Placement Agency Agreement - BLUE DOLPHIN ENERGY CO - 3-30-2006

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Placement Agency Agreement - BLUE DOLPHIN ENERGY CO - 3-30-2006 Powered By Docstoc
					Exhibit 10.9 PLACEMENT AGENCY AGREEMENT This Placement Agency Agreement (this "Agreement") is made and entered into as of May 27, 2005 (the "Effective Date"), by and between Blue Dolphin Energy Company, a Delaware corporation (the "Company"), and Starlight Investments, LLC, a Texas corporation ("Starlight"). WHEREAS, the Company desires to retain Starlight as its non-exclusive placement agent, and Starlight is willing to act in its specific capacity, in each case subject to the terms and conditions of this Agreement. WHEREAS, the Company currently has in place investment banking agreements with other firms including Amerifund Capital Group, LLC, this agreement is exclusive to the $5 (five) million proposed "PIPE" transaction as contemplated herein, and PIPE related agency fees as defined in Section 6.(a) below will only be paid to Starlight under this agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and Starlight (each a "Party" and collectively, the "Parties") hereby agree as follows: 1. RETENTION OF STARLIGHT; SCOPE OF SERVICES (a) Subject to the terms and conditions set forth herein, the Company hereby retains Starlight to act as the nonexclusive placement agent to the Company during the Contract Period (as defined in Section 2 below), and Starlight hereby agrees to be so retained. (b) As the non-exclusive placement agent to the Company, Starlight will have the non-exclusive right during the Contract Period to identify for the Company prospective purchasers (collectively, the "Purchasers" and each individually, a "Purchaser") in a placement (the "Placement") of equity securities to be issued by the Company, the type and dollar amount being as mutually agreed to by the Parties (the "Securities"). (c) Terms of the Placement shall be as set forth in subscription documents, including any stock purchase or subscription agreement, escrow agreement, registration rights agreement, warrant agreement and/or other documents to be executed and delivered in connection with the Placement (collectively, the "Subscription Documents"). The Placement is intended to be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Regulation D ("Regulation D") of the rules and regulations of the Securities and Exchange Commission (the "SEC") promulgated under the Securities Act. (d) Starlight will act on a best efforts basis and will have no obligation to purchase any of the Securities offered in the Placement. During the Contract Period, Starlight shall have the non-exclusive right to arrange for all sales of Securities in the Placement, including without limitation the non-exclusive right to identify Initials: For Company: For Starlight: Page 1

potential buyers for the Securities. All sales of Securities in the Placement shall be subject to the approval of the Company, which approval may be withheld in the Company's sole discretion. 2. CONTRACT PERIOD AND TERMINATION (a) Starlight shall act as the Company's non-exclusive placement agent under this Agreement for a period commencing on the Effective Date, and continuing until the earlier of the Closing of the proposed "PIPE" transaction or the Company's decision not to pursue the transaction, or until terminated by either Party upon 30 days notice to the other Party (the "Contract Period"). (b) Upon termination, neither party will have any further obligation under this Agreement, except as provided in Sections 5, 6, 7, 8, 9 and 10 hereof. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The representations and warranties of the Company made to the Purchasers as set forth in the Subscription Documents are hereby incorporated by reference as of the date of consummation of the sale of the Securities (the "Closing") and all such representations and warranties are hereby deemed made by the Company directly to Starlight as though set forth in full herein. 4. COVENANTS OF THE COMPANY The Company covenants and agrees as follows: (a) Neither the Company nor any affiliate of the Company (as defined in Rule 501(b) of Regulation D) will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) of the Company which will be integrated with the sale of the Securities in a manner which would require the registration under the Securities Act of the Securities. (b) Any and all filings and documents required to be filed in connection with or as a result of the Placement pursuant to federal and state securities laws are the responsibility of the Company and will be filed by the Company. (c) Any press release to be issued by the Company announcing or referring to the Placement shall be subject to the prior review of Starlight, and each such press release shall, at the request of Starlight, identify Starlight as the placement agent. Starlight shall be permitted to publish a tombstone or similar advertisement upon completion of the Placement identifying itself as the Company's placement agent with respect thereto. This Agreement shall not be filed publicly by the Company without the prior written consent of Starlight, unless required by applicable law or regulation. Initials: For Company: For Starlight: Page 2

5. FURNISHING OF COMPANY INFORMATION; CONFIDENTIALITY (a) In connection with Starlight's activities hereunder on the Company's behalf, the Company shall furnish Starlight with all reasonable information concerning the Company and its operations that Starlight deems necessary or appropriate (the "Company Information") and shall provide Starlight with reasonable access to the Company's books, records, officers, directors, employees, accountants and counsel. The Company acknowledges and agrees that, in rendering its services hereunder, Starlight will be using and relying upon the Company Information without independent verification thereof or independent appraisal of any of the Company's assets and may, in its sole discretion, use additional information contained in public reports or other information furnished by the Company or third parties. (b) Starlight agrees that the Company Information will be used solely for the purpose of performing its services hereunder. Subject to the limitations set forth in subsection (c) below, Starlight will keep the Company Information provided hereunder confidential and will not disclose such Company Information or any portion thereof, except (i) to a third party contacted by Starlight on behalf of, and with the prior approval of, the Company pursuant hereto who has agreed to be bound by a confidentiality agreement satisfactory in form and substance to the Company, or (ii) to any other person for which the Company's consent to disclose such Company Information has been obtained. (c) Starlight's confidentiality obligations under this Agreement shall not apply to any portion of the Company Information which (i) at the time of disclosure to Starlight or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by Starlight in violation of this Agreement); (ii) was available to Starlight on a non-confidential basis from a source other than the Company, provided that such source is not and was not bound by a confidentiality agreement with the Company; (iii) has been independently acquired or developed by Starlight without violating any of its obligations under this Agreement; or (iv) the disclosure of which is legally compelled (whether by deposition, interrogatory, request for documents, subpoena, civil or administrative investigative demand or other similar process). In the event that Starlight becomes legally compelled to disclose any of the Company Information, Starlight shall provide the Company with prompt prior written notice of such requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement. (d) The obligations of the Parties under this Section 5 shall survive the termination of this Agreement for 12 months. Initials: For Company: For Starlight: Page 3

6. FEES AND EXPENSES (a) As compensation for services rendered by Starlight in connection with the Placement, the Company agrees to pay Starlight a fee of seven percent (7%) of the gross proceeds from the sale of Securities sold in the Placement (the "Agency Fee"). The Agency Fee shall be paid immediately upon the closing of each sale of Securities by the Company. Due diligence, marketing, and other offering related third party (including Amerifund Capital Group, LLC offering related expenses) expenses not covered in section 6.(b) below will be credited against the Agency Fee. (b) The Company shall also promptly reimburse Starlight for all reasonable out-of-pocket expenses incurred by Starlight and its directors, officers and employees in connection with the performance of Starlight's services under this Agreement. For these purposes, "out-of-pocket expenses" shall include, but not be limited to, attorney's fees and costs, long distance telephone, facsimile, courier, mail, supplies, travel and similar expenses. Except for bills for long distance telephone, facsimile, express mail, courier, mail and supplies, Starlight will not incur any expenses without the prior consent of the Company; and the Parties shall attempt to have the Company direct billed as often as possible for such expenses. (c) Upon closing of the Placement, the Company agrees to issue to Starlight and/or its assigns, a Securities Purchase Warrant (the "Representative's Warrant") entitling the holder(s) thereof to purchase an amount of Securities equal to six percent (6%) of the total number of Securities sold in the Placement for a period of three (3) years at an exercise price per share equal to the price at which the Securities are sold to Purchasers. The Representative's Warrant shall otherwise be substantially in the form of EXHIBIT A attached hereto. (d) Addendum B to that certain Agreement dated August 5, 2004 between Amerifund Capital Group, LLC and the Company, attached herein by reference as EXHIBIT C, provides for the provision of consultancy and other services by Amerifund Capital Group, LLC or its subsidiaries, collectively ("AMCAP"), to the Company in connection with the Placement, in return for fees payable to AMCAP. Starlight hereby agrees that any such fees paid or payable to AMCAP by the Company shall be credited against the fees due Starlight hereunder. (e) The obligations of the Parties under this Section 6 shall survive the termination of this Agreement for any reason for 12 (twelve) months. 7. INDEMNIFICATION (a) The Company agrees to indemnify and hold Starlight harmless from and against any and all losses, claims, damages or liabilities (or actions, including securityholder actions, in respect thereof) related to or arising out of Starlight's engagement hereunder or its role in connection herewith, and will reimburse Starlight for all reasonable expenses (including reasonable costs, expenses, awards and counsel fees and/or judgments) as they are incurred by Starlight in Initials: For Company: For Starlight: Page 4

