to such Initial Investment, Later Investment or such Warrant exercise
closing divided by (2) the Restatement Price (as defined below) and (y) the number
of shares of Common Stock issued on such Closing Date and (B) the Exercise Price (as
defined in the Warrant) shall be reduced as set forth in the Warrant.

(b) At any time after the date of the Restatement and before the Restatement Adjustment
Notice Deadline, Purchaser may deliver a notice in the form attached hereto as Annex E (a
“Restatement Adjustment Notice”) to the Company specifying the Restatement Date, the
Restatement Price, and calculating the number of shares of Common Stock, if any, required to
be issued by the Company to Purchaser pursuant to clause (a) of this Section 12.

(c) “Restatement” means the earlier of (x) the announcement by the Company of
its intention to restate any portion of the Company Financial Statements and (y) the actual
restatement by the Company of any portion of the Company Financial Statements.

(d) “Restatement Price” means the Daily Market Price calculated as of any day
during either of the following periods, in the sole discretion of the Purchaser: (A) the
forty (40) Business Days after and excluding the related Restatement Date or (B) the forty
(40) Business Days after and excluding any date on which the Company files restated
financial statements with the SEC with respect to such Restatement.

(e) “Restatement Adjustment Notice Deadline” means the sixtieth (60th) Business
Day after the later of (i) the date on which the Company delivers the Restatement Notice to
Purchaser and (ii) the date on which the Company files an amended SEC Filing or Form 8-K
fully and finally restating the financial statements required to be restated in the
Restatement.

(f) “Company Financial Statements” means all financial statements (including
the notes thereto) and earnings
releases filed by the Company with (or furnished by the Company to) the SEC or publicly
announced by the Company.

 

24

 

(g) “Restatement Date” means, at the option of and pursuant to the
determination of Purchaser (as designated in a notice from Purchaser to the Company), any
date on which a Restatement occurs (including, with respect to any Restatement, the date of
an announcement by the Company of its intention to restate any portion of the Company’s
Financial Statements or the date on which is filed an amended SEC Filing or Form 8-K or
issuance of a press release in respect of the matters described in such announcement or the
date on which such Restatement is filed with the SEC).

13. Conditions Precedent to Purchaser’s Obligations. The obligations of Purchaser hereunder are subject to the performance by the Company of its
obligations hereunder and to the satisfaction of the following additional conditions precedent,
unless expressly waived in writing by Purchaser:

(a) On each Closing Date, (i) the representations and warranties made by the Company in
this Agreement shall be true and correct, except those representations and warranties which
address matters only as of a particular date, which shall be true and correct as of such
date; (ii) the Company shall have complied fully with all of the covenants and agreements in
this Agreement in all material respects; (iii) the Company shall not possess any negative,
material non-public information other than as shall have been filed with the SEC at least
five (5) Business Days prior to and excluding such Closing Date and (iv) Purchaser shall
have received on each Closing Date a certificate of the Chief Executive Officer and the
Principal Financial Officer of the Company dated such date and to such effect.

(b) On each Closing Date, the Company shall have delivered to Purchaser an opinion of
counsel, substantially in the form of Exhibit A hereto, dated the date of delivery,
confirming in substance the matters covered by paragraphs (a), (b), (c), (d), (e), (f), (g),
(h), (k), (l), (q) and (ll) of Section 5 hereof and otherwise in the form set forth in
Exhibit A.

(c) As of each Closing Date and as of the date or dates upon which Company shall have
received from Purchaser an Initial Investment Notice or any Later Investment Notice or
Warrant Exercise Notice (as defined in the Warrant), the Registration Statement shall be
effective.

(d) On each Closing Date, Purchaser shall have received from the Company the report of
the independent auditor of the Company (together with the accompanying consolidated balance
sheet, financial statement and schedules of the Company and results of the Company’s
operations and cash flows) that was included in the most recent Form 10-K filed by the
Company with the SEC.

(e) The Company shall have submitted to the Nasdaq a correct and complete Notice for
Listing of Additional Shares by no later than November 30, 2007.

 

25

 

(f) On each Closing Date, all Common Shares issued and outstanding shall be duly listed
and admitted for trading on the Nasdaq Global Market.

(g) On each Closing Date, Purchaser shall have received from the transfer agent of the
Company a certificate with respect to the total number of shares of Common Stock outstanding
as of a date on or around Closing Date.

14. Conditions Precedent to the Company’s Obligations.

The obligations of the Company hereunder are subject to the performance by Purchaser of its
obligations hereunder and to the satisfaction (unless expressly waived in writing by the Company)
of the additional conditions precedent that, on each Closing Date:

(a) the representations and warranties made by Purchaser in this Agreement shall be
true and correct;

(b) Purchaser shall have complied fully with all the covenants and agreements in this
Agreement; and

(c) Purchaser shall have delivered to the Company on each such date a certificate of an
appropriate officer of Purchaser dated such date and to such effect.

15. Fees and Expenses. Each of Purchaser and the Company agrees to pay its own expenses incident to the performance of
its obligations hereunder, including, but not limited to, the fees, expenses and disbursements of
such party’s counsel, except as is otherwise expressly provided in this Agreement. Notwithstanding
the foregoing, the Company shall pay all fees and expenses associated with the Registration
Statement, including, without limitation, all fees and expenses associated with any FINRA filing,
if applicable.

16. Non-Performance.

(a) If the Company, at any time, shall fail to deliver the shares of Common Stock to
the Purchaser required to be delivered pursuant to this Agreement or the Warrant, in
accordance with the terms and conditions of this Agreement or the Warrant, as the case may
be, for any reason other than the failure of any condition precedent to the Company’s
obligations hereunder or the failure by Purchaser to comply with its obligations hereunder,
then the Company shall (without limitation to Purchaser’s other remedies at law or in
equity):

(i) indemnify and hold Purchaser harmless against any loss, claim or damage
(excluding incidental, special, punitive and consequential damages) arising from or
as a result of such failure by the Company; and

(ii) reimburse Purchaser for all of its reasonable out-of-pocket expenses,
including fees and disbursements of its counsel, incurred by Purchaser in connection
with this Agreement, the Warrant and the transactions contemplated herein and
therein.

 

26

 

(b) If Purchaser, at any time, shall fail to comply with its obligations to effect the
Initial Investment or the Later Investments under this Agreement for any reason other than
the failure of any condition precedent to Purchaser’s obligations hereunder or the failure
by the Company to comply with its obligations hereunder, then Purchaser shall (without
limitation to the Company’s other remedies at law or in equity):

(i) indemnify and hold the Company harmless against any loss, claim or damage
(excluding incidental, special, punitive and consequential damages) arising from or
as a result of such failure by Purchaser; and

(ii) reimburse the Company for all of its reasonable out-of-pocket expenses,
including fees and disbursements of its counsel, incurred by the Company in
connection with this Agreement, the Warrant and the transactions contemplated herein
and therein.

17. Indemnification.

(a) Company Indemnification Obligation. The Company hereby agrees to indemnify
Purchaser and each of its officers, directors, employees, consultants, agents, attorneys,
accountants and affiliates and each Person that controls (within the meaning of Section 20
of the Exchange Act) any of the foregoing Persons (each a “Purchaser Indemnified
Party”) against any claim, demand, action, liability, damages (excluding incidental,
special, punitive and consequential damages), loss, cost or expense (including, without
limitation, reasonable legal fees and expenses incurred by such Purchaser Indemnified Party
in investigating or defending any such proceeding) (all of the foregoing, including
associated costs and expenses being referred to herein as a “Purchaser Indemnified
Proceeding”), that it may incur in connection with any of the transactions contemplated
hereby arising out of or based upon:

(i) any untrue or alleged untrue statement of a material fact in a SEC Filing
by the Company or any of its affiliates or any Person acting on its or their behalf
or omission or alleged omission to state therein any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading by the Company or any of its affiliates or any Person
acting on its or their behalf;

(ii) any of the representations or warranties made by the Company herein being
untrue or incorrect at the time such representation or warranty was made; and

(iii) any breach or non-performance by the Company of any of its covenants,
agreements or obligations under this Agreement or the Warrant;

provided, however, that the foregoing indemnity shall not apply to any
Purchaser Indemnified Proceeding to the extent that it arises out of, or is based upon, the
gross negligence or willful misconduct of Purchaser in connection therewith.

 

27

 

(b) Purchaser Indemnification Obligation. Purchaser hereby agrees to indemnify
the Company and each of its officers, directors, employees, consultants, agents, attorneys,
accountants and affiliates and each Person that controls (within the meaning of Section 20 of
the Exchange Act) any of the foregoing Persons (each a “Company Indemnified Party”)
against any claim, demand, action, liability, damages (excluding incidental, special,
punitive and consequential damages), loss, cost or expense (including, without limitation,
reasonable legal fees and expenses incurred by such Company Indemnified Party in
investigating or defending any such proceeding) (all of the foregoing, including associated
costs and expenses being referred to herein as a “Company Indemnified Proceeding”,
and together with the Purchase Indemnified Proceeding, the “Proceeding”), that it may
incur in connection with any of the transactions contemplated hereby arising out of or based
upon:

(i) any of the representations or warranties made by Purchaser herein being
untrue or incorrect at the time such representation or warranty was made; and

(ii) any breach or non-performance by Purchaser of its obligations to effect
the Initial Investment and the Later Investments pursuant to the terms of this
Agreement;

provided, however, that the foregoing indemnity shall not apply to any
Company Indemnified Proceeding to the extent that it arises out of, or is based upon, the
gross negligence or willful misconduct of any Company Indemnified Party in connection
therewith.

(c) Conduct of Claims.

(i) Whenever a claim for indemnification shall arise under this Section 17, the
party seeking indemnification (the “Indemnified Party”), shall notify the
party from whom such indemnification is sought (the “Indemnifying Party”) in
writing of the Proceeding and the facts constituting the basis for such claim in
reasonable detail;

(ii) Such Indemnifying Party shall have the right to retain the counsel of its
choice in connection with such Proceeding and to participate at its own expense in
the defense of any such Proceeding; provided, however, that counsel
to the Indemnifying Party shall not (except with the consent of the relevant
Indemnified Party) also be counsel to such Indemnified Party. In no event shall the
Indemnifying Party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all Indemnified
Parties in connection with any one action or separate but similar or related actions
in the same jurisdiction arising out of the same general allegations or
circumstances; and

 

28

 

(iii) No Indemnifying Party shall, without the prior written
consent of the Indemnified Parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with respect
to any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 17 unless such settlement,
compromise or consent (A) includes an unconditional release of each Indemnified
Party from all liability arising out of such litigation, investigation, proceeding
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any Indemnified Party.

18. Survival of the Representations, Warranties, etc. The respective representations, warranties, and agreements made herein by or on behalf of the
parties hereto shall remain in full force and effect, regardless of any investigation made by or on
behalf of the other party to this Agreement or any officer, director or employee of, or Person
controlling or under common control with, such party and will survive delivery of and payment for
any shares of Common Stock issuable hereunder.

19. Notices. All communications hereunder shall be in writing and delivered as set forth below.

(a) If sent to Purchaser, all communications will be deemed delivered: if delivered by
hand, on the day received by Purchaser; if sent by reputable overnight courier, on the next
Business Day; and if transmitted by facsimile to Purchaser, on the date transmitted
(provided such facsimile is later confirmed), in each case to the address set forth
in Annex F hereto (unless otherwise notified in writing of a substitute address).

(b) If sent to the Company, all communications will be deemed delivered: if delivered
by hand, on the day received by the Company; if sent by reputable overnight courier, on the
next Business Day; and if transmitted by facsimile to the Company, on the date transmitted
(provided such facsimile is later confirmed), in each case to the following address
(unless otherwise notified in writing of a substitute address):

Syntroleum Corporation

4322 South 49th West Avenue

Tulsa, Oklahoma 74107

Attention: Principal Financial Officer

Telephone: (918) 592-7900

Facsimile: (918) 592-7979

with a copy to (which copy shall not constitute notice):

Syntroleum Corporation

4322 South 49th West Avenue

Tulsa, Oklahoma 74107

Attention: Chief Executive Officer

Telephone: (918) 592-7900

Facsimile: (918) 592-7979

 

29

 

(c) To the extent that any funds shall be delivered to the Company by wire transfer,
unless otherwise instructed by the Company, such funds should be delivered in accordance
with the wire instructions set forth in Annex G.

