Exhibit 10.1 SECURITIES PURCHASE AGREEMENT Dated as of February 24, 2005 among CONSOLIDATED ENERGY, INC. and THE PURCHASERS LISTED ON EXHIBIT A ARTICLE I Purchase and Sale of Notes, Warrants and AIRs 1 Section 1.1 Purchase and Sale of Notes, Warrants...

Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
Dated as of February 24, 2005
among
CONSOLIDATED ENERGY, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A

ARTICLE I Purchase and Sale of Notes, Warrants and AIRs  1
Section 1.1  Purchase and Sale of Notes, Warrants and Additional Investment
Rights  1
Section 1.2  Purchase Price and Closing.  1
Section 1.3  Warrants.  2
Section 1.4   AIRs  2
Section 1.5  Conversion Shares, Warrant Shares and AIR Shares  2
ARTICLE II Representations and Warranties  2
Section 2.1  Representations and Warranties of the Company  2
Section 2.2  Representations and Warranties of the Purchasers  13
ARTICLE III  Covenants  15
Section 3.1  Securities Compliance.  15
Section 3.2  Registration and Listing.  15
Section 3.3  Inspection Rights.  15
Section 3.4  Compliance with Laws.  16
Section 3.5  Keeping of Records and Books of Account.  16
Section 3.6  Reporting Requirements  16
Section 3.7  Other Agreements.  16
Section 3.8  Reservation of Shares.  16
Section 3.9  Disclosure of Transactions and Other Material Information.  17
Section 3.10  Delivery of Securities  17
Section 3.11  No Shorting of Stock  17
Section 3.12  Subsequent Financings.  18
Section 3.13  Beneficial Ownership Restrictions.  20
Section 3.14  Financial Covenants  21
Section 3.15  Negative Covenants  23
ARTICLE IV  Conditions  25
Section 4.1  Conditions Precedent to the Obligation of the Company to Close
and to Sell the Notes, Warrants and AIRs.  25
Section 4.2  Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the Notes, the Warrants and the AIRs.  26
ARTICLE V Transfer Restrictions and Legends  28
ARTICLE VI Termination  30
Section 6.1  Termination by Mutual Consent.  30
Section 6.2  Effect of Termination  30
ARTICLE VII Indemnification  30
Section 7.1  General Indemnity  30
Section 7.2  Indemnification Procedure.  31
ARTICLE VIII Miscellaneous  32
Section 8.1  Fees and Expenses  32
Section 8.2  Specific Enforcement; Consent to Jurisdiction.  32
Section 8.3  Entire Agreement; Amendment  33
Section 8.4  Notices  33
Section 8.5  Waivers  34
Section 8.6  Headings  34
Section 8.7  Successors and Assigns.  34
Section 8.8  No Third Party Beneficiaries  34
Section 8.9  Governing Law.  34
Section 8.10  Survival  34
Section 8.11  Counterparts  34
Section 8.12  Publicity  34
Section 8.13  Severability  35
Section 8.14  Further Assurances.  35



SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February
22, 2005, by and among Consolidated Energy, Inc., a Wyoming corporation (the
"Company"), and the entities listed on Exhibit A hereto (each, a "Purchaser"
and collectively, the "Purchasers"), for the purchase by the Purchasers of the
Company's 6% Senior Secured Convertible Notes Due 2008 (the "Notes"), warrants
to purchase shares of the Company's Common Stock, par value $0.001 per share
(the "Common Stock"), and additional investment rights to purchase additional
Notes.
The parties hereto agree as follows:
ARTICLE I

Purchase and Sale of Notes, Warrants and AIRs
Section 1.1 Purchase and Sale of Notes, Warrants and Additional Investment
Rights. Upon the following terms and conditions, the Company shall issue and
sell to the Purchasers, and each Purchaser shall, severally but not jointly,
purchase from the Company (i) a Note in substantially the form attached hereto
as Exhibit B, (ii) warrants to purchase shares of Common Stock, in
substantially the form attached hereto as Exhibit C (the "Warrants"), and
(iii) additional investment rights, in substantially the form attached hereto
as Exhibit D (the "AIRs"), pursuant to which each Purchaser may have the
right, but not the obligation, to purchase, and upon exercise of the
Purchasers' right the Company shall be required to sell, additional Notes, in
each case, as set forth opposite each such Purchaser's name on Exhibit A
hereto, for an aggregate purchase price to the Company from all Purchasers of
$7,000,000 (the "Purchase Price"). The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the U.S. Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), including Regulation D
("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
Section 1.2 Purchase Price and Closing. The Company agrees to issue and sell
to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not jointly, agree to purchase the
Notes, Warrants and AIRs, in the amounts as set forth opposite their
respective names on Exhibit A. The closing of the purchase and sale of the
Notes, Warrants and AIRs to be acquired by the Purchasers from the Company
under this Agreement shall take place at the offices of the Company located at
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxx Xxxxxxx, Xxxxxxx 00000 (the "Closing")
at 10:00 a.m., Eastern Time (i) on or before February 25, 2005, provided, that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith, or (ii) at
such other time and place or on such date as the Purchasers and the Company
may agree upon (the  "Closing Date"). The entire Purchase Price shall be paid
by the Purchasers in cash, by wire transfer or in readily available funds.
Section 1.3 Warrants. At the Closing, the Company shall issue to each
Purchaser such number of Warrants to purchase shares of Common Stock as is set
forth opposite such Purchaser's name on Exhibit A hereto. The Warrants shall
be exercisable for five (5) years from the date of issuance and shall have an
initial exercise price equal to $1.70.
Section 1.4   AIRs. At the Closing, the Company shall issue to each Purchaser
such number of AIRs to purchase additional Notes as is set forth opposite such
Purchaser's name on Exhibit A hereto. The AIRs shall be exercisable at any
time on or after the date of the issuance of the AIR and on or prior to the
later of (i) the earlier of (A) the 14th day following the date that the
Company first executes a second coal supply contract with American Electric
Power, and (B) the 90th day following the date that the Registration Statement
is declared effective by the Commission (as such terms are defined in the



Registration Rights Agreement to be entered into at the Closing between the
Company and the Purchasers), and (ii) May 25, 2005. The Company covenants and
agrees to provide each Purchaser with prompt written notice of its execution
of the second coal supply contract with American Electric Power.

Section 1.5  Conversion Shares, Warrant Shares and AIR Shares. The Company has
authorized and has reserved and covenants to continue to reserve, free of
preemptive rights and other similar contractual rights of stockholders, a
number of its authorized but unissued shares of Common Stock equal to the
aggregate number of shares of Common Stock necessary to effect the conversion
of the Notes and the exercise of the Warrants and the AIRs. Any shares of
Common Stock issuable upon conversion of the Notes (and such shares when
issued) are herein referred to as the "Conversion Shares". Any shares of
Common Stock issuable upon exercise of the Warrants (and such shares when
issued) are herein referred to as the "Warrant Shares". Any shares of Common
Stock issuable upon exercise of the AIRs (and such shares when issued) are
herein referred to as the "AIR Shares". The Notes, the Warrants, the AIRs, the
Conversion Shares, the Warrant Shares and the AIR Shares are sometimes
collectively referred to herein as the "Securities".
ARTICLE II

Representations and Warranties
Section 2.1 Representations and Warranties of the Company. In order to induce
the Purchasers to enter into this Agreement and to purchase the Notes, the
Warrants and the AIRs, the Company hereby makes the following representations
and warranties to the Purchasers:
(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Wyoming and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now
being conducted.  The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity, except as
disclosed in the Commission Documents (as defined in Section 2.1(f)) or as set
forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect.  For the purposes of this Agreement, "Material
Adverse Effect" means any adverse effect on the business, operations,
properties, prospects or financial condition of the Company or its
Subsidiaries and which is material to such entity or other entities
controlling or controlled by such entity or which is likely to materially
hinder the performance by the Company of its material obligations hereunder
and under the other Transaction Documents (as defined in Section 2.1(b)
hereof).
(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Registration
Rights Agreement, each Lock-up Agreement, the Security Agreement, the Notes,
the Warrants, the AIRs, and the other agreements and documents contemplated
hereby and thereby and executed by the Company or to which the Company is
party (collectively, the "Transaction Documents"), and to issue and sell the
Notes, the Warrants and the AIRs in accordance with the terms hereof.  The
execution, delivery and performance of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action, and,
except as set forth in Schedule 2.1(b), no further consent or authorization of
the Company, its Board of Directors or its stockholders is required. This
Agreement has been duly executed and delivered by the Company. The other
Transaction Documents will have been duly executed and delivered by the
Company at the Closing.  Each of the Transaction Documents constitutes, or
shall constitute when executed and delivered, a valid and binding obligation



of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of,
creditor's rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized capital stock of the Company and the shares
thereof currently issued and outstanding as of February 22, 2005, are set
forth on Schedule 2.1(c) hereto. All of the outstanding shares of the
Company's Common Stock and any other security of the Company have been duly
and validly authorized. Except as disclosed in the Commission Documents or as
set forth on Schedule 2.1(c) hereto, no shares of Common Stock or any other
security of the Company are entitled to preemptive rights or registration
rights and there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company.  Furthermore, except as disclosed in the Commission Documents or as
set forth on Schedule 2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered
into by the Company in order to sell restricted securities or as provided on
Schedule 2.1(c) hereto, the Company is not a party to or bound by any
agreement or understanding granting registration or anti-dilution rights to
any individual, corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind (a "Person") with respect to any of its equity or
debt securities. Except as set forth on Schedule 2.1(c), the Company is not a
party to, and it has no knowledge of, any agreement or understanding
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth on Schedule 2.1(c) hereto, the offer and sale of
all capital stock, convertible securities, rights, warrants, or options of the
Company issued prior to the Closing complied with all applicable federal and
state securities laws, and no holder of such securities has a right of
rescission or claim for damages with respect thereto which could have a
Material Adverse Effect. The Company has furnished or made available to the
Purchasers true and correct copies of the Company's Articles of Incorporation
as in effect on the date hereof (the "Articles"), and the Company's Bylaws as
in effect on the date hereof (the "Bylaws").
(d) Issuance of Securities. The Notes, the Warrants and the AIRs to be issued
at the Closing have been duly authorized by all necessary corporate action
and, when paid for or issued in accordance with the terms hereof, the Notes
shall be validly issued and outstanding, fully paid and nonassessable and free
and clear of all liens, encumbrances and rights of refusal of any kind. When
the Conversion Shares are issued and paid for in accordance with the terms of
this Agreement and as set forth in the Notes, such shares will be duly
authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be
entitled to all rights accorded to a holder of Common Stock. When the Warrant
Shares are issued and paid for in accordance with the terms of this Agreement
and as set forth in the Warrants, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a
holder of Common Stock. When the AIR Shares are issued and paid for in
accordance with the terms of the AIRs, such shares will be duly authorized by
all necessary corporate action and validly issued and outstanding, fully paid
and nonassessable, free and clear of all liens, encumbrances and rights of



refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate
any provision of the Articles or Bylaws or any Subsidiary's comparable charter
documents, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries'
respective properties or assets are bound, (iii) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any
property or asset of the Company or any of its Subsidiaries under any
agreement or any commitment to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound or by
which any of their respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected, except, in all cases other than violations pursuant to
clauses (ii), (iii) or (iv) (with respect to federal and state securities
laws) or clause (i) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company and its Subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental entity, except for
possible violations which singularly or in the aggregate do not and will not
have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is required under federal, state, foreign or local law, rule or
regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it
to execute, deliver or perform any of its obligations under the Transaction
Documents or issue and sell the Securities in accordance with the terms hereof
or thereof (other than any filings which may be required to be made by the
Company with the Securities and Exchange Commission (the "Commission") prior
to or subsequent to the Closing, or state securities administrators prior to
or subsequent to the Closing, or any registration statement which may be filed
pursuant hereto or thereto).
(f) Commission Documents; Financial Statements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, except as disclosed on Schedule 2.1(f)
hereto, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Commission pursuant to
the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing,
including filings incorporated by reference therein, being referred to herein
as the "Commission Documents"). The Company has delivered or made available
(through the SEC XXXXX website) to the Purchasers true and complete copies of
the Commission Documents filed with the Commission since December 31, 2000.
The Company has not provided to the Purchasers any material non-public
information or other information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has
not been so disclosed, other than with respect to the transactions
contemplated by this Agreement.  At the time of its filing, the Company's
Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30,
2004 (the "Form 10-Q") complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and the Form 10-Q did not contain



any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. At the time of its filing, the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2003 (the "Form 10-K") complied
in all material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and, at the time of its filing, the Form 10-K did not contain any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial position of the Company and its
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each Person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any Person of which at least a majority of the
securities or other ownership interest having ordinary voting power
(absolutely or contingently) for the election of directors or other Persons
performing similar functions are at the time owned directly or indirectly by
the Company and/or any of its other Subsidiaries. All of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and
validly issued, and are fully paid and nonassessable. There are no outstanding
preemptive, conversion or other rights, options, warrants or agreements
granted or issued by or binding upon any Subsidiary for the purchase or
acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the capital stock of
any Subsidiary or any convertible securities, rights, warrants or options of
the type described in the preceding sentence except as set forth on Schedule
2.1(g) hereto. Neither the Company nor any Subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of any Subsidiary.
(h) No Material Adverse Change. Since September 30, 2004, the Company has not
experienced or suffered any Material Adverse Effect, except for operating
losses incurred in the ordinary course of business.
(i) No Undisclosed Liabilities.  Except as disclosed on Schedule 2.1(i)
hereto, neither the Company nor any of its Subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those set
forth on the balance sheet included in the Form 10-Q or incurred in the
ordinary course of the Company's or its Subsidiaries respective businesses
since September 30,  2004, and which, individually or in the aggregate, do not
or would not have a Material Adverse Effect on the Company or its
Subsidiaries.



(j) No Undisclosed Events or Circumstances. Since September 30, 2004, except
as disclosed on Schedule 2.1(j) hereto or in the Commission Documents, no
event or circumstance has occurred or exists with respect to the Company or
its Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For
purposes of this Agreement: (x) "Indebtedness" of any Person means, without
duplication (A) any indebtedness for borrowed money in excess of $100,000, (B)
any obligations issued, undertaken or assumed as the deferred purchase price
of property or services (other than trade payables entered into in the
ordinary course of business) in excess of $100,000, (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) any obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) any
indebtedness in excess of $100,000 created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with GAAP, consistently applied for the
periods covered thereby, is classified as a capital lease with a present value
in excess of $100,000, (G) all indebtedness referred to in clauses (A) through
(F) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; and (y) "Contingent Obligation"
means, as to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto in excess of $100,000 due under leases
required to be capitalized in accordance with GAAP. Except as disclosed on
Schedule 2.1(k), neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.
(l) Title to Assets.  Each of the Company and the Subsidiaries has good and
marketable title to all of its real and personal property, free and clear of
any mortgages, pledges, charges, liens, security interests or other
encumbrances of any nature whatsoever, except as disclosed in the Commission
Documents, for those indicated on Schedule 2.1(l) hereto or such that,
individually or in the aggregate, do not have a Material Adverse Effect.  All
leases to real and personal property of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary which questions the validity of this Agreement or any of the
other Transaction Documents or any of the transactions contemplated hereby or
thereby or any action taken or to be taken pursuant hereto or thereto. Except



as set forth on Schedule 2.1(m) hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or  other
proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company, any Subsidiary or any of their respective properties or
assets, which individually or in the aggregate, would have a Material Adverse
Effect. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against
the Company or any Subsidiary or any officers or directors of the Company or
any Subsidiary in their capacities as such, which individually, or in the
aggregate, would have a Material Adverse Effect.
(n) Compliance with Law.  The business of the Company and the Subsidiaries has
been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the Commission Documents or on Schedule 2.1(n) hereto
or such that, individually or in the aggregate, the noncompliance therewith
would not have a Material Adverse Effect. The Company and each of its
Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(o) Taxes.  Except as set forth on Schedule 2.1(o) hereto, the Company and
each of the Subsidiaries has accurately prepared and filed all federal, state
and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and the Subsidiaries for all current taxes
and other charges to which the Company or any Subsidiary is subject and which
are not currently due and payable.  Except as disclosed on Schedule 2.1(o)
hereto, none of the federal income tax returns of the Company or any
Subsidiary have been audited by the Internal Revenue Service. The Company has
no knowledge of any additional assessments, adjustments or contingent tax
liability (whether federal or state) of any nature whatsoever, whether pending
or threatened against the Company or any Subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
(p) Certain Fees.  Except as set forth on Schedule 2.1(p) hereto, the Company
has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the
Transaction Documents.
(q) Disclosure. To the best of the Company's knowledge, neither this Agreement
or the Schedules hereto nor any other documents, certificates or instruments
furnished to the Purchasers by or on behalf of the Company or any Subsidiary
in connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.
(r) Intellectual Property.  Except as set forth on Schedule 2.1(r), the
Company and each of the Subsidiaries owns or possesses all the Proprietary
Rights owned by it and have no knowledge that such rights are in conflict with
the rights of others. As of the date of this Agreement, neither the Company
nor any of its Subsidiaries has received any written notice that any
Proprietary Rights have been declared unenforceable or otherwise invalid by
any court or governmental agency. As of the date of this Agreement, there is,
to the knowledge of the Company, no material existing infringement, misuse or
misappropriation of any Proprietary Rights by others.  From September 30, 2004
to the date of this Agreement, neither the Company nor any of its Subsidiaries
has received any written notice alleging that the operation of the business of
the Company or any of its Subsidiaries infringes in any material respect upon
the intellectual property rights of others. "Proprietary Rights" shall mean
patents, trademarks, domain names (whether or not registered) and any



patentable improvements or copyrightable derivative works thereof, websites
and intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the
foregoing.
(s) Environmental Compliance. Except as disclosed on Schedule 2.1(s) hereto,
the Company and each of its Subsidiaries have obtained all approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
Person, that are required under any  Environmental Laws, the absence of which
would have a Material Adverse Effect.  "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including,
without limitation, all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges,
releases or threatened releases of hazardous substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, material or
wastes, whether solid, liquid or gaseous in nature. Except as set forth on
Schedule 2.1(s) hereto, the Company has all necessary governmental approvals
required under all Environmental Laws and used in its business or in the
business of any of its Subsidiaries, except for such instances as would not
individually or in the aggregate have a Material Adverse Effect. The Company
and each of its Subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material
Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate any
Environmental Law after the Closing or that may give rise to any Environmental
Liabilities, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation (i) under any Environmental Law,
or (ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including, without limitation, underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance.  "Environmental Liabilities"
means all liabilities of a Person (whether such liabilities are owed by such
Person to governmental authorities, third parties or otherwise) whether
currently in existence or arising hereafter which arise under or relate to any
Environmental Law.
(t) Books and Records; Internal Accounting Controls. The books, records and
documents of the Company and its Subsidiaries accurately reflect in all
material respects the information relating to the business of the Company and
the Subsidiaries, the location and collection of their assets, and the nature
of all transactions giving rise to the obligations or accounts receivable of
the Company or any Subsidiary. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment
of the Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences.
(u) Material Agreements. Except for the Transaction Documents or as set forth
on Schedule 2.1(u) hereto, or those that are included as exhibits to the
Commission Documents, neither the Company nor any Subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan
or arrangement, a copy of which would be required to be filed with the



Commission (collectively, "Material Agreements") if the Company or any
Subsidiary were registering securities under the Securities Act. The Company
and each of its Subsidiaries has in all material respects performed all the
obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the
Company's knowledge, are not in default under any Material Agreement now in
effect, the result of which could cause a Material Adverse Effect. No written
or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement of the Company or of any Subsidiary limits or shall limit the
payment of dividends on its Common Stock, except as set forth on Schedule
2.1(u) hereto.
(v) Transactions with Affiliates. Except as disclosed in the Commission
Documents or as set forth on Schedule 2.1(v) hereto, there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions between (a) the Company, any
Subsidiary or any of their respective customers or suppliers, on the one hand,
and (b) on the other hand, Xxxxx Xxxx, Xxxxxxx Xxxxxx, Xxx Xxxxxx, and/or X.X.
Xxxxxxx, and/or any officer, employee, consultant or director of the Company,
or any of its Subsidiaries, or any Person owning 5% or more of the capital
stock of the Company or any Subsidiary or any member of the immediate family
of such Person, officer, employee, consultant, director or 5% or greater
stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder.
(w) Securities Act of 1933.  The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell
or solicit offers to buy any of the Securities, or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, or has taken
or will take any action so as to bring the issuance and sale of any of the
Securities under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its
affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
any of the Securities.
(x) Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto, and
except for the filing of any notice prior or subsequent to the Closing that
may be required under applicable state and/or federal securities laws (which
if required, shall be filed on a timely basis), no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Notes, the Warrants and the AIRs, or for the
performance by the Company of its obligations under the Transaction Documents.
(y) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees.  Except
as set forth in the Commission Documents or on Schedule 2.1(y) hereto, neither
the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary, which
contract or agreement is required to be disclosed in the Commission Documents
but which is not so disclosed. Since September 30, 2004, no officer,
consultant or key employee of the Company or any Subsidiary whose termination,
either individually or in the aggregate, could have a Material Adverse Effect,
has terminated or, to the knowledge of the Company, has any present intention
of terminating his or her employment or engagement with the Company or any
Subsidiary.


(z) Absence of Certain Developments.  Except as set forth in the Commission
Documents or on Schedule 2.1(z) hereto, since September 30, 2004, neither the
Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto other than under the Company's stock
option plans;
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature
and volume of the Company's or such Subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any obligation
or liability (absolute or contingent), other than current liabilities paid in
the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or intellectual property
rights, or disclosed any proprietary confidential information to any Person
except in the ordinary course of business or to the Purchasers or their
representatives;
(vii) suffered any substantial losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss of any
material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in
excess of $25,000;
(x) entered into any other transaction other than in the ordinary course of
business, or entered into any other material transaction, whether or not in
the ordinary course of business;
(xi) made charitable contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss, whether or
not covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind which in the
aggregate would cause a Material Adverse Effect; or
(xv) entered into an agreement, written or otherwise, to take any of the
foregoing actions.

(aa) Use of Proceeds. The proceeds from the sale of the Notes, the Warrants
and the AIRs will be used by the Company solely (i) to repay in full all
outstanding indebtedness under that certain Senior Secured Bridge Promissory
Note dated January 11, 2005 (the "Bridge Note"), in the original principal
amount of $2,500,000 executed by the Company and payable to the order of
Gryphon Master Fund, L.P., a Bermuda limited partnership ("Gryphon"), and GSSF
Master Fund, LP, a Bermuda limited partnership ("GSSF"), and (ii) for working
capital purposes, and shall not be used (A) to repay any outstanding
Indebtedness (other than the Bridge Note) or any loans to any officer,
director, affiliate or insider of the Company; provided, however, that the
Company may repay the Indebtedness listed on Schedule 2.1(k) attached hereto,
but only as and when such Indebtedness becomes due per the terms of such
Indebtedness as in effect on the date of this Agreement, (B) for non-coal
operation research and development (including, without limitation, the
development of the Company's clean coal technology that was acquired from
Saudi American Minerals, Inc.; provided, however, that the Company may use up
to $250,000 of such proceeds to pay for expenses related to developing,



testing and patenting such clean coal technology), (C) for the development,
exploration, or prospecting of any of the Company's natural gas properties, or
(D) for dividends or other distributions on any class of its capital stock or
to repurchase any capital stock (or any options, rights, warrants or
securities exchangeable or convertible into its capital stock). The Company
hereby covenants and agrees to repay in full all outstanding indebtedness
under the Bridge Note out of the proceeds from the sale of the Notes, the
Warrants and the AIRs, and hereby authorizes and directs Gryphon and GSSF to
deduct such amount from the Purchase Price to be paid by Gryphon and GSSF at
Closing as is necessary to repay in full all indebtedness under the Bridge
Note outstanding at Closing.
(bb) Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a "holding company" or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended.  The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its Subsidiaries
which is or would cause a Material Adverse Effect. The execution and delivery
of this Agreement and the issue and sale of the Notes, the Warrants and the
AIRs will not involve any transaction which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"); provided that, if any Purchaser, or any Person that owns a beneficial
interest in any Purchaser, is an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) with respect to which the Company is a
"party in interest" (within the meaning of Section 3(14) of ERISA), the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met.  As used in this Section 2.1(cc), the term "Plan" shall mean an "employee
pension benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
(dd) Delisting Notification. The Company has not received a delisting
notification from the OTC Bulletin Board that has not been rescinded, and, to
its knowledge, there are no existing facts or circumstances that could give
rise to the delisting of the Common Stock from the OTC Bulletin Board.
(ee) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
Section 2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization and Standing of the Purchasers. If such Purchaser is an
entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Such Purchaser has the requisite power and
authority to enter into and perform the Transaction Documents and to purchase
the Notes, the Warrants and the AIRs being sold to it hereunder. The
execution, delivery and performance of the Transaction Documents by such
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate or partnership action,
and no further consent or authorization of such Purchaser or its Board of



Directors, stockholders, or partners, as the case may be, is required. This
Agreement has been duly authorized, executed and delivered by such Purchaser.
The other Transaction Documents constitute, or shall constitute when executed
and delivered, valid and binding obligations of such Purchaser enforceable
against such Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of,
creditor's rights and remedies or by other equitable principles of general
application.
(c) Acquisition for Investment. Such Purchaser is purchasing the Notes and
acquiring the Warrants and the AIRs solely for its own account for the purpose
of investment and not with a view to or for sale in connection with the
distribution thereof. Such Purchaser does not have a present intention to sell
any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to
or through any Person; provided, however, that by making the representations
herein and subject to Section 2.2(e) below, such Purchaser does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to pledge any of the Securities for margin purposes and/or to
dispose of any of the Securities at any time in accordance with federal and
state securities laws applicable to such disposition. Such Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that such Purchaser is capable of evaluating the merits
and risks of its investment in the Company, (ii) is able to bear the financial
risks associated with an investment in the Securities, and (iii) has been
given full access to such records of the Company and the Subsidiaries and to
the officers of the Company and the Subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation.
(d) Rule 144. Such Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that
it is familiar with Rule 144 of the rules and regulations of the Commission,
as amended, promulgated pursuant to the Securities Act ("Rule 144"), and that
such Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of
another exemption from such registration requirement.
(e) General. Such Purchaser understands that the Securities are being offered
and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Such Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
(f) Opportunities for Additional Information. Such Purchaser acknowledges that
such Purchaser has had the opportunity to ask questions of and receive answers
from, or obtain additional information from, the executive officers of the
Company concerning the financial and other affairs of the Company, and to the
extent deemed necessary in light of such Purchaser's personal knowledge of the
Company's affairs, such Purchaser has asked such questions and received
answers to the full satisfaction of such Purchaser, and such Purchaser desires
to invest in the Company.
(g) No General Solicitation. Such Purchaser acknowledges that the Securities
were not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements
or sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which



such Purchaser was invited by any of the foregoing means of communications.
(h) Accredited Investor. Such Purchaser is an accredited investor (as defined
in Rule 501 of Regulation D), and such Purchaser has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Securities.  Such Purchaser acknowledges that an
investment in the Securities is speculative and involves a high degree of
risk.
ARTICLE III
Covenants
The Company covenants with each Purchaser as follows, which covenants are for
the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the Commission, in
accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents, 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
Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any
registration statement filed pursuant to this Agreement, and will not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
promptly file the "Listing Application" for, or in connection with, the
issuance and delivery of the Securities.
Section 3.3 Inspection Rights. In the event the Registration Statement (as
defined in the Registration Rights Agreement) is not effective or has been
suspended, and subject to the Purchaser signing a mutually agreeable
Non-Disclosure Agreement and agreeing not to sell (and not to permit any
Person over which it has direct control to sell) any of its securities if it
obtains material non-public information, the Company shall, subject to Section
3.9, permit, during normal business hours and upon reasonable request and
reasonable notice, a Purchaser or any employees, agents or representatives
thereof, so long as the Purchaser shall be obligated hereunder to purchase the
Notes or shall beneficially own Notes aggregating $1,000,000 or more in
principal amount, or shall own Securities which, in the aggregate, represent
(or would be convertible into or exchangeable for securities which represent)
more than two percent (2%) of the total combined voting power of all voting
securities then outstanding, to examine (but not to make copies of) the
records and books of account of, and visit and inspect, during the term of the
Warrants, the properties, assets, operations and business of the Company and
any Subsidiary, and to discuss the affairs, finances and accounts of the
Company and any Subsidiary with any of its officers, consultants, directors,
and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and cause each
Subsidiary to comply, with all applicable laws, rules, regulations and orders,
the noncompliance with which could have a Material Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company shall keep
and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
Section 3.6 Reporting Requirements. The Company, only to the extent not
included in a Commission Document publicly filed and available for public
access, shall furnish two (2) copies of the following to each Purchaser in a
timely manner so long as that Purchaser shall be obligated hereunder to
purchase the Notes or shall beneficially own the Notes, or shall own



Securities which, in the aggregate, represent (or are convertible into or
exchangeable for securities which represent) more than one percent (1%) of the
total combined voting power of all voting securities then outstanding:
(a) whether or not then required to file the same with the Commission, all of
the information required for Quarterly Reports filed with the Commission on
Form 10-Q as soon as available, and in any event within forty-five (45) days
after the end of each of the first three (3) fiscal quarters of the Company,
but in no event prior to the time that such Reports are publicly filed with
the Commission or otherwise made publicly available;
(b) whether or not then required to file the same with the Commission, all of
the information required for Annual Reports filed with the Commission on Form
10-K as soon as available, and in any event within ninety (90) days after the
end of each fiscal year of the Company, but in no event prior to the time that
such Reports are publicly filed with the Commission or otherwise made publicly
available; and
(c) Copies of all notices and information, including without limitation
notices and proxy statements in connection with any meetings, that are
provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.
Section 3.7 Other Agreements. The Company shall not enter into any agreement
in which the terms of such agreement would restrict or impair the right or
ability of the Company or any Subsidiary to perform under any Transaction
Document.
Section 3.8 Reservation of Shares. So long as the Notes, the Warrants and/or
the AIRs remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, the
maximum number of shares of Common Stock to effect the conversion or exercise
of the Notes, the Warrants and the AIRs.
Section 3.9 Disclosure of Transactions and Other Material Information.  On or
before 8:30 a.m., New York City time, on the Business Day immediately
following the Closing Date, the Company shall file a Current Report on Form
8-K with the Commission describing the terms of the transactions contemplated
by the Transaction Documents and including as exhibits to such Current Report
on Form 8-K this Agreement, forms of the Note, the Warrant, the AIR, the
Registration Rights Agreement, the Lock-up Agreement and the Security
Agreement, and the schedules hereto and thereto in the form required by the
Exchange Act and to which Current Report the Purchasers shall reasonably
approve (including all attachments, the "8-K Filing"). For purposes of this
Agreement, a "Business Day" means any day except Saturday, Sunday and any day
which is a legal holiday or a day on which banking institutions in the State
of Florida generally are authorized or required by law or other government
actions to close. As of the time of the filing of the 8-K Filing with the
Commission, no Purchaser shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of their
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors,
employees and agents not to, provide any Purchaser with any material,
nonpublic information regarding the Company or any of its Subsidiaries from
and after the filing of the 8-K Filing with the Company without the express
written consent of such Purchaser. Subject to the foregoing, neither the
Company nor any Purchaser shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Purchaser, to make any press release or other public disclosure with respect
to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith, and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) above, each Purchaser
shall be notified by the Company (although the consent of such Purchaser shall
not be required) in connection with any such press release or other public
disclosure prior to its release).



Section 3.10 Delivery of Securities. At Closing or as soon thereafter as
reasonably possible (but in any event no later than three Business Days
immediately following the Closing Date), the Company shall deliver to each
Purchaser the original Notes, Warrants and AIRs acquired by such Purchaser at
the Closing.
Section 3.11  No Shorting of Stock. Each Purchaser represents and warrants to
the Company that, during the period beginning on the date such Purchaser was
initially contacted by the Company or an agent thereof with respect to a
prospective investment in the Company and ending on the date hereof, such
Purchaser has not sold short (or entered into any other similar hedging
transaction with respect to) the shares of the Company's Common Stock.  Each
Purchaser, severally and not jointly with the other Purchasers, understands
and acknowledges that the Commission currently takes the position that
coverage of short sales of shares of the Common Stock "against the box" with
the Securities purchased hereunder prior to the effective date of the
Registration Statement is a violation of Section 5 of the Securities Act, as
set forth in Item 65, Section 5 under Section A, of the Manual of Publicly
Available Telephone Interpretations, dated June 1997, compiled by the Office
of Chief Counsel, Division of Corporate Finance. Accordingly, each Purchaser
hereby agrees (on behalf of itself or any Person over which it has direct
control) not to use any of the Securities to cover any short sales, hedging or
similar transactions with the same economic effect as a short sale, made prior
to the effective date of the Registration Statement. Additionally, each
Purchaser, severally and not jointly with the other Purchasers, agrees (a) to
comply with Regulation M under the federal securities laws, and (b) not to
sell short (or enter into any other similar hedging transaction with respect
to) the shares of the Company's Common Stock in contravention of state and
federal securities laws. Upon reasonable request, each Purchaser shall provide
to the Company documentation reasonably demonstrating compliance by such
Purchaser with the covenants set forth in this Section 3.11.

Section 3.12  Subsequent Financings.
(a) Until the first anniversary of the Closing Date, the Company hereby grants
to each Purchaser that (A) owns Notes, Conversion Shares, Warrant Shares or
AIR Shares immediately prior to the issuance of the "New Securities" (as
defined in Section 3.12(b)), and (B) was not an officer or director of the
Company as of the Closing Date (any such Purchaser, for such purpose, an
"Eligible Purchaser"), a right (the "Right of First Refusal") to purchase all
or any part of such Eligible Purchaser's pro rata share of any New Securities
that the Company may, from time to time, propose to sell and issue. The pro
rata share for each Eligible Purchaser, for purposes of the Right of First
Refusal, is the ratio of (x) the number of shares of Common Stock then held or
deemed to be held by such Eligible Purchaser immediately prior to the issuance
of the New Securities (assuming the full conversion of the Notes and the full
exercise of the Warrants and the AIRs), to (y) the total number of shares of
Common Stock of the Company then held or deemed to be held by all Eligible
Purchasers immediately prior to the issuance of the New Securities (assuming
the full conversion of the Notes and the full exercise of the Warrants and the
AIRs).
(b) For purposes of this Section 3.12, "New Securities" shall mean any Common
Stock, whether or not authorized on the date hereof, and rights, options or
warrants to purchase Common Stock and securities of any type whatsoever that
are, or may become, convertible into Common Stock; provided, however, that
"New Securities" does not include the following:
      (i)  shares of capital stock of the Company issuable upon conversion or
exercise of any currently outstanding securities or any Notes, AIRs, Warrants
or New Securities issued in accordance with this Agreement (including the
Conversion Shares, the Warrant Shares and the AIR Shares);
(ii) shares or options or warrants for Common Stock granted to officers,
directors and employees of, and consultants to, the Company pursuant to stock
option or purchase plans or other compensatory agreements approved by the
Compensation Committee of the Board of Directors;



(iii) shares of Common Stock issued in connection with any pro rata stock
split or stock dividend in respect of any series or class of capital stock of
the Company or recapitalization by the Company;
(iv) shares of capital stock, or options or warrants to purchase capital
stock, issued to a strategic investor in connection with a strategic
commercial agreement or pursuant to joint ventures, partnerships, licensing
agreements or other similar arrangements, as approved by the Board of
Directors;
(v) shares of capital stock, or options or warrants to purchase capital stock,
issued pursuant to a commercial borrowing, secured lending or lease financing
transaction approved by the Board of Directors;
(vi) shares of capital stock, or options or warrants to purchase capital
stock, issued pursuant to the acquisition of another corporation or entity by
the Company by consolidation, merger, purchase of all or substantially all of
the assets, or other reorganization in which the Company acquires, in a single
transaction or series of related transactions, all or substantially all of the
assets of such other corporation or entity or fifty percent (50%) or more of
the voting power of such other corporation or entity or fifty percent (50%) or
more of the equity ownership of such other corporation or entity;
(vii) shares of capital stock issued in a public securities offering pursuant
to a registration statement filed under the Securities Act or in a private
offering pursuant to Rule 144A promulgated under the Securities Act;
(viii) shares of capital stock, or options or warrants to purchase capital
stock, issued to current or prospective customers or suppliers of the Company
or to its employees, officers or directors, approved by the Board of Directors
as compensation or accommodation in lieu of other payment, compensation or
accommodation to such customer, supplier, employee, officer or director;
(ix) shares of capital stock, or warrants to purchase capital stock, issued to
any Person that provides services to the Company as compensation therefor
pursuant to an agreement approved by the Board of Directors;
(x) shares of capital stock, or options or warrants to purchase capital stock,
offered in a transaction where purchase of such securities by any Purchaser
would cause such transaction to fail to comply with applicable federal or
state securities laws or would cause an applicable registration or
qualification exemption to fail to be available to the Company; provided,
however, that this clause (x) shall apply only to the Purchaser or Purchasers
who would cause any such failure, and not to any of the other Purchasers; and
(xi) securities issuable upon conversion or exercise of the securities set
forth in paragraphs (i) - (x) above;

provided, further, however, that in any event, prior to the 120th day
following the date that the Registration Statement is declared effective by
the Commission, no more than an aggregate of 8 million shares of Common Stock
(including in the calculation of such 8 million shares any securities
exchangeable for or convertible into Common Stock), after adjusting for any
stock dividend, stock split, reverse split and similar events occurring after
the date hereof, shall be issued pursuant to clauses (ii), (iv), (v), (vi),
(vii), (viii) and (ix) of the preceding proviso (the "Applicable Clauses")
and, to the extent relating to the Applicable Clauses, clause (xi) of the
preceding proviso, and any shares or securities issued pursuant to any of the
Applicable Clauses shall be in furtherance or in connection with the
operation, expansion or financing of the Company's coal and natural gas
properties and business.

In the event that the Company proposes to undertake an issuance of New
Securities, it shall give each Eligible Purchaser written notice (the
"Notice") of its intention, describing the type of New Securities, the price,
and the general terms upon which the Company proposes to issue the same.  Each
Eligible Purchaser shall have ten (10) Business Days after receipt of such
notice to agree to purchase all or any portion of its pro rata share of such
New Securities at the price and upon the terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New



Securities to be purchased. In the event that any New Securities subject to
the Right of First Refusal are not purchased by the Eligible Purchaser within
the ten (10) Business Day period specified above, the Company shall have
ninety (90) days thereafter to sell (or enter into an agreement pursuant to
which the sale of New Securities that had been subject to the Right of First
Refusal shall be closed, if at all, within sixty (60) days from the date of
said agreement) the New Securities with respect to which the rights of the
Purchaser were not exercised at a price and upon terms, including manner of
payment, no more favorable to the purchasers thereof than specified in the
Notice. In the event the Company has not sold all offered New Securities
within such ninety (90) day period (or sold and issued New Securities in
accordance with the foregoing within sixty (60) days from the date of such
agreement), the Company shall not thereafter issue or sell any New Securities,
without first complying again with the procedures set forth in this Section
3.12.

Section 3.13  Beneficial Ownership Restrictions.
(a) Notwithstanding anything to the contrary set forth in this Agreement or
any other Transaction Document (including, without limitation, the Notes, the
Warrant and the AIRs), at no time may a Purchaser convert or exercise a
Security if the number of shares of Common Stock to be issued pursuant to such
conversion or exercise, when aggregated with all other shares of Common Stock
owned by such Purchaser at such time, would result in such Purchaser
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act, and the rules thereunder) in excess of 4.99% of the then issued
and outstanding shares of Common Stock outstanding at such time; provided,
however, that upon a Purchaser providing the Company with sixty-one (61) days
notice (the "Waiver Notice") that such Purchaser would like to waive this
Section 3.13(a) with regard to any or all shares of Common Stock issuable upon
conversion or exercise of any Security, this Section 3.13(a) shall be of no
force or effect with regard to those Securities referenced in the Waiver
Notice; provided, further, that any Purchaser may waive this Section 3.13(a)
by so indicating on the signature page to this Agreement, any such waiver to
be effective on and as of the date of this Agreement.
(b) Notwithstanding anything to the contrary set forth in this Agreement or
any other Transaction Document (including, without limitation, the Notes, the
Warrants and the AIRs), at no time may a Purchaser convert or exercise a
Security if the number of shares of Common Stock to be issued pursuant to such
conversion or exercise, when aggregated with all other shares of Common Stock
owned by such Purchaser at such time, would result in such Purchaser
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act, and the rules thereunder) in excess of 9.99% of the then issued
and outstanding shares of Common Stock outstanding at such time; provided,
however, that upon a Purchaser providing the Company with a Waiver Notice that
such Purchaser would like to waive this Section 3.13(b) with regard to any or
all shares of Common Stock issuable upon conversion or exercise of a Security,
this Section 3.13(b) shall be of no force or effect with regard to those
Securities referenced in the Waiver Notice.
Section 3.14  Financial Covenants. So long as any Purchaser shall be obligated
hereunder to purchase the Notes, or so long as the Purchasers collectively
shall beneficially own Notes aggregating $1,000,000 or more in principal
amount, the Company shall be obligated to maintain the following financial
covenants (unless the failure to so maintain any such financial covenant
results from a Force Majeure Event (as defined below), in which case such
failure shall not constitute a breach of this Section 3.14, but only with
respect to such financial covenant for the relevant single accounting period):

(a) EBITDA.  (i)  If the Purchasers exercise their AIRs in full (i.e., they
purchase all of the Securities underlying all of the AIRs), the Company shall
not permit its EBITDA (as defined below) for any period set forth below (in
each case, taken as a single accounting period) to be less than the amount set
forth opposite such period below:



Accounting Period
Minimum EBITDA to be maintained
October 1, 2005 through December 31, 2005
$2,500,000
January 1, 2006 through March 31, 2006
$2,500,000
April 1, 2006 through June 30, 2006
$2,500,000
July 1, 2006 through September 30, 2006
$2,500,000
October 1, 2005 through December 31, 2006
$2,500,000; or

(ii)  If the Purchasers do not exercise their AIRs in full (i.e., they do not
purchase all of the Securities underlying all of the AIRs), the Company shall
not permit its EBITDA for any period set forth below (in each case, taken as a
single accounting period) to be less than the amount set forth opposite such
period below:
Accounting Period
Minimum EBITDA to be maintained
October 1, 2005 through December 31, 2005
$1,500,000
January 1, 2006 through March 31, 2006
$1,500,000
April 1, 2006 through June 30, 2006
$1,500,000
July 1, 2006 through September 30, 2006
$1,500,000
October 1, 2005 through December 31, 2006
$1,500,000


(b) Capital Expenditures.  (i)  If the Purchasers exercise their AIRs in full
(i.e., they purchase all of the Securities underlying all of the AIRs), the
Company shall not permit its Capital Expenditures (as defined below) during
any period set forth below to exceed the amount set forth opposite such period
below:
Accounting Period
Maximum Capital Expenditures
October 1, 2005 through December 31, 2005
$1,500,000
October 1, 2005 through March 31, 2006
$2,750,000
October 1, 2005 through June 30, 2006
$4,000,000
October 1, 2005 through September 30, 2006
$5,250,000; or

(ii)  If the Purchasers do not exercise their AIRs in full (i.e., they do not
purchase all of the Securities underlying all of the AIRs), the Company shall
not permit its Capital Expenditures during any period set forth below to
exceed the amount set forth opposite such period below:
Accounting Period
Maximum Capital Expenditures
October 1, 2005 through December 31, 2005
$1,000,000
October 1, 2005 through March 31, 2006
$2,250,000
October 1, 2005 through June 30, 2006
$3,500,000
October 1, 2005 through September 30, 2006
$4,750,000



(c) Cash Level.  (i)  If the Purchasers exercise their AIRs in full (i.e.,
they purchase all of the Securities underlying all of the AIRs), the Company
shall not permit its level of Cash (as defined below) to be, at any point
during any time period set below, less than the amount set forth opposite such
period:
Accounting Period
Minimum Cash Level
October 1, 2005 through December 31, 2005
$1,000,000
January 1, 2006 through March 31, 2006
$2,000,000
April 1, 2006 through June 30, 2006
$3,000,000
July 1, 2006 through September 30, 2006
$4,000,000; or

(ii)  If the Purchasers do not exercise their AIRs in full (i.e., do not
purchase all of the Securities underlying all of the AIRs), the Company shall
not permit its level of Cash to be, at any point during any time period set
below, less than the amount set forth opposite such period:
Accounting Period
Minimum Cash Level
October 1, 2005 through December 31, 2005
$750,000
January 1, 2006 through March 31, 2006
$1,250,000
April 1, 2006 through June 30, 2006
$1,500,000
July 1, 2006 through September 30, 2006
$2,000,000

(d) Notwithstanding the foregoing, if, at any time following the date that the
Registration Statement is declared effective by the Commission, the Company's
quarterly EBITDA equals or exceeds $5,000,000 for two full consecutive
calendar quarters, then the Company shall thereafter no longer be required to
maintain the financial covenants required by subsections (b) and (c) above.
(e) For purposes of this Section 3.14, the following terms shall have the
meanings set forth below:
"EBITDA" means, for any period, the Company's earnings before interest, income
taxes, depreciation and amortization for such period, as reflected in the
Company's audited income statement, which income statement shall be prepared
in accordance with GAAP applied on a consistent basis to that of prior
periods. For purposes of calculating EBITDA, the Company shall exclude any
extraordinary gains or losses for such period and any non-operating income or
losses for such period from the calculation of EBITDA, each such exclusion to
be reasonably acceptable to the Purchasers.

"Capital Expenditures" means expenditures for the acquisition, construction,
improvement, or replacement of land, buildings, equipment, or other fixed or
capital assets or leaseholds (excluding, however, expenditures properly
chargeable to repairs or maintenance).

"Cash" means cash or cash equivalents that can properly be reported as such on
a balance sheet prepared in accordance with GAAP (excluding, however, cash
that is restricted against letters of credit or on deposit for equipment).

"Force Majeure Event" means an event or circumstance that prevents the Company
from maintaining any of the financial covenants required by this Section 3.14
(including, without limitation, an act of God, war, insurrection, riot,
nuclear disaster, labor strike or threat of violence, labor and material
shortage, fire, explosion, flood, river freeze-up, breakdown or damage to
mines, plant, equipment, or facilities (including a forced outage or an



extension of a scheduled outage of equipment or facilities to make repairs to
avoid breakdowns thereof or damage thereto), interruption to or slowdown in
transportation, railcar shortage, barge shortage, embargo, order, or act of
civil or military authority, law, regulation, or administrative ruling, or
total or partial interruption of the Company's operations which are due to any
enforcement action or other administrative or judicial action arising from an
environmental law or regulation), but in any case which is not within the
reasonable control of, or the result of the negligence of, the Company, and
which by the exercise of due diligence, the Company is unable to overcome or
avoid or cause to be avoided or is unable in good faith to obtain a substitute
acceptable to the Purchasers.

Section 3.15  Negative Covenants. So long as any Purchaser shall be obligated
hereunder to purchase the Notes, or so long as the Purchasers collectively
shall beneficially own Notes aggregating $1,000,000 or more in principal
amount, the Company shall not, nor shall it permit any of its Subsidiaries to,
do any of the following:

(a) except with respect to equipment purchases and operating leases made or
entered into in the ordinary course of the Company's mining operations,
create, incur, assume, suffer to exist, guarantee, or otherwise become or
remain, directly or indirectly, liable with respect to any Indebtedness, other
than Indebtedness evidenced by this Agreement and the other Transaction
Documents;
(b) except for those created under the Security Agreement, create, incur,
assume, or suffer to exist, directly or indirectly, any liens, restrictions,
security interests, claims, rights of another or other encumbrances on or with
respect to any of its assets, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom;
(c) merge or consolidate with or into any other Person, enter into any
reorganization or recapitalization transaction, or reclassify any of its
securities; provided, however, that nothing herein contained shall be deemed
to prohibit or limit the merger between the Company and Saudi American
Minerals, Inc., which was publicly announced on or about June 11, 2003, so
long as the Company issues no more than 13,791,420 shares of Common Stock to
the shareholders of Saudi American Minerals, Inc. in connection with the
consummation of such merger;
(d) liquidate, wind up, or dissolve (or suffer any liquidation or
dissolution);
(e) convey, sell, lease, license, assign, transfer, or otherwise dispose of
all or any substantial portion of its properties or assets, other than
transactions in the ordinary course of business consistent with past
practices, and transactions by non-material Subsidiaries;
(f) cause, permit, or suffer, directly or indirectly, any Change in Control
Transaction (as defined in the Note), except for any Change in Control
Transaction effected pursuant to the merger between the Company and Saudi
American Minerals, Inc., which was publicly announced on or about June 11,
2003;
(g) directly or indirectly enter into or permit to exist any transaction with
any "affiliate" (as defined in Rule 144 promulgated under the Securities Act)
of the Company or any of its Subsidiaries, except for transactions that are in
the ordinary course of its business, upon fair and reasonable terms, that are
fully approved by its Board of Directors, and that are no less favorable to it
than would be obtained in an arm's length transaction with a non-affiliate;
(h) declare or pay a dividend or return any equity capital to any holder of
any of its equity interests or authorize or make any other distribution to any
holder of its equity interests in its capacity as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for consideration any
of its equity interests outstanding (or any options or warrants issued to
acquire any of its equity interests); provided that the foregoing shall not
prohibit (i) the performance by the Company of its obligations under the
Warrants or the Registration Rights Agreement, (ii) any of the Company's



wholly-owned Subsidiaries in respect of which a Subsidiary Guaranty is
effective from paying dividends to the Company or another wholly- owned
Subsidiary of the Company in respect of which a Subsidiary Guaranty is
effective, or (iii) the Company and any Subsidiary thereof from paying
dividends in common stock issued by the Company or such Subsidiary that is
neither puttable by any holder thereof nor redeemable, so long as, in the case
of any such common stock dividend made by any such Subsidiary, the percentage
ownership (direct or indirect) of the Company in such Subsidiary is not
reduced as a result thereof;
(i) directly or indirectly, lend money or credit (by way of guarantee or
otherwise) or make advances to any person, or purchase or acquire any stock,
bonds, notes, debentures or other obligations or securities of, or any other
interest in, or make any capital contribution to, any other Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract (all of the foregoing, collectively, "Investments"); provided
that the following shall be permitted: (i) Investments outstanding on the
Closing Date and identified on Schedule 3.15(i) attached hereto, (ii)
Investments in accounts receivable owing to the Company or any of its
Subsidiaries obtained in the ordinary course of business, (iii) Investments in
cash and cash equivalents, (iv) making lease, utility and other similar
deposits in the ordinary course of business, (v) xxxxxx or swaps in the
ordinary course of business to protect against price or interest rate
fluctuations that are not for speculative purposes, (vi) Investments by the
Company in any wholly-owned Subsidiary of the Company in respect of which a
Subsidiary Guaranty is effective, (vii) Investments by any wholly-owned
Subsidiary of the Company in respect of which a Subsidiary Guaranty is
effective in the Company or any other wholly-owned Subsidiary of the Company
in respect of which a Subsidiary Guaranty is effective, and (viii) Investments
in securities of trade creditors or customers in the ordinary course of
business received upon foreclosure or pursuant to any plan of reorganization
or liquidation or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers;
(j) sell or transfer any of its assets (or, in the case of any Subsidiary of
the Company, issue any of its equity interests to any entity that is not the
Company or a wholly- owned Subsidiary of the Company in respect of a
Subsidiary Guaranty is effective); provided that the following shall be
permitted: (i) sales of inventory in the ordinary course of business, (ii)
dispositions of used, worn out, or obsolete property, (iii) leases of real or
personal property in the ordinary course of business, so long as the Security
Agreement is not violated thereby, (iv) the performance of the Transaction
Documents, and (v) other asset sales not to exceed $1,000,000 per fiscal year
(pro rated for any partial fiscal year); or
(k) form or acquire any Subsidiaries after the Closing Date.

ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and
to Sell the Notes, Warrants and AIRs. The obligation hereunder of the Company
to close and issue and sell the Notes, the Warrants and the AIRs to the
Purchasers on the Closing Date is subject to the satisfaction or waiver, at or
before the Closing, of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser 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 are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.



(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by the Purchasers at or prior to the Closing Date.
(c) No Injunction.  No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Notes, the Warrants
and the AIRs shall have been delivered to the Company at the Closing.
(e) Delivery of Transaction Documents. The Transaction Documents to which the
Purchasers are party shall have been duly executed and delivered by the
Purchasers to the Company.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the Notes, the Warrants and the AIRs. The obligation hereunder
of the Purchasers to purchase the Notes, the Warrants and the AIRs and
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions
set forth below. These conditions are for the Purchasers' sole benefit and may
be waived by the Purchasers at any time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement and in each of
the other Transaction Documents shall be true and correct in all material
respects as of the Closing Date, except for representations and warranties
that speak as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
(c) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior
to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets ("Bloomberg")
shall not have been suspended or limited, or minimum prices shall not have
been established on securities whose trades are reported by Bloomberg, nor
shall a banking moratorium have been declared either by the United States or
Florida State authorities, nor shall there have occurred any national or
international calamity or crisis of such magnitude in its effect on any
financial market which, in each case, in the reasonable judgment of the
Purchasers, makes it impracticable or inadvisable to purchase the Notes, the
Warrants and the AIRs.
(d) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary, seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Opinion of Counsel, Etc. The Purchasers shall have received an opinion of
counsel to the Company, dated the Closing Date, in the form of Exhibit E
hereto, and such other certificates and documents as the Purchasers or their
counsel shall reasonably require incident to the Closing.



(g) Notes, Warrants and AIRs. The Company shall have delivered to the
Purchasers the originally executed Notes, Warrants and AIRs (in such
denominations as each Purchaser may request) being acquired by the Purchasers
in accordance with Section 3.10.
(h) Resolutions. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to the Purchasers (the "Resolutions").
(i) Reservation of Shares. As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Notes and the exercise of the
Warrants and the AIRs, a number of shares of Common Stock equal to (A) the
number of Conversion Shares issuable upon conversion of the Notes, assuming
the Notes were issued on the Closing Date (after giving effect to the Notes to
be issued on the Closing Date and assuming the Notes were fully convertible on
such date regardless of any limitation on the timing or amount of such
conversion), plus (B) the number of Warrant Shares issuable upon exercise of
the Warrants, assuming the Warrants were issued on the Closing Date (after
giving effect to the Warrants to be issued on the Closing Date and assuming
the Warrants were fully exercisable on such date regardless of any limitation
on the timing or amount of such exercises), plus (C) the number of AIR Shares
issuable upon exercise of the AIRs, assuming the AIRs were issued on the
Closing Date (after giving effect to the AIRs to be issued on the Closing Date
and assuming the AIRs were fully exercisable on such date regardless of any
limitation on the timing or amount of such exercises).
(j) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the Resolutions, (ii) the Articles and the Bylaws, each as in effect at the
Closing, and (iii) the authority and incumbency of the officers of the Company
executing the Transaction Documents and any other documents required to be
executed or delivered in connection therewith.
(k) Officer's Certificate. On the Closing Date, the Company shall have
delivered to the Purchasers a certificate of an executive officer of the
Company, dated as of the Closing Date, confirming the accuracy of the
Company's representations, warranties and covenants as of the Closing Date and
confirming the compliance by the Company with the conditions precedent set
forth in this Section 4.2 as of the Closing Date.
(l) Fees and Expenses. As of the Closing Date, all fees and expenses required
to be paid by the Company shall have been or authorized to be paid by the
Company as of the Closing Date.
(m) Registration Rights Agreement. As of the Closing Date, the parties shall
have entered into the Registration Rights Agreement in the Form of Exhibit F
attached hereto.
(n) Lock-Up Agreements. Each officer, director and holder of 10% or more of
the Common Stock, and each of Xxxxx Xxxx, Xxxxxxx Xxxxxx, Xxx Xxxxxx and X.X.
Xxxxxxx, shall have executed and delivered to the Purchasers a Lock-Up
Agreement in the form attached hereto as Exhibit G.
(o) Security Agreement. As of the Closing Date, the relevant parties shall
have entered into the Security Agreement in the Form of Exhibit H attached
hereto.
(p) Subsidiary Guaranties. As of the Closing Date, each Subsidiary shall have
executed and delivered to the Purchasers a Subsidiary Guaranty in the Form of
Exhibit I attached hereto.
(q) Material Adverse Effect. No Material Adverse Effect shall have occurred.
ARTICLE V

Transfer Restrictions and Legends
Section 5.1 (a)  The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement, to the
Company, to an Affiliate of a Purchaser or in connection with a pledge
permitted by Section 5.1(b), the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor, to



the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
    (b)  The Purchasers agree to the imprinting, so long as is required by
this Section 5.1(b), of a legend on any of the Securities in the following
form:

         THESE SECURITIES HAVE NOT 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. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a) UNDER THE SECURITIES ACT.

         The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to
a financial institution that is an "accredited investor" as defined in Rule
501(a) under the Securities Act and who agrees to be bound by the provisions
of this Agreement and the Registration Rights Agreement and, if required under
the terms of such arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At
the appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder, if required.

     (c)  Certificates evidencing the Conversion Shares, the Warrant Shares
and AIR Shares shall not contain any legend (including the legend set forth in
Section 5.1(b)), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective
under the Securities Act, or (ii) following any sale of such Conversion
Shares, Warrant Shares or AIR Shares pursuant to Rule 144, or (iii) if such
Conversion Shares, Warrant Shares or AIR Shares are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Company's transfer agent promptly
after the Effectiveness Date (as defined in the Registration Rights Agreement)
if required by the Company's transfer agent to effect the removal of the
legend hereunder. If all or any portion of a Note, Warrant or AIR is converted
or exercised at a time when there is an effective registration statement to
cover the resale of the Conversion Shares, Warrant Shares or the AIR Shares,
such Conversion Shares, Warrant Shares or AIR Shares shall be issued free of
all legends. The Company agrees that following the Effectiveness Date or at
such time as such legend is no longer required under this Section 5.1(c), it
will, no later than five Business Days following the delivery by a Purchaser



to the Company or the Company's transfer agent of a certificate representing
Conversion Shares, Warrant Shares or AIR Shares, as the case may be, issued
with a restrictive legend (such date, the "Legend Removal Date"), deliver or
cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any transfer
agent of the Company that enlarge the restrictions on transfer set forth in
this Section 5.1.

    (d)  In addition to such Purchaser's other available remedies, the Company
shall pay to a Purchaser, in cash, as liquidated damages and not as a penalty,
for each $1,000 of Conversion Shares, Warrant Shares and/or AIR Shares (based
on the closing price of the Common Stock on the date such Securities are
submitted to the Company's transfer agent) subject to Section 5.1(c), $10 per
Business Day (increasing to $20 per Business Day five (5) Business Days after
such damages have begun to accrue) for each Business Day after the Legend
Removal Date until such certificate is delivered in proper form. Nothing
herein shall limit such Purchaser's right to pursue actual damages for the
Company's failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.

    (e)  Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 5.1 is predicated upon
the Company's reliance that the Purchaser will sell any Securities pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom.

ARTICLE VI

Termination
Section 6.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Closing Date by the mutual written consent of the
Company and the Purchasers.
Section 6.2 Effect of Termination.  In the event of termination by the Company
or the Purchasers, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by any party.  If this Agreement is
terminated as provided in Section 6.1 herein, this Agreement shall become void
and of no further force and effect, except for Sections 8.1 and 8.2, and
Article VII  herein. Nothing in this Section 6.2 shall be deemed to release
the Company or any Purchaser from any liability for any breach under this
Agreement, or to impair the rights of the Company or such Purchaser to compel
specific performance by the other party of its obligations under this
Agreement.
ARTICLE VII

Indemnification
Section 7.1 General Indemnity. The Company agrees to indemnify and hold
harmless each Purchaser (and its respective directors, officers, employees,
affiliates, agents, successors and assigns) from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by each Purchaser or any such Person as a result of any inaccuracy in
or breach of the representations, warranties or covenants made by the Company
herein. Each Purchaser, severally but not jointly with any other Purchaser,
agrees to indemnify and hold harmless the Company (and its directors,
officers, employees, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys' fees, charges



and disbursements) incurred by the Company or any such Person as result of any
inaccuracy in or breach of the representations or warranties made by such
Purchaser in Section 2.2 hereof (for the avoidance of doubt, no Purchaser
shall (i) be liable to, indemnify or hold harmless any other Purchaser, or
(ii) be liable to, indemnify or hold harmless the Company (or any of its
directors, officers, employees, affiliates, agents, successors and assigns)
for any loss, liability, deficiency, cost, damage or expense (including,
without limitation, any attorneys' fee, charge or disbursement) arising from
the acts, omissions, representations or warranties of any other Purchaser).
Section 7.2 Indemnification Procedure. Any party entitled to indemnification
under this Article VII (an "indemnified party") will give written notice to
the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect to such action, proceeding
or claim, to assume the defense thereof with counsel reasonably satisfactory
to the indemnified party.  In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such Person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then
the indemnified party may, at its option, defend, settle or otherwise
compromise or pay such action or claim. In any event, unless and until the
indemnifying party elects in writing to assume and does so assume the defense
of any such claim, proceeding or action, the indemnified party's costs and
expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party
all information reasonably available to the indemnified party which relates to
such action or claim.  The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto.  If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense.  The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect
of such claim. The indemnification required by this Article VII shall be made
by periodic payments of the amount thereof during the course of investigation
or defense, as and when bills are received or expense, loss, damage or
liability is incurred, so long as the indemnified party irrevocably agrees to
refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The
indemnity agreements contained herein shall be in addition to (a) any cause of
action or similar rights of the indemnified party against the indemnifying
party or others, and (b) any liabilities the indemnifying party may be subject
to pursuant to the law.




ARTICLE VIII

Miscellaneous
Section 8.1 Fees and Expenses. Each party shall pay the fees and expenses of
its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, however, that
the Company shall pay a flat $30,000 to Gryphon, the lead Purchaser, to
reimburse Gryphon for the fees and expenses (including attorneys' fees and
expenses) incurred by it in connection with its due diligence review of the
Company and the preparation, negotiation, execution, delivery and performance
of this Agreement and the other Transaction Documents and the transactions
contemplated thereunder (including Gryphon's counsel's review of the
Registration Statement (as contemplated by the Registration Rights Agreement)
as special counsel to Purchasers), $10,000 of which has already been paid and
is non-refundable, and the remaining $20,000 of which shall be due and payable
in cash at Closing (and only if the Closing occurs). If the Closing occurs,
the Company hereby authorizes and directs Gryphon to deduct $20,000 from the
Purchase Price to be paid by Gryphon at Closing in payment and satisfaction of
such remaining $20,000 due and payable by the Company at Closing. In addition,
the Company shall pay all fees and expenses incurred by the Purchasers in
connection with the enforcement of this Agreement and any of the other
Transaction Documents, following a breach by the Company of this Agreement or
any of the other Transaction Documents, including, without limitation, all
attorneys' fees, disbursements and expenses.
Section 8.2 Specific Enforcement; Consent to Jurisdiction.
(a) The Company and the Purchasers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
or the other Transaction Documents were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may
be entitled by law or equity.
(b) The Company and each Purchaser (i) hereby irrevocably submit to the
non-exclusive jurisdiction of the United States District Court sitting in the
Northern District of Texas and the courts of the State of Texas located in
Dallas, Texas, for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby, and (ii) hereby waive, and
agree not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. The Company and each Purchaser
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 8.2
shall affect or limit any right to serve process in any other manner permitted
by law. The Company and the Purchasers hereby agree that the prevailing party
in any suit, action or proceeding arising out of or relating to the Notes, the
Warrants, the AIRs or any Transaction Document shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
Section 8.3 Entire Agreement; Amendment. This Agreement and the Transaction
Documents contain the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein or in the other Transaction Documents, neither the Company nor any
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged
herein. No provision of this Agreement may be waived or amended other than by



a written instrument signed by the Company and the holders of at least 60% in
principal amount of the then-outstanding Notes, and no provision hereof may be
waived other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought.  No such amendment
shall be effective to the extent that it applies to less than all of the
holders of the Notes then outstanding. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents or holders of
Notes, as the case may be.
Section 8.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a Business Day during
normal business hours where such notice is to be received), or the first
Business Day following such delivery (if delivered other than on a Business
Day during normal business hours where such notice is to be received), or (b)
on the second Business Day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur.  The addresses for such
communications shall be:
If to the Company:    Consolidated Energy, Inc.
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxx  00000
Attention:  Xxxxx Xxxxxxx, President
Telecopier:  (000) 000-0000
Telephone:  (000) 000-0000

with copies (which copies
shall not constitute notice
to the Company) to:    Xxxx X. Xxxxxxxx, LLC
        1371 East 0000 Xxxxx, #000
Xxxx Xxxx Xxxx, Xxxx  00000
        Attention: Xxxx X. Xxxxxxxx, Esq.
        Telecopier: (000) 000-0000
        Telephone: (000) 000-0000

If to any Purchaser:  At the address of such Purchaser set forth on Exhibit A
to this Agreement.

Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 8.5 Waivers. No waiver by any party 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 other provision, condition
or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any  such
right accruing to it thereafter.
Section 8.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. After
the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
After the Closing, the Purchasers, in compliance with all applicable
securities laws, may assign the Notes, the Warrants, the AIRs and their rights
under this Agreement and the other Transaction Documents and any other rights
hereto and thereto without the consent of the Company, and any such assignee
shall be deemed to be a "Purchaser" under this Agreement.