connection with investigating, preparing for or defending any such action or claim, whether or not in connection with pending or threatened litigation in which Starlight is a party. The Company will not, however, be responsible for any claims, liabilities, losses, damages or expenses which are finally judicially determined to have resulted primarily from the bad faith, gross negligence or willful misconduct of Starlight. The Company also agrees that Starlight shall not have any liability to the Company for or in connection with such engagement, except for any such liability for losses, claims, damages, liabilities or expenses incurred by the Company that result primarily from the bad faith, gross negligence or willful misconduct of Starlight. In the event that the foregoing indemnity is unavailable (except by reason of the bad faith, gross negligence, or willful misconduct of Starlight), then the Company shall contribute to amounts paid or payable by Starlight in respect of its losses, claims, damages and liabilities in such proportion as appropriately reflects the relative benefits received by, and fault of, the Company and Starlight in connection with the matters as to which such losses, claims, damages or liabilities relate, and other equitable considerations. The foregoing shall be in addition to any rights that Starlight may have at common law or otherwise and shall extend upon the same terms to and inure to the benefit of any director, officer, employee, agent or controlling person of Starlight. The Company hereby consents to personal jurisdiction, service and venue in any court in which any claim which is subject to this agreement is brought against Starlight or any other person entitled to indemnification or contribution under this subsection (a). (b) Starlight agrees to indemnify and hold the Company harmless from and against any and all losses, claims, damages or liabilities (or actions, including securityholder actions, in respect thereof) which are finally judicially determined to have resulted primarily from the bad faith, gross negligence or willful misconduct of Starlight, and will reimburse the Company for all reasonable expenses (including reasonable costs, expenses, awards and counsel fees and/or judgments) as they are incurred by the Company in connection with investigating, preparing for or defending any such action or claim, whether or not in connection with pending or threatened litigation in which the Company is a party. In the event that the foregoing indemnity is unavailable, then Starlight shall contribute to amounts paid or payable by the Company in respect of its losses, claims, damages and liabilities in such proportion as appropriately reflects the relative benefits received by, and fault of, the Company and Starlight in connection with the matters as to which such losses, claims, damages or liabilities relate, and other equitable considerations. The foregoing shall be in addition to any rights that the Company may have at common law or otherwise and shall extend upon the same terms to and inure to the benefit of any director, officer, employee, agent or controlling person of the Company. Starlight hereby consents to personal jurisdiction, service and venue in any court in which any claim, which is subject to this agreement, is brought against the Company or any other person entitled to indemnification or contribution under this subsection (b). (c) The obligations of the Parties under this Section 7 shall survive the termination of this Agreement for a period of 12 (twelve) months. Initials: For Company: For Starlight: Page 5

8. NON-CIRCUMVENTION The Company and Starlight acknowledge that Amerifund Capital Securities, a subsidiary of Amerifund Capital Group, LLC (hereinafter referred to collectively as AMCAP) and an affiliate of Starlight has previously disclosed and will further identify and disclose investors to that certain Agreement between the Company and AMCAP dated August 5, 2004. Such investors have been registered in writing with, and the Company has agreed to, such list of approved and subsequently to be approved investors for solicitation by AMCAP. Starlight hereby agrees that, for a period of one year from the end of the Contract Period or other termination of this Agreement, Starlight will not enter into any agreement, transaction or arrangement with any of the institutions (including their agents, principals and affiliates and the accounts and funds which they manage or advise) which AMCAP has introduced, directly or as a result of a referral from such institution, to the Company as prospective purchasers of the Securities in the Placement (collectively, the "AMCAP Contacts"), regardless of whether a transaction is consummated with such prospective purchasers, unless Starlight notifies AMCAP and the Company in writing of the agreement, transaction or arrangement, and pays AMCAP either a fee equal to the Agency Fee or a mutually agreeable fee for securities of the Company sold to AMCAP Contacts. 9. GOVERNING LAW THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS PROVISIONS THEREOF. 10. ARBITRATION Starlight and the Company will attempt to settle any claim or controversy arising out of this Agreement through consultation and negotiation in good faith and a spirit of mutual cooperation. Any dispute which the parties cannot resolve may then be submitted by either party to binding arbitration in Houston, Texas under the rules of the American Arbitration Association for resolution. Nothing in this paragraph will prevent either party from resorting to judicial proceedings if (a) good faith efforts to resolve the dispute under these procedures have been unsuccessful or (b) interim relief from a court is necessary to prevent serious and irreparable injury. 11. NO WAIVER The failure or neglect of any party hereto to insist, in any one or more instances, upon the strict performance of any of the terms or conditions of this Agreement, or waiver by any party of strict performance of any of the terms or conditions of this Agreement, shall not be construed as a waiver or relinquishment in the future of such term or condition, but the same shall continue in full force and effect. Initials: For Company: For Starlight: Page 6

12. SUCCESSORS AND ASSIGNS The benefits of this Agreement shall inure to the benefit of the Parties, their respective successors, assigns and representatives, and the obligations and liabilities assumed in this Agreement by the Parties shall be binding upon their respective successors and assigns. This Agreement may not be assigned by either Party without the express written consent of the other Party, which consent shall not be unreasonably withheld. 13. NOTICES All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, recognized overnight delivery service, or facsimile as follows: If to the Company: Blue Dolphin Energy Company 801 Travis, Suite 2100 Houston, TX 77002 Facsimile: 713-227-7626 Attention: Michael Jacobson (President) If to Starlight: Starlight Investments, LLC. c/o Amerifund Capital Group, LLC 14800 St Mary's Lane, Suite 130 Houston, TX 77079 Facsimile: 713-482-2004 Attention: Andrew J. Martin (Branch Manager) Either Party may change its address or facsimile number set forth above by giving the other Party notice of such change in accordance with the provisions of this Section 13. A notice shall be deemed given (a) if by personal delivery, on the date of such delivery, (b) if by certified mail, on the date shown on the applicable return receipt, (c) if by overnight delivery service, on the day after the date delivered to the service, or (d) if by facsimile, on the date of transmission. 14. NATURE OF RELATIONSHIP The Parties intend that Starlight's relationship to the Company and the relationship of each director, officer, employee or agent of Starlight to the Company shall be that of an independent contractor and not as an employee of the Company or an affiliate thereof. Nothing contained in this Agreement shall constitute or be construed to be or create a partnership or joint venture between Starlight and the Company or their respective successors or assigns. Neither Starlight nor any director, officer, employee or agent of Starlight shall be considered to be an employee of the Company by virtue of the services provided hereunder. Initials: For Company: For Starlight: Page 7