(d) If the Company does not agree and acknowledge or object to the delivery of the
Initial Investment Notice or any Later Investment Notice or Warrant Exercise Notice (as
defined in the Warrant), in each case by 5:00 PM, New York time, on the Business Day
following the date of delivery of such notice, such non-response by the Company shall be
deemed to be agreement and acknowledgment by the Company with the terms of such notice.

20. Miscellaneous.

(a) The parties may execute and deliver this Agreement as a single document or in any
number of counterparts, manually, by facsimile or by other electronic means, including
contemporaneous xerographic or electronic reproduction by each party’s respective attorneys.
Each counterpart shall be an original, but a single document or all counterparts together
shall constitute one instrument that shall be the agreement.

(b) This Agreement will inure to the benefit of and be binding upon the parties hereto,
their respective successors and assigns and, with respect to Section 17 hereof, will inure
to the benefit of their respective officers, directors, employees, consultants, agents,
attorneys, accountants and affiliates and each Person that controls (within the meaning of
Section 20 of the Exchange Act) any of the foregoing Persons, and no other Person will have
any right or obligation hereunder. The Company may not assign this Agreement.
Notwithstanding anything to the contrary in this Agreement, Purchaser may assign, pledge,
hypothecate or transfer any of the rights and associated obligations contemplated by this
Agreement (including, but not limited to, the shares of Common Stock), in whole or in part,
at its sole discretion (including, but not limited to, assignments, pledges, hypothecations
and transfers in connection with financing, derivative or hedging transactions with respect
to this Agreement and the shares of Common Stock), provided, that, any such
assignment, pledge, hypothecation or transfer must comply with applicable federal and state
securities laws. No Person acquiring Common Stock from Purchaser pursuant to a public
market purchase will thereby obtain any of the rights contained in this Agreement. This
Agreement, together with the Warrant and that certain Non-Disclosure Agreement dated as of
October 23, 2007, by and between the Company and Purchaser, constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral, between the
parties hereto with respect to the subject matter of this Agreement. Except as provided in
this Section 20(b), this Agreement is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.

 

30

 

(c) This Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York, and each of the parties hereto hereby submits to the
non-exclusive jurisdiction of any state or federal court in the Southern
District of New York and any court hearing any appeal therefrom, over any suit, action
or proceeding against it arising out of or based upon this Agreement (a “Related
Proceeding”). Each of the parties hereto hereby waives any objection to any Related
Proceeding in such courts whether on the grounds of venue, residence or domicile or on the
ground that the Related Proceeding has been brought in an inconvenient forum.

(d) Each party represents and acknowledges that, in the negotiation and drafting of
this Agreement and the other instruments and documents required or contemplated hereby, it
has been represented by and relied upon the advice of counsel of its choice. Each party
hereby affirms that its counsel has had a substantial role in the drafting and negotiation
of this Agreement and such other instruments and documents. Therefore, each party agrees
that no rule of construction to the effect that any ambiguities are to be resolved against
the drafter shall be employed in the interpretation of this Agreement and such other
instruments and documents.

(e) Without prejudice to other rights or remedies hereunder (including any specified
interest rate), and except as otherwise expressly set forth herein, interest shall be due on
any amount that is due pursuant to this Agreement and has not been paid when due, calculated
for the period from and including the due date to but excluding the date on which such
amount is paid at the prime rate of U.S. money center banks as published in The Wall Street
Journal (or if The Wall Street Journal does not exist or publish such information, then the
average of the prime rates of three (3) U.S. money center banks agreed to by the parties)
plus two percent (2%).

(f) Purchaser and the Company stipulate that the remedies at law of the parties hereto
in the event of any default or threatened default by either party in the performance of or
compliance with any of the terms of this Agreement and the Warrant are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.

(g) Any and all remedies set forth in this Agreement or the Warrant: (i) shall be in
addition to any and all other remedies Purchaser or the Company may have at law or in
equity, (ii) shall be cumulative, and (iii) may be pursued successively or concurrently as
each of Purchaser and the Company may elect. The exercise of any remedy by Purchaser or the
Company shall not be deemed an election of remedies or preclude Purchaser or the Company,
respectively, from exercising any other remedies in the future.

(h) The Company agrees that the parties have negotiated in good faith and at arms’
length concerning the transactions contemplated herein, and that Purchaser would not have
agreed to the terms of this Agreement without each and every of the terms, conditions,
protections and remedies provided herein and the Warrant. Except as specifically provided
otherwise in this Agreement and the Warrant, the Company’s obligations to indemnify and hold
Purchaser harmless in accordance with Section 17 of
this Agreement are obligations of the Company that the Company promises to pay to
Purchaser when and if they become due. The Company shall record any such obligations on its
books and records in accordance with U.S. generally accepted accounting principles.

 

31

 

(i) This Agreement may be amended, modified or supplemented in any and all respects,
but only by a written instrument signed by Purchaser and the Company expressly stating that
such instrument is intended to amend, modify or supplement this Agreement.

(j) Each of the parties will cooperate with the others and use its best efforts to
prepare all necessary documentation, to effect all necessary filings, and to obtain all
necessary permits, consents, approvals and authorizations of all governmental bodies and
other third-parties necessary to consummate the transactions contemplated by this Agreement.

(k) For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires: (i) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other gender and neuter gender of
such term; (ii) accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with U.S. generally accepted accounting principles; (iii) references
herein to “Articles”, “Sections”, “Subsections”, “Paragraphs” and other subdivisions without
reference to a document are to designated Articles, Sections, Subsections, Paragraphs and
other subdivisions of this Agreement, unless the context shall otherwise require; (iv) a
reference to a Subsection without further reference to a Section is a reference to such
Subsection as contained in the same Section in which the reference appears, and this rule
shall also apply to Paragraphs and other subdivisions; (v) the words “herein”, “hereof”,
“hereunder” and other words of similar import refer to this Agreement as a whole and not to
any particular provision; (vi) the term “include” or “including” shall mean without
limitation; (vii) the table of contents to this Agreement and all section titles or captions
contained in this Agreement or in any Schedule or Annex hereto or referred to herein are for
convenience only and shall not be deemed a part of this Agreement and shall not affect the
meaning or interpretation of this Agreement; (viii) any agreement, instrument or statute
defined or referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable successor
statues and references to all attachments thereto and instruments incorporated therein; and
(ix) references to a Person are also to its permitted successors and assigns and, in the
case of an individual, to his or her heirs and estate, as applicable.

 

32

 

(l) If any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect. If the final judgment of
a court of competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration, area or
applicability of the term or provision, to delete specific words or phrases, or to replace
any invalid, void or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest extent
possible.

(m) Time shall be of the essence in this Agreement.

(n) All dollar ($) amounts set forth herein and in the Warrant refer to United States
dollars. All payments hereunder and thereunder will be made in lawful currency of the
United States of America.

(o) Notwithstanding anything herein to the contrary, all measurements and references
related to share prices and share numbers herein will be, in each instance, appropriately
adjusted for stock splits, recombinations, stock dividends and the like.

[SIGNATURE PAGE FOLLOWS]

 

33

 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement, all as
of the date first set forth above.

	 	 	 	 	 
	 	SYNTROLEUM CORPORATION

 	 
	 	By:  	/s/ Gary Roth
 	 
	 	 	Name:  	Gary Roth 	 
	 	 	Title:  	President and COO 	 
	 

	 	 	 	 	 
	 	FLETCHER INTERNATIONAL, LTD.

 	 
	 	By:  	/s/ Peter Zayfert
 	 
	 	 	Name:  	Peter Zayfert 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	 	 
	 	By:  	                                              /s/ Stewart Turner
 	 
	 	 	Name:  	Stewart Turner 	 
	 	 	Title:  	Authorized Signatory 	 
	 

Signature Page to Agreement

 

 

 

TABLE OF CONTENTS

Page

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	1.	 	 	PURCHASE AND SALE
	 	 	1	 
	 	 	 	 	 
	 	 	 	 
	 	2.	 	 	DOCUMENTATION CLOSING
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	3.	 	 	INITIAL INVESTMENT CLOSING
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	4.	 	 	LATER INVESTMENT CLOSINGS
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	 	5.	 	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	7	 
	 	 	 	 	 
	 	 	 	 
	 	6.	 	 	REGISTRATION PROVISIONS
	 	 	15	 
	 	 	 	 	 
	 	 	 	 
	 	7.	 	 	19.99% LIMIT ON SHARES ISSUABLE
	 	 	16	 
	 	 	 	 	 
	 	 	 	 
	 	8.	 	 	REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	 	9.	 	 	FUTURE EQUITY ISSUANCES
	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	 	10.	 	 	COVENANTS OF THE COMPANY
	 	 	20	 
	 	 	 	 	 
	 	 	 	 
	 	11.	 	 	CHANGE OF CONTROL
	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	 	12.	 	 	RESTATEMENTS
	 	 	23	 
	 	 	 	 	 
	 	 	 	 
	 	13.	 	 	CONDITIONS PRECEDENT TO PURCHASER’S OBLIGATIONS
	 	 	25	 
	 	 	 	 	 
	 	 	 	 
	 	14.	 	 	CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS
	 	 	26	 
	 	 	 	 	 
	 	 	 	 
	 	15.	 	 	FEES AND EXPENSES
	 	 	26	 
	 	 	 	 	 
	 	 	 	 
	 	16.	 	 	NON-PERFORMANCE
	 	 	26	 
	 	 	 	 	 
	 	 	 	 
	 	17.	 	 	INDEMNIFICATION
	 	 	27	 
	 	 	 	 	 
	 	 	 	 
	 	18.	 	 	SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC
	 	 	29	 
	 	 	 	 	 
	 	 	 	 
	 	19.	 	 	NOTICES
	 	 	29	 
	 	 	 	 	 
	 	 	 	 
	 	20.	 	 	MISCELLANEOUS
	 	 	30	 

 i 

 

 

 

INDEX

	 	 	 	 	 
	19.99% Limit
	 	 	16	 
	65 Day Notice
	 	 	16	 
	Acquiring Person
	 	 	23	 
	Acquisition Consideration
	 	 	22	 
	Aggregate Later Investment Commitment
	 	 	1	 
	Agreement
	 	 	1	 
	Agreement Closing
	 	 	5	 
	Agreement Closing Date
	 	 	5	 
	Business Day
	 	 	3	 
	Change of Control
	 	 	23	 
	Change of Control Notice
	 	 	21	 
	claim
	 	 	10	 
	Closing Date
	 	 	5	 
	Closings
	 	 	5	 
	Common Shares
	 	 	3	 
	Common Stock
	 	 	1	 
	Company
	 	 	1	 
	Company Financial Statements
	 	 	24	 
	Company Indemnified Party
	 	 	27	 
	Company Indemnified Proceeding
	 	 	28	 
	Contingent Later Investment Notice
	 	 	22	 
	Daily Market Price
	 	 	3	 
	debt
	 	 	10	 
	Environmental Laws
	 	 	14	 
	Equity Issuance Notice
	 	 	18	 
	Exchange Act
	 	 	4	 
	Excluded Issuance
	 	 	19	 
	FINRA
	 	 	8	 
	Future Equity Issuance
	 	 	17	 
	Hazardous Materials
	 	 	14	 
	Increase
	 	 	17	 
	Increase Notice
	 	 	16	 
	Indemnified Party
	 	 	28	 
	Indemnifying Party
	 	 	28	 
	Initial Investment
	 	 	1	 
	Initial Investment Closing
	 	 	5	 
	Initial Investment Closing Date
	 	 	3	 
	Initial Investment Notice
	 	 	5	 

 i 

 

 

 

