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EXECUTION COPY

AMENDMENT AND EXCHANGE AGREEMENT
 
AMENDMENT AND EXCHANGE AGREEMENT (the "Agreement"), dated as of December __,
2008, by and between Earth Biofuels, Inc., a Delaware corporation, with its
corporate headquarters located at 3001 Knox Street, Suite 403, Dallas, Texas
75205 (the "Company") and Castlerigg PNG Investments LLC (the "Investor").
 
WHEREAS:
 
A.           On June 25, 2008, the Company and certain investors (including the
Investor) (the "Investors") each entered into an Amendment and Exchange
Agreement (collectively, the "Existing Amendment and Exchange Agreements"),
pursuant to which the Company issued to each of the Investors, in exchange for
the cancellation of certain securities and other obligations of the Company, (a)
Amended and Restated Senior Secured Convertible Exchangeable Notes (the
"Existing Series A Notes"), convertible into shares (the "Existing Series A
Conversion Shares") of common stock of the Company, par value $0.001 per share
(the "Common Stock"), in accordance with the terms thereof and exchangeable into
common stock, par value $0.001 per share (the "PNG Common Stock") of PNG
Ventures, Inc., a Nevada corporation ("PNG") in accordance with the terms
thereof and (b) Senior Secured Convertible Exchangeable Notes (the "Existing
Series B Notes", and together with the Existing Series A Notes, the "Existing
Notes"), convertible into shares (the "Existing Series B Conversion Shares" and
together with the Existing Series A Conversion Shares, the "Existing Conversion
Shares") of Common Stock, in accordance with the terms thereof and exchangeable
into PNG Common Stock, in accordance with the terms thereof.
 
B.           On or prior to the date hereof, pursuant to (i) an Exchange Notice
(as defined in the Existing Series A Notes) to the Company electing to exchange
$55,000,000 of the Existing Series A Note of the Investor for 5,500,000 shares
of PNG Common Stock (the "Initial Exchange Notice") and (ii) a subsequent
Exchange Notice electing to exchange an additional $1,000,000 of the Existing
Series A Note of the Investor for 100,000 shares of PNG Common Stock (the
"Additional Exchange Notice", and together with the Initial Exchange Notice, the
"Exchange Notices"), the Investor exchanged $56,000,000 of the Existing Series A
Note of the Investor for 5,600,000 shares of PNG Common Stock.
 
C.           The Company and the Investor desire to enter into this Agreement
(the date the transactions described herein are consummated, the “Exchange
Date”), pursuant to which, among other things, (i) the Company and the Investor
shall (A) exchange a portion of the outstanding principal amount of such
Existing Series A Note for a senior secured convertible note in the aggregate
principal amount of $13,235,000 in form attached hereto as Exhibit A (the
"Series C Note"), which shall be convertible into Common Stock (as converted,
the "Series C Conversion Shares"), in accordance with the terms thereof and (B)
decrease the remaining outstanding principal amount of the Investor's Existing
Series A Note to $5,000,000 and (ii) the Company and the Investor shall amend
and restate the Investor's Existing Series B Note for a senior secured
convertible note in the aggregate principal amount of $1,765,000 in the form
attached hereto as Exhibit B (the "Series D Notes", and together with the Series
C Notes, the "December Amendment Notes"), which shall be convertible into Common
Stock (as converted,
 

 
 

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the "Series D Conversion Shares" and together with the Series C Conversion
Shares, the "December Amendment Conversion Shares ").
 
D.           The Series C Note will rank pari passu with the Existing Series A
Notes that remain outstanding after the Closing Date (as defined below) and the
Series D Note will rank pari passu with the Existing Series B Notes that remain
outstanding after the Closing Date.  The Existing Series B Notes and Series D
Notes will rank junior to the Series C Note and the Existing Series A Notes and
senior to all outstanding and future indebtedness of the Company, other than
Permitted Senior Indebtedness (as defined in the Series C Note), and each of the
Existing Notes and the December Amendment Notes will be secured by a perfected
security interest in certain of the assets of the Company and the stock, equity
interests and assets of certain of the Company's subsidiaries as evidenced by
the Security Documents (as defined in the Existing Amendment and Exchange
Agreements) and that certain Reaffirmation Agreement in the form attached hereto
as Exhibit C (the "Reaffirmation Agreement").
 