15. MISCELLANEOUS Starlight's obligations under this Agreement are subject to the following general conditions: (a) All relevant terms, conditions, and circumstances relating to the Placement will be reasonably satisfactory to the Company, Starlight and their respective counsel. (b) Starlight reserves the right to solicit the assistance of outside dealers ("Dealers") to assist in the offer and sale of the Placement; provided, however, that any such Dealers agree in writing to be bound by the terms of the Placement. It is understood that Starlight, in its sole discretion, shall be entitled to pay over to any such Dealers any portion of the compensation received by Starlight hereunder. The Company shall have no financial liability for any fees or expenses of any such Dealers. 16. CAPTIONS The Section titles herein are for reference purposes only and do not control or affect the meaning or interpretation of any term or provision hereof. 17. AMENDMENTS No alteration, amendment, change or addition hereto shall be binding or effective unless the same is set forth in writing and signed by a duly authorized representative of each Party. 18. PARTIAL INVALIDITY If it is finally determined that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision shall be replaced by a term or provision that is valid and enforceable and that comes as close as possible to expressing the intention of the invalid or unenforceable term or provision. 19. ENTIRE AGREEMENT This Agreement embodies the entire agreement and understanding of the Parties and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. Initials: For Company: For Starlight: Page 8

20. COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be an original, but all of which together shall be considered one and the same agreement. IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above by duly authorized representatives of the Company and Starlight. BLUE DOLPHIN ENERGY COMPANY By: Ivar Siem Title: Chairman & CEO STARLIGHT INVESTMENTS, LLC. By: Title: Initials: For Company: For Starlight: Page 9

EXHIBIT A FORM OF REPRESENTATIVE'S WARRANT [See attached]

SAMPLE THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL (WHICH OPINION IS REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES), SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
Date: ______________ Warrant to Purchase ***______*** Shares

BLUE DOLPHIN ENERGY COMPANY (Incorporated under the laws of the State of Delaware) REPRESENTATIVE'S WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK Warrant Price: $_____ [the same price that the Securities were sold in the Placement] per share, subject to adjustment as provided below. THIS IS TO CERTIFY that, for value received, Starlight Investments, LLC. ("Starlight") and its assigns (collectively, the "Holder"), is entitled to purchase, subject to the terms and conditions hereinafter set forth, up to ***______*** shares of the common stock, par value $0.01 per share ("Common Stock"), of Blue Dolphin Energy Company, a Delaware corporation (the "Company"), and to receive certificate(s) for the Common Stock so purchased. 1. EXERCISE PERIOD AND VESTING. The exercise period is the period beginning on the date of this Warrant (the "Issuance Date") and ending at 5:00 p.m., Houston, Texas time, on ______________ [Three years from the Issuance Date] (the "Exercise Period"). This Warrant is vested in full as of the Issuance Date and is immediately exercisable by Holder. This Warrant will terminate automatically and immediately upon the expiration of the Exercise Period. Subject to adjustment as provided below, the Warrant Price shall be adjusted as follows: (i) for the period of time beginning on the issuance date and until the later of the date such warrant shares underlying the warrant are registered or one (1) year [110% of the Warrant Price], (ii) after the expiration of the later of one year after the date hereof or until the warrant shares underlying the warrant are registered until two (2) years [120%of the Warrant Price], and (iii) after the expiration two (2) years after the date hereof [130% of the Warrant Price]. A-1

2. EXERCISE OF WARRANT; CASHLESS EXERCISE. This Warrant may be exercised, in whole or in part, at any time and from time to time during the Exercise Period. Such exercise shall be accomplished by tender to the Company of the purchase price set forth above as the warrant price (the "Warrant Price"), either (a) in cash, by wire transfer or by certified check or bank cashier's check, payable to the order of the Company, or (b) by surrendering such number of shares of Common Stock received upon exercise of this Warrant with a current market price equal to the Warrant Price (a "Cashless Exercise") together with presentation and surrender to the Company of this Warrant with an executed subscription in substantially the form attached hereto as Exhibit A (the "Subscription"). Upon receipt of the foregoing, the Company will deliver to the Holder, as promptly as possible, a certificate or certificates representing the shares of Common Stock so purchased, registered in the name of the Holder or its transferee (as permitted under Section 3 below). With respect to any exercise of this Warrant, the Holder will for all purposes be deemed to have become the holder of record of the number of shares of Common Stock purchased hereunder on the date this Warrant, a properly executed Subscription and payment of the Warrant Price is received by the Company (the "Exercise Date"), irrespective of the date of delivery of the certificate evidencing such shares, except that, if the date of such receipt is a date on which the stock transfer books of the Company are closed, such person will be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. Fractional shares of Common Stock will not be issued upon the exercise of this Warrant. In lieu of any fractional shares that would have been issued but for the immediately preceding sentence, the Holder will be entitled to receive cash equal to the current market price of such fraction of a share of Common Stock on the trading day immediately preceding the Exercise Date. In the event this Warrant is exercised in part, the Company shall issue a new Warrant to the Holder covering the aggregate number of shares of Common Stock as to which this Warrant remains exercisable for. If the Holder elects to conduct a Cashless Exercise, the Company shall cause to be delivered to the Holder a certificate or certificates representing the number of shares of Common Stock computed using the following formula: X = (Y x (A-B))/A Where: X = the number of shares of Common Stock to be issued to Holder; Y = the portion of the Warrant (in number of shares of Common Stock) being exercised by Holder (at the date of such calculation); A = the fair market value of one share of Common Stock on the Exercise Date (as calculated below); and B = Warrant Price (as adjusted to the date of such calculation). For purposes of the foregoing calculation, "fair market value of one share of Common Stock on the Exercise Date" shall mean: (i) if the principal trading market for such securities is a national or regional securities exchange, the closing price on such exchange for day immediately prior to such Exercise Date; (ii) if sales prices for shares of Common Stock are reported by the NASDAQ National Market System or NASDAQ Small Cap Market (or a similar system then in use), the last reported sales price for the day immediately prior to such Exercise Date; or (iii) if A-2

neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of Common Stock are reported in the over-the-counter market by NASDAQ (or, if not so reported, by the National Quotation Bureau), the average of the high bid and low ask prices so reported for the ten (10) trading days immediately prior to such Exercise Date. Notwithstanding the foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the period in question, then the current market price shall be determined as of the latest ten (10) day period prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the current market price shall be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company. The Company acknowledges and agrees that this Warrant was issued on the Issuance Date. 3. TRANSFERABILITY AND EXCHANGE (a) This Warrant, and the Common Stock issuable upon the exercise hereof, may not be sold, transferred, pledged or hypothecated unless the Company shall have been provided with an opinion of counsel, or other evidence reasonably satisfactory to it, that such transfer is not in violation of the Securities Act, and any applicable state securities laws. Subject to the satisfaction of the aforesaid condition, this Warrant and the underlying shares of Common Stock shall be transferable from time to time by the Holder upon written notice to the Company. If this Warrant is transferred, in whole or in part, the Company shall, upon surrender of this Warrant to the Company, deliver to each transferee a Warrant evidencing the rights of such transferee to purchase the number of shares of Common Stock that such transferee is entitled to purchase pursuant to such transfer. The Company may place a legend similar to the legend at the top of this Warrant on any replacement Warrant and on each certificate representing shares issuable upon exercise of this Warrant or any replacement Warrants. Only a registered Holder may enforce the provisions of this Warrant against the Company. A transferee of the original registered Holder becomes a registered Holder only upon delivery to the Company of the original Warrant and an original Assignment, substantially in the form set forth in Exhibit B attached hereto. (b) This Warrant is exchangeable upon its surrender by the Holder to the Company for new Warrants of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable hereunder, each of such new Warrants to represent the right to purchase such number of shares as may be designated by the Holder at the time of such surrender. 4. ADJUSTMENTS TO WARRANT PRICE AND NUMBER OF SHARES SUBJECT TO WARRANT. The Warrant Price and the number of shares of Common Stock purchasable upon the exercise of this Warrant are subject to adjustment from time to time upon the occurrence of any of the events specified in this Section 4. For the purpose of this Section 4, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right to participate in any distribution of the assets or earnings of the Company without limit as to per share amount (excluding, and subject to any prior rights of, any class or series of preferred stock). (a) In case the Company shall (i) pay a dividend or make a distribution in shares of Common Stock or other securities, (ii) subdivide its outstanding shares of Common A-3

Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, then the Warrant Price in effect at the time of the record date for such dividend or on the effective date of such subdivision, combination or reclassification, and/or the number and kind of securities issuable on such date, shall be proportionately adjusted so that the Holder of any Warrant thereafter exercised shall be entitled to receive the aggregate number and kind of shares of Common Stock (or such other securities other than Common Stock) of the Company, at the same aggregate Warrant Price, that, if such Warrant had been exercised immediately prior to such date, the Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (b) In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of cash, evidences of indebtedness or assets, or subscription rights or warrants, the Warrant Price to be in effect after such record date shall be determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price per share of Common Stock on such record date, less the amount of cash so to be distributed (or the fair market value (as determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company) of the portion of the assets or evidences of indebtedness so to be distributed, or of such subscription rights or warrants, applicable to one share of Common Stock, and the denominator of which shall be such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Warrant Price shall again be adjusted to be the Warrant Price which would then be in effect if such record date had not been fixed. (c) For the purpose of any computation under any subsection of this Section 4, the "current market price" per share of Common Stock on any date shall be the per share price of the Common Stock on the trading day immediately prior to the event requiring an adjustment hereunder and shall be: (i) if the principal trading market for such securities is a national or regional securities exchange, the closing price on such exchange on such day; or (ii) if sales prices for shares of Common Stock are reported by the NASDAQ National Market System or Small Cap Market System (or a similar system then in use), the last reported sales price so reported on such day; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of Common Stock are reported in the over-thecounter market by NASDAQ (or, if not so reported, by the National Quotation Bureau), the average of the high bid and low ask prices so reported on such day. Notwithstanding the foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the day in question, then the current market price shall be determined as of the latest date prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the current market price shall be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company. A-4

(d) Notwithstanding any provision herein to the contrary, no adjustment in the Warrant Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Warrant Price; provided, however, that any adjustments which by reason of this subsection (b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be. (e) In the event that at any time, as a result of an adjustment made pursuant to subsection (a) above, the Holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 4, and the other provisions of this Warrant shall apply on like terms to any such other shares. (f) If the Company merges or consolidates into or with another corporation or entity, or if another corporation or entity merges into or with the Company (excluding such a merger in which the Company is the surviving or continuing corporation and which does not result in any reclassification, conversion, exchange, or cancellation of the outstanding shares of Common Stock), or if all or substantially all of the assets or business of the Company are sold or transferred to another corporation, entity, or person, then, as a condition to such consolidation, merger, or sale (a "Transaction"), lawful and adequate provision shall be made whereby the Holder shall have the right from and after the Transaction to receive, upon exercise of this Warrant and upon the terms and conditions specified herein and in lieu of the shares of the Common Stock that would have been issuable if this Warrant had been exercised immediately before the Transaction, such shares of stock, securities, or assets as the Holder would have owned immediately after the Transaction if the Holder had exercised this Warrant immediately before the effective date of the Transaction. 5. REGISTRATION RIGHTS. The Company hereby grants to Holder, with respect to the shares of Common Stock underlying this Warrant, registration rights identical to those that are granted to Purchasers in the Placement (as such terms are defined in that certain Placement Agency Agreement, dated as of __________, by and between the Company and Starlight); it being specifically agreed and understood that the shares of Common Stock underlying this Warrant will be included in any registration statement filed by the Company which includes shares of Common Stock, or shares of Common Stock underlying any securities, issued to Purchasers in the Placement. 6. RESERVATION OF SHARES. The Company agrees at all times to reserve and hold available out of its authorized but unissued shares of Common Stock the number of shares of Common Stock issuable upon the full exercise of this Warrant. The Company further covenants and agrees that all shares of Common Stock that may be delivered upon the exercise of this Warrant will, upon delivery, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the purchase thereof hereunder. 7. NOTICES TO HOLDER. Upon any adjustment of the Warrant Price (or number of shares of Common Stock purchasable upon the exercise of this Warrant) pursuant to Section 4, the Company shall promptly thereafter cause to be given to the Holder written notice of such A-5

adjustment. Such notice shall include the Warrant Price (and/or the number of shares of Common Stock purchasable upon the exercise of this Warrant) after such adjustment, and shall set forth in reasonable detail the Company's method of calculation and the facts upon which such calculations were based. Where appropriate, such notice shall be given in advance and included as a part of any notice required to be given under the other provisions of this Section 7. In the event of (a) any fixing by the Company of a record date with respect to the holders of any class of securities of the Company for the purpose of determining which of such holders are entitled to dividends or other distributions, or any rights to subscribe for, purchase or otherwise acquire any shares of capital stock of any class or any other securities or property, or to receive any other right, (b) any capital reorganization of the Company, or reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets or business of the Company to, or consolidation or merger of the Company with or into, any other entity or person, or (c) any voluntary or involuntary dissolution or winding up of the Company, then and in each such event the Company will give the Holder a written notice specifying, as the case may be (i) the record date for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; or (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, conveyance, dissolution, liquidation, or winding up is to take place and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such capital stock or securities receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock securities) for securities or other property deliverable upon such event. Any such notice shall be given at least 10 days prior to the earliest date therein specified. 8. NO RIGHTS AS A STOCKHOLDER. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company, nor to any other rights whatsoever except the rights herein set forth. 9. ADDITIONAL COVENANTS OF THE COMPANY. The Company shall not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant. Without limiting the generality of the foregoing, the Company (a) will at all times reserve and keep available, solely for issuance and delivery upon exercise of this Warrant, shares of Common Stock issuable from time to time upon exercise of this Warrant, (b) will not increase the par value of any shares of capital stock receivable upon exercise of this Warrant above the amount payable therefor upon such exercise, and (c) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable stock. 10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and permitted assigns. 11. NOTICES. All notices, requests, demands, and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if (i) delivered personally, (ii) sent by prepaid overnight courier service, or (iii) sent by telecopy or facsimile transmission, answer back requested, to the parties at the following addresses (or at such other address as shall be specified by the parties by like notice): A-6

if to the Holder: Starlight Investments, LLC c/o Amerifund Capital Group, LLC 14800 St. Mary's Lane, Suite 130 Houston, TX 77079 Facsimile: 713-482-2004 Attention: Andrew J. Martin (Branch Manager) and, if to the Company: Blue Dolphin Energy Company 801 Travis, Suite 2100 Houston, TX 77002 Facsimile: 713-227-7626 Attention: President Such notices, requests, demands, and other communications shall be effective (i) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, or (ii) if sent by telecopy or facsimile transmission, when the answer back is received. 12. SEVERABILITY. Every provision of this Warrant is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the remainder of this Warrant. 13. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of Texas without giving effect to the principles of choice of laws thereof. 14. ATTORNEYS' FEES. In any action or proceeding brought to enforce any provision of this Warrant, the prevailing party shall be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. 15. ENTIRE AGREEMENT. This Warrant (including the Exhibits attached hereto) constitutes the entire understanding between the Company and the Holder with respect to the subject matter hereof, and supersedes all prior negotiations, discussions, agreements and understandings relating to such subject matter. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first set forth above. BLUE DOLPHIN ENERGY COMPANY By: Title: A-7