	 	 	 	 	 
	Initial Investment Period
	 	 	4	 
	Initial Investment Price
	 	 	4	 
	Intellectual Property Rights
	 	 	13	 
	Later Investment
	 	 	1	 
	Later Investment Closing
	 	 	1	 
	Later Investment Closing Date
	 	 	1	 
	Later Investment Notice
	 	 	1	 
	Later Investment Period
	 	 	1	 
	Later Investment Price
	 	 	4	 
	Later Issuance Price
	 	 	19	 
	Material Adverse Effect
	 	 	4	 
	Maximum Number
	 	 	16	 
	Nasdaq
	 	 	4	 
	Notice Period
	 	 	16	 
	Offering
	 	 	7	 
	Person
	 	 	4	 
	Prior Period
	 	 	18	 
	Proceeding
	 	 	28	 
	Prospectus
	 	 	16	 
	Purchaser
	 	 	1	 
	Purchaser Indemnified Party
	 	 	27	 
	Purchaser Indemnified Proceeding
	 	 	27	 
	Registration Statement
	 	 	7	 
	Related Proceeding
	 	 	30	 
	Restatement
	 	 	24	 
	Restatement Adjustment Notice Deadline
	 	 	24	 
	Restatement Conversion Stock Price
	 	 	24	 
	Restatement Date
	 	 	24	 
	Restatement Filing Date
	 	 	2	 
	Restatement Notice
	 	 	24	 
	SEC
	 	 	9	 
	SEC Filing
	 	 	9	 
	Securities Act
	 	 	7	 
	Settlement Stock
	 	 	6	 
	Specified Issuance
	 	 	19	 
	Specified Issuance Warrants
	 	 	19	 
	Warrant
	 	 	3	 
	Withdrawal Reduction
	 	 	2	 

 

 

 

ANNEX INDEX

	 	 	 
	ANNEX A

	 	FORM OF LATER INVESTMENT NOTICE
	 
	 	 
	ANNEX B

	 	FORM OF WARRANT
	 
	 	 
	ANNEX C

	 	FORM OF INITIAL INVESTMENT NOTICE
	 
	 	 
	ANNEX D

	 	FORM OF RESTATEMENT NOTICE
	 
	 	 
	ANNEX E

	 	FORM OF RESTATEMENT ADJUSTMENT NOTICE
	 
	 	 
	ANNEX F

	 	CLOSING DELIVERY ADDRESS
	 
	 	 
	ANNEX G

	 	WIRE INSTRUCTIONS
	 
	 	 
	ANNEX H

	 	AMENDMENT TO SECOND AMENDED AND RESTATED RIGHTS AGREEMENT

 

 

 

ANNEX A

[FORM OF LATER INVESTMENT NOTICE]

                    ,           

	 	 	 
	Syntroleum Corporation
	4322 South 49th West Avenue
	Tulsa, Oklahoma 74107
	Attention:

	 	Principal Financial Officer
	Telephone:

	 	(918) 592-7900 
	Facsimile:

	 	(918) 592-7979 

Ladies and Gentlemen:

Reference is made to the Agreement (the “Agreement”) dated as of November 18, 2007 by
and between Syntroleum Corporation (the “Company”) and Fletcher International, Ltd.
(“Fletcher”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Agreement. Fletcher hereby elects to make a Later Investment on the date,
at a price per share and in the amount set forth below.

In accordance with the terms of the Agreement, Fletcher will make a Later Investment with
respect to [
 _____ 

] shares of Common Stock [Cashless Exercise: without payment of any additional
consideration by Fletcher] [at a Later Investment Price equal to [
 _____ 

] per share of Common Stock],
and the Later Investment Closing Date shall be [
 _____ 

]. The Investment Amount for this Later
Investment shall be [
 _____ 

].

On the Later Investment Closing Date, the Company shall deliver the shares of Common Stock
described above to Fletcher’s account via The Depository Trust Company’s [Delivery Versus Payment
system—INSERT REQUIRED INFORMATION FOR DVP] [Deposit/Withdrawal at Custodian (DWAC) system using
the following account information: [INSERT ACCOUNT INFORMATION]].

	 	 	 	 	 
	 	 	FLETCHER INTERNATIONAL, LTD., by its
	 	 	duly authorized investment advisor,
	 	 	FLETCHER ASSET MANAGEMENT, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

 

A-1

 

AGREED AND ACKNOWLEDGED:

SYNTROLEUM CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 

 

A-2

 

ANNEX B

[FORM OF WARRANT]

Warrant Certificate No. [___________]

WARRANTS TO PURCHASE

SHARES OF COMMON STOCK

OF SYNTROLEUM CORPORATION

Syntroleum Corporation, a Delaware corporation (together with its successors, the
“Company”), for value received, hereby certifies that Fletcher International, Ltd., a
company domiciled in Bermuda (together with its successors, “Fletcher”), or its registered
assigns, the registered holder (the “Holder”), is entitled to purchase from the Company up
to the Warrant Amount (as defined below), subject to the adjustments contained in this warrant
certificate (this “Certificate”) or the Agreement between the Company and Fletcher dated as
of November 18, 2007 (the “Agreement”), of duly authorized, validly issued, fully paid and
nonassessable shares of the Company’s common stock, par value $0.01 per share (together with the
associated common stock purchase rights under the Second Amended and Restated Rights Agreement
dated as of October 28, 2004, the “Common Stock”), of the Company at the then-prevailing
Warrant Price (as defined below) at any time or from time to time during the Warrant Term (as
defined below), all subject to the terms, conditions and adjustments set forth below in this
Certificate and in the Agreement.

1. Warrants.

The warrants represented hereby (the “Warrants”) have been issued pursuant to the
Agreement, and are subject to the terms and conditions thereof. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings set forth in the Agreement. A copy of the
Agreement may be obtained at no cost by the Holder upon written request to the Secretary of the
Company at the principal executive offices of the Company.

(a) General; Warrant Price; Warrant Term. 

 

B-1

 

(i) The Warrants entitle the Holder to purchase the number of newly-issued shares of Common
Stock equal to fifty percent (50%) of the quantities purchased in all Later Investment Closings (or
in the case of any Later Investment Closing settled by Cashless Exercise (as defined below), the
gross number of shares used in the calculation of the lesser number to be issued upon such Later
Investment Closing), subject to adjustment as set forth herein and in the Agreement (the
“Warrant Amount”). The “Warrant Price” means the Later Investment Price with
respect to the first Later Investment Closing to occur plus forty cents ($0.40) per share, less the
Dividend Amount, subject to adjustment as set forth herein. The Warrants may be exercised (in
whole or in part) at any time or from time to time after 12:01 A.M., New York City time, on the
date of the Agreement (the “Commencement Date”) until 11:59 P.M., New York City time, on
the date that is seven (7) years after and excluding the last Later Investment Closing Date,
subject to extension pursuant to the Agreement (the period of time from the Commencement Date to
such date, the “Warrant Term”).

(b) Manner of Exercise. 

(i) The Warrants may be exercised by the Holder, in whole or in part, from time to time, on
any day during the Warrant Term, by delivery of a notice in substantially the form attached to this
Certificate (or a reasonable facsimile thereof) duly executed by the Holder (a “Warrant
Exercise Notice”).

(ii) The Warrant Exercise Notice shall designate the number of shares of Common Stock to be
received upon such exercise and the aggregate Warrant Price to be paid (or deemed paid in the case
of Cashless Exercise), which shall be at least the lesser of (i) One Million Dollars ($1,000,000)
and (ii) the aggregate Warrant Price for all shares that may then be purchased under the Warrant.
The closing of each exercise shall take place (i) on the third (3rd) Business Day after
and excluding the date of the Warrant Exercise Notice or (ii) any other date upon which the
exercising Holder and the Company mutually agree (the “Warrant Closing Date”).

(c) Conditions to Closing. 

(i) Holder’s Conditions to Closing. It shall be a condition to each Holder’s
obligation to close on each Warrant Closing Date that each of the following is satisfied, unless
waived by such Holder:

(A) (A) The representations and warranties made by the Company in the
Agreement shall be true and correct as of such Warrant Closing Date, except those
representations and warranties which address matters only as of a particular date,
which

 

B-2

 

shall be true and correct as of such date; (B) the Company shall have
complied in all material respects with all of the covenants and agreements in the
Agreement and this Certificate; (C) the Company shall not possess any negative,
material non-public information other than as shall have been filed with the SEC
at least five (5) Business Days prior to and excluding such Warrant Closing Date;
and (D) Holder shall have received on the date of such exercise a certificate of
the Chief Executive Officer and the Principal Financial Officer of the Company
dated such Warrant Closing Date and to such effect.

(B) On such Warrant Closing Date, the Company shall have delivered to Holder
an opinion of counsel, the form and substance of which shall be reasonably
satisfactory to Holder, dated the date of delivery.

(C) Company will keep the Registration Statement continuously effective
through the end of the Later Investment Period and for so long as any Common Stock
continues to be issuable upon exercise of the Warrant.

(ii) Company’s Conditions to Closing. The obligations of the Company hereunder are
subject to the performance by Holder of its obligations hereunder and to the satisfaction (unless
expressly waived in writing by the Company) of the additional conditions precedent that, on each
Warrant Closing Date: (i) the representations and warranties made by Holder in the Agreement shall
be true and correct; (ii) Holder shall have complied in all material respects with all the
covenants and agreements in the Agreement; and (iii) Holder shall have delivered to the Company on
each such date a certificate of an appropriate officer of Holder dated such date and to such
effect.

(iii) Agreement to Cause Conditions to be Satisfied. The Company with respect to
Section 1.3(a) and the Holder with respect to Section 1.3(b) shall each use commercially reasonable
efforts to cause each of the foregoing conditions to be satisfied at the earliest possible date.

(iv) Withdrawal of Notice. If the conditions set forth in Section 1.3(a) are not
satisfied or waived prior to the second (2nd) Business Day following and excluding the Warrant
Exercise Notice Date (except for those conditions which by their terms can be satisfied only on the
Warrant Closing Date) or if the Company fails to perform its obligations on any Warrant Closing
Date (including delivery of all shares of Common Stock issuable on such date) for any reason other
than Holder’s failure to satisfy the conditions

 

B-3

 

required by Section 1.3(b), then in addition to all remedies available to Holder at law or in
equity, such Holder may, at its sole option, and at any time, withdraw the Warrant Exercise Notice
by written notice to the Company regardless of whether such condition has been satisfied or waived
as of the withdrawal date and, after such withdrawal, shall have no further obligations with
respect to such Warrant Exercise Notice and may submit an Warrant Exercise Notice on any future
date with respect to such Warrants and the Warrant Price for such subsequent Warrant Exercise
Notice shall be the lesser of (i) the Warrant Price in the withdrawn Warrant Exercise Notice and
(ii) the Warrant Price in effect as of the subsequent Warrant Exercise Notice Date.

(d) When Exercise Effective. 

Each exercise of any Warrant shall be deemed to have been effected on the Warrant Closing Date upon
receipt of the relevant Warrant Price (or deemed to have been received in connection with Cashless
Exercises), and the Person or Persons in whose name or names any certificate or certificates
representing the Common Stock shall be issuable upon such exercise as provided in Section 1.5 shall
be deemed to have become the holder(s) of record thereof.

(e) Delivery of Common Stock and Payment.

(i) Subject to Section 1.3, on the Warrant Closing Date, the Holder shall deliver payment in
the amount designated as the “Designated Aggregate Exercise Price” by the holder in the Warrant
Exercise Notice, and such Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock designated in the
Warrant Exercise Notice, delivered as set forth in Section 1.7.

(ii) Notwithstanding subsection (a) above, if any of the following occurs or is true:

(A) the actual number of shares of Common Stock issued pursuant to the
Agreement and this Certificate and the number of shares of Common Stock issuable
pursuant to the Agreement and this Certificate (which number shall be calculated
assuming consummation of the Initial Investment and all Later Investments (as
defined in the Agreement) and exercise of all Warrants, in each case at an Initial
Investment Price (as defined in the Agreement), Later Investment Price (as defined
in the Agreement) or Warrant Price, as the case may, that has been determined in
accordance with the terms hereof or the Agreement, as the case may

 

B-4

 

be or, if not yet determined, at the relevant price per share computed as of
the date on which the Initial Investment Notice (as defined in the Agreement),
Later Investment Notice (as defined in the Agreement) or Warrant Exercise Notice,
as the case may be, is delivered) exceeds Nine Million Three Hundred Twenty Nine
Thousand Two Hundred Ninety Three (9,329,293) without regard to the Maximum Number
then in effect;

(B) the Registration Statement is not effective or otherwise not available;
or

(C) the Holder shall have received a Change of Control Notice from the
Company (as defined in the Agreement) or an event shall have occurred that would
require the Company to deliver a Change of Control Notice, in each case at any
time on or before the date of the Warrant Exercise Notice,

then the exercising Holder may elect to receive an amount of Common Stock (the “Settlement
Stock”) equal to “X” where:

X = [(N x D) — (N x P)] / P

N = the gross number of shares of Common Stock that would have
been issuable on the relevant Warrant Closing Date if the Holder had
not elected Cashless Exercise 

D = Daily Market Price on the third (3rd) Business Day before,
and excluding, the Warrant Closing Date 

P = Warrant Price with respect to such Warrant Exercise Notice

The Settlement Stock shall be issued by the Company to Holder upon the Warrant Closing Date in
lieu of the number of shares of Common Stock otherwise issuable upon exercise of the Warrants
covered by such Warrant Exercise Notice, provided, that the Holder shall not be required to tender
the Warrant Price otherwise payable (a “Cashless Exercise”). 