E.           As a closing condition to the transactions contemplated hereby,
each of the other holders of Existing Notes (the "Other Investors"), which Other
Investors, together with the Investor, hold, in the aggregate, 100% of the
principal amount of the Existing Notes outstanding as of the date hereof, are
each executing a consent to the transaction contemplated hereby in the form
attached hereto as Exhibit D (collectively, the "Consents") and shall be
entitled to enter into agreements identical to this Agreement (the "Other
Agreements", and together with this Agreement, the "Amendments") (other than
proportional changes in the numbers reflecting the (i) different principal
amount of such Other Investor's Series C Note and (ii) different principal
amount of such Other Investor's Series D Note being issued to such Other
Investor ("Proportionate Changes")).
 
F.           The amendment of the Existing Notes is being made in reliance upon
the exemption from registration provided by Section 3(a)(9) of the 1933 Act.
 
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investor hereby agree as
follows:
 
 
1.
EXCHANGE NOTICE TRANSACTIONS; EXCHANGE AND AMENDMENT AND RESTATEMENT OF NOTES

 
(a)           Exchange Notice Transactions.  Prior to the Closing Date, the
Company consummated the transactions contemplated by the Exchange Notices and a
stock certificate for 5,600,000 shares of PNG Common Stock in the name of the
Investor was delivered to the Investor.
 
(b)           Exchange and Amendment and Restatement.  Subject to satisfaction
(or waiver) of the conditions set forth in Sections 5 and 6 below, at the
closing contemplated by this Agreement (the "Closing"), (i) the instrument
representing the Investor's Existing Series B Note shall be cancelled upon the
issuance and delivery to the Investor of the Series D Note as provided in clause
(iv) below, (ii) the Company shall exchange a portion of the outstanding
principal amount of the Investor’s Existing Series A Note for a Series C Note in
a principal amount of $13,235,000, (iii) the remaining principal amount of the
Investor’s Existing
 

 
 

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Series A Note shall be decreased to $5,000,000 and (iv) the Company shall amend
and restate the Investor’s Existing Series B Note by issuing and delivering to
the Investor a Series D Note in a principal amount equal to $1,765,000.
 
(c)           Amendment of Investor's Existing Series A Note.  The second
sentence of Section 12(a) of the Investor's Existing Series A Note shall be
amended and restated in its entirety as follows:
 
"The portion of this Note subject to redemption at a price equal to the
Principal amount pursuant to this Section 12 shall be redeemed by the Company or
such Subsidiary, as applicable, in cash in an amount equal to the product of the
Holder Pro Rata Percentage and the Mandatory Prepayment Amount (the "Mandatory
Prepayment Price"); provided, however, that if such amount is greater than the
sum of (i) the outstanding Principal amount of this Note plus (ii) the amount of
any accrued but unpaid Interest on such Conversion Amount being redeemed and
accrued and unpaid Late Charges, if any, with respect to such Conversion Amount
and Interest (the “Outstanding Amount”) on the Mandatory Prepayment Date, then
the Mandatory Prepayment Price shall equal the Outstanding Amount."
 
The foregoing amendment to the Investor's Existing Series A Note shall become
effective at such time as the Company receives Consents, duly executed by the
other holders of the Existing Series A Notes constituting the Required Holders
(as defined in the Existing Series A Notes), containing identical amendments to
Section 12(a) of such holders' Existing Series A Notes.
 
(d)           Ratifications.
 
(i)           Existing Transaction Documents.  Each of the Existing Transaction
Documents and the Existing Amendment and Exchange Agreement is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects, except as otherwise amended hereby or in accordance herewith.
 
(ii)           Security Documents.  The Security Documents which assign or
pledge to the holders of Existing Notes, or Sandell Asset Management Corp, as
collateral agent, or to grant to the holders of Existing Notes, or Castlerigg
PNG Investments LLC, as collateral agent, a security interest in or lien on, any
collateral as security for the obligations of the Company from time to time
existing in respect of the Existing Notes, such pledge, assignment and/or grant
of the security interest or lien are hereby ratified and confirmed in all
respects, and shall apply with respect to the obligations under the December
Amendment Notes and the Existing Notes.
 