Exhibit A SUBSCRIPTION FORM (To be Executed by the Holder to Exercise the Rights To Purchase Common Stock Evidenced by the Within Warrant) The undersigned hereby irrevocably subscribes for _______ shares (the "Stock") of the Common Stock of _________________ (the "Company") pursuant to and in accordance with the terms and conditions of the attached Warrant (the "Warrant"), and hereby makes payment of $_______ therefor by [tendering cash, wire transferring or delivering a certified check or bank cashier's check, payable to the order of the Company] [surrendering _______ shares of Common Stock received upon exercise of the Warrant, which shares have a current market price equal to such payment as required in Section 2 of the Warrant]. The undersigned requests that a certificate for the Stock be issued in the name of the undersigned and be delivered to the undersigned at the address stated below. If the Stock is not all of the shares purchasable pursuant to the Warrant, the undersigned requests that a new Warrant of like tenor for the balance of the remaining shares purchasable thereunder be delivered to the undersigned at the address stated below. In connection with the issuance of the Stock, I hereby represent to the Company that I am acquiring the Stock for my own account for investment and not with a view to, or for resale in connection with, a distribution of the shares within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). I understand that because the Stock has not been registered under the Securities Act, I must hold such Stock indefinitely unless the Stock is subsequently registered and qualified under the Securities Act or is exempt from such registration and qualification. I shall make no transfer or disposition of the Stock unless (a) such transfer or disposition can be made without registration under the Securities Act by reason of a specific exemption from such registration and such qualification, or (b) a registration statement has been filed pursuant to the Securities Act and has been declared effective with respect to such disposition. I agree that each certificate representing the Stock delivered to me shall bear substantially the same legend as set forth on the front page of the Warrant. I further agree that the Company may place stop orders on the certificates evidencing the Stock with the transfer agent, if any, to the same effect as the above legend. The legend and stop transfer notice referred to above shall be removed only upon my furnishing to the Company of an opinion of counsel (reasonably satisfactory to the Company) to the effect that such legend may be removed.
Date: -------------------------Signed: -------------------------------Address: ----------------------------------------------------------------------

A-8

Exhibit B ASSIGNMENT (To be Executed by the Holder to Effect Transfer of the Attached Warrant) For Value Received __________________________ hereby sells, assigns and transfers to _________________________ the Warrant attached hereto and the rights represented thereby to purchase _________ shares of Common Stock in accordance with the terms and conditions hereof, and does hereby irrevocably constitute and appoint _________________________ as attorney to transfer such Warrant on the books of the Company with full power of substitution.
Dated: ------------------------Please print or typewrite name and address of assign: ------------------------------------------------------------------------------------------------------------Signed: -------------------------------Please insert Social Security or other Tax Identification Number of Assign: ----------------------------------------

B-1

EXHIBIT C ADDENDUM B To That Certain Agreement dated August 5, 2004 (Incorporated by reference)

Exhibit 10.10 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of March 8, 2006 by and between Blue Dolphin Energy Company, a Delaware corporation (the "COMPANY"), and the investors listed on the signature pages hereto (each, an "INVESTOR" and collectively the "INVESTORS"). WHEREAS, the Investors wish to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, __________ shares of the common stock, par value $.01 per share, of the Company (the "COMMON STOCK"). The shares of Common Stock to be purchased by the Investors pursuant to this Agreement are referred to herein as the "SECURITIES"; and WHEREAS, the Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States Securities and Exchange Commission (the "COMMISSION") under the Securities Act. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated: "2005 10-K" has the meaning set forth in Section 4.4. "ADVICE" has the meaning set forth in Section 6.5. "AFFILIATE" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, "controls" or is "controlled" by or is under common control with, such Person, as such terms are used in and construed under Rule 144 under the Securities Act. "AGREEMENT" has the meaning set forth in the Preamble. "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in the City of Houston are authorized or required by law to remain closed. "CLOSING" means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

"CLOSING DATE" means the date and time of the Closing and shall be 9:00 a.m., Houston time, on March 8, 2006, or such other date and time as is mutually agreed to by the Company and the Investors. "COMMISSION" has the meaning set forth in the Recitals. "COMMON STOCK" has the meaning set forth in the Recitals. "COMPANY" has the meaning set forth in the Preamble. "DISCLOSURE MATERIALS" has the meaning set forth in Section 3.1(g). "EFFECTIVE DATE" means the date that the Registration Statement is first declared effective by the Commission. "EFFECTIVENESS PERIOD" has the meaning set forth in Section 6.1(b). "ELIGIBLE MARKET" means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "INDEMNIFIED PARTY" has the meaning set forth in Section 6.4(c). "INDEMNIFYING PARTY" has the meaning set forth in Section 6.4(c). "INVESTOR" has the meaning set forth in the Preamble. "LIEN" means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction. "LOSSES" means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, costs of preparation and reasonable attorneys' fees. "MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 3.1(b). "PERSON" means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, or joint stock company. "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened in writing. "PROSPECTUS" means the prospectus included in the Registration Statement at the time of effectiveness (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and 2

supplements to such prospectus including post effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "PURCHASE PRICE" means [80% of the volume weighted average price for twenty (20) Trading Days preceding the Closing Date]. "REGULATION D" has the meaning set forth in the Recitals. "REGISTRABLE SECURITIES" means any Securities issued pursuant to this Agreement, together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing. "REGISTRATION STATEMENT" means each registration statement required to be filed under Article VI, as amended at the time and on the date it became effective, including the information (if any) contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) or deemed to be part thereof at the time of effectiveness pursuant to Rule 430A, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "RULE 144," "RULE 415," "RULE 424" and "RULE 430A" means Rule 144, Rule 415, Rule 424 and Rule 430A, respectively, promulgated by the Commission pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SEC REPORTS" has the meaning set forth in Section 3.1(g). "SECURITIES" has the meaning set forth in the Recitals. "SECURITIES ACT" has the meaning set forth in the Recitals. "SUBSIDIARY" means any Person in which the Company, directly or indirectly, owns voting securities having the power to elect a majority of the directors (or similar members of such corporation's or other entity's governing body), or otherwise direct the management and polices of such corporation or other entity. "TRADING DAY" means (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq SmallCap Market (or any successor thereto), or (c) if trading ceases to occur on the Nasdaq SmallCap Market (or any successor thereto), any Business Day. "TRADING MARKET" means the Nasdaq SmallCap Market or any other Eligible Market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted. "TRANSFER AGENT" means Securities Transfer Corporation or any successor transfer agent for the Company. 3