 

B-5

 

(iii) Closing of Cashless Exercise. The Company shall close a Cashless Exercise on
the relevant Warrant Closing Date. The Company shall issue and deliver
the Settlement Stock pursuant to Section 1.7 on the relevant Warrant Closing Date. Upon
receipt of the Settlement Stock in connection with any Cashless Exercise, (i) that amount of
Warrants as specified for exercise in the Warrant Exercise Notice shall be deemed exercised and
(ii) that amount of cash that would have been paid by the Purchaser on the relevant Warrant Closing
Date if the Holder had not elected Cashless Exercise shall be deemed paid by the Holder and
received by the Company.

(iv) Effect on 19.99% Limit Calculation. In determining whether the 19.99% Limit
described in Section 7(a) of the Agreement has been reached, computation shall be made based on the
number of shares of Settlement Stock actually issued in the case of a Cashless Exercise.

(f) Extension of Term. 

(i) The Warrant Term shall be extended: by two (2) Business Days for each Business Day:

(A) that the Registration Statement is not effective and available for the
issuance of all Common Stock issuable under this Certificate; or

(B) occurring during the period (x) commencing on the earlier of the day on
which the Company restates or announces its intention to restate any portion of
the Company Financial Statements., and (b) ending on the Restatement Filing Date
(as defined in the Agreement).

(ii) To the extent that the Company (i) restates or announces its intention to restate any
portion of the Company Financial Statements or (ii) fails to maintain the effectiveness and
availability of the Registration Statement for the issuance of all Common Stock issuable under this
Certificate, in either case, within sixty-five (65) Business Days of the expiration of the Warrant
Term, the Warrant Term shall be extended to a date that is at least sixty-five (65) Business Days
after the later of the Restatement Filing Date or the remediation of the failure described in
clause (ii).

(g) Delivery of Common Stock. 

 

B-6

 

(i) On the Warrant Closing Date, the Company at its expense (including payment by it of any
applicable issue taxes) shall cause to be issued in the name of and delivered to the exercising
Holder or as such Holder may direct, at the election of such
Holder, (i) at such address specified by such Holder via reputable overnight courier, one or
more certificates for, or (ii) via the Depository Trust Company’s Deposit and Withdrawal at
Custodian (or DWAC) system the number of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock to which such Holder shall be entitled upon such exercise
plus, in lieu of any fractional share of Common Stock to which such Holder would otherwise be
entitled, cash in an amount equal to the same fraction of the Daily Market Price on the Business
Day immediately preceding the relevant Warrant Closing Date, and a certificate from the Company
stating the remaining number of shares of Common Stock for which this Warrant may be exercised.

2. Reservation of Shares.

For so long as the Warrant Amount represented hereby has not been exercised in full, the Company
shall at all times prior to the end of the Warrant Term reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued capital stock, the number of shares
available for exercise hereunder. In the event the number of shares of Common Stock or other
securities issuable exceeds the authorized number of shares of Common Stock or other securities,
the Company shall promptly take all actions necessary to increase the authorized number, including
causing its board of directors to call a special meeting of stockholders and recommend such
increase.

3. Accountants’ Report as to Adjustments.

In each case of any adjustment or readjustment of the Warrant Amount, the Warrant Term, the Warrant
Price or any other adjustment or readjustment pursuant to the terms of the Agreement or this
Certificate, or upon the written request at any time of any Holder, the Company at its expense will
promptly compute such adjustment or readjustment (the “Company Calculation”) in accordance
with the terms of this Certificate and the Agreement and cause the Company’s Principal Financial
Officer to verify such computation and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof and the facts upon
which such adjustment or readjustment is based, including a statement of (a) the Warrant Amount,
(b) the Warrant Term and (c) the Warrant Price in effect immediately prior to such adjustment or
readjustment (as adjusted and readjusted, as applicable). The Company will forthwith deliver a
copy of each such report to each Holder and will also keep copies of all such reports at its
principal office and will cause the same to be available for inspection at such office during
normal business hours by any Holder. The Holder may dispute the Company Calculation by providing
its computation of such adjustment or readjustment (the “Holder 

 

B-7

 

Calculation”) and requesting in writing that independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company) selected by the
Company verify the Company Calculation. The Holder shall be responsible for the costs and expenses
of such accountants if the difference between the computation of the adjustment or readjustment by
such accountants (the “Accountant Calculation”) and the Holder Calculation is greater than
the difference between the Accountant Calculation and the Company Calculation, and otherwise the
Company shall bear such costs and expenses.

4. Taxes.

The Company shall pay all documentary stamp taxes (if any) attributable to the issuance of Common
Stock upon each exercise of the Warrants by the Holder; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the registration of any certificates for Common Stock in a name other than
that of a Holder upon each exercise of Warrants, and the Company shall not be required to issue or
deliver a Certificate evidencing Warrants or certificates for Common Stock unless or until the
person or persons requesting the issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the reasonable satisfaction of the Company that such tax has been
paid.

5. Treatment of Company Stock Adjustment Events. 

In case the Company may effect any subdivision or combination of the issued Common Stock, whether
by reason of any dividend or distribution of units, split, recapitalization, reorganization,
spin-off, combination or other similar change (each a “Company Stock Adjustment Event”),
including a pro rata distribution of Common Stock to all Holders of Common Stock, or a subdivision
or combination of the outstanding Common Stock, then (a) in the case of any such distribution,
immediately after the close of business on the record date for the determination of Holders of any
class of securities entitled to receive such distribution, or (b) in the case of any such
subdivision or combination, at the close of business on the Business Day immediately prior to the
Business Day upon which such Company action becomes effective, the Warrant Price, the Prevailing
Price and, to the extent applicable, the Daily Market Price and each other price or quantity in
effect immediately prior to such Company Stock Adjustment Event shall be proportionately changed.

(a) Business Combinations.

 

B-8

 

(i) If after the date of this Certificate, a Business Combination or plan or proposal with
respect thereto is publicly announced or occurs, as part of such Business Combination, proper
provision shall be made as follows:

(1) Between the date a Business Combination is announced and the effective
date of the Business Combination, each Holder at its sole option shall continue to
have the right to submit to the Company a Warrant Exercise Notice in accordance
with the terms and conditions of this Certificate. In addition, each Holder at
its sole option may elect to submit to the Company a special notice (a
“Contingent Warrant Exercise Notice”) to exercise all or part of its
unexercised Warrants (including any increase in the Warrant Amount contingent upon
any Later Investment Closing for which a Contingent Later Investment Exercise
Notice has been submitted) in connection with such Business Combination; in which
case, notwithstanding the provisions of Section 1.4:

1 the effectiveness of such contingent exercise shall be
conditional upon the effectiveness of the Business Combination;

2 such Holder shall have the right to deliver a notice to
withdraw such Contingent Warrant Exercise Notice until the
effective date of such Business Combination; and

3 if such Contingent Warrant Exercise Notice shall not have
been withdrawn, then on the effective date of such Business
Combination, the Holder of such Warrants shall receive, upon
payment of the Warrant Price designated in the Warrant Exercise
Notice, the same consideration, in the form of cash, securities or
other assets (the “Acquisition Consideration”) per share of
Common Stock issuable to any other holder of shares of Common Stock
in connection with such Business Combination based upon the number
of shares of Common Stock into which such Holder’s Warrants would
be exercisable if such Holder had exercised each Warrant on the
Business Day

 

B-9

 

immediately preceding the date on which such Business
Combination occurs. Upon receipt of the Warrant Price, such
Holder’s Warrants tendered for exercise pursuant to a Warrant
Exercise Notice or Contingent Warrant Exercise Notice shall be
fully exercised and shall no longer permit such Holder to exercise
such Warrants into Common Stock; provided, that if the Acquisition
Consideration is in the form of cash, the Holder shall not be
required to tender the relevant Warrant Price to exercise its
Warrants, but shall receive an amount in connection with such
Business Combination equal to the Acquisition Consideration
applicable to such Holder based on the number of shares of Common
Stock into which such Holder’s Warrants would be exercisable if
such Holder had exercised each Warrant that it owns on the Business
Day immediately preceding the date on which such Business
Combination occurs, less such Warrant Price.

(ii) In the case of any Business Combination, the Company shall not enter into an agreement
with the Acquiring Person resulting in a Business Combination unless such Agreement expressly
obligates the Acquiring Person to assume all of the Company’s obligations under any unexercised
Warrants (the “Stock Assumption Agreement”). In the event that any Warrant remains
unexercised upon consummation of the Business Combination, the Holder thereof shall thereafter
automatically have equivalent rights with respect to the Acquiring Person and from and after the
effective date of the Business Combination and under such Stock Assumption Agreement (i) all
references to the Company in this Certificate shall be references to the Acquiring Person, (ii) all
references to Common Stock in this Certificate shall be references to the securities for which the
Common Stock are exchanged in the Business Combination (or if none, the most widely-held class of
voting securities of the Acquiring Person), (iii) all references to the Warrant Price in this
Certificate shall be references to the Stock Adjustment Measuring Price (as defined below), and
(iv) all references to the Prevailing Price and Warrant Price shall be references to such prices
with respect to the Acquiring Person.

(iii) “Acquiring Person” means, in connection with any Change of Control, (i) the
continuing or surviving Person of a consolidation or merger with the Company (if other than the
Company), (ii) the transferee of all or substantially all of the properties or assets of the
Company, (iii) the corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or

 

B-10

 

exchanged for stock or other securities of any other Person or cash or any other property,
(iv) the entity or group acting in concert acquiring or possessing the power to cast the majority
of the eligible votes at a meeting of the Company’s stockholders at which directors are elected,
or, (v) in the case of a capital reorganization or reclassification of the Common Stock pursuant to
which the shareholders of the Company immediately prior to such reorganization or reclassification
do not beneficially own at least sixty-five percent (65%) of each class of voting securities of the
Company outstanding immediately following such reorganization or reclassification, the Company, or
(vi) at Purchaser’s election, any Person that (A) controls the Acquiring Person directly or
indirectly through one or more intermediaries, (B) is required to include the Acquiring Person in
the consolidated financial statements contained in such Person’s Annual Report on Form 10 K (if
such Person is required to file such a report) or would be required to so include the Acquiring
Person in such Person’s consolidated financial statements if they were prepared in accordance with
U.S. generally accepted accounting principles and (C) is not itself included in the consolidated
financial statements of any other Person (other than its consolidated subsidiaries).

(iv) “Change of Control” means (a) acquisition of the Company by means of merger or
other form of corporate reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the Acquiring Person or its
Parent, Subsidiary or Affiliate (each as defined in Rule 12b-2 of the Exchange Act), other than a
restructuring by the Company where outstanding shares of the Company are exchanged for shares of
the Acquiring Person on a one-for-one basis and, immediately following the exchange, former
stockholders of the Company own all of the outstanding shares, (b) a sale of all or substantially
all of the assets of the Company (on a consolidated basis) in a single transaction or series of
related transactions, (c) any tender offer, exchange offer, stock purchase or other transaction or
series of related transactions by the Company in which the power to cast the majority of the
eligible votes at a meeting of the Company’s stockholders at which directors are elected is
transferred to a single entity or group acting in concert, or (d) a capital reorganization or
reclassification of the Common Stock pursuant to which the shareholders of the Company immediately
prior to such reorganization or reclassification do not beneficially own at least sixty-five
percent (65%) of each class of voting securities of the Company outstanding immediately following
such reorganization or reclassification. Notwithstanding anything contained herein to the
contrary, a change in the state of incorporation of the Company shall not in and of itself
constitute a Change of Control.