(e)           Closing Date.  The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m., New York Time, on the date hereof, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 5 and 6 below (or such other time and date as is mutually
agreed to by the Company and the Investor).  The
 

 
 

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Closing shall occur on the Closing Date at the offices of Schulte Roth & Zabel
LLP, 919 Third Avenue, New York, New York 10022.
 
(f)           Delivery.  On the Closing Date, (i) the Company shall issue and
deliver to the Investor the Investor's December Amendment Notes, duly executed
on behalf of the Company and registered in the name of the Investor, and
(ii) the Investor's Existing Notes shall be cancelled.  The Investor hereby
covenants to use its reasonable best efforts to deliver its cancelled Existing
Notes to the Company or its agents no later than thirty (30) days after the
Closing Date.
 
(g)           Holding Period.
 
(i)           For the purposes of Rule 144, the Company acknowledges that the
holding period of the December Amendment Notes (including the corresponding
December Amendment Conversion Shares) may be tacked onto the holding period of
the Existing Notes (including the corresponding Existing Conversion Shares) and
the Company agrees not to take a position contrary to this Section 1(e).  The
Company agrees to take all actions, including, without limitation, the issuance
by its legal counsel of any necessary legal opinions, necessary to issue the
December Amendment Conversion Shares without restriction and not containing any
restrictive legend without the need for any action by the Investor.
 
(ii)           So long as the Investor owns any December Amendment Notes or
December Amendment Conversion Shares (collectively the "December Amendment
Securities") or any capital stock of the Company issued or issuable with respect
to the December Amendment Securities as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the December Amendment Notes (the
"Registrable Securities"), with a view to making available to the Investor the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investor to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
 
(1)          make and keep public information available, as those terms are
understood and defined in Rule 144;
 
(2)          file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
 
(3)          furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of Rule 144, the 1933
Act and the 1934 Act, (ii) a copy of the most recent annual report of the
Company and such other reports and documents so filed by the Company (but
 

 
 

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only if such reports are not publicly available on the EDGAR system), and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.
 
(h)           Disclosure of Transactions and Other Material Information.  On or
before 8:30 a.m., New York City time, on the first Business Day following the
date of this Agreement, the Company shall issue a press release and file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by this Agreement in the form required by the 1934 Act and attaching the
material Transaction Documents not previously filed (including, without
limitation, this Agreement (and all schedules to this Agreement), the
Reaffirmation Agreement and the form of the December Amendment Notes) (including
all attachments, the "8-K Filing").  From and after the filing of the 8-K Filing
with the SEC, the Investor shall not be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing.  The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents,
not to, provide the Investor with any material, nonpublic information regarding
the Company or any of its Subsidiaries from and after the filing of the 8-K
Filing with the SEC without the express written consent of the Investor or as
may be required under the terms of the Transaction Documents.  If the Investor
has, or believes it has, received any such material, nonpublic information
regarding the Company or any of its Subsidiaries, it shall provide the Company
with written notice thereof.  The Company shall, within five (5) Trading Days
(as defined in the December Amendment Note) of receipt of such notice, make
public disclosure of such material, nonpublic information.  In the event of a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents,
the Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents.  The
Investor shall not have any liability to the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees, stockholders or
agents for any such disclosure.  Subject to the foregoing, neither the Company,
its Subsidiaries nor the Investor shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Investor, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) the Investor shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).  Without the prior written consent of
the Investor, neither the Company nor any of its Subsidiaries or affiliates
shall disclose the name of the Investor in any filing, announcement, release or
otherwise, unless such disclosure is required by law, regulation or the
Principal Market.
 

 
 

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2.           MANDATORY CONVERSION RIGHT.
 