ARTICLE II PURCHASE AND SALE 2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to the Investors, and the Investors shall purchase from the Company, the Securities. The date and time of the Closing and shall be 9:00 a.m., Houston, Texas time, on the Closing Date. The Closing shall take place at a location mutually agreeable to the parties or by electronic mail and/or facsimile. 2.2 Closing Deliveries. (a) At the Closing, each Investor shall deliver or cause to be delivered to the Company the aggregate Purchase Price for the Securities listed next to such Investor's name on Schedule 2.2. The Purchase Price shall be paid in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to the Investor by the Company for such purpose. (b) As soon as practicable after the Closing, the Company shall deliver or cause to be delivered to each Investor one or more stock certificates, containing only the legend expressly provided in Section 4.1 hereof, evidencing the Securities purchased by such Investor. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors as follows (which representations and warranties shall be deemed to apply, where appropriate, to each Subsidiary): (a) Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected, individually or in the aggregate, to have a material adverse effect on (i) the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a whole on a consolidated basis, or (ii) the Company's ability to consummate the transactions contemplated by this Agreement on a timely basis (either of (i) or (ii), a "MATERIAL ADVERSE EFFECT"). (b) Authorization; Enforcement. The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by this 4

Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its board of directors or its stockholders. This Agreement has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, or by general principles of equity. (c) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any provision of the Company's Amended and Restated Certificate of Incorporation or its bylaws, (ii) conflict with, or constitute a default (or an event that 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 (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right could not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company or a Subsidiary is bound or affected, except to the extent that such violation could not reasonably be expected to have a Material Adverse Effect. (d) Subsidiaries. The Company has no Subsidiaries or any other equity interests in any other Person other than those listed on Schedule 3.1(d) hereto. Except as disclosed on Schedule 3.1(d) hereto, the Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien and all the issued and outstanding shares of capital stock or comparable equity interests of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. (e) Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be subject to preemptive or similar rights of stockholders. (f) Capitalization. The aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) as of the date of this Agreement is set forth on 5

Schedule 3.1(f) hereto. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except as disclosed on Schedule 3.1(f) hereto, the Company has not issued any other options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as set forth on Schedule 3.1(f) hereto, and except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investor) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities. (g) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (the foregoing materials, together with any materials filed by the Company under the Exchange Act, whether or not required, being collectively referred to herein as the "SEC REPORTS" and, together with this Agreement and the Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis. As of the respective dates on which they were filed and/or amended, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The audited consolidated balance sheets and audited consolidated statements of income and cash flows of the Company as of December 31, 2004 and 2003 and for the three years ended December 31, 2004 and the unaudited consolidated balance sheets and unaudited consolidated statements of income and cash flows of the Company as at and for the periods ended March 31, 2005, June 30, 2005 and September 30, 2005 (as restated and including in each case any related notes and schedules thereto) included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of and for 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. 6

(h) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, and except as specifically disclosed in the SEC Reports or on Schedule 3.1(h) hereto, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that could result in a Material Adverse Effect and (ii) the Company has not incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission. (i) Absence of Litigation. Except as disclosed in the SEC Reports, there is no action, suit, claim, or proceeding, or, to the Company's knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that would be reasonably expected to, individually or in the aggregate, have a Material Adverse Effect. (j) Compliance. Neither the Company nor any Subsidiary, except in each case as could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority. (k) Private Placement. Neither the Company, nor any of its Affiliates, nor any Person acting on the Company's behalf, has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market. (l) Disclosure. The Company confirms that neither it nor any officers, directors or Affiliates, has provided the Investors or their agents or counsel with any information that constitutes or might constitute material, nonpublic information with respect to the Company (other than the existence and terms of the issuance of Securities, as contemplated by this Agreement). 7

3.2 Representations and Warranties of the Investors. Each Investor hereby represents and warrants to the Company as follows: (a) Organization; Authority. If the Investor is an entity, the Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by such Investor of the Securities hereunder has been duly authorized by all necessary action on the part of the Investor. In addition, this Agreement has been duly executed and delivered by each Investor and constitutes the valid and legally binding obligation of the Investor, enforceable against it in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, or by general principles of equity. (b) No Public Sale or Distribution; Investment Intent. The Investor is acquiring the Securities for investment, for its own account, and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and the Investor does not have a present intention or arrangement to effect any sale or distribution of the Securities to or through any Person except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws; provided, however, that by making the representations herein, the Investor does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with applicable federal and state securities laws. (c) Investor Status. At the time the Investor was offered the Securities, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501(a) under the Securities Act. (d) Experience of the Investor. The Investor has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. (e) Access to Information. The Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information (other than material non-public information) about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such 8

additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the Securities. Neither such inquiries nor any other investigation conducted by or on behalf of the Investor or its representatives or counsel shall modify, amend or affect the Investor's right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company's representations and warranties contained in this Agreement. (f) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. (g) No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation by the Investor of the transactions contemplated hereby will not (i) conflict with or violate the organizational documents of the Investor (if the Investor is an entity), (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 (with or without notice, lapse of time, or both) of, any agreement, credit facility, debt, indenture or other instrument to which the Investor is a party or by which any of its property is bound, or (iii) result in a violation of any law, rule, regulation, order, judgment, decree or other restriction of any court or governmental authority to which the Investor is subject (including federal and state securities laws) or by which any of its property or assets is bound or affected, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults or violations that are not material and do not otherwise affect the ability of the Investor to consummate the transactions contemplated hereby. (h) No Legal, Tax or Investment Advice. The Investor understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Investor in connection with the purchase of the Securities constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities. (i) Disclosure. The Investor confirms that, to the Investor's knowledge, none of the Company and its officers, directors and Affiliates has provided the Investor or its agents or counsel with any information that constitutes or might constitute material, nonpublic information with respect to the Company, other than the existence and terms of the issuance of Securities, as contemplated by this Agreement. ARTICLE IV OTHER AGREEMENTS OF THE PARTIES 4.1 Legend Requirements. Each Investor agrees to the imprinting, so long as is required by this Section 4.1, of the following legend on any certificate evidencing Securities: 9

"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 COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS." Certificates evidencing Securities shall not be required to contain such legend (i) after a Transfer pursuant to a Registration Statement that is effective under the Securities Act covering the resale of such Securities, (ii) following any sale of such Securities pursuant to Rule 144, (iii) if such Securities are eligible for sale under Rule 144(k) or (iv) if such legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Staff of the Commission). Following the Effective Date or at such earlier time as a legend is no longer required for the Securities, the Company will no later than five Business Days following the delivery by an Investor to the Company or the Transfer Agent of a legended certificate representing such Securities and an opinion of counsel to the extent required, deliver or cause to be delivered to such Investor a certificate representing such Securities that is free from such legend. 4.2 Furnishing of Information. As long as any Investor owns Securities, the Company covenants to use its commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. The Company further covenants that it will use its commercially reasonable efforts to take such further action as any holder of Securities may reasonably request to satisfy the provisions of this Section 4.2. 4.3 Securities Laws Disclosure; Publicity. Following the Closing, the Company shall issue a press release disclosing all material terms of the transactions contemplated hereby and shall, thereafter, timely file a Current Report on Form 8-K with the Commission describing the terms of the transactions contemplated by this Agreement in the form required by the Exchange Act and shall file this Agreement as an exhibit to its annual report on Form 10-K for the fiscal year ended December 31, 2005 (the "2005 10-K"). The Company and the Investors shall consult with each other in issuing any press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory agency or Trading Market with respect to the transactions contemplated hereby, and neither party shall issue any such press release or otherwise make any such public statement, filing or other communication without the prior consent of the other, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not publicly 10

disclose the name of any Investor, or include the name of any Investor in any press release without the prior written consent of such Investor. 4.4 Use of Proceeds. The Company intends to use the net proceeds from the sale of the Securities for working capital needs and general corporate purposes. ARTICLE V CONDITIONS 5.1 Conditions Precedent to the Obligations of the Investors. The obligation of the Investors to acquire Securities at the Closing is subject to the satisfaction or waiver by the Investors, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date; and (b) Performance. The Company 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 it at or prior to the Closing. 5.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell the Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Investors contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date; and (b) Performance. The Investors 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 Investors at or prior to the Closing. ARTICLE VI REGISTRATION RIGHTS 6.1 Shelf Registration. (a) The Company shall prepare and file with the Commission a "Shelf" Registration Statement covering the resale of all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415, as promptly as reasonably practicable after the filing of the 2005 10-K, but in no event later than May 15, 2006. The Registration Statement shall be on Form S-3, except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance with the Securities Act and the Exchange Act and as consented to by the Investors. 11