(v) “Stock Adjustment Measuring Price” means the Warrant Price multiplied by a
fraction, (i) the numerator of which is the Daily Market Price and (ii) the denominator of which is
the volume-weighted average price, calculated to the nearest ten thousandth (i.e., four decimal
places (.xxxx)), of the securities for which Common Stock is
exchanged in the Business Combination (or if none, the most widely-held class of voting
securities of the Acquiring Person), in each case determined as of the Business Day immediately
preceding and excluding the date on which the Business Combination is consummated.

 

B-11

 

(b) Adjustment for Restatements. 

From and after the date that any Holder delivers a Restatement Adjustment Notice (as defined in the
Agreement) to the Company, each subsequent Warrant Price shall equal the lesser of (a) the Warrant
Price calculated without regard to such Restatement Adjustment Notice and (b) the Restatement Price
(as defined in the Agreement) specified in such Restatement Adjustment Notice less the fair market
value of all dividends, distributions and other payments or issuances declared or paid by the
Company per share of Common Stock on and after the Agreement Closing Date determined as of the date
of each such declaration (the “Dividend Amount”); provided that to the
extent that any dividend constitutes a Company Stock Adjustment Event, such dividend shall be
disregarded from the calculation of the Dividend Amount.

(c) Adjustment for Future Equity Issuances. 

From and after the date that the Company delivers any Equity Issuance Notice to any Holder (or from
and after the date on which a disclosure or consummation described in Section 9(b) of the Agreement
has occurred that requires the Company to deliver an Equity Issuance Notice), each subsequent
Warrant Price shall equal the lesser of (a) the Warrant Price calculated without regard to such
Price Adjustment Notice and (b) the Later Issuance Price (as defined in the Agreement) specified in
such Equity Issuance Notice less the Dividend Amount.

6. Lost or Stolen Certificate

In case this Certificate shall be mutilated, lost, stolen or destroyed, the Company may in its
discretion issue in exchange and substitution for and upon cancellation of the mutilated
Certificate, or in lieu of and substitution for the Certificate lost, stolen or destroyed, a new
Certificate of like tenor, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction of such Certificate and indemnity, if requested, reasonably
satisfactory to the Company. Applicants for a substitute Certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the Company may prescribe.

 

B-12

 

7. Transfer Agent.

(i) Initially, the Company (and upon a Business Combination, the Acquiring Person) shall serve
as the transfer agent (the “Transfer Agent”) for the Warrants. The Transfer Agent shall at
all times maintain a register (the “Stock Register”) of the Holders of the Warrants. The
Company may deem and treat each Holder of Warrants as set forth in the Stock Register as the true
and lawful owner thereof for all purposes, and the Company shall not be affected by any notice to
the contrary.

(ii) The Company may, at any time and from time to time, appoint another Person to serve as
the Transfer Agent, and shall upon acceptance by such Person, give notice to each Holder of the
change in Transfer Agent. Such new Transfer Agent shall be (a) a Person doing business and in good
standing under the laws of the United States or any state thereof, and having a combined capital
and surplus of not less than Fifty Million Dollars ($50,000,000) or (b) an affiliate of such a
Person. The combined capital and surplus of any such new Transfer Agent shall be deemed to be the
combined capital and surplus as set forth in the most recent report of its condition published by
such Transfer Agent prior to its appointment; provided that such reports are published at least
annually pursuant to law or to the requirements of a federal or state supervising or examining
authority. After acceptance in writing of such appointment by the new Transfer Agent, it shall be
vested with the same powers, rights, duties and responsibilities as if it had been originally named
herein as the Transfer Agent, without any further assurance, conveyance, act or deed; but if for
any reason it shall be reasonably necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall
be legally and validly executed and delivered by the Company. Any Person into which any new
Transfer Agent may be merged or any Company resulting from any consolidation to which any new
Transfer Agent shall be a party or any Company to which any new Transfer Agent transfers
substantially all of its corporate trust or stockholders services business shall be a successor
Transfer Agent under this Certificate without any further act; provided that such Person (a) would
be eligible for appointment as successor to the Transfer Agent under the provisions of this Section
7 or (b) is a wholly owned subsidiary of the Transfer Agent. Any such successor Transfer Agent
shall promptly cause notice of its succession as Transfer Agent to be delivered via reputable
overnight courier to the Holders of the Warrants at such Holder’s last address as shown on the
Stock Register.

8. Notices. 

(i) All notices and other communications under this Certificate shall be in writing and shall
be delivered by either a nationally recognized overnight courier, postage prepaid, or transmitted
by facsimile, in each case to the addresses as provided below:

 

B-13

 

(A) If to the Company:

Syntroleum Corporation

4322 South 49th West Avenue

Tulsa, OK 74107-6100

Attention:     Principal Financial Officer

Telephone:    (918) 592-7900

Facsimile:     (918) 592-7979

(B) If to a Holder, at the address of such Holder as listed in the Stock
Register, or to such other address as the Holder shall have designated by notice
similarly given to the Transfer Agent.

(ii) Any such notice or communication shall be deemed received (i) when made, if by hand
delivery, and upon confirmation of receipt, if made by facsimile and in each case if such notice is
received on or before 11:59 p.m. New York City time, otherwise, such notice shall be deemed to be
received the following Business Day, (ii) one (1) Business Day after being deposited with a
next-day courier, return receipt requested, postage prepaid or (iii) three (3) Business Days after
being sent by certified or registered mail, return receipt requested, postage prepaid, in each case
addressed as above (or to such other addresses as the Company or a Holder may designate in writing
from time to time).

9. Construction. 

For purposes of this Certificate, except as otherwise expressly provided or unless the context
otherwise requires: (a) the terms defined in this Certificate have the meanings assigned to them in
this Certificate and include the plural as well as the singular, and the use of any gender herein
shall be deemed to include the other gender and neuter gender of such term; (b) accounting terms
not otherwise defined herein have the meanings assigned to them in accordance with U.S. generally
accepted accounting principles; (c) references herein to “Articles”, “Sections”, “Subsections”,
“Paragraphs” and other subdivisions without reference to a document are to designated Articles,
Sections, Subsections, Paragraphs and other subdivisions of this Certificate, unless the context
shall otherwise require; (d) a reference to a Subsection without further reference to a Section is
a reference to such Subsection as contained in the same Section in which the reference appears, and
this rule shall also apply to Paragraphs and other subdivisions; (e) the words “herein”,
“hereunder” and other words of similar import refer to this Certificate as a whole and not to any

 

B-14

 

particular provision; (f) the term “include” or “including” shall mean without limitation; (g) the
table of contents to this Certificate and all section titles or captions contained in this
Certificate or in any Exhibit or Schedule hereto or referred to herein are for convenience only and
shall not be deemed a part of this Certificate and shall not affect the meaning or interpretation
of this Certificate; (h) any agreement, instrument or statute defined or referred to herein means
such agreement, instrument or statute as amended, modified or supplemented from time to time,
including (in the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all attachments thereto
and instruments incorporated therein; and (i) references to a Person are also to its permitted
successors and assigns and, in the case of an individual, to his or her heirs and estate, as
applicable.

10. Severability of Provisions.

If any right, preference, or limitation of the Warrants set forth in this Certificate (as such
Certificate may be amended from time to time) is invalid, unlawful, or incapable of being enforced
by reason of any rule of law or public policy, all other rights, preferences, and limitations set
forth in this Certificate (as so amended) which can be given effect without the invalid, unlawful
or unenforceable right, preference, or limitation will, nevertheless, remain in full force and
effect, and no right, preference, or limitation set forth in this Certificate shall be deemed
dependent upon any other such right, preference, or limitation unless so expressed in this
Certificate.

This Certificate shall not be valid unless signed by the Company.

[Remainder of Page Left Blank Intentionally]

 

B-15

 

IN WITNESS WHEREOF, Syntroleum Corporation has caused this Warrant to be signed by its duly
authorized officer.

Dated:

	 	 	 	 	 	 	 
	 	 	SYNTROLEUM CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

ATTEST:

Secretary

 

 

 

Exhibit 1

[FORM OF WARRANT EXERCISE NOTICE]

(To Be Executed Upon Exercise Of Warrants)

[DATE]

Syntroleum Corporation

4322 South 49th West Avenue

Tulsa, Oklahoma 74107

Telephone: (212) 994-8200

Facsimile: [                    ]

Attention: [                                        ]

Re: Exercise of Warrants

Ladies and Gentlemen:

Reference is made to the Agreement (the “Agreement”) dated as of November 18, 2007 by
and between Syntroleum Corporation. (the “Company”) and Fletcher International, Ltd.
(“Purchaser”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Agreement.

The undersigned is the registered Holder of a warrant certificate (the “Certificate”)
evidencing the above-referenced warrants (the “Warrants”) issued by the Company and hereby
elects to exercise the Warrants to purchase [
 _____ 

] shares of Common Stock (as defined in the
Certificate) at a Warrant Price (as defined in the Warrants) of $[                    ] for a Designated
Aggregate Exercise Price of $[
 _____ 

].

[Cash exercise:] Subject to the terms and conditions of the Agreement and Warrants, on the
Warrant Closing Date (as defined in the Warrant), Purchaser shall deliver $[ ]
to the Company and the Company shall deliver the number of shares of Common Stock specified above
to Purchaser via The Depository Deposit/Withdrawal at Custodian (DWAC) system using the following
account information:

 

 

 

[Broker:

DTC#:

Account Name:

Account Number:          ]

[Cashless Exercise:] Purchaser hereby elects to exercise [                    ] Warrants into
[                    ] shares of Common Stock via Cashless Exercise (as defined in the Agreement).
Pursuant to the Warrants, delivery of the Warrants shall be the sole consideration deliverable to
the Company in connection with such exercise. Subject to the terms and conditions of the Agreement
and the Warrants, on the Warrant Closing Date (as defined in the Warrants) the Company shall
deliver the number of shares of Common Stock specified above to Purchaser via The Depository
Deposit/Withdrawal at Custodian (DWAC) system using the following account information:

[Broker:

DTC#:

Account Name:

Account Number:          ]

	 	 	 	 	 	 	 
	 	 	[FLETCHER INTERNATIONAL, LTD., by its duly authorized
	 	 	investment advisor, FLETCHER ASSET MANAGEMENT, INC.]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 

AGREED AND ACKNOWLEDGED:

SYNTROLEUM CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

 

 

 

Exhibit 2

[FORM OF WARRANT DELIVERY NOTICE]

[DATE]

Fletcher International, Ltd.]

c/o Fletcher Asset Management, Inc.

48 Wall Street

New York, NY 10005

Attn: Peter Zayfert

Facsimile:     (212) 284-4801

Ladies and Gentlemen:

Reference is made to the Agreement (the “Agreement”) dated as of November 18, 2007 by
and between Syntroleum Corporation (“Syntroleum”) and Fletcher International, Ltd.
(“Fletcher”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Agreement.

This notice confirms that Warrants have been exercised by Fletcher with respect to a Warrant
Price (as designated in the Warrant Exercise Notice) of $[
 _____ 

] and a Designated Aggregate
Exercise Price of $[
 _____ 

], requiring delivery by Syntroleum Corporation to Fletcher of
[
 _____ 

] shares of Common Stock.

After delivery of such shares, the Warrant shall remain exercisable for [
 _____ 

] shares of
Common Stock.

	 	 	 	 	 
	 	 	SYNTROLEUM CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

 

 

ANNEX C

[FORM OF INITIAL INVESTMENT NOTICE]

Syntroleum Corporation

4322 South 49th West Avenue

Tulsa, Oklahoma 74107

Attention:     Principal Financial Officer

Telephone:     (918) 592-7900

Facsimile:     (918) 592-7979

Ladies and Gentlemen:

Reference is made to the Agreement (the “Agreement”) dated as of November 18, 2007 by
and between Syntroleum Corporation (the “Company”) and Fletcher International, Ltd.
(“Fletcher”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Agreement. Fletcher hereby elects to make an Initial Investment on the
date, at a price per share and in the amount set forth below.