The Investor and the Company agree that, with respect to the Investor’s Existing
Series A Note, the Company shall have the following right of Mandatory
Conversion.  Capitalized terms used and not otherwise defined in this Section 2
shall have the meanings ascribed to them in the Investor’s Existing Series A
Note:

(a)           Mandatory Conversion.  The Company shall have the right to require
the Investor to convert all, or any portion, of the Conversion Amount then
remaining under its Existing Series A Note, provided there has been no Equity
Conditions Failure (as defined below), into fully paid, validly issued and
nonassessable shares of Common Stock in accordance with this Section 2 at the
Mandatory Conversion Rate (as defined below) as of the Mandatory Conversion Date
(as defined below) with respect to the Conversion Amount (a "Mandatory
Conversion").  The Company may exercise its right to require conversion under
this Section 2 by delivering a written notice thereof by facsimile and overnight
courier the Investor (the "Mandatory Conversion Notice" and the date the
Investor receives such notice by facsimile is referred to as the "Mandatory
Conversion Notice Date").  The Mandatory Conversion Notice shall be
irrevocable.  The Mandatory Conversion Notice shall state (i) the Trading Day
selected for the Mandatory Conversion in accordance with this Section 2, which
Trading Day shall be at least five (5) Trading Days following the Mandatory
Conversion Notice Date (the "Mandatory Conversion Date"), (ii) the aggregate
Conversion Amount of the Existing Series A Note subject to mandatory conversion
from the Investor, (iii) the number of shares of Common Stock to be issued to
the Investor on the Mandatory Conversion Date (the “Mandatory Conversion
Shares”) and (iv) that there has been no Equity Conditions
Failure.  Contemporaneously with the issuance of the Mandatory Conversion Shares
to the Investor on the applicable Mandatory Conversion Date, the Company shall
deliver to the Investor a certificate (the "Mandatory Conversion Certification")
signed by the Chief Financial Officer of the Company certifying that since the
Mandatory Conversion Notice Date, there has been no Equity Conditions Failure;
provided, that to the extent the Company is unable to deliver the foregoing
Mandatory Conversion Certification (a "Mandatory Conversion Conditions
Failure"), such Mandatory Conversion Certification shall instead state that the
conditions have not been met and that such Mandatory Conversion Notice is
revoked and null and void; provided, further, that a failure by the Company to
deliver a Mandatory Conversion Certification to the Investor shall be deemed to
be a Mandatory Conversion Conditions Failure (unless waived by the
Investor).  All Conversion Amounts converted by the Investor after the Mandatory
Conversion Notice Date shall reduce the Conversion Amount of the Investor’s
Existing Series A Note required to be converted on the Mandatory Conversion
Date.  The mechanics of conversion set forth in Section 3(c) of the Investor’s
Existing Series A Note shall apply to any Mandatory Conversion as if the Company
and the Transfer Agent had received from the Investor on the Mandatory
Conversion Date a Conversion Notice with respect to the Conversion Amount being
converted pursuant to the Mandatory Conversion.
 
(b)           Definitions. For purposes of this Section 2, (a) "Equity
Conditions" shall mean the Equity Conditions set forth in the Series C Note, (b)
an “Equity Conditions Failure” shall mean that on any day during the period
commencing ten (10) Trading Days prior to the applicable Mandatory Conversion
Notice Date through the applicable Mandatory Conversion Date, the Equity
Conditions have not been satisfied (or waived in writing by the
 

 
 

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Investor) and (c) "Mandatory Conversion Price" means, as of any Mandatory
Conversion Date, $0.025, subject to adjustment as provided in the Investor’s
Existing Series A Note; provided, however, that following the consummation of
the Reverse Split as defined in the Company's Definitive Information Statement
on Schedule 14C filed with the Commission on March 11, 2008, the Mandatory
Conversion Price shall be $0.50 (as may be further adjusted as provided in the
Investor’s Existing Series A Note).
 
 
3.
AMENDMENTS TO TRANSACTION DOCUMENTS.

 
(a)           Each Transaction Document (as defined in the Existing Amendment
and Exchange Agreement) is hereby amended as follows:
 
(i)           All references in the Existing Primary Securities Purchase
Agreement (as defined in the Existing Amendment and Exchange Agreement) to "this
Agreement", "hereto", "hereof", "hereunder" or words of like import referring to
the Existing Primary Securities Purchase Agreement shall mean the Existing
Primary Securities Purchase Agreement as amended by the Existing Amendment and
Exchange Agreements and the Amendments.
 