(b) The Company shall use its reasonable best efforts to cause the Registration Statement to be declared effective by the Commission as promptly as possible after the filing thereof and shall use its reasonable best efforts to keep the Registration Statement continuously effective (the period for which the Company is required to use its reasonable best efforts to keep such Registration Statement effective, the "EFFECTIVENESS PERIOD") under the Securities Act until the earlier of (i) the date that all Registrable Securities covered by such Registration Statement have been sold or (ii) the date that all Registrable Securities may be sold publicly under Rule 144(k). (c) The Company shall notify the Investors in writing promptly (and in any event within three Business Days) after receiving notification from the Commission that the Registration Statement has been declared effective. (d) Notwithstanding anything in this Agreement to the contrary, at any time when the Registration Statement is effective, the Company may, by written notice to the Investors, suspend sales thereunder and/or require that the Investors immediately cease the sale of shares of Common Stock pursuant thereto if (x) the Company is engaged in a merger, acquisition or sale and the board of directors of the Company determines in good faith, by appropriate resolutions, that, as a result of such activity, (A) it would be detrimental to the Company (other than as relating solely to the price of the Common Stock) to maintain a Registration Statement at such time and (B) it is in the best interests of the Company to suspend such Registration Statement or (y) another event has occurred or is reasonably likely to occur that would require additional disclosure by the Company and that the Company has a bona fide business purpose for keeping confidential, and the nondisclosure of which would reasonably be expected to cause the Registration Statement to fail to comply with applicable disclosure requirements at such time. Upon receipt of such notice, the Investors shall immediately discontinue any sales of Registrable Securities pursuant to such registration until the Investors have received copies of a supplemented or amended Prospectus or until the Investors are advised in writing by the Company that the then-current Prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Company's board of directors) the failure to require such suspension would be detrimental to the Company. The Company's rights under this Section 6.1(d) may be exercised for a period of no more than 30 days at a time and not more than three times in any twelve-month period. Immediately after the end of any suspension period under this Section 6.1(d), the Company shall take all necessary actions (including filing any required supplemental prospectus) to restore the effectiveness of the applicable Registration Statement and the ability of the Investors to publicly resell their Registrable Securities pursuant to such effective Registration Statement. 6.2 Information from Investors. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Article VI with respect to the Registrable Securities that each of the Investors shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of such securities, including but not limited to, the Investor's name, the amount of Registrable Securities 12

held by such Investor and the amount of other debt and equity securities of the Company held by such Investor. Each Investor agrees to provide such other information as the Company may reasonably request in writing. 6.3 Registration Procedures. In connection with the Company's registration obligations hereunder, the Company shall: (a) Not less than three Business Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), furnish to the Investors copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of the Investors. (b) (i) Subject to Section 6.1(d), prepare and file with the Commission such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission during the Effectiveness Period any additional Registration Statements, only to the extent necessary to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Investors with true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Investor thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Investors as promptly as reasonably practicable, and no later than three Business Days thereafter, of any of the following events: (i) the Commission notifies the Company whether there will be a "review" of any Registration Statement; (ii) the Commission comments in writing on any Registration Statement (in which case the Company shall deliver to the Investors a copy of such comments and of all written responses thereto); (iii) the Registration Statement or any post-effective amendment is declared effective; (iv) the Commission or any other federal or state governmental authority requests any amendment or supplement to any Registration Statement or Prospectus or requests additional information related thereto; (v) the Commission issues any stop order suspending the effectiveness of any Registration Statement or initiates any Proceedings for that purpose; (vi) the Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the financial statements included in any Registration Statement become ineligible for 13

inclusion therein or any statement made in any Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference is untrue in any material respect or any revision to a Registration Statement, Prospectus or other document is required so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of any Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as possible. (e) Upon request, provide the Investors, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (f) Consent to the use of any Prospectus and each amendment or supplement thereto by the Investors in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto to the extent permitted by federal and state securities laws and regulations. (g) Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the Investor in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as the Investor requests in writing, to keep each such registration or qualification (or exemption therefrom) effective for so long as required, but not to exceed the duration of the Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. (h) If requested by the Investors, as promptly as reasonably practicable incorporate in the Registration Statement such appropriate information as the Investors may reasonably request to have included therein by filing a Form 8K, or filing a supplement to the Prospectus, to reflect any change in the information regarding the holder of the Registrable Securities or the Investor's plan of distribution, provided, that all filings made in connection with such requests shall be made at the requesting Investor's expense. 14

(i) Cooperate with the Investors to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by this Agreement and under law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as the Investors may reasonably request. (j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Cooperate with any reasonable due diligence investigation undertaken by the Investors in connection with the sale of Registrable Securities, including, without limitation, by making available documents and information. (l) Comply with all rules and regulations of the Commission applicable to the registration of the Securities. 6.4 Registration Expenses. The Company shall pay all fees and expenses incident to the performance of or compliance with Article VI of this Agreement by the Company, including without limitation (a) all registration and filing fees and expenses, including without limitation those related to filings with the Commission, any Trading Market and in connection with applicable state securities or Blue Sky laws, other than those fees and expenses which are specific to an individual Investor, (b) printing expenses (including without limitation expenses of printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement and (f) all listing fees to be paid by the Company to the Trading Market. 6.5 Indemnification. (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Investor, their officers, directors, partners, members, agents and employees, each Person who controls an Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all Losses arising out of or based on (i) any breach of any representation or warranty made by the Company in this Agreement or any other certificate, instrument or document delivered in connection with this Agreement, (ii) any breach of any 15