In accordance with the terms of the Agreement, the Initial Investment Price shall be [
 _____ 

] per
share of Common Stock and the Initial Investment Closing Date shall be [
 _____ 

]. The Company
shall deliver on the Initial Investment Closing Date to Fletcher’s account [
 _____ 

] shares of
Common Stock against payment of Three Million Dollars ($3,000,000) via The Depository Trust
Company’s [Delivery Versus Payment system—INSERT REQUIRED INFORMATION FOR DVP] [Deposit/Withdrawal
at Custodian (DWAC) system using the following account information: [INSERT ACCOUNT INFORMATION]].

The Company shall also deliver to Fletcher the Warrant by overnight courier to the following
address:

Fletcher International, Ltd.

c/o Appleby Services (Bermuda) Ltd.

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda

Attention: Julia Trippitt, Corporate Administrator

Telephone: +1 441 295 2244 (Main)

Telephone: +1 441 298 3235 (Direct)

 

C-1

 

with copies to:

Fletcher International, Ltd.

c/o Fletcher Asset Management, Inc.

48 Wall Street

New York, NY 10005

Attention: Peter Zayfert

Telephone: 212-284-4801

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Attention: Leif King

Telephone: 650-470-4662

Facsimile: 888-329-8274

 

C-2

 

	 	 	 	 	 
	 	 	FLETCHER INTERNATIONAL, LTD., by its
	 	 	duly authorized investment advisor,
	 	 	FLETCHER ASSET MANAGEMENT, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

AGREED AND ACKNOWLEDGED:

SYNTROLEUM CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 

 

C-3

 

ANNEX D

[FORM OF RESTATEMENT NOTICE]

[date]

Fletcher International, Ltd.

c/o Appleby Services (Bermuda) Ltd.

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda

Attention: Julia Trippitt, Corporate Administrator

Telephone: +1 441 295 2244 (Main)

Telephone: +1 441 298 3235 (Direct)

Ladies and Gentlemen:

Reference is made to the Agreement (the “Agreement”) dated as of November 18, 2007 by
and between Syntroleum Corporation (the “Company”) and Fletcher International, Ltd.
(“Purchaser”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Agreement.

In accordance with Section 12(a)(i) of the Agreement, the Company hereby gives notice to
Purchaser that a Restatement has occurred on [DATE], as described in the enclosed [DOCUMENT IN
WHICH RESTATEMENT WAS PUBLICLY DISCLOSED].

	 	 	 	 	 
	 	 	SYNTROLEUM CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

 

D-1

 

With copies to:

Fletcher International, Ltd.

c/o Fletcher Asset Management, Inc.

48 Wall Street

New York, NY 10005

Attention: Peter Zayfert

Telephone: 212-284-4801

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Attention: Leif King

Telephone: 650-470-4662

Facsimile: 888-329-8274

 

D-2

 

ANNEX E

[FORM OF RESTATEMENT ADJUSTMENT NOTICE]

[date]

Syntroleum Corporation

4322 South 49th West Avenue

Tulsa, Oklahoma 74107

Attention:     Principal Financial Officer

Telephone:     (918) 592-7900

Facsimile:     (918) 592-7979

Ladies and Gentlemen:

Reference is made to the Agreement (the “Agreement”) dated as of November 18, 2007 by
and between Syntroleum Corporation (the “Company”) and Fletcher International, Ltd.
(“Purchaser”). Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Agreement.

This letter serves as a Restatement Adjustment Notice in accordance with Section 12 of the
Agreement.

Pursuant to Section 12(d) of the Agreement, the Restatement Date is [
 _____ 

] and the Restatement
Price is $[
 _____ 

] per share. [The number of shares of Common Stock required to be issued pursuant
to clause (a)(ii) of Section 12 of the Agreement is [                                        ].]

	 	 	 	 	 
	 	 	FLETCHER INTERNATIONAL, LTD., by its
	 	 	duly authorized investment advisor,
	 	 	FLETCHER ASSET MANAGEMENT, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

 

E-1

 

ANNEX F

NOTICE ADDRESS

Fletcher International, Ltd.

c/o Appleby Services (Bermuda) Ltd.

Canon’s Court

22 Victoria Street

PO Box HM 1179

Hamilton HM EX

Bermuda

Attention: Julia Trippitt, Corporate Administrator

Telephone: +1 441 295 2244 (Main)

Telephone: +1 441 298 3235 (Direct)

with copies to (which copies shall not constitute notice):

Fletcher International, Ltd.

c/o Fletcher Asset Management, Inc.

48 Wall Street

New York, NY 10005

Attention: Peter Zayfert

Telephone: 212-284-4801

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Avenue

Palo Alto, CA 94301

Attention: Leif King

Telephone: 650-470-4662

Facsimile: 888-329-8274

 

F-1

 

ANNEX G

SYNTROLEUM CORPORATION WIRE INSTRUCTIONS

	 	 	 	 	 
	 	 	Syntroleum Corporation
	 

	 	Account Number:
	 	[INSERT ACCOUNT INFORMATION]
	 

	 	ABA Number:
	 	[INSERT ACCOUNT INFORMATION]
	 

	 	Bank:
	 	[INSERT ACCOUNT INFORMATION]
	 

	 	Account Name:
	 	[INSERT ACCOUNT INFORMATION]
	 

	 	SWIFT:
	 	[INSERT ACCOUNT INFORMATION]

 

G-1

 

ANNEX H

AMENDMENT TO

SECOND AMENDED AND RESTATED RIGHTS AGREEMENT

Section 11(a)(iii) shall be deleted and replaced with the following:

(iii) In the event that the number of shares of Common Stock that are authorized by the
Company’s certificate of incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights is not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company shall, to the extent permitted by applicable law and regulation, (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right
(computed using the Current Market Price used to determine the number of Adjustment Shares)
(the “Current Value”) over (2) the Purchase Price (such excess is herein referred to as the
“Spread”), and (B) with respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon the exercise of the Rights and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units of shares, of
preferred stock (including, without limitation, the Preferred Stock) that the Board of
Directors of the Company has determined to have the same value as shares of Common Stock
(such shares of preferred stock are herein referred to as “Common Stock Equivalents”)), (4)
debt securities of the Company, (5) other assets or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the Company;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within 30 days following the later of (x) the
first occurrence of a Flip-In Event and (y) the date on which the Company’s right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to
herein as the “Flip-In Trigger Date”), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the Purchase Price,
 shares of Common Stock (to the extent not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the Rights, the 30-day
period set forth above may be extended to the extent necessary, but not more than 90 days
after the Flip-In Trigger Date, in order that the Company may seek stockholder approval for
the authorization of such additional shares (such period, as it may be extended, the
“Substitution Period”). To the extent that the Company or the Board of Directors determines
that some action need be taken pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek

 

H-1

 

any authorization of additional shares and/or to decide the appropriate form of distribution
to be made pursuant to such first sentence and to determine the value thereof. In the event
of any such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Stock shall be the Current Market Price per
share of the Common Stock on the Flip-In Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common Stock on such date.

 

H-2

 

SCHEDULE 5(d)

Certain anti-dilution provisions set forth in Sections 5(e) and 5(f) of the Warrant Agreement dated
as of May 25, 2004 between Syntroleum Corporation and American Stock Transfer and Trust Company as
Warrant Agent may be triggered by the issuance of the shares of Common Stock issuable under this
Agreement and under the Warrant.

 

 

 

SCHEDULE 5(k)

In connection with that certain Non-Disclosure Agreement dated as of October 23, 2007, by and
between the Company and Purchaser, the Company disclosed the following to the Purchaser:

	 	1.	 	Selection of the Geismar, Louisiana site for the first Dynamic Fuels plant
	 
	 	2.	 	Changes in management involving the retirement or separation of John B. Holmes, Jr.,
Kenneth L. Agee and Richard L. Edmonson
	 
	 	3.	 	Possible transaction to sell certain Company laboratory facilities to Kenneth L. Agee
or a company to be formed by him
	 
	 	4.	 	 
	 
	 	5.	 	Staff reductions to approximately 19 employees
	 
	 	6.	 	Cost reductions to a level of a cash burn rate of approximately $6.5 million per year

 

 

 

SCHEDULE 5(p)

In connection with that certain Non-Disclosure Agreement dated as of October 23, 2007, by and
between the Company and Purchaser, the Company disclosed the following to the Purchaser:

	 	1.	 	Selection of the Geismar, Louisiana site for the first Dynamic Fuels plant
	 
	 	2.	 	Changes in management involving the retirement or separation of John B. Holmes, Jr.,
Kenneth L. Agee and Richard L. Edmonson
	 
	 	3.	 	Possible transaction to sell certain Company laboratory facilities to Kenneth L. Agee or
a company to be formed by him
	 
	 	4.	 	 
	 
	 	5.	 	Staff reductions to approximately 19 employees
	 
	 	6.	 	Cost reductions to a level of a cash burn rate of approximately $6.5 million per year

 

 

 

SCHEDULE 5(v)

In connection with that certain Non-Disclosure Agreement dated as of October 23, 2007, by and
between the Company and Purchaser, the Company disclosed the following to the Purchaser:

	 	1.	 	Selection of the Geismar, Louisiana site for the first Dynamic Fuels plant
	 
	 	2.	 	Changes in management involving the retirement or separation of John B. Holmes, Jr.,
Kenneth L. Agee and Richard L. Edmonson
	 
	 	3.	 	Possible transaction to sell certain Company laboratory facilities to Kenneth L. Agee or
a company to be formed by him
	 
	 	4.	 	 
	 
	 	5.	 	Staff reductions to approximately 19 employees
	 
	 	6.	 	Cost reductions to a level of a cash burn rate of approximately $6.5 million per year

 

 

 

SCHEDULE 5(z)

The Company is in negotiations with Richard L. Edmonson for his retirement or separation from the
Company. The Company contemplates entering into a retirement or severance agreement with this
executive before the end of 2007. On November 15, 2007, the Company and John B. Holmes, Jr.
executed a retirement agreement which provides for Mr. Holmes to retire from the Company on
December 28, 2007. On November 16, 2007, the Company and Kenneth L. Agee executed a retirement
agreement which calls for Mr. Agee to retire from the Company on December 2, 2007. The Company is
also in negotiations with Mr. Agee to sell him or a company formed by him certain laboratory
facilities and equipment.

 

 

 

SCHEDULE 5(ll)

Certain anti-dilution provisions set forth in Sections 5(e) and 5(f) of the Warrant Agreement dated
as of May 25, 2004 between Syntroleum Corporation and American Stock Transfer and Trust Company as
Warrant Agent may be triggered by the issuance of the shares of Common Stock issuable under this
Agreement and under the Warrant.

 

 

 

SCHEDULE 9(d)

Warrants issued by the Company pursuant to the Warrant Agreement dated June 22, 2007, by and
between Syntroleum Corporation and Tyson Foods, Inc.exhib4-4.htm

     

    
      

      

    

    EXHIBIT
      4.4
 

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
      THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
      OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

    

    COMMON
      STOCK BROKER’S WARRANT

    

    To
      Purchase _______ Shares of Common Stock of

     

    MANAS
      PETROLEUM CORPORATION

     

    THIS
      COMMON STOCK BROKER’S WARRANT (the “Warrant”) certifies
      that, for value received, _______________. (the “Holder”), is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date hereof (the
      “Exercise
      Date”) and on or prior to the close of business on the second anniversary
      of the Exercise Date (the “Termination Date”)
      but not thereafter, to subscribe for and purchase from Manas Petroleum
      Corporation, a Nevada corporation (the “Company”), in the
      aggregate, up to _______ shares (the “Warrant Shares”) of
      Common Stock, $.001 par value per share, of the Company (the “Common
      Stock”).  The purchase price of one share of Common Stock under
      this Warrant shall be equal to the Exercise Price, as defined in Section
      2(b).

     

    Section
      1.                                Definitions.  Capitalized
      terms used and not otherwise defined herein shall have the meanings set forth
      in
      that certain Securities Purchase Agreement (the “Purchase Agreement”),
      dated July 31, 2007, among the Company and the purchasers signatory
      thereto.