Section 8.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person (other than indemnified parties, as contemplated
by Article VII).
Section 8.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas, without giving
effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 8.10 Survival. The representations and warranties of the Company and
the Purchasers contained in Sections 2.1(o) and 2.1(s) shall survive
indefinitely and those contained in Article II, with the exception of Sections
2.1(o) and 2.1(s), shall survive the execution and delivery hereof and the
Closing until the date two (2) years from the Closing Date, and the agreements
and covenants set forth in Articles I, III, V, VII and VIII of this Agreement
shall survive the execution and delivery hereof and the Closing hereunder.
Section 8.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.
Section 8.12 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the names of the Purchasers without
the consent of the Purchasers in accordance with Section 8.3, which consent
shall not be unreasonably withheld or delayed, or unless and until such
disclosure is required by law, rule or applicable regulation, and then only to
the extent of such requirement.
Section 8.13 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 8.14 Further Assurances. From and after the date of this Agreement,
upon the request of the Purchasers or the Company, the Company and each
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
other Transaction Documents.
Section 8.15 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Purchaser Transaction Document. Nothing contained herein
or in any other Purchaser Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting
in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser confirms that it has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors. Each Purchaser shall
be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any
other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser (other than Gryphon and GSSF) hereby agrees and



acknowledges that (a) Xxxxxx X. Garden, P.C. was retained solely by Gryphon
and GSSF in connection with their due diligence review of the Company and the
preparation, negotiation, execution, delivery and performance of this
Agreement and the other Transaction Documents and the transactions
contemplated thereunder, and in such capacity has provided legal services
solely to Gryphon and GSSF, (b) Xxxxxx X. Garden, P.C. has not represented,
nor will it represent, any Purchaser (other than Gryphon and GSSF) in
connection with the preparation, negotiation, execution, delivery and
performance of this Agreement or the other Transaction Documents or the
transactions contemplated thereunder, and (c) each Purchaser (other than
Gryphon and GSSF) should, if it wishes counsel with respect to the
preparation, negotiation, execution, delivery and performance of this
Agreement or the other Transaction Documents or the transactions contemplated
thereunder, retain its own independent counsel with respect thereto.

[Remainder of page intentionally left blank. Signature pages to follow.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.

CONSOLIDATED ENERGY, INC.



By: /s/Xxxxx Xxxxxxx
      Name:   Xxxxx Xxxxxxx
      Title:  President



[Signatures of Purchasers to follow on next pages.]

        PURCHASERS:

        GRYPHON MASTER FUND, L.P.

           By:  Gryphon Partners, L.P., its General Partner
           By:  Gryphon Management Partners, L.P., its General Partner
           By:  Gryphon Advisors, L.L.C., its General Partner
             By: /s/X.X. Xxxx, XX, Authorized Agent


                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)


        GSSF MASTER FUND, LP

           By:  Gryphon Special Situations Fund, LP, its General Partner
           By:  GSSF Management Partners, LP, its General Partner
           By:  GSSF, LLC, its General Partner
             By: /s/ X.X. Xxxx, XX, Authorized Agent


                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)




        XXXXXXXX PARTNERS, L.P.

           By:  Xxxxxxxx Capital Management, LLC, its General Partner
              By: /s/ Yedi Xxxx, CFO

                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)

        WS OPPORTUNITY INTERNATIONAL FUND, LTD.

           By:  WS Ventures Management, L.P., as agent and attorney-in-fact
           By:  WSV Management, LLC, its General Partner
              By: /s/ Xxxx X. Xxxxxx, Member

                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)


        WS OPPORTUNITY FUND (QP), L.P.

           By:  WS Ventures Management, L.P., its General Partner
           By:  WSV Management, LLC, its General Partner
              By: /s/ Xxxx X. Xxxxxx, Member

                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)


        WS OPPORTUNITY FUND, L.P.

           By:  WS Ventures Management, L.P., its General Partner
           By:  WSV Management, LLC, its General Partner
             By: /s/ Xxxx X. Xxxxxx, Member

                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)


      RENAISSANCE US GROWTH INVESTMENT TRUST PLC

          By: /s/ Xxxxxxx Xxxxxxxxx, Director

                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)


      BFS US SPECIAL OPPORTUNITIES TRUST PLC

          By: /s/ Xxxxxxx Xxxxxxxxx, Director

                                  ( Check box and initial if the foregoing
Purchaser wishes to waive the provisions of Section 3.13(a). ______ (initial
here)





EXHIBIT A
LIST OF PURCHASERS


                                                          Number of         Principal Amt      Dollar Amt
                                      Principal Amt        Warrants    Of Notes Representing   of Initial
Names and Addresses                Of Notes Purchased      Purchased      AIRS Purchased       Investment
of Purchasers
                                                                               
Gryphon Master Fund, L.P.
000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx  00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn:  Xxxx X. Xxxxxxx                $2,250,000            661,765        $2,250,000           $2,250,000

GSSF Master Fund, LP
000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx  00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn:  Xxxxxxx X. Xxxxxxxx            $  750,000            220,588        $  750,000           $  750,000

With a copy to:
Xxxxxx X. Garden, P.C.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx  00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn:  Xxxxxx X. Garden, Esq.

Xxxxxxxx Partners, L.P.
c/o Xxxxxxxx Capital Management, LLC
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx  00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn:  Xxxxx Xxxxxxx, Xxxxx Xxxxxx,
 Xxxxxx Xxxxx                         $3,000,000            882,353        $3,000,000           $3,000,000

With a copy to:
Xxxxxx Xxxxxx & Xxxxxxx LLP
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx  00000
Tel. No.:  (000) 000-0000
Fax No.:  (000) 000-0000
Attn:  Xxxxxx Silver

WS Opportunity International Fund, Ltd.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Tel. No.:  (000) 000-0000
Fax No.:  (000) 000-0000
Attn:  Xxx Xxxxxxx                    $  102,400             30,118        $  102,400           $  102,400


WS Opportunity Fund (QP), L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Tel. No.:  (000) 000-0000
Fax No.:  (000) 000-0000
Attn:  Xxx Xxxxxxx                    $   76,500             22,500        $   76,500           $   76,500


WS Opportunity Fund, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Tel. No.:  (000) 000-0000
Fax No.:  (000) 000-0000
Attn:  Xxx Xxxxxxx                    $   71,100             20,912        $   71,100           $   71,100





EXHIBIT A
LIST OF PURCHASERS (continued)


                                                          Number of         Principal Amt      Dollar Amt
                                      Principal Amt        Warrants    Of Notes Representing   of Initial
Names and Addresses                Of Notes Purchased      Purchased      AIRS Purchased       Investment
of Purchasers
                                                                               
Renaissance US Growth Investment
 Trust PLC
c/o RENN Capital Group, Inc.
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 000, XX-00
Xxxxxx, Xxxxx  00000
Tel. No.:  (000) 000-0000
Fax No.:  (000) 000-0000
Attn:  Xxxxxxxx Xxxxxx                $  375,000            110,294        $  375,000           $  375,000


BFS US Special Opportunities
 Trust PLC
c/o RENN Capital Group, Inc.
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 000, XX-00
Xxxxxx, Xxxxx  00000
Tel. No.:  (000) 000-0000
Fax No.:  (000) 000-0000
Attn:  Xxxxxxxx Xxxxxx                $  375,000            110,294        $  375,000           $  375,000
                                      ----------          ---------        ----------           ----------

Totals                                $7,000,000          2,058,824        $7,000,000           $7,000,000



EXHIBIT B
FORM OF NOTE

EXHIBIT C
FORM OF WARRANT

EXHIBIT D
FORM OF AIR

EXHIBIT E
FORM OF OPINION

1.  The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Wyoming and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted.  The Company is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect.
2.  The Company has the requisite corporate power and authority to enter into
and perform its obligations under the Transaction Documents and to issue the
Notes, the Warrants, the AIRs, the Conversion Shares, the Warrant Shares and
the AIR Shares. The execution, delivery and performance of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors is required. Each of the Transaction
Documents have been duly executed and delivered, and the Notes, the Warrants
and the AIRs have been duly executed, issued and delivered by the Company and



each of the Transaction Documents constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its respective terms. The issuance of the Conversion Shares, the Warrant
Shares and the AIR Shares will not trigger any preemptive rights under the
Articles or the Bylaws.
3.  The Notes, Warrants and AIRs have been duly authorized and, when delivered
against payment in full as provided in the Purchase Agreement, will be validly
issued, fully paid and nonassessable.  The Conversion Shares have been duly
authorized and reserved for issuance, and, when delivered upon conversion or
against payment in full as provided in the Notes, will be validly issued,
fully paid and nonassessable. The Warrant Shares have been duly authorized and
reserved for issuance, and, when delivered upon exercise or against payment in
full as provided in the Warrants, will be validly issued, fully paid and
nonassessable. The AIR Shares have been duly authorized and reserved for
issuance, and, when delivered upon exercise or against payment in full as
provided in the AIRs, will be validly issued, fully paid and nonassessable.
4.  The execution, delivery and performance of and compliance with the terms
of the Transaction Documents and the issuance of the Notes, the Warrants, the
AIRs, the Conversion Shares, the Warrant Shares and the AIR Shares do not (a)
violate any provision of the Articles or Bylaws, and, provided that the
representations of the Purchasers under the Transaction Documents are complete
and correct, (b) will not result in a violation of any Federal and state
securities laws and regulations applicable to the Company.
5.  No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Notes, the Warrants, the AIRs, the Conversion
Shares, the Warrant Shares and the AIR Shares, other than filings as may be
required by applicable Federal and state securities laws and regulations, or
the NASD rules and regulations.
6.  To my knowledge, other than as set forth in the Schedules or the
Commission Documents, there is no action, suit, claim, investigation or
proceeding pending, or threatened, against or involving the Company or any of
its properties or assets and which, if adversely determined, is reasonably
likely to result in a Material Adverse Effect.  To my knowledge, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7.  Provided that the representations of the Purchasers under the Transaction
Documents are complete and correct, the offer, issuance and sale of the Notes,
the Warrants and the AIRs to the Purchasers, and the offer, issuance and sale
of the Conversion Shares to the Purchasers pursuant to the Notes, the Warrant
Shares to the Purchasers pursuant to the Warrants and the AIR Shares to the
Purchasers pursuant to the AIRs, are exempt from the registration requirements
of the Securities Act of 1933, as amended.

EXHIBIT F
FORM OF REGISTRATION RIGHTS AGREEMENT

EXHIBIT G
FORM OF LOCK-UP AGREEMENT

EXHIBIT H
FORM OF SECURITY AGREEMENT

EXHIBIT I
FORM OF SUBSIDIARY GUARANTY