covenant, agreement or obligation of the Company contained in this Agreement or any other certificate, instrument or document delivered in connection with this Agreement or (iii) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or related preliminary prospectus or in any amendment or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except (x) to the extent, but only to the extent, that any such untrue statement, alleged untrue statement, omission or alleged omission was contained in or based upon information furnished in writing to the Company by or on behalf of the Investor for use therein, or to the extent that such information relates to the Investor or the Investor's proposed method of distribution of Registrable Securities, or (y) in the case of an occurrence of an event of the type specified in Section 6.2(c)(v)(vii), such Loss results from the use by the Investor of an outdated or defective Prospectus after the Company has notified the Investor in writing that the Prospectus is outdated or defective and prior to the receipt by the Investor of the Advice contemplated in Section 6.5. The indemnification obligations of the Company pursuant to Sections 6.4(a)(i) and 6.4(a)(ii) shall terminate upon the first anniversary of the Closing Date. In addition, the Company shall not be liable to reimburse the Investor pursuant to Sections 6.4(a)(i) or 6.4(a)(ii) unless the aggregate amount of Losses incurred by the Investor with respect to all such breaches of representations, warranties, covenants, agreements or obligations by the Company exceeds $25,000 and, provided that, the Company's maximum aggregate indemnification obligations pursuant to Sections 6.4(a)(i) or 6.4(a)(ii) will be limited to the amount of the purchase price paid by the Investor for the Securities pursuant to Section 2.2(b). (b) Indemnification by Investors. Each Investor shall indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses arising out of or based on (i) any breach of any representation or warranty made by such Investor in this Agreement or any other certificate, instrument or document delivered in connection with this Agreement, (ii) any breach of any covenant, agreement or obligation of the Investor contained in this Agreement or any other certificate, instrument or document delivered in connection with this Agreement or (iii) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or related preliminary prospectus or in any amendment or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading. In no event shall the liability of the Investor hereunder be greater in amount than the dollar amount of the proceeds received by the Investor upon the sale of the Registrable Securities giving rise to such indemnification obligation. The indemnification obligations of the Investors pursuant to Sections 6.4(b)(i) and 6.4(b)(ii) shall terminate upon the first anniversary of the Closing Date. In addition, the Investors shall not be liable to reimburse the Company pursuant to Sections 6.4(b)(i) or 6.4 (b)(ii) unless the aggregate amount of Losses incurred by the Company with respect to all such breaches of representations, warranties, covenants, agreements or obligations by the Investor exceeds $25,000 and, provided that, the Investor's maximum aggregate indemnification obligations pursuant to Sections 6.4(b)(i) 16

or 6.4(b)(ii) will be limited to the amount of the purchase price paid by the Investor for the Securities pursuant to Section 2.2(b). (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). It is understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties; provided, however, that in the case a single firm of attorneys would be inappropriate due to actual or potential differing interests or conflicts between such Indemnified Parties and any other party represented by such counsel in such Proceeding or otherwise, then the Indemnifying Party shall be liable for the fees and expenses of one additional firm of attorneys with respect to such Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability for claims that are the subject matter of such Proceeding. 17

(d) Contribution. If a claim for indemnification under Section 6.4(a) or 6.4(b) is unavailable to an Indemnified Party or is otherwise insufficient to hold harmless an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6.4(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.4(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), the Investor shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by the Investor from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that an Indemnifying Party may have to an Indemnified Party. 6.6 Dispositions. Each Investor agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Investor further agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 6.2(c)(v)-(vii), the Investor will discontinue disposition of such Registrable Securities under the Registration Statement until the Investor's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 6.2(k), or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration 18

Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. ARTICLE VII MISCELLANEOUS 7.1 Termination. This Agreement may be terminated by the Company or the Investor, by written notice to the other party, if the Closing has not been consummated by April 1, 2006; provided that no such termination will affect the right of any party to sue for any breach by the other party. 7.2 Fees and Expenses. Each party shall pay the fees and expenses of its advisers, 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. 7.3 Entire Agreement. This Agreement, together with the Schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company will execute and deliver to the Investors such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under this Agreement. 7.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the Investor's signature page prior to 6:30 p.m. (Houston time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the Investor's signature page on a day that is not a Trading Day or later than 6:30 p.m. (Houston time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service and (d) the date of actual receipt by the party to whom such notice is required to be given. The addresses and facsimile numbers for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person. 7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Investors or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to rights 19

under Article VI may be given by holders of least a majority of the Registrable Securities to which such waiver or consent relates. 7.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Each Investor may assign its rights under this Agreement to any Person to whom the Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the "Investors." 7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party is an intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions of such Sections directly against the parties with obligations thereunder. 7.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. 7.10 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing, provided that the representations and warranties contained herein shall terminate on the first anniversary of the Closing Date. 7.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 7.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) this Agreement, whenever an Investor exercises a right, election, demand or option owed to the Investor by the Company under this Agreement and the Company does not timely perform its related obligations within the 20

periods therein provided, then, prior to the performance by the Company of the Company's related obligation, the Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights. 7.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. 7.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to seek specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for temporary restraining order) the defense that a remedy at law would be adequate. 7.16 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in this Agreement or any other certificate, instrument or document delivered in connection with this Agreement to a number of shares or a price per share shall be amended to appropriately account for such event. [SIGNATURE PAGES FOLLOW] 21

SIGNATURE PAGE Attached to and made a part of the STOCK PURCHASE AGREEMENT dated as of March 8, 2006 IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be duly executed as of the date written above. THE COMPANY: BLUE DOLPHIN ENERGY COMPANY By: Name: Michael J. Jacobson Title: President Address for Notice: 801 Travis, Suite 2100 Houston, Texas 77002 Facsimile: (713) 227-7626 Telephone: (713) 227-7660 22

SIGNATURE PAGE Attached to and made a part of the STOCK PURCHASE AGREEMENT dated as of March 8, 2006 IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be duly executed as of the date written above. INVESTOR: By: Name: Title: Number of Shares Purchased: Address for Notice:

Facsimile: Telephone: E-Mail: 23

Exhibit 21.1 List of Subsidiaries of Blue Dolphin Energy Company: - Blue Dolphin Exploration Company, a Delaware corporation, - Blue Dolphin Pipe Line Company, a Delaware corporation; - Blue Dolphin Services Co., a Texas corporation; - Blue Dolphin Petroleum Company, a Delaware corporation; and - Petroport, Inc., a Delaware corporation.

Exhibit 23.1 Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-38606 and Form S-3 No. 333-124908) of Blue Dolphin Energy Company and in the related Prospectus of our report dated March 24, 2006, with respect to the consolidated balance sheet as of December 31, 2005, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the two-year period ended December 31, 2005 included in this Annual Report (Form 10-KSB) of Blue Dolphin Energy Company.
/s/ UHY Mann Frankfort Stein & Lipp CPAs, LLP Houston, Texas March 30, 2006

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Exhibit 31.1 I, Ivar Siem, certify that: 1. I have reviewed this annual report on Form 10-KSB of Blue Dolphin Energy Company (the "Registrant"). 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this annual report; 3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) [paragraph omitted pursuant to Securities Exchange Commission Release Nos. 33-8238 and 34-47986]; c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and d) Disclosed in this annual report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: March 30, 2006

/s/ Ivar Siem ------------------------------------Ivar Siem Chairman and Chief Executive Officer (Principal Executive Officer)

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Exhibit 31.2 I, Gregory W. Starks, certify that: 1. I have reviewed this annual report on Form 10-KSB of Blue Dolphin Energy Company (the "Registrant"). 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this annual report; 3. Based on my knowledge, the financial statements and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) [paragraph omitted pursuant to Securities Exchange Commission Release Nos. 33-8238 and 34-47986]; c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and d) Disclosed in this annual report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: March 30, 2006

/s/ Gregory W. Starks ------------------------------------Gregory W. Starks Treasurer (Principal Financial and Accounting Officer)

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Exhibit 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Blue Dolphin Energy Company (the "Company") on Form 10-KSB for the period ended December 31, 2005 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Ivar Siem, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Ivar Siem ------------------------------------Ivar Siem Chairman and Chief Executive Officer March 30, 2006

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Exhibit 32.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Blue Dolphin Energy Company (the "Company") on Form 10-KSB for the period ended December 31, 2005 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Gregory W. Starks, Treasurer (Principal Financial and Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Gregory W. Starks ------------------------------------Gregory W. Starks Treasurer (Principal Financial and Accounting Officer) March 30, 2006

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