     

    Section
      2.                                Exercise.

     

    a) Exercise
      of
      Warrant.  Exercise of the purchase rights represented by this
      Warrant may be made, in whole or in part, at any time or times on or after
      the
      Exercise Date and on or before the Termination Date by delivery to the Company
      of a duly executed facsimile copy of the Notice of Exercise Form
      annexed  hereto (or such other office or agency of the Company as it
      may designate by notice in writing to the registered Holder at the address
      of
      such Holder appearing on the books of the Company); provided, however,
      within 5
      Trading Days of the date said Notice of Exercise is delivered to the Company,
      if
      this Warrant is exercised in full, the Holder shall have surrendered this
      Warrant to the Company and the Company shall have received  payment of
      the aggregate Exercise Price of the shares thereby purchased by wire transfer
      or
      cashier’s check drawn on a United States bank.  Notwithstanding
      anything herein to the contrary, the Holder shall not be required to physically
      surrender this Warrant to the Company until the Holder has purchased all of
      the
      Warrant Shares available hereunder and the Warrant has been exercised in
      full.  Partial exercises of this Warrant resulting in purchases of a
      portion of the total number of Warrant Shares available hereunder shall have
      the
      effect of lowering the outstanding number of Warrant Shares purchasable
      hereunder in an amount equal to the applicable number of Warrant Shares
      purchased.  The Holder and the Company shall maintain records showing
      the number of Warrant Shares purchased and the date of such
      purchases.  The Company shall deliver any objection to any Notice of
      Exercise Form within 1 Business Day of receipt of such notice.  In the
      event of any dispute or discrepancy, the records of the Holder shall be
      controlling and determinative in the absence of manifest error. The Holder
      and
      any assignee, by acceptance of this Warrant, acknowledge and agree that, by
      reason of the provisions of this paragraph, following the purchase of a portion
      of the Warrant Shares hereunder, the number of Warrant Shares available for
      purchase hereunder at any given time may be less than the amount stated on
      the
      face hereof.

     

    b) Exercise
      Price.  The exercise price of the Common Stock under this
      Warrant shall be $4.50, subject to adjustment hereunder (the “Exercise
      Price”).

     

    c) Mechanics
      of
      Exercise.

     

    i. Authorization
      of Warrant
      Shares.  The Company covenants that all Warrant Shares which
      may be issued upon the exercise of the purchase rights represented by this
      Warrant will, upon exercise of the purchase rights represented by this Warrant,
      be duly authorized, validly issued, fully paid and nonassessable and free from
      all taxes, liens and charges in respect of the issue thereof (other than taxes
      in respect of any transfer occurring contemporaneously with such
      issue).

     

    ii. Delivery
      of Certificates
      Upon Exercise.  Certificates for shares purchased hereunder
      shall be transmitted by the transfer agent of the Company to the Holder by
      crediting the account of the Holder’s prime broker with the Depository Trust
      Company through its Deposit Withdrawal Agent Commission (“DWAC”) system
      if the
      Company is a participant in such system, and otherwise by physical delivery
      to
      the address specified by the Holder in the Notice of Exercise within 3 Trading
      Days from the delivery to the Company of the Notice of Exercise Form, surrender
      of this Warrant (if required) and payment of the aggregate Exercise Price as
      set
      forth above (“Warrant
      Share Delivery Date”).  This Warrant shall be deemed to have
      been exercised on the date the Exercise Price is received by the
      Company.  The Warrant Shares shall be deemed to have been issued, and
      Holder or any other person so designated to be named therein shall be deemed
      to
      have become a holder of record of such shares for all purposes, as of the date
      the Warrant has been exercised by payment to the Company of the Exercise Price
      and all taxes required to be paid by the Holder, if any, pursuant to Section
      2(e)(vii) prior to the issuance of such shares, have been paid.

     

    iii. Delivery
      of New Warrants
      Upon Exercise.  If this Warrant shall have been exercised in
      part, the Company shall, at the request of a Holder and upon surrender of this
      Warrant certificate, at the time of delivery of the certificate or certificates
      representing Warrant Shares, deliver to Holder a new Warrant evidencing the
      rights of Holder to purchase the unpurchased Warrant Shares called for by this
      Warrant, which new Warrant shall in all other respects be identical with this
      Warrant.

     

    iv. Rescission
      Rights.  If the Company fails to cause its transfer agent to
      transmit to the Holder a certificate or certificates representing the Warrant
      Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date,
      then the Holder will have the right to rescind such exercise.

     

    v. No
      Fractional Shares or
      Scrip.  No fractional shares or scrip representing fractional
      shares shall be issued upon the exercise of this Warrant.  As to any
      fraction of a share which Holder would otherwise be entitled to purchase upon
      such exercise, the Company shall pay a cash adjustment in respect of such final
      fraction in an amount equal to such fraction multiplied by the Exercise
      Price.

     

    vi. Charges,
      Taxes and
      Expenses.  Issuance of certificates for Warrant Shares shall be
      made without charge to the Holder for any issue or transfer tax or other
      incidental expense in respect of the issuance of such certificate, all of which
      taxes and expenses shall be paid by the Company, and such certificates shall
      be
      issued in the name of the Holder or in such name or names as may be directed
      by
      the Holder; provided, however,
      that in the
      event certificates for Warrant Shares are to be issued in a name other than
      the
      name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    vii. Closing
      of
      Books.  The Company will not close its stockholder books or
      records in any manner which prevents the timely exercise of this Warrant,
      pursuant to the terms hereof.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    Section
      3.                                CertainAdjustments.

     

    a) Stock
      Dividends and
      Splits. If the Company, at any time while this Warrant is outstanding:
      (A) pays a stock dividend or otherwise make a distribution or distributions
      on
      shares of its Common Stock or any other equity or equity equivalent securities
      payable in shares of Common Stock (which, for avoidance of doubt, shall not
      include any shares of Common Stock issued by the Company pursuant to this
      Warrant), (B) subdivides outstanding shares of Common Stock into a larger number
      of shares, (C) combines (including by way of reverse stock split) outstanding
      shares of Common Stock into a smaller number of shares, or (D) issues by
      reclassification of shares of the Common Stock any shares of capital stock
      of
      the Company, then in each case the Exercise Price shall be multiplied by a
      fraction of which the numerator shall be the number of shares of Common Stock
      (excluding treasury shares, if any) outstanding immediately before such event
      and of which the denominator shall be the number of shares of Common Stock
      outstanding immediately after such event and the number of shares issuable
      upon
      exercise of this Warrant shall be proportionately adjusted.  Any
      adjustment made pursuant to this Section 3(a) shall become effective immediately
      after the record date for the determination of stockholders entitled to receive
      such dividend or distribution and shall become effective immediately after
      the
      effective date in the case of a subdivision, combination or
      re-classification.

     

    b) Subsequent
      Equity
      Sales. If the Company or any Subsidiary thereof, as applicable, at any
      time while this Warrant is outstanding, shall offer, sell, grant any option
      to
      purchase or offer, sell or grant any right to reprice its securities, or
      otherwise dispose of or issue (or announce any offer, sale, grant or any option
      to purchase or other disposition) any Common Stock or Common Stock Equivalents
      entitling any Person to acquire shares of Common Stock, at an effective price
      per share less than the then Exercise Price (such lower price, the “Base Share Price” and
      such issuances collectively, a “Dilutive Issuance”),
      as adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Exercise Price, such
      issuance shall be deemed to have occurred for less than the Exercise Price
      on
      such date of the Dilutive Issuance), then the Exercise Price shall be reduced
      and only reduced to equal the Base Share Price and the number of Warrant Shares
      issuable hereunder shall be increased such that the aggregate Exercise Price
      payable hereunder, after taking into account the decrease in the Exercise Price,
      shall be equal to the aggregate Exercise Price prior to such
      adjustment.  Such adjustment shall be made whenever such Common Stock
      or Common Stock Equivalents are issued.  Notwithstanding the
      foregoing, no adjustments shall be made, paid or issued under this Section
      3(b)
      in respect of an Exempt Issuance.  The Company shall notify the Holder
      in writing, no later than the Trading Day following the issuance of any Common
      Stock or Common Stock Equivalents subject to this section, indicating therein
      the applicable issuance price, or of applicable reset price, exchange price,
      conversion price and other pricing terms (such notice the “Dilutive Issuance
      Notice”).  For purposes of clarification, whether or not the
      Company provides a Dilutive Issuance Notice pursuant to this Section 3(b),
      upon
      the occurrence of any Dilutive Issuance, after the date of such Dilutive
      Issuance the Holder is entitled to receive a number of Warrant Shares based
      upon
      the Base Share Price regardless of whether the Holder accurately refers to
      the
      Base Share Price in the Notice of Exercise.

     

    c) Pro
      Rata
      Distributions.  If the Company, at any time prior to the
      Termination Date, shall distribute to all holders of Common Stock (and not
      to
      Holders of the Warrants) evidences of its indebtedness or assets (including
      cash
      and cash dividends) or rights or warrants to subscribe for or purchase any
      security other than the Common Stock (which shall be subject to Section 3(b)),
      then in each such case the Exercise Price shall be adjusted by multiplying
      the
      Exercise Price in effect immediately prior to the record date fixed for
      determination of stockholders entitled to receive such distribution by a
      fraction of which the denominator shall be the VWAP determined as of the record
      date mentioned above, and of which the numerator shall be such VWAP on such
      record date less the then per share fair market value at such record date of
      the
      portion of such assets or evidence of indebtedness so distributed applicable
      to
      one outstanding share of the Common Stock as determined by the Board of
      Directors in good faith.  In either case the adjustments shall be
      described in a statement provided to the Holder of the portion of assets or
      evidences of indebtedness so distributed or such subscription rights applicable
      to one share of Common Stock.  Such adjustment shall be made whenever
      any such distribution is made and shall become effective immediately after
      the
      record date mentioned above.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    d) Fundamental
      Transaction. If, at any time while this Warrant is outstanding, (A) the
      Company effects any merger or consolidation of the Company with or into another
      Person, (B) the Company effects any sale of all or substantially all of its
      assets in one or a series of related transactions, (C) any tender offer or
      exchange offer (whether by the Company or another Person) is completed pursuant
      to which holders of Common Stock are permitted to tender or exchange their
      shares for other securities, cash or property, or (D) the Company effects any
      reclassification of the Common Stock or any compulsory share exchange pursuant
      to which the Common Stock is effectively converted into or exchanged for other
      securities, cash or property (in any such case, a “Fundamental
      Transaction”), then, upon any subsequent exercise of this Warrant, the
      Holder shall have the right to receive, for each Warrant Share that would have
      been issuable upon such exercise immediately prior to the occurrence of such
      Fundamental Transaction, at the option of the Holder, (a) upon exercise of
      this
      Warrant, the number of shares of Common Stock of the successor or acquiring
      corporation or of the Company, if it is the surviving corporation, and any
      additional consideration (the “Alternate
      Consideration”) receivable upon or as a result of such reorganization,
      reclassification, merger, consolidation or disposition of assets by a Holder
      of
      the number of shares of Common Stock for which this Warrant is exercisable
      immediately prior to such event or (b) if the Company is acquired in an all
      cash
      transaction, cash equal to the value of this Warrant as determined in accordance
      with the Black-Scholes option pricing formula.  For purposes of any
      such exercise, the determination of the Exercise Price shall be appropriately
      adjusted to apply to such Alternate Consideration based on the amount of
      Alternate Consideration issuable in respect of one share of Common Stock in
      such
      Fundamental Transaction, and the Company shall apportion the Exercise Price
      among the Alternate Consideration in a reasonable manner reflecting the relative
      value of any different components of the Alternate Consideration.  If
      holders of Common Stock are given any choice as to the securities, cash or
      property to be received in a Fundamental Transaction, then the Holder shall
      be
      given the same choice as to the Alternate Consideration it receives upon any
      exercise of this Warrant following such Fundamental Transaction.  To
      the extent necessary to effectuate the foregoing provisions, any successor
      to
      the Company or surviving entity in such Fundamental Transaction shall issue
      to
      the Holder a new warrant consistent with the foregoing provisions and evidencing
      the Holder’s right to exercise such warrant into Alternate Consideration. The
      terms of any agreement pursuant to which a Fundamental Transaction is effected
      shall include terms requiring any such successor or surviving entity to comply
      with the provisions of this Section 3(d) and insuring that this Warrant (or
      any
      such replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental Transaction.

     

    e) Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    f) Voluntary
      Adjustment By
      Company. The Company may at any time during the term of this Warrant
      reduce the then current Exercise Price to any amount and for any period of
      time
      deemed appropriate by the Board of Directors of the Company.

     

    g) Notice
      to
      Holders.

     

    i. Adjustment
      to Exercise
      Price. Whenever the Exercise Price is adjusted pursuant to this Section
      3, the Company shall promptly mail to each Holder a notice setting forth the
      Exercise Price after such adjustment and setting forth a brief statement of
      the
      facts requiring such adjustment. If the Company issues a variable rate security,
      despite the prohibition thereon in the Purchase Agreement, the Company shall
      be
      deemed to have issued Common Stock or Common Stock Equivalents at the lowest
      possible conversion or exercise price at which such securities may be converted
      or exercised in the case of a Variable Rate Transaction (as defined in the
      Purchase Agreement).

     

    ii. Notice
      to Allow Exercise by
      Holder. If (A) the Company shall declare a dividend (or any other
      distribution) on the Common Stock; (B) the Company shall declare a special
      nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
      Company shall authorize the granting to all holders of the Common Stock rights
      or warrants to subscribe for or purchase any shares of capital stock of any
      class or of any rights; (D) the approval of any stockholders of the Company
      shall be required in connection with any reclassification of the Common Stock,
      any consolidation or merger to which the Company is a party, any sale or
      transfer of all or substantially all of the assets of the Company, of any
      compulsory share exchange whereby the Common Stock is converted into other
      securities, cash or property; (E) the Company shall authorize the voluntary
      or
      involuntary dissolution, liquidation or winding up of the affairs of the
      Company; then, in each case, the Company shall cause to be mailed to the Holder
      at its last address as it shall appear upon the Warrant Register of the Company,
      at least 20 calendar days prior to the applicable record or effective date
      hereinafter specified, a notice stating (x) the date on which a record is to
      be
      taken for the purpose of such dividend, distribution, redemption, rights or
      warrants, or if a record is not to be taken, the date as of which the holders
      of
      the Common Stock of record to be entitled to such dividend, distributions,
      redemption, rights or warrants are to be determined or (y) the date on which
      such reclassification, consolidation, merger, sale, transfer or share exchange
      is expected to become effective or close, and the date as of which it is
      expected that holders of the Common Stock of record shall be entitled to
      exchange their shares of the Common Stock for securities, cash or other property
      deliverable upon such reclassification, consolidation, merger, sale, transfer
      or
      share exchange; provided that the failure to mail such notice or any defect
      therein or in the mailing thereof shall not affect the validity of the corporate
      action required to be specified in such notice.  The Holder is
      entitled to exercise this Warrant during the 20-day period commencing on the
      date of such notice to the effective date of the event triggering such
      notice.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      4.                                Transfer
      of
      Warrant.

     

    a) Transferability.  Subject
      to compliance with any applicable securities laws
      and the conditions set forth in Sections 5(a) and 4(d) hereof and to the
      provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
      hereunder are transferable, in whole or in part, upon surrender of this Warrant
      at the principal office of the Company, together with a written assignment
      of
      this Warrant substantially in the form attached hereto duly executed by the
      Holder or its agent or attorney and funds sufficient to pay any transfer taxes
      payable upon the making of such transfer.  Upon such surrender and, if
      required, such payment, the Company shall execute and deliver a new Warrant
      or
      Warrants in the name of the assignee or assignees and in the denomination or
      denominations specified in such instrument of assignment, and shall issue to
      the
      assignor a new Warrant evidencing the portion of this Warrant not so assigned,
      and this Warrant shall promptly be cancelled.  A Warrant, if properly
      assigned, may be exercised by a new holder for the purchase of Warrant Shares
      without having a new Warrant issued.

     

    b) New
      Warrants. This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney.  Subject to compliance
      with Section 4(a), as to any transfer which may be involved in such division
      or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c) Warrant
      Register. The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant Register”),
      in the name of the record Holder hereof from time to time.  The
      Company may deem and treat the registered Holder of this Warrant as the absolute
      owner hereof for the purpose of any exercise hereof or any distribution to
      the
      Holder, and for all other purposes, absent actual notice to the
      contrary.

     

    d) Transfer
      Restrictions. If, at the time
      of the surrender of this Warrant in connection with
      any transfer of this Warrant, the transfer of this Warrant shall not be
      registered pursuant to an effective registration statement under the Securities Act and under
      applicable state securities or blue sky laws, the
      Company may require, as a condition of allowing such transfer (i) that the
      Holder or transferee of this Warrant, as the case may be, furnish to the Company
      a written opinion of counsel (which opinion shall be in form, substance and
      scope customary for opinions of counsel in comparable transactions) to the
      effect that such transfer may be made without registration under the Securities Act and under applicable
      state securities
      or blue sky laws, (ii) that the holder or transferee execute and deliver to
      the
      Company an investment letter in form and substance acceptable to the Company
      and
      (iii) that the transferee be an “accredited
      investor”
      as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7),
      or (a)(8) promulgated under the Securities Act or a qualified institutional
      buyer as defined in Rule 144A(a) under the Securities Act.

     

    

    Section
      5.                                Miscellaneous.

     

    a) Title
      to
      Warrant.  Prior to the Termination Date and subject to
      compliance with applicable laws and Section 4 of this Warrant, this Warrant
      and
      all rights hereunder are transferable, in whole or in part, at the office or
      agency of the Company by the Holder in person or by duly authorized attorney,
      upon surrender of this Warrant together with the Assignment Form annexed hereto
      properly endorsed.  The transferee shall sign an investment letter in
      form and substance reasonably satisfactory to the Company.

     

    b) No
      Rights as Shareholder
      Until Exercise.  This Warrant does not entitle the Holder to
      any voting rights or other rights as a shareholder of the Company prior to
      the
      exercise hereof.  Upon the surrender of this Warrant and the payment
      of the aggregate Exercise Price, the Warrant Shares so purchased shall be and
      be
      deemed to be issued to such Holder as the record owner of such shares as of
      the
      close of business on the later of the date of such surrender or
      payment.

     

    c) Loss,
      Theft, Destruction or
      Mutilation of Warrant. The Company covenants that upon receipt by the
      Company of evidence reasonably satisfactory to it of the loss, theft,
      destruction or mutilation of this Warrant or any stock certificate relating
      to
      the Warrant Shares, and in case of loss, theft or destruction, of indemnity
      or
      security reasonably satisfactory to it (which, in the case of the Warrant,
      shall
      not include the posting of any bond), and upon surrender and cancellation of
      such Warrant or stock certificate, if mutilated, the Company will make and
      deliver a new Warrant or stock certificate of like tenor and dated as of such
      cancellation, in lieu of such Warrant or stock certificate.

     

    d) Saturdays,
      Sundays,
      Holidays, etc.  If the last or appointed day for the taking of
      any action or the expiration of any right required or granted herein shall
      be a
      Saturday, Sunday or a legal holiday, then such action may be taken or such
      right
      may be exercised on the next succeeding day not a Saturday, Sunday or legal
      holiday.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    e) Authorized
      Shares.

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant.  The Company further covenants
      that its issuance of this Warrant shall constitute full authority to its
      officers who are charged with the duty of executing stock certificates to
      execute and issue the necessary certificates for the Warrant Shares upon the
      exercise of the purchase rights under this Warrant.  The Company will
      take all such reasonable action as may be necessary to assure that such Warrant
      Shares may be issued as provided herein without violation of any applicable
      law
      or regulation, or of any requirements of the Trading Market upon which the
      Common Stock may be listed.

     

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment.  Without limiting the generality of the foregoing, the
      Company will (a) not increase the par value of any Warrant Shares above the
      amount payable therefor upon such exercise immediately prior to such increase
      in
      par value, (b) take all such action as may be necessary or appropriate in order
      that the Company may validly and legally issue fully paid and nonassessable
      Warrant Shares upon the exercise of this Warrant, and (c) use commercially
      reasonable efforts to obtain all such authorizations, exemptions or consents
      from any public regulatory body having jurisdiction thereof as may be necessary
      to enable the Company to perform its obligations under this
      Warrant.

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    f) Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    g) Restrictions.  The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    h) Nonwaiver
      and
      Expenses.  No course of dealing or any delay or failure to
      exercise any right hereunder on the part of Holder shall operate as a waiver
      of
      such right or otherwise prejudice Holder’s rights, powers or remedies,
      notwithstanding the fact that all rights hereunder terminate on the Termination
      Date.  If the Company willfully and knowingly fails to comply with any
      provision of this Warrant, which results in any material damages to the Holder,
      the Company shall pay to Holder such amounts as shall be sufficient to cover
      any
      costs and expenses including, but not limited to, reasonable attorneys’ fees,
      including those of appellate proceedings, incurred by Holder in collecting
      any
      amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
      or remedies hereunder.

     

    i) Notices.  Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    j) Limitation
      of
      Liability.  No provision hereof, in the absence of any
      affirmative action by Holder to exercise this Warrant or purchase Warrant
      Shares, and no enumeration herein of the rights or privileges of Holder, shall
      give rise to any liability of Holder for the purchase price of any Common Stock
      or as a stockholder of the Company, whether such liability is asserted by the
      Company or by creditors of the Company.

     

    k) Remedies.  Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant.  The Company agrees that monetary damages would
      not be adequate compensation for any loss incurred by reason of a breach by
      it
      of the provisions of this Warrant and hereby agrees to waive the defense in
      any
      action for specific performance that a remedy at law would be
      adequate.

     

    l) Successors
      and
      Assigns.  Subject to applicable securities laws, this Warrant
      and the rights and obligations evidenced hereby shall inure to the benefit
      of
      and be binding upon the successors of the Company and the successors and
      permitted assigns of Holder.  The provisions of this Warrant are
      intended to be for the benefit of all Holders from time to time of this Warrant
      and shall be enforceable by any such Holder or holder of Warrant
      Shares.

     

    m) Amendment.  This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    n) Severability.  Wherever
      possible, each provision of this Warrant shall be interpreted in such manner
      as
      to be effective and valid under applicable law, but if any provision of this
      Warrant shall be prohibited by or invalid under applicable law, such provision
      shall be ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provisions or the remaining provisions of
      this Warrant.

     

    o) Headings.  The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized.

    

    Dated:  July
      31, 2007

    

    
      	
              MANAS
                PETROLEUM CORPORATION

               

               

            
	
              By:__________________________________________

                   Name:
                Peter-Mark Vogel

                   Title:   CFO
                & Director

               

            

    

    

    

    

    

    

    

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    NOTICE
      OF EXERCISE

    

    TO:           MANAS
      PETROLEUM CORPORATION

    

    (1) The
      undersigned hereby elects to purchase ___________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

    (2) Payment
      shall take the form of lawful money of the United States.

    (3) Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

    _______________________________

    

    

    The
      Warrant Shares shall be delivered to the following:

    

    ____________

    

    (4)  Accredited
      Investor.  The undersigned is an “accredited investor” as
      defined in Regulation D promulgated under the Securities Act of 1933, as
      amended.

    

    [SIGNATURE
      OF HOLDER]

    

    Name
      of Investing Entity:
      _______________________________________________________________________

    Signature
      of Authorized Signatory of
      Investing Entity:
      _________________________________________________

    Name
      of Authorized Signatory:
      ___________________________________________________________________

    Title
      of Authorized Signatory:
      ____________________________________________________________________

    Date:
      ________________________________________________________________________________________

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form and supply required information.

    Do
      not use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
      hereby assigned to

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:
      ______________,
      _______

    

    

    Holder’s
      Signature:                                          
 _____________________________

    

    Holder’s
      Address:                                             
_____________________________

    

                                      
        _____________________________

    
 

    

    

    Signature
      Guaranteed:  ___________________________________________

    

    

    NOTE:  The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust
      company.  Officers of corporations and those acting in a fiduciary or
      other representative capacity should file proper evidence of authority to assign
      the foregoing Warrant.

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