(ii)           All references in the other Transaction Documents to the
"Securities Purchase Agreement", "thereto", "thereof", "thereunder" or words of
like import referring to the Existing Primary Securities Purchase Agreement
shall mean the Existing Primary Securities Purchase Agreement as amended by the
Existing Amendment and Exchange Agreements and the Amendments.
 
(iii)           All references to "Conversion Shares" are hereby amended and
restated to mean "Amended and Restated Conversion Shares (as defined in those
certain Amendment Agreements, dated June 25, 2008, by and between the Company
and the parties thereto (the "Amendment Agreements")), the Series B Conversion
Shares (as defined in the Amendment Agreements), and the December Amendment
Conversion Shares (as defined in that certain Amendment and Exchange Agreement,
dated December 12, 2008, by and between the Company and Castlerigg PNG
Investments LLC (the "December Amendment Agreement"));
 
(iv)           All references to "Notes" are hereby amended and restated to mean
"Amended and Restated Primary Notes (as defined in the Amendment Agreements),
the Series B Notes (as defined in the Amendment Agreements) and the December
Amendment Notes (as defined in the December Amendment Agreement)";
 
(v)           The defined term "Transaction Documents" is hereby amended to
include the December Amendment Agreement, the Reaffirmation Agreement and the
December Amendment Notes.
 
 
4.
REPRESENTATIONS AND WARRANTIES

 
(a)           Investor Representations.
 

 
 

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(i)           The Investor hereby represents and warrants to the Company as to
the December Amendment Notes being issued to the Investor hereunder as set forth
in Section 2 of the Existing Primary Securities Purchase Agreement (as amended
hereby) as if such representations and warranties were made as of the date
hereof (except for representations and warranties that speak as of a specific
date, which shall remain true and correct as of such specific date) and set
forth in their entirety in this Agreement.
 
(b)           Company Representations.
 
(i)           The Company represents and warrants to the Investor as set forth
in Section 3 of each of the Existing Primary Securities Purchase Agreement as if
such representations and warranties were made as of the date hereof (except for
representations and warranties that speak as of a specific date, which shall
remain true and correct as of such specific date, and except as set forth in a
Disclosure Schedule attached hereto) and set forth in their entirety in this
Agreement.  Such representations and warranties to the transactions thereunder
and the securities issued thereby are hereby deemed for purposes of this
Agreement to be references to the transactions hereunder and the issuance of the
securities hereby, references therein to "Closing Date" being deemed references
to the Closing Date as defined in Section 1(d) above, and references to "the
date hereof" being deemed references to the date of this Agreement.
 
(c)           No Event of Default.  Except as set forth in Schedule 3(c)
attached hereto, the Company represents and warrants to the Investor that after
giving effect to the terms of this Agreement and the Other Agreements, no
Default or Event of Default (as defined in the Existing Series A Notes) shall
have occurred and be continuing as of the date hereof.
 
 
5.
CONDITIONS TO COMPANY'S OBLIGATIONS HEREUNDER.

 
The obligations of the Company to the Investor hereunder are subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion by providing the Investor with prior written notice
thereof:

(a)           The Investor shall have executed this Agreement and delivered the
same to the Company.
 
(b)           Each of the Other Investors shall have duly executed and delivered
a Consent.
 
 
6.
CONDITIONS TO INVESTOR'S OBLIGATIONS HEREUNDER.

 
The obligations of the Investor hereunder are subject to the satisfaction of
each of the following conditions, provided that these conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion by providing the Company with prior written notice thereof:

(a)           The Company shall have duly executed and delivered to the Investor
(i) this Agreement, (ii) the Series C Notes (allocated in such principal amounts
as the
 

 
 

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Investor shall request) being issued to the Investor at the Closing pursuant to
this Agreement and (iii) the Series D Notes (allocated in such principal amounts
as the Investor shall request) being issued to the Investor at the Closing
pursuant to this Agreement.
 
(b)           Each of the Company and its Subsidiaries shall have duly executed
and delivered to the Investor the Reaffirmation Agreement.
 
(c)           The Company shall have delivered to the Investor a certificate, in
the form attached hereto as Exhibit E, executed by the Secretary of the Company
and dated as of the Closing Date, as to (i) the resolutions approving the
transactions contemplated hereby as adopted by the Board in a form reasonably
acceptable to the Investor, (ii) the Certificate of Incorporation and (iii) the
Bylaws, each as in effect as of the Closing.
 
(d)           Each of the Investors (other than the Investor) shall have duly
executed and delivered to the Investor a Consent.
 
(e)           The Investor shall have received the opinions of JPF Securities
Law, LLC, the Company's outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit F attached hereto.
 
(f)           The Company shall have delivered to the Investor a copy of the
Irrevocable Transfer Agent Instructions, in the form of Exhibit G attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
 
(g)           On or prior to the fifth (5th) calendar day after the date hereof,
the Company shall have delivered to the Investor a letter from the Company's
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the Closing Date.
 
(h)           The Company shall have delivered to the Investor a certificate (or
a fax or pdf copy of such certificate) evidencing the formation and good
standing of the Company and each of its Subsidiaries in such entity's
jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction, as of a date within ten (10) days of the Closing
Date.
 
(i)           The Company shall have delivered to the Investor a certificate (or
a fax or pdf copy of such certificate) evidencing the Company's qualification as
a foreign corporation and good standing issued by the Secretary of State of
Delaware, which is the only jurisdiction in which the Company conducts business
and is required to so qualify, as of a date within ten (10) days of the Closing
Date.
 
(j)           The Company shall have delivered to the Investor a certified copy
of the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware (or a fax or pdf copy of such certificate) within ten (10)
days of the Closing Date.
 
(k)           The representations and warranties of the Company in Section 4(b)
shall be true and correct in all material respects (except for those
representations and warranties
 

 
 

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that are qualified by materiality or Material Adverse Effect, which shall be
true and correct in all respects) as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such
specified date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.  The Investor shall have received a
certificate, executed by the Chief Executive Officer or Chief Financial Officer
of the Company, dated as of the Closing Date, to the foregoing effect in the
form attached hereto as Exhibit H.
 
(l)           The Common Stock (I) shall be designated for quotation or listed
on the Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
 
(m)           The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale of the
Securities, including, without limitation, any approvals or notifications
required by the Principal Market.
 
 
7.
TERMINATION.

 
In the event that the Closing does not occur by January 5, 2009, due to the
Company's or the Investor's failure to satisfy the conditions set forth in
Sections 5 and 6 hereof (and the nonbreaching party's failure to waive such
unsatisfied conditions(s)), the nonbreaching party shall have the option to
terminate their obligations to consummate the transactions contemplated hereby
at the close of business on such date without liability of any party to any
other party.

 
8.
MISCELLANEOUS.

 
(a)           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
 
(b)           Headings.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
 
(c)           Severability.  If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
 

 
 

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this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the
parties.  The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
(d)           Governing Law; Jurisdiction; Jury Trial.  All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York.  Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
 
(e)           No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
 
(f)           Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
 
(g)           No Strict Construction.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
 

 
 

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(h)           Entire Agreement; Effect on Prior Agreements; Amendments.  Except
for the Existing Transaction Documents (in each case, to the extent any such
Existing Transaction Document is not amended by this Agreement), this Agreement
supersedes all other prior oral or written agreements between the Investor, the
Company, their affiliates and Persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters.  No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor and to the extent that Other Investors may be
affected thereby, by the holders of a majority of the principal amount of the
December Amendment Notes.  No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is
sought.  No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Existing
Transaction Documents, the Amendments, the Security Documents, or any of the
December Amendment Securities unless the same consideration also is offered to
all of the holders of December Amendment Notes.  The Company has not, directly
or indirectly, made any agreements with any of the Investors relating to the
terms or conditions of the transactions contemplated by the Existing Transaction
Documents except as set forth in the Existing Transaction Documents.
 
(i)           Notices.  Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered:  (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such communications
shall be:
 
If to the Company:
 
Earth Biofuels, Inc.
 
3001 Knox Street, Suite 403,
 
Dallas, Texas 75205
 
Telephone:                                (214) 389-9800
 
Facsimile:                                (214) 389-9806
 
Attention:                                Dennis McLaughlin
 
Copy to (for informational purposes only):
 
JPF Securities Law, LLC
 
17111 Kenton Drive
 
Suite 100B
 
Cornelius, NC 28031
 
Telephone:  (704) 897-8334
 
Facsimile:   (888) 608-5705
 
Attention:  Jared P. Febbroriello, Esq.
 

 
 

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If to the Investor, to its address and facsimile number set forth in the
Existing Primary Securities Purchase Agreement, with copies to the Investor's
representatives as set forth on the Existing Primary Securities Purchase
Agreement or on the signature page to this Agreement,
 
with a copy (for informational purposes only) to:
 
Schulte Roth & Zabel LLP
 
919 Third Avenue
 
New York, New York  10022
 
Telephone:                                (212) 756-2000
 
Facsimile:                                (212) 593-5955
 
Attention:                                Eleazer N. Klein, Esq.
 
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
 
(j)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
in accordance with the terms of the Securities Purchase Agreement.
 
(k)           Survival.  Unless this Agreement is terminated under Section 7,
the representations and warranties of the Company and the Investor contained
herein and the agreements and covenants set forth herein shall survive the
Closing.
 
(l)           Remedies.  The Investor and each holder of the December Amendment
Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law.  Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by
law.  Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Investor.  The Company therefore agrees that the Investor shall be entitled to
seek temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages and without posting a bond or other
security.
 
(m)           Independent Nature of Investor's Obligations and Rights.  The
obligations of the Investor under any Existing Transaction Document, several and
not joint with
 

 
 

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the obligations of any Other Investor, and the Investor shall not be responsible
in any way for the performance of the obligations of any Other Investor under
any Existing Transaction Documents.  Nothing contained herein or in any other
Existing Transaction Documents, and no action taken by the Investor pursuant
hereto, shall be deemed to constitute the Investor and Other Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investor and Other Investors are in any way acting
in concert or as a group with respect to such obligations or the transactions
contemplated by the Existing Transaction Documents.  The Company and the
Investor confirm that the Investor has independently participated in the
negotiation of the transactions contemplated hereby with the advice of its own
counsel and advisors.  The Investor shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Existing Transaction Documents, and it shall
not be necessary for any Other Investor to be joined as an additional party in
any proceeding for such purpose.
 
(n)           Most Favored Nation.  The Company hereby represents and warrants
as of the date hereof and covenants and agrees from and after the date hereof
that none of the terms offered to any Person with respect to any amendment,
settlement or waiver (each a "Settlement Document") relating to the terms,
conditions and transactions contemplated hereby, is or will be more favorable to
such Person than those of the Investor and this Agreement shall be, without any
further action by the Investor or the Company, deemed amended and modified in an
economically and legally equivalent manner such that the Investor shall receive
the benefit of the more favorable terms contained in such Settlement
Document.  Notwithstanding the foregoing, the Company agrees, at its expense, to
take such other actions (such as entering into amendments to the Transaction
Documents) as the Investor may reasonably request to further effectuate the
foregoing.
 
[Signature Page Follows]

 
 

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

 
COMPANY:
 
EARTH BIOFUELS, INC.
By:
Name:
Title:
 

 

     

[Signature Page to Amendment and Exchange Agreement]
 
 

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

 
INVESTOR:
 
CASTLERIGG PNG INVESTMENTS LLC
By: Castlerigg Master Investments Ltd.,
         its managing member and sole
         member
 
 
By:
Name:
Title:
Copy to:
 
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York  10022
Telephone:                                (212) 756-2000
Facsimile:                                (212) 593-5955
Attention:                                Eleazer N. Klein, Esq.
 
 

 

 

 
   

[Signature Page to Amendment Agreement]
 
 

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