Document:

EXHIBIT
10.30

THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS A REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE
EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH OFFER OR SALE OR TRANSFER.

WARRANT

TO PURCHASE COMMON STOCK

OF

EARTH BIOFUELS, INC.

	
  Issue Date: May 26, 2006

  	
  Warrant
  No. 2

  

 

THIS
CERTIFIES that COWEN AND COMPANY, LLC or any subsequent holder hereof (the “Holder”), has the
right to purchase from EARTH BIOFUELS, INC.,
a Delaware corporation (the “Company”), up to 18,750 fully paid and
nonassessable shares of the Company’s common stock, par value $0.001 per share
(the “Common Stock”),
subject to adjustment as provided herein, at a price per share equal to the
Exercise Price (as defined below), at any time and from time to time beginning
on the date on which this Warrant is issued (the “Issue Date”) and ending at 5:00 p.m.,
eastern time, on the fifth (5th) anniversary of the Issue Date or, if such day is not a
Business Day, on the next succeeding Business Day (the “Expiration Date”).  This Warrant is issued pursuant to a
Securities Purchase Agreement, dated as of May 26, 2006 (the “Securities Purchase Agreement”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the
Securities Purchase Agreement.

1.             EXERCISE.

(a)           Right
to Exercise; Exercise Price.  The
Holder shall have the right to exercise this Warrant at any time and from time
to time during the period beginning on the Issue Date and ending on the
Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the “Warrant
Shares”).  The “Exercise Price” for
each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be $3.84, subject to adjustment for the events specified in Section 6 below.

 

(b)           Exercise
Notice.  In order to exercise this
Warrant, the Holder shall (i) send by facsimile transmission, at any time prior
to 5:00 p.m., eastern time, on the Business Day on which the Holder wishes to
effect such exercise (the “Exercise
Date”), to the Company an executed copy of the notice of
exercise in the form attached hereto as Exhibit A (the “Exercise Notice”), (ii) deliver the
original Warrant or a copy thereof, and (iii) in the case of a Cash Exercise
(as defined below), the Exercise Price to the Company.  The Exercise Notice shall also state the name
or names in which the Warrant Shares issuable on such exercise shall be
issued.  In the case of a dispute as to
the calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder (including, without limitation, the calculation of any adjustment
pursuant to Section 6 below),
the Company shall promptly issue to the Holder the number of Warrant Shares
that are not disputed and shall submit the disputed calculations to a certified
public accounting firm of national recognition (other than the Company’s
independent accountants) within two (2) Business Days following the date on
which the Exercise Notice is delivered to the Company. The Company shall use
its best efforts to cause such accountant to calculate the Exercise Price
and/or the number of Warrant Shares issuable hereunder and to notify the
Company and the Holder of the results in writing no later than two (2) Business
Days following the day on which such accountant received the disputed
calculations (the “Dispute
Procedure”). Such accountant’s calculation shall be deemed
conclusive absent manifest error.  The
fees of any such accountant shall be borne by the party whose calculations were
most at variance with those of such accountant.

(c)           Holder
of Record.  The Holder shall, for all
purposes, be deemed to have become the holder of record of the Warrant Shares
specified in an Exercise Notice on the Exercise Date specified therein,
irrespective of the date of delivery of such Warrant Shares. Except as
specifically provided herein, nothing in this Warrant shall be construed as
conferring upon the Holder hereof any rights as a stockholder of the Company
prior to the Exercise Date.

(d)           Cancellation
of Warrant.  This Warrant shall be
canceled upon its exercise and, if this Warrant is exercised in part, the
Company shall, at the time that it delivers Warrant Shares to the Holder
pursuant to such exercise as provided herein, issue a new warrant, and deliver
to the Holder a certificate representing such new warrant, with terms identical
in all respects to this Warrant (except that such new warrant shall be exercisable
into the number of shares of Common Stock with respect to which this Warrant
shall remain unexercised); provided, however,
that the Holder shall be entitled to exercise all or any portion of such new
warrant at any time following the time at which this Warrant is exercised,
regardless of whether the Company has actually issued such new warrant or
delivered to the Holder a certificate therefor.

 

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2.             DELIVERY OF WARRANT SHARES UPON EXERCISE.

Upon receipt of an Exercise Notice pursuant to Section 1 above, the
Company shall, (A) in the case of a Cash Exercise (as defined below) no later
than the close of business on the later to occur of (i) the third (3rd)
Business Day following the Exercise Date set forth in such Exercise Notice and
(ii) the date on which the Company has received payment of the Exercise Price,
(B) in the case of a Cashless Exercise (as defined below), no later than the
close of business on the third (3rd) Business Day following the Exercise Date
set forth in such Exercise Notice, and (C) with respect to Warrant Shares that
are the subject of a Dispute Procedure, the close of business on the third (3rd) Business Day following the
determination made pursuant to Section 1(b) (each of the dates specified in (A), (B) or
(C) being referred to as a “Delivery Date”), issue and deliver or cause to be
delivered to the Holder the number of Warrant Shares as shall be determined as
provided herein. The Company shall effect delivery of Warrant Shares to the
Holder, as long as the Company’s designated transfer agent or co-transfer agent
in the United States for the Common Stock (the “Transfer Agent”) participates in the
Depository Trust Company (“DTC”)
Fast Automated Securities Transfer program (“FAST”), by crediting the account of the
Holder or its nominee at DTC (as specified in the applicable Exercise Notice)
with the number of Warrant 

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Shares required to be delivered, no later than the
close of business on such Delivery Date. In the event that the Transfer Agent
is not a participant in FAST, or if the Holder so specifies in an Exercise
Notice or otherwise in writing on or before the Exercise Date, the Company
shall effect delivery of Warrant Shares by delivering to the Holder or its
nominee physical certificates representing such Warrant Shares, no later than
the close of business on such Delivery Date. 
If any exercise would create a fractional Warrant Share, such fractional
Warrant Share shall be disregarded and the number of Warrant Shares issuable
upon such exercise, in the aggregate, shall be the nearest whole number of
Warrant Shares.  Warrant Shares delivered
to the Holder shall not contain any restrictive legend unless such legend is
required pursuant to the terms of the Securities Purchase Agreement.

3.             FAILURE
TO DELIVER WARRANT SHARES.

(a)           In the event that the Company fails
for any reason (other than as a result of the Holder’s failure, in the case of
a Cash Exercise (as defined below), to pay the aggregate Exercise Price for the
Warrant Shares being purchased) to deliver to the Holder the number of Warrant
Shares specified in the applicable Exercise Notice (without any restrictive
legend to the extent permitted by the terms of the Securities Purchase
Agreement) on or before the second (2nd) Business Day following the Delivery
Date therefor (an “Exercise
Default”), the Holder shall have the right to receive from the
Company an amount equal to (i) (N/365) multiplied by (ii) the aggregate
Exercise Price of the Warrant Shares which are the subject of such Exercise
Default multiplied by (iii) the lower of sixteen percent (16%) and the
maximum rate permitted by applicable law or by the applicable rules or
regulations of any Governmental Agency (the “Default Interest Rate”), where “N”
equals the number of days elapsed between the original Delivery Date of such
Warrant Shares and the date on which such Exercise Default has been cured.  In the event that shares of Common Stock are
purchased by or on behalf of the Holder in order to make delivery on a sale effected in anticipation of receiving
Warrant Shares upon an exercise, the Holder shall have the right to receive
from the Company, in addition to the foregoing amounts, (i) the aggregate
amount paid by or on behalf of the Holder for such shares of Common Stock minus
(ii) the aggregate amount of net proceeds, if any, received by the Holder from
the sale of the Warrant Shares issued by the Company pursuant to such
exercise.  Amounts payable under this Section 3(a)  shall be paid to the Holder in immediately available funds on or before
the fifth (5th) Business Day following written notice from the Holder to the
Company specifying the amount owed to it by the Company pursuant to this Section 3(a).

(b)           In addition to its rights under Section 3(a) above,
upon an Exercise Default, the Exercise Price applicable to the applicable
exercise shall be automatically be adjusted to the lower of (i) the Exercise
Price in effect on the Exercise Date and (ii) the lowest Exercise Price
occurring from the first date of such Exercise Default through the date on
which all Warrant Shares to which the Holder is entitled have been delivered in
accordance with the terms of this Warrant. 
The Holder shall have the right to pursue all other remedies available
to it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief).

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4.             EXERCISE
LIMITATION.

In no event shall the Holder be permitted to exercise
this Warrant, or part thereof, if, upon such exercise, the number of shares of
Common Stock beneficially owned by the Holder (other than shares which may be
deemed beneficially owned except for being subject to a limitation on exercise
or exercise analogous to the limitation contained in this Section 4), would
exceed 4.99% of the number of shares of Common Stock then issued and
outstanding, it being the intent of the Company and the Holder that the Holder
not be deemed at any time to have the power to vote or dispose of greater than
4.99% of the number of shares of Common Stock issued and outstanding at any
time. Nothing contained herein shall be deemed to restrict the right of the
Holder to exercise this Warrant at such time as such exercise will not violate
the provisions of this Section
4.  As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of (i) Securities Exchange Act of
1934, as amended, and the rules thereunder. 
To the extent that the limitation contained in this Section 4 applies (and without limiting any rights the
Company may otherwise have), the Company may rely on the Holder’s determination
of whether this Warrant is exercisable pursuant to the terms hereof, the Company shall have no obligation whatsoever
to verify or confirm the accuracy of such determination, and the submission of
an Exercise Notice by the Holder shall be deemed to be the Holder’s
representation that this Warrant is exercisable pursuant to the terms
hereof. 
The Company shall have no liability to any person if the Holder’s
determination of whether this Warrant is exercisable pursuant to the terms
hereof is incorrect.  The holders of
Common Stock are to be deemed third-party beneficiaries of the limitations
hereby and, accordingly, this Section 4
may not be amended without the consent of the holders of a majority of the
shares of Common Stock then outstanding; provided, however,
that the Holder shall have the right, upon sixty (60) days’ prior written
notice to the Company, to waive the provisions of this Section
4 in the event that either a Fundamental Change or Liquidation
Event (each, as defined in the Notes) is announced or occurs, without obtaining
such consent.

5.             PAYMENT
OF THE EXERCISE PRICE; CASHLESS EXERCISE.

The Holder may pay the Exercise Price in either of the
following forms or, at the election of Holder, a combination thereof:

(a)           through
a cash exercise (a “Cash
Exercise”) by delivering immediately available funds, or

(b)           through a cashless exercise (a “Cashless Exercise”)
if, following the one-year anniversary of the Issue Date, an effective
Registration Statement is not available for the resale of all of the Warrant
Shares issuable hereunder at the time an Exercise Notice is delivered to the
Company, or if the Company otherwise consents in writing.  The Holder shall effect a Cashless Exercise
by surrendering this Warrant to the Company and noting on the Exercise Notice
that the Holder wishes to effect a Cashless Exercise, upon which the Company
shall issue to the Holder a number of Warrant Shares determined as follows:

	
   

  	
   

  	
  X = Y x (A-B)/A

  
	
   

  	
   

  	
   

  
	
  where:

  	
   

  	
  X = the number of Warrant Shares to be issued to the
  Holder;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y = the number of Warrant Shares with respect to
  which this Warrant is being exercised;

  

 

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  A = the Market Price as of the Exercise Date; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B = the Exercise Price.

  

It is intended and
acknowledged that the Warrant Shares issued in a Cashless Exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Warrant Shares required by Rule 144 shall be deemed to have been commenced,
on the Issue Date.

6.             ANTI-DILUTION
ADJUSTMENTS; DISTRIBUTIONS; OTHER EVENTS.

The Exercise Price
and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6.

(a)           Stock Splits, Stock Interests, Etc.  If, at any time on or after the Issue Date,
the number of outstanding shares of Common Stock is increased by a stock split,
stock dividend, combination, reclassification or other similar event, the
Exercise Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination, reclassification or other similar event, the Exercise Price shall
be proportionately increased. In such event, the Company shall notify the
Company’s transfer agent of such change on or before the effective date thereof.

(b)           Major Transactions.  If, at any time after the Issue Date, any
Major Transaction shall occur, then the Holder shall thereafter have the right
to receive upon exercise, in lieu of the shares of Common Stock otherwise
issuable, such shares of publicly traded stock, securities and/or other
property as would have been issued or payable upon such Major Transaction with
respect to or in exchange for the number of shares of Common Stock which would
have been issuable upon exercise had such Major Transaction not taken place
(without giving effect to any limitations on such exercise contained in this
Warrant or the Securities Purchase Agreement). Notwithstanding the foregoing,
following a Major Transaction in which all or substantially all of the
outstanding Common Stock of the Company is exchanged for, converted into,
acquired for or constitutes the right to receive solely cash (a “Triggering
Event”), at the written request of the Holder delivered before the 30th day
after such Triggering Event, the Company (or the successor entity) shall
purchase this Warrant from the Holder by paying to the Holder, within five days
after such request, cash in an amount equal to the Black-Scholes Value (as
defined below) of the remaining unexercised portion of this Warrant.  “Black-Scholes Value” means the value of the
unexercised portion of this Warrant calculated using the Black-Scholes Option
Pricing Model determined as of the day immediately following the public
announcement of the applicable Triggering Event and reflecting (i) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of the date of such request and (ii) an
expected volatility equal to the lesser of (a) the 100 day volatility obtained
from the HVT function on Bloomberg or (b) a volatility of 60.  The Company shall not effect any Major
Transaction unless (i) the Holder has received written notice of such
transaction at least thirty (30) days prior thereto (which period shall be
increased to sixty one (61) days if, at such time, without giving effect to the
limitation on exercise contained in Section 4 hereof, the Holder would
beneficially own more than 4.9% of the Common Stock then outstanding, and the

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Holder has
notified the Company in writing of such circumstance) but in no event later
than fifteen (15) days prior to the record date for the determination of
stockholders entitled to vote with respect thereto; provided, however,
that the Company shall publicly disclose the material terms of any such Major
Transaction on or before the date on which it delivers notice of a Major
Transaction to the Holder, and (ii) the resulting successor or acquiring entity
(if not the Company) assumes by written instrument (in form and substance
reasonable satisfactory to the Holder) the obligations of the Company under
this Warrant.  The above provisions shall
apply regardless of whether or not there would have been a sufficient number of
shares of Common Stock authorized and available for issuance upon exercise of
this Warrant as of the date of such transaction, and shall similarly apply to
successive Major Transactions.

(c)           Distributions.  If, at any time after the Issue Date, the
Company declares or makes any distribution of cash or any other assets (or
rights to acquire such assets) to holders of Common Stock, including without
limitation any dividend or distribution to the Company’s stockholders in shares
(or rights to acquire shares) of capital stock of a subsidiary) (a “Distribution”), the
Company shall deliver written notice of such Distribution (a “Distribution Notice”)
to the Holder at least fifteen (15) days prior to the earlier to occur of (i)
the record date for determining stockholders entitled to such Distribution (the
“Record Date”)
and (ii) the date on which such Distribution is made (the “Distribution Date”)(the
earlier of such dates being referred to as the “Determination Date”).  Upon receipt of the Distribution Notice, the
Holder shall promptly (but in no event later than three (3) Business Days)
notify the Company whether it has elected (A) to receive the same amount and
type of assets (including, without limitation, cash) being distributed as
though the Holder were, on the Determination Date, a holder of a number of
shares of Common Stock into which this Warrant is exercisable as of such
Determination Date (such number of shares to be determined without giving
effect to any limitations on such exercise) or (B) upon any exercise of this
Warrant on or after the Distribution Date, to reduce the Exercise Price
applicable to such exercise by reducing the Exercise Price in effect on the
Business Day immediately preceding the Record Date by an amount equal to the
fair market value of the assets to be distributed divided by the number
of shares of Common Stock as to which such Distribution is to be made, such
fair market value to be reasonably determined in good faith by the independent
members of the Company’s Board of Directors. 
Upon receipt of such election notice from the Holder, the Company shall
timely effectuate the transaction or adjustment contemplated in the foregoing clause (A) or (B), as
applicable.  If the Holder does not notify the Company of
its election pursuant to the preceding sentence on or prior to the
Determination Date, the Holder shall be deemed to have elected clause (A) of
the preceding sentence.

(d)           Convertible Securities; Options.  If, at any time after the Issue Date, the
Company issues Convertible Securities or Options to the record holders of the
Common Stock, whether or not such Convertible Securities or Options are
immediately convertible, exercisable or exchangeable, then the Holders shall be
entitled, upon any exercise of this Warrant after the date of record for
determining stockholders entitled to receive such Convertible Securