Document:

exhibit10_1.htm

    FIRST
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT

    

               THIS FIRST AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT (this “Agreement”), is made as of
April 9, 2008, by and among Earth Biofuels, Inc., a Delaware corporation (the
“Company”), and Black
Forest International, LLC, a Delaware limited liability company (the “Subscriber”).

    

    WHEREAS, on or about March 28, 2008,
the Parties executed (i) the Series A Preferred Stock, Restricted Stock and
Warrant Purchase Agreement in substantially the form annexed hereto as Exhibit
A, (the “Original
Purchase Agreement”), (ii) the Common Stock Purchase Warrant in
substantially the form annexed hereto as Exhibit
B (the “Original
Warrant”), (iii) the Guaranty in substantially the form annexed hereto as
Exhibit
C (the “Original
Guaranty”), (iv) the Escrow Agreement in substantially the form annexed
hereto as Exhibit
D (the “Original Escrow
Agreement”) and (v) the Form of Confession of Judgment Financial
Instrument in substantially the form annexed hereto as Exhibit
E (the “Original
Confession of Judgment”)(Collectively the Original Purchase Agreement,
Original Guaranty Agreement, Original Escrow Agreement and the Original
Confession of Judgment shall be referred to hereinafter as the “Original Transaction
Documents”);

    

    WHEREAS,
on or about March 28, 2008, in connection with the Original Purchase Agreement,
the Subscriber delivered to the Company via wire transfer, and the Company
hereby confirms receipt of, $100,000;

    

    WHEREAS, the Parties wish to amend and
restate the Original Transaction Documents as further described
herein;

    

               WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscriber, and the Subscriber shall purchase (i)
535,000 shares of Series A Preferred Stock, par value $.001 per share of the
Company, (the “Preferred
Stock”), at a purchase price of $1.00 per share, pursuant to a
Certificate of Designation to be approved by the Company and filed with the
Secretary of State of Delaware designating the rights and privileges of the
Preferred Stock, substantially in the form annexed hereto as Exhibit
F (the “Certificate”), (ii) 5,000,000
restricted shares (the “Restricted Shares”) of common
stock, par value $0.001 of the Company (the “Common Stock”) in
substantially the form as annexed hereto as Exhibit
G (iii) the Original Warrant to purchase shares of Common Stock at an
exercise price of $.0375 per share, subject to adjustment, in substantially the
form as annexed hereto as Exhibit
H (referred to hereinafter as the “Series A-1 Warrants”), and
(iv) the Series A-2 Warrants to purchase Common Stock at an exercise price of
$.025 per share, subject to adjustment, in substantially the form as annexed
hereto as Exhibit
I (the “Series A-2
Warrants”)(Collectively the Series A-1 Warrants and A-2 Warrants may be
referred to hereinafter as the
“Warrants” and the shares issuable upon exercise of the Warrants are
referred to as the “Warrant
Shares”).  The Preferred Stock, Additional Shares (as
hereinafter defined) and the Warrants and the Warrant Shares are collectively
referred to herein as the “Securities”; and

    

    WHEREAS, simultaneously with
the Closing the Company is delivering a Registration Rights Agreement
substantially in the form annexed hereto as Exhibit
J (the “Registration
Rights Agreement”),  a First Amended and Restated Escrow
Agreement substantially in the form annexed hereto as Exhibit
K (the “Escrow
Agreement”), and the Company’s principal officer, Dennis G. McLaughlin,
II, Apollo Resources International, Inc. and MAC Partners, LP (collectively the
“Guarantors”) are
delivering the First Amended and Restated Guaranty (the “Guaranty”) in the form
annexed hereto as Exhibit
L (the “Guaranty”)
and the Company and the Guarantors are delivering the First Amended and Restated
Confession of Judgment in the form annexed hereto as Exhibit
M (the “Confession of
Judgment”)(Collectively this Agreement, the Warrants, the Registration
Rights Agreement, the Escrow Agreement, the Guaranty and the Confession of
Judgment shall be collectively referred to hereinafter as the “Restated Transaction
Documents”);

    
      
         

      

      
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    WHEREAS, the Company and the
Subscriber are executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2) and/or Regulation D (“Regulation D”) as promulgated
under the Securities Act of 1933, as amended (the “1933 Act”); and

    

    NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscriber hereby agree as follows:

    

    1.           Restatement
of Original Transaction Document Terms.   Every term,
condition, recital, preamble, paragraph, section, subsection, article and
executory page of the Original Transaction Documents shall be amended and
restated through the execution and issuance of the Restated Transaction
Documents. As such, upon issuance of the Restated Transaction Documents, the
Parties rights and obligations under the Original Transaction Documents shall be
deemed to be fully amended and restated and the terms, conditions, rights and
obligations under the Restated Transaction Documents shall be hereinafter
binding upon the Parties.

    

    2.           Purchase and Sale of
Preferred Stock.

     

    2.1.           Sale and Issuance of
Preferred Stock.

     

    (a) In
accordance with the terms herein, the Company shall adopt and file with the
Secretary of State of the State of Delaware the Certificate in the form of Exhibit
F attached to this Agreement.

     

    (b)           Subject
to the terms and conditions of this Agreement, Subscriber agrees to purchase at
the Closing and the Company agrees to sell and issue to the Subscriber at the
Closing units consisting of 535,000 shares of Preferred Stock, the Warrants and
the Restricted Shares, at a purchase price of $1.00 per share of Preferred Stock
(the “Purchase Price”)
for an aggregate purchase price of $535,000. Upon Closing, the Company shall
deliver to the Subscriber, among other closing documents described herein, a
certificate representing the Preferred Stock , Restricted Shares and the
Warrants being purchased by the Subscriber at the Closing against payment of the
Purchase Price, less the Original Issue Discount (as defined below), to the
Company by wire transfer to a bank account designated by the Company. The
Company hereby acknowledges the prior receipt of $100,000 delivered by the
Subscriber on March 28, 2008, which shall be applied to the Net Purchase Price
(as defined below) of $500,000, such that upon Closing, the Subscriber shall be
required to deliver only the remaining balance of $400,000.

    

    (c)           The
Restricted Shares shall provide the Subscriber a guaranteed net sales price of
$175,000 as further described in Section 8(g) .

    

    2.2           Original Issue
Discount. The purchase of the 535,000 shares of Preferred Stock as
described herein has been subject to a $35,000 original issue discount (the
“Original Issue
Discount”) such that the 535,000 shares have been purchased for a total
net purchase price of $500,000 (the “Net Purchase
Price”).

    

                          2.3           Use of Proceeds. In
accordance with the directions of the Company’s Board of Directors, the Company
shall use the proceeds from the sale of the Preferred Shares for general
corporate purposes.

    

    2.4           Additional
Shares.  After the Initial Closing (as defined below), the
Subscriber or its assigns shall have the sole and exclusive right, but not
obligation, to acquire at their sole and absolute discretion and from time to
time in whole or in part, up to an additional 400,000 shares of Series A
Preferred Stock, on the same terms and conditions as those contained in this
Agreement, (subject to appropriate adjustment in the event of any stock

    
      
         

      

      
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    dividend,
stock split, combination or similar recapitalization affecting such shares) of
Series A Preferred Stock (the “Additional Shares”), provided
that (i) such right to acquire Additional Shares is delivered by fax, email or
overnight courier or by hand, to the Company or its representatives, prior to
one year after the Initial Closing, (ii) the Subscriber execute and deliver a
notice to the Company and tender the funds for such Additional Shares (and in
the event of the exercise of this right in whole or in part by an assignee of
Subscriber, then such assignee shall execute and be bound by this Agreement) and
(iii) the Purchase Price for any Additional Shares shall be the adjusted Series
A Preferred Stock Original Issuance Price as set forth in the Certificate and
shall be reflected at each closing in subsequent series, (i.e. Series A-1,
Series A-2, Series A-3) until an aggregate of 935,000 shares of Series A
Preferred Stock are sold.  In the event that notice is given by
Subscriber or its assigns to the Company to acquire any Additional Shares, then
the Company shall sell such shares to Subscriber or it’s Assigns in a subsequent
Closing at the adjusted Series A Original Issuance Price.  For
avoidance of doubt, any representation, warranty or covenant of the Company
hereby to the Preferred Stock shall be deemed to include and encompass the
Additional Shares if and when such shares are acquired by
Subscriber.

    

               3.           Closing.  The
consummation of the transactions contemplated in Section 2.1 (b) and
(c)  (the “Initial
Closing”) shall take place upon the satisfaction of all conditions to
Closing set forth in this Agreement, at a date and time acceptable to the
parties (the date on which the actual Closing takes place shall be referred to
as the “Closing
Date”).  Thereafter, additional closings (the “Additional Closing” and the
date thereof shall be the “Additional Closing Date” and,
each closing date and Closing are sometimes referred to herein as a “Closing Date” and Closing,
respectively) may take place from time to time at the discretion of the
Subscriber or its assigns.

    

    3.1           Closing Deliveries by
Company.  At Closing, the Company shall have approved and filed
the Certificate with the State of Delaware and delivered original signed copies
of those closing documents and instruments required by Section 11
below.  

    

    3.2           Closing Deliveries by
Guarantors.  At Closing, the Company and the Guarantors shall
deliver to Subscriber: original executed copies of the Guaranty and the
Confession of Judgment, all, duly authorized, approved, executed and delivered
as set forth in Section 11 below.

    

    3.3           Closing Deliveries by
Subscriber.   At the Initial Closing, Subscriber shall
deliver to the Company the Net Purchase Price in immediately available funds and
this originally executed Agreement.

    

               4.           Subscriber’s Representations and
Warranties.  Subscriber hereby represents and warrants to and
agrees with the Company that:

    

                          (a)           Organization and Standing of
the Subscriber.  The Subscriber is a limited liability company
duly incorporated or organized, validly existing and in good standing under the
laws of the Delaware.

    

                          (b)           Authorization and
Power.  The Subscriber has the requisite power and authority to
enter into and perform this Agreement and to purchase the Securities being sold
to it hereunder.  The execution, delivery and performance of this
Agreement by the Subscriber and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or partnership action on the part of the Subscriber, and no further
consent or authorization of the Subscriber or its board of directors,
stockholders, partners, members or managers, as the case may be, is
required.

    

                          (c)           No
Conflicts.  The execution, delivery and performance of this
Agreement and the consummation by the Subscriber of the transactions
contemplated hereby do not conflict with such Subscriber’s charter documents or
bylaws or other organizational documents.  Subscriber is not required
to obtain any consent, authorization or order of, or make any filing, notice
filing or registration with, any court or governmental agency or creditor

    
      
         

      

      
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    in order
for it to execute, deliver or perform any of its obligations under this
Agreement.

    

                          (d)           Information on
Company. Subscriber has reviewed and relied upon the accuracy of the
“SEC Documents” (as
defined in Section 5(h) hereof) and has been afforded (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the “Subsidiaries” (as defined in
Section 4(d) hereof) and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate the investment in the Securities; and (iii) the opportunity to
obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment.  Neither such
inquiries nor any other investigation conducted by or on behalf of such
Subscriber or its representatives or counsel shall modify, amend or affect such
Subscriber’s right to rely on the truth, accuracy and completeness of the SEC
Documents (subject to a re-audit of the Company’s financial statements currently
being conducted) and the Company’s representations and warranties contained in
this Agreement.

    

                          (e)           Information on
Subscriber.  The Subscriber is an “accredited investor”, as such
term is defined in Regulation D promulgated under the 1933 Act, is experienced
in investments and business matters, and, with its representatives, has such
knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase of the Securities.  The
information set forth on the signature page hereto regarding the Subscriber is
accurate.  The Subscriber is not a registered broker-dealer under
Section 15 of the Securities Exchange Act of 1934, as amended (the “1934 Act”).  The
Subscriber does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

    

                          (f)           Investment Intent.
The Subscriber is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to the
Subscriber’s right at all times to sell or otherwise dispose of all or any part
of such Securities in compliance with applicable federal and state securities
laws.  Subject to the immediately preceding sentence, nothing
contained herein shall be deemed a representation or warranty by the Subscriber
to hold the Securities for any period of time.

    

               (g)           Legends.  The
Subscriber understands that the certificates or other instruments representing
the Securities shall bear a restrictive legend in substantially the following
form:

    

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED SOLELY
FOR  INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

     

    
      
         

      

      
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    The legend set forth above shall be removed and the Company
shall, within five (5) business days, issue a certificate without such legend to
the holder of the Securities upon which it is stamped, if, unless otherwise
required by state securities laws, (i) in connection with a sale transaction,
provided the Securities are registered under the 1933 Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act.

     

    

                          (h)           Communication of
Offer. The offer to sell the Securities was directly communicated to the
Subscriber by the Company and/or its agents.  At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, spam or “mass” email, radio or television advertisement, or any other
form of general advertising or solicited or invited to attend a promotional
meeting otherwise than in connection and concurrently with such communicated
offer.  Notwithstanding anything to the contrary contained in this
Agreement, the Company acknowledges and agrees that the Subscriber may transfer
the Securities to its Affiliates (as defined below) provided that each such
Affiliate is an “accredited
investor” under Regulation D and such Affiliate agrees to be bound by the
terms and conditions of this Agreement and Security Agreements.  For
the purposes of this Agreement, an “Affiliate” of any person or
entity means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such person or
entity. For purposes of this definition, “control” means the power to
direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

    

                          (i)           Enforceability.  This
Agreement has been duly authorized and executed by the Subscriber and, when
delivered by the Subscriber, will become Subscriber’s valid and binding
agreement enforceable against the Subscriber in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights generally and to general principles of equity.

    

                          (j)           Group.  Subscriber,
together with any other shareholders or affiliates of Subscriber, is not part of
a “Group” (as defined in Schedule 13 and Section 13 of the 1934 Act) and is not
acting in concert with any person or persons as part of a Group with respect to
the acquisition or holding of the Securities or any other securities of the
Company, and does not have any agreement or understanding with any other person
relating to the sale or voting of securities held by Subscriber or such other
persons.  In each case, a Group for the foregoing purposes shall only
be deemed to exist if said Group beneficially owns or controls 5% or more (as
defined in Rule 13(d) of the 1934 Act) of the voting securities of the
Company.

    

    (k)           Funds.  The
Subscriber has taken such measures as are required by law to assure that the
funds used to pay to the Company the Net Purchase Price are derived: (i) from
transactions that do not violate United States law nor, to the extent such funds
originate outside the United States, do not violate the laws of the jurisdiction
in which they originated; and (ii) from permissible sources under United States
law and to the extent such funds originate outside the United States, under the
laws of the jurisdiction in which they originated.

    

    5.           Company Representations and
Warranties.  The Company represents and warrants to and agrees
with the Subscriber that:

    
      
         

      

      
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                          (a)           Due Incorporation.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the requisite
corporate power to own its properties and to carry on its business as disclosed
in the Latest SEC Documents (as defined in Section 5(h)).  The Company
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have or be reasonably
likely to have a Material Adverse Effect.  For purpose of this
Agreement, a “Material Adverse
Effect” shall mean any of (i) a material and adverse effect on the
legality, validity or enforceability of any of this Agreement (ii) a material
and adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) an adverse impairment to the Company’s ability to perform on a
timely basis its obligations under this Agreement.

    

    (b)           Capitalization.  The
authorized capital stock of the Company, other than the Conversion Shares (as
defined in Section
11 below), consists of 400,000,000 shares of Common
Stock, par value $.001 per share, of which 311,023,428 shares are issued
and outstanding as of the date hereof, and 15,000,000 shares of “blank
check” preferred stock have been authorized. As of the date of this Agreement,
the Company’s Board of Directors has the authority to, and has approved of the
designation of the “Series A Preferred Stock,” but the Certificate has not been
filed with the Delaware Secretary of State designating such stock. As further
described in Section 8(d) herein, the Certificate will be filed by the Company
with the Delaware Secretary of State designating 935,000 shares of the “blank
check” preferred stock as “Series A Preferred Stock” and reserved for issuance
to the Subscriber hereby. Except as disclosed in the Latest SEC Documents (as
defined in Section 5(h)), no shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company or, the existence of any such
rights will be waived prior to Closing.  Except as disclosed in the
SEC Documents, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act and (iv) there are no outstanding
registration statements and there are no outstanding comment letters from the
Securities and Exchange Commission (the “Commission”) or any other
regulatory agency. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
any of the Securities as described in this Agreement (except, to the extent, if
any, that such rights are understood prior to Closing). The Company has reserved
for issuance all of the Conversion Shares upon conversion of the Preferred
Stock, all of which have been duly deposited into escrow in accordance with the
Escrow Agreement along with appropriate stock transfer
documentation.

    

                          (c)           Authorization, Enforcement,
Compliance with Other Instruments.  (i) The Company has the
requisite corporate power and authority to enter into and perform this Agreement
and to issue the Preferred Stock, the Warrants, and, upon conversion or exercise
thereof, the Conversion Shares and Warrant Shares, respectively, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this
Agreement  by the Company (or any subsidiary) to which it is a party
and the consummation by it or them of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Restricted Shares,
the Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares
and the reservation for issuance and the issuance of the Conversion Shares and
Warrant Shares issuable upon conversion or exercise thereof (whether in the
event of a mandatory redemption of Preferred Stock or otherwise), have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) on or

    
      
         

      

      
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    before
the Closing Date, this Agreement  will have been duly executed and
delivered by the Company, (iv) this Agreement will, when executed and delivered
constitute the valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies.

    

                          (d)           Consents.  No
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, or FINRA, the SEC, or the OTC Bulletin Board market system or the
Company’s stockholders, is required for the execution by the Company of this
Agreement to which it is a party and compliance and performance by the Company
of its covenants and obligations under this Agreement, including, without
limitation, the issuance and sale of the Securities.

    

                          (e)           No Violation or
Conflict. Assuming the representations and warranties of the Subscriber
in Section
4 are
true and correct (except with respect to Section 4(c)),
neither the issuance and sale of the Securities nor the performance of the
Company’s obligations under this Agreement will: (i) violate, conflict with,
result in a breach of, or constitute 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) under (A) the Articles of Incorporation of the Company as
in effect on the date hereof, including the Certificate (the “Certificate of
Incorporation”), the Bylaws of the Company as in effect on the date
hereof (the “Bylaws”) or
other organizational documents of the Company, (B) any decree, judgment, order,
law, treaty, rule, regulation or determination applicable to the Company of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company or over the properties or assets of the Company or any of its
Affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any “lock-up” or similar provision
of any underwriting or similar agreement to which the Company, or any of its
Affiliates is a party except the violation, conflict, breach, or default of
which would not have or be reasonably likely to have a Material Adverse Effect;
or (ii) result in the creation or imposition of any lien, charge or encumbrance
upon the Securities or any of the assets of the Company or any of its
Affiliates; or (iii) result in the activation of any anti-dilution rights or a
reset or repricing of any debt or security instrument of any other creditor or
equity holder of the Company, nor result in the acceleration of the due date of
any obligation of the Company; or (iv) result in the activation of any
piggy-back registration rights of any person or entity holding securities of the
Company or having the right to receive securities of the Company.

    

                          (f)           Issuance of the
Securities. The Securities upon issuance: (i) are free and clear of any
security interests, liens, claims or other encumbrances, subject to restrictions
upon transfer under the 1933 Act and any applicable state securities laws; (ii)
have been duly and validly authorized and on the date exercise of the Warrants,
the Warrant Shares will be duly and validly issued, fully paid and
non-assessable or if registered pursuant to the 1933 Act, and if resold pursuant
to an effective registration statement, will be freely tradable without any
restriction whatsoever; (iii) will not have been issued or sold in violation of
any pre-emptive or other similar rights of the holders of any securities of the
Company; and  (iv) will not subject the holders thereof to personal
liability by reason of being such holders.

    

                          (g)           Litigation. 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 or the performance by the Company of
its obligations under the Transaction Documents to which it is a party. Except
as disclosed in the Latest SEC Documents (as defined in Section 5(h)), there is
no pending or, to the best knowledge of the Company, basis for or threatened
action, suit, proceeding or investigation before any court, governmental agency
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    arbitrator
having jurisdiction over the Company, or any of its Affiliates which litigation
if adversely determined would have or be reasonably likely to have a Material
Adverse Effect.

    

                          (h)           SEC
Documents:  Financial Statements.  Since December 31,
2006, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission under the 1934 Act (all
of the foregoing filed prior to the date hereof or amended after the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred to
as the “SEC Documents”
and any of the foregoing filed prior to the date hereof for periods ending on or
after December 31, 2006 or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the “Latest SEC
Documents”).   As of their respective dates, the financial
statements of the Company disclosed in the SEC Documents (the “Financial Statements”) are the
subject of a re-audit by the Company’s current principal
auditors.  The Company has not, in the past two years, received any
notice from FINRA, the NASD, the OTC Bulletin Board quotation system or the SEC,
advising the Company that it is in danger of having its securities listed, or
that any late filings of SEC reports by it in the future would endanger the
eligibility of its common stock to remain quoted on the OTC Bulletin Board
quotation or any other quotations service.

    

                          (i)           No Market
Manipulation. The Company has not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Securities or affect the price at
which the Securities may be issued or resold.

    

                          (j)           Information Concerning
Company. The Subscriber has not been provided with any material
non-public information concerning the Company, except (i) as the terms and
conditions of the transactions contemplated hereby may constitute such
information, or (ii) pursuant to non-disclosure agreements or documents of
similar purpose.  The Company understands and confirms that the
Subscriber will rely on the representations and covenants herein effecting
transactions in securities of the Company. All disclosure provided to the
Subscriber regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) are true and correct
in all material respects as of the date thereof and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The SEC Documents contain all material
information relating to the Company and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein, (subject to a re-audit as disclosed in certain SEC Documents) and
disclosed in the Latest SEC Documents which are subject to audit.

    

                          (k)           Stop Transfer. The
Securities, when issued, will be restricted securities. The Company will not
issue any stop transfer order or other order impeding the sale, resale or
delivery of any of the Securities, except as may be required by any applicable
federal or state securities laws and unless contemporaneous notice of such
instruction is given to the Subscriber.

    

                          (l)           Defaults. The Company
is not in violation of its Certificate of Incorporation or
Bylaws.  The Company is (i) not in default under or in violation of
any agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have or be
reasonably likely to have a Material Adverse Effect or which default has not
been waived for purposes of allowing the issuance of the Preferred Stock and
entry into this Agreement, (ii) not in default with respect to any order of any
court, arbitrator or governmental body or subject to or party to any order of
any court or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) not in
violation of any statute, rule or regulation of any governmental authority which
violation 

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    would
have or be reasonably likely to have a Material Adverse Effect.

    

                          (m)           No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would cause the offer of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the 1933 Act or any applicable stockholder approval
provisions.  Neither the Company nor any of its Affiliates will take
any action or steps that would cause the offer or issuance of the Securities to
be integrated with other offerings.

    

                          (n)           No General Solicitation;
Private Placement.  Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities. Assuming the accuracy of the Subscriber’ representations and
warranties set forth in Sections 4, no registration under the 1933 Act is
required for the offer and sale of the Securities by the Company to the
Subscriber under this Agreement.

    

                          (o)           Listing.  The
Company has not received any oral or written notice that its Common Stock is not
eligible or will become ineligible for quotation on the OTC Bulletin Board, and
there have been no FINRA or similar hearings relating to the listing or
quotation of the Company’s securities on such market or any other market in the
past two years,  or that its Common Stock does not meet all
requirements for the continuation of such quotation, and the Company satisfies
all the requirements for the continued listing of its Common Stock on the OTC
Bulletin Board.

    

                          (p)           No Undisclosed
Liabilities.  The Company has no liabilities or obligations
which are material, individually or in the aggregate, which are not disclosed as
of the respective dates as of which the information is given in the SEC
Documents, other than those incurred in the ordinary course of the Company’s
businesses since December 31, 2007 and which, individually or in the aggregate,
would not reasonably be expected to have or be reasonably likely to have a
Material Adverse Effect.

    

                          (q)           No Undisclosed Events or
Circumstances.  Since December 31, 2007, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the SEC Documents.

    

                          (r)           Acknowledgment Regarding
Subscriber’ Purchase of the Securities.  The Company
acknowledges and agrees that the Subscriber is acting solely in the capacity of
an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby.  The Company further acknowledges that the
Subscriber is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Subscriber or any of its
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Subscriber’s
purchase of the Securities.  The Company further represents to the
Subscriber that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its
representatives.

    

    (s)           No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants (other than those specified designates
with the independent auditors or the Company’s financial statements which have
already been disclosed in the SEC Reports), and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers. 

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    (t)           Title to
Assets.  The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all liens, except for liens as do not materially
affect the actual value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and its Subsidiaries are in compliance, except as
could not, individually or in the aggregate, have or be reasonably likely to
have a Material Adverse Effect.

    

                          (u)           Patents and
Trademarks. The Company and its subsidiaries have, or have rights to use,
in accordance with applicable U.S. or foreign laws where it transacts business,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and other similar rights that are
necessary or material for use in connection with their respective businesses as
described in the Latest SEC Documents and which the failure to so have could,
individually or in the aggregate, have or be reasonably likely to have a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the Company or
any Subsidiary violates or infringes upon the rights of any
person.  To the knowledge of the Company, there  is no
existing infringement by another person of any of the Intellectual Property
Rights.

    

                          (v)           Solvency.  Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the Company’s fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature, (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company will not incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).

    

                          (w)           Compliance with
Law.  The Company and its subsidiaries are conducting business
in all material respects in compliance with all applicable laws and
orders.  The Company and the Subsidiaries hold all permits of all
governmental authorities that by the nature of the operations of the business
conducted by it or the ownership of the assets owned by it are permits required
to conduct the operation and ownership thereof in the manner currently conducted
or to use such assets in the manner currently utilized in the business, except
for such permits, if any, as to which the failure to hold are not reasonably
likely to have a Material Adverse Effect.  

    

                          (x)           Environmental
Laws.  The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental
Laws”), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval.  The Company and its Subsidiaries have
not been notified by any governmental authority that any such environmental
permits will be modified, suspended or revoked or cannot be renewed in the
ordinary course of business consistent with past practice.  There are
no present or past environmental conditions at any property owned, leased or
used by the Company or any Subsidiary.  There is no pending or, to the
best knowledge of the Company,

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    threatened
environmental claim against the Company or any Subsidiary relating to their
business or the properties owned, leased or used thereby, or against any entity
relating to the business of the Company or such properties, for which the
Company or any Subsidiary may have any liability.  There are no
hazardous materials or other conditions at, under or emanating from, and there
has been no release at, on or adjoining, any real property currently or formerly
owned, operated or leased by the Company or any Subsidiary or their respective
predecessors in interest that would reasonably be expected to give rise to an
environmental claim against or liability of any of the foregoing under any
Environmental Law.  Neither the Company nor any Subsidiary has
assumed, contractually or by operation of applicable law, any liabilities of any
third party under any Environmental Law.

    

                          (y)           Tax
Status.  Except as set forth in the SEC Documents, the Company
and each of its Subsidiaries has made and filed through December 31, 2007 (and
has valid extensions for all applicable periods thereafter) all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) 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 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,
in each case, except where the failure to make such filing or payment or set
aside such amount would not, individually or in the aggregate, have or be
reasonably likely to have a Material Adverse Effect.

    

                          (z)           Certain
Transactions.  Except as set forth in the Latest SEC Documents,
and except for arm’s length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed in the Latest SEC Documents, none of the officers, directors,
or employees of the Company or any Subsidiary is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director trustee or partner.

    

    6.           Exempt Offering. The offer and
issuance of the Securities to the Subscriber is being made pursuant to the
exemption from the registration provisions of the 1933 Act afforded by Section
4(2) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. The
Company will provide, at the Company’s expense, such legal opinions in the
future as are reasonably necessary for the issuance and resale of the Warrant
Shares issuable upon the due exercise of the Warrants.

    

    7.           Broker/Legal
Fees.  The Company on the one hand, and the Subscriber on the
other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities to any persons claiming brokerage commissions or
finder’s fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions.

    

    8.           Covenants of the Company. The
Company covenants and agrees with the Subscriber as follows:

    

               (a)           Listing.  The
Company will maintain the listing of its Common Stock on the OTC Bulletin board
or any other national exchange or listing system, whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock
(the “Principal
Market”), and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Principal Market,
as applicable.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

               (b)           Market Regulations.
The Company shall notify the Commission, the Principal Market and applicable
state authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Subscriber
and promptly provide copies thereof to Subscriber.

    

               (c)           Reservation.  Prior
to the Closing Date, the Company undertakes to reserve from its authorized but
unissued shares of Common Stock, a number of such shares equal to (i) 100% of
the number of Warrant Shares as are issuable upon exercise of the Warrants and
(ii) 100% of the maximum number of Conversion Shares as may be issued upon
conversion in the event of a mandatory conversion. Failure to have sufficient
shares reserved pursuant to this Section 8(d) for three (3) consecutive business
days or ten (10) days in the aggregate shall be a material default of the
Company’s obligations under this Agreement and the Preferred Stock.

    

    (d)           Certificate of
Designation.   Within five (5) days following the
execution of this Agreement, the Company shall file with the Delaware Secretary
of State the Certificate designating the 935,000 shares of the “blank check”
preferred stock as “Series A Preferred Stock” and shall reserve such shares for
issuance to the Subscriber pursuant to the terms of this Agreement. Within four
(4) days of filing the Certificate with the Delaware Secretary of State, the
Company shall disclose the designation of the Preferred Stock to the public
through the filing of a Form 8-K Current Report to be filed with the
Commission.

    

               (e)           Books and
Records.  From the date of this Agreement and until the later
of (i) two (2) years after the Closing Date, or (ii) until all the Preferred
Stock have been converted and Conversion Shares resold or transferred by the
Subscriber or are eligible for resale pursuant Rule 144, without regard to
volume limitations, the Company will keep true records and books of account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent
basis.

    

    (f)           Legacy Agreement Preferred
Shares.   In connection with the Original Purchase
Agreement, the Subscriber was issued Certificate Number 0100 representing
100,000 shares of Series A Preferred Shares (the “Original Preferred
Certificate”). The Subscriber shall return the Original Preferred
Certificate to the Company’s transfer agent and the Company shall instruct its
transfer agent to cancel the Original Preferred Certificate and issue and
deliver to the Purchaser a newly issued certificate representing the Preferred
Stock.

    

    (g)           Restricted Shares Guaranteed
Return. As an inducement to enter into this Agreement, the Company has
guaranteed the Subscriber shall receive a net sales price, minus sales
commissions and fees, of $175,000 from the eventual sale of the Restricted
Shares (the “Restricted Shares
Guaranteed Return”). Such Restricted Shares, absent an effective
registration of such shares under the 1933 Act, or the availability of an
exemption thereto, may not be available for resale by the Subscriber for an
indefinite period of time. Upon the eventual opportunity of a public sale of the
Restricted Shares, in the event the sales proceeds, minus sales commissions and
fees, from the final sale of the Restricted Shares does not equal or exceed the
Restricted Shares Guaranteed Return (the difference between the final sales
proceeds and the Restricted Shares Guaranteed Return being the “Restricted Shares Loss”), the
Company hereby agrees and covenants to provide the Subscriber, at the
Subscribers sole option, either (i) a cash payment equal to Restricted Shares
Loss, (ii) additional shares of Common Stock held in escrow pursuant to the
Escrow Agreement equal to Restricted Shares Loss, or (iii) newly issued shares
of the Company’s Common Stock equal to Restricted Shares Loss.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

               (h)           Reasonable Best
Efforts.  Each party shall use its reasonable best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 10 and 11 of this Agreement.

    

    9.           Covenants of the Company Regarding
Indemnification.  The Company agrees to indemnify, hold
harmless, reimburse and defend the subscriber, the subscriber’s officers,
directors, agents, Affiliates, control persons, and principal stockholders or,
equity holders, against any actual: claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Subscriber or any such person which results, arises out of or
is based upon (i) any material misrepresentation by Company or breach of any
warranty made by the Company in this Agreement or in any Exhibits or Schedules
attached hereto or (ii) after any applicable notice and/or cure periods, any
breach or default in performance by the Company of any covenant or undertaking
to be performed by the Company hereunder.

    

    10.           Conditions to the Company’s
Obligation to Sell.  The obligation of the Company hereunder to
issue and sell the Preferred Stock, Additional Shares, if any are requested to
be purchased, and the Warrants and the Restricted Shares to the Subscriber are
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company’s
benefit and may be waived by the Company at any time in its sole
discretion:

    

               (a)           The
Subscriber shall have executed this Agreement and any of the other transaction
documents to which it is a party, and delivered it to the Company, or, in the
case of additional shares, a notice demanding such Subscriber’s right to acquire
Additional Shares stating the amount of Additional Shares being subscribed for
and the closing date therefore.

    

               (b)           The
Subscriber shall have delivered to the Company the $400,000 (pursuant to Section
2.1(b)) by wire transfer of immediately available U.S. funds pursuant to the
wire instructions provided by the Company.

    

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

    

     

               11.           Conditions to the Subscriber’
Obligation to Purchase.  The obligation of the Subscriber
hereunder to subscribe for the Preferred Stock, the Warrants and the Restricted
Shares to be sold on or before the Closing Date, of each of the following
conditions, any which may be waived at Subscriber’s sole and absolute
discretion:

     

    

    (a)           The
Certificate shall have been duly authorized and approved and filed with the
State of Delaware, and in full force and effect, and the Company shall file a
Form 8-K Current Report with the Commission within four (4) days following the
filing of the Certificate;

    

    (b)           Certificates
representing the Preferred Stock and Restricted Stock shall be executed and
delivered to each Subscriber,

    

    (c)           The
Company shall have approved, authorized executed and delivered the Escrow
Agreement to the agent for the Subscriber set forth therein (the “Agent”) along with the
50,000,000 shares of Common Stock for issuance upon conversion of the Preferred
Stock, based on the adjusted Conversion Price (as defined in the
Certificate)  and shall have reserved such shares plus any other
shares that may be issuable upon conversion of the Preferred Stock for issuance
thereon (the “Conversion
Shares”),

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (i)           Series
A-1 Warrants to purchase 2,000,000 shares of Common Stock,

    

    (ii)           Series
A-2 Warrants to purchase 3,000,000 shares of Common Stock

    

    (iii)           A
Registration Rights Agreement with respect to all of the Conversion Shares,
Restricted Shares and Warrant Shares,  

    

    all duly
authorized, approved, executed and delivered by the Company, and a as well as a
legal opinion from counsel to the Company, as reasonably approved by the
Subscriber, which shall contain customary opinions relating to enforceability,
validity, due authority, no conflicts of laws of all agreements and securities
issued as well as the valid and fully paid issuance of Preferred Stock and all
other securities contemplated hereby (the “Opinion”).

    

               (d)           The
Common Stock shall be authorized for quotation on the OTC Bulletin Board and
trading in the Common Stock shall not have been suspended for any
reason.

    

               (e)           The
representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality, in which case, such
representations and warranties shall be true and correct without further
qualification) as of the date when made and as of the Closing Date as though
made at that time (except for  representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company on or prior to the Closing Date.  If requested by the
Subscriber, the Subscriber shall have received a certificate, executed by the
President and the Treasurer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Subscriber.

    

               (f)           The
Guarantors shall have duly executed and delivered both the Guaranty and
Confession of Judgment.

    

               (g)           The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting exercise of the Warrants, that number of
shares of Common Stock as shall be equal to 100% of the number of shares
of Common Stock required to effect the exercise of all the Warrants to be
outstanding immediately following the Closing Date.

    

    (h)           The
Subscriber shall have received the Opinion.

    

               (i)           The
Subscriber shall have completed a due diligence review of the Company to their
sole satisfaction.

    

    At any
Subsequent Closing for Additional Shares, each of the Additional Shares and
Investor Warrants as well as a new Opinion, shall be delivered and the foregoing
agreements shall be amended and restated as necessary and delivered to
Subscriber reflecting the Additional Shares and additional Investor Warrants
(provided that no additional Escrow Shares need be deposited).

    

    12.           Miscellaneous.

    

               (a)           Notices. All notices,
demands, requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, confirmed email (with a hard copy by mail or fax) or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given 

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    hereunder
shall be deemed effective (i) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (ii) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall
be:

    

    

    (i) if to
the Company, to:

    

    Earth
Biofuels, Inc.

    3001 Knox
Street, Suite 303

    Dallas,
Texas 75205

    Fax:
214-520-0507

    

    (ii) if
to the Subscriber, to

    

    Black
Forest International, LLC

    c/o BCGU,
LLC

    2038
Corte del Nogal, Suite 110

    Carlsbad,
California 92011

    Fax:
760-804-8845

    

    with a
copy by telecopier only to:

    

    Hodgson
Russ, LLP

    1540
Broadway, 24th
Floor

    New York,
NY 10036,

    Fax:
(212) 751-0928,

    

               (b)           Entire Agreement;
Assignment. This Agreement and other documents delivered in connection
herewith represent the entire agreement between the parties hereto with respect
to the subject matter hereof. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the
Subscriber.

    

               (c)           Amendments; Waivers; No
Additional Consideration. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company and the Subscriber
(or transferees of Securities) holding a majority in interest of the Preferred
Stock. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right.

    

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

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

               (e)           Law Governing this
Agreement. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to conflicts
of lawsprinciples that would result in the application of the substantive laws
of another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought in
the state courts of California or in the federal courts located in the Southern
District of the state of California. The parties and the individuals executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney’s fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.

    

               (f)           Specific Enforcement,
Consent to Jurisdiction. The Company and Subscriber acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to one or more preliminary and final injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity. Subject to Section 12(e) hereof,
each of the Company, Subscriber and any signatory hereto in his personal
capacity hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
California of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.

    

               (g)           Business/Calendar
Days. Unless otherwise indicated, references to days in this Agreement
will refer to business days.

    

               (h)           Termination.                                In
the event that the Closing shall not have occurred with respect to the on or
before ten (10) business days from the date hereof due to the Company’s or the
Subscriber’s failure to satisfy the conditions set forth in Sections 10 and 11
above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party.

    

    

    SIGNATURE
PAGE FOLLOWS

    

    THE
REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     SIGNATURE
PAGE

    

    IN WITNESS WHEREOF, the Company and the
Subscriber have executed this Agreement as of the date first set forth
above.

    

    
      	
              EARTH
      BIOFUELS, INC

              (Company)

            	
              BLACK
      FOREST INTERNATIONAL, LLC

              (Subscriber)

            
	
               

               

               

              __/s/_Dennis G.
      McLaughlin III__________

            	
               

               

               

              ___________________________________

            
	
              By:
      Dennis G. McLaughlin, III

            	
              By:
      BCGU, LLC

            
	
              Its:
      Chief Executive Officer

            	
              Its:
      Administrative Manager

            
	 
      	
              By:
      Business Consulting Group Unlimited, Inc.

            
	 
      	
              Its:
      Administrative Manager

            
	 
      	
              By:
      James B. Panther, II

            
	 
      	
              Its:
      Managing Director

            

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    LIST
OF EXHIBITS

    

    Exhibits

    

    Exhibit
A                                Original
Purchase Agreement

    Exhibit
B                      Original
Warrant

    Exhibit
C                      Original
Guaranty

    Exhibit
D                      Original
Escrow Agreement

    Exhibit
E                      Original
Confession of Judgment

    Exhibit
F                      Certificate
of Designation

    Exhibit
G                      Restricted
Shares

    Exhibit
H                                Series
A-1 Warrants

    Exhibit
I                      Series
A-2 Warrants

    Exhibit
J                      Registration
Rights Agreement

    Exhibit
K                      Escrow
Agreement

    Exhibit
L                      Guaranty

    Exhibit
M                      Confession
of Judgment

    

    

    
      
         

      

      
        18EX-10.1

April 24, 2008

Mr. Roger J. Hopkins

10434 White Birch Drive

San Diego, CA 92131

Dear Mr. Hopkins:

On behalf of Delta Design Inc., we are pleased to confirm this offer of employment to you for the
position of Vice President Sales and Service at the base rate of $15,000.00 per month, located in
Poway and reporting to James A. Donahue, President and CEO, with a start date on or about May 12,
2008. You will be eligible for an annual performance bonus as determined by the Cohu, Inc.
Compensation Committee with an annual target bonus of $75,000 (prorated for time worked in the
fiscal year). You will also receive a $500 per month car allowance.

Upon commencement of your employment, you will be granted a stock option to purchase 13,750 shares
of Cohu’s Common Stock and 5,417 restricted stock units (RSUs) under the Cohu, Inc. 2005 Equity
Incentive Plan (the “Plan”). The stock option will (i) vest 25% annually over the four-year
vesting period, (ii) expire ten years from the grant date and (iii) have an exercise price equal to
the closing price of Cohu, Inc. Common Stock on the grant date. Each RSU (i) represents a
contingent right to receive one share of Cohu, Inc. Common Stock, (ii) will vest 25% annually over
the four-year vesting period and (iii) vested shares will be delivered on or shortly after the
vesting date as required by the Plan.

Your benefits, which are described more fully in the “Summary of Benefits,” will include paid
vacation, holiday pay, health insurance, an Employee Assistance Program, Company-paid life
insurance, plus a choice of two additional life insurance plans, if desired. You will also be
eligible to participate in the Cohu Employee Stock Purchase Plan offering, and after six months of
employment you will be eligible to join the Company’s 401(k) pension plan.

Your employment at Delta Design is at-will. This means that employment is not for any specified
period and that either you or the Company may terminate the employment relationship at any time,
with or without notice, and with or without cause. In addition, the Company reserves the right to
alter or modify your position, compensation and benefits, in its sole discretion, with or without
cause or notice, through actions other than termination including demotion, promotion, transfer, or
reclassification or reassignment. The

1

Page 2

Roger Hopkins

Company also reserves the right to impose discipline when, in its discretion, it deems it
appropriate. All prior inconsistent statements, whether written or oral, about the nature of your
employment relationship with Delta Design are superseded. This is the entire agreement between the
parties on this subject. Furthermore, no person other than the President of the Company has the
authority to alter the at-will nature of the employment relationship. Any such change, to be
valid, must be reflected in a specific written agreement signed by the President of the Company.

This offer of employment is contingent upon your successful completion of a substance abuse
screening. Please acknowledge your acceptance of this offer of employment by signing and returning
the following:

	 	1.	 	Offer letter

	 	2.	 	Authorization and Release of Liability for Personal Background Information
Investigation

Roger, we look forward to your rejoining the Delta Design team. If you have any questions, please
contact me at (858) 848-8048.

Sincerely,

/s/ Susan Hane

Susan Hane

Human Resources Manager

Enclosures

I accept the offer of employment described above.

  Roger Hopkins       

NAME (please print)

	 	 	 	 	 
	  /s/ Roger Hopkins  

	 	  April 24, 2008  
	 	  TBD                  
	 

	 	 
	 	 
	SIGNATURE

	 	DATE
	 	START DATE

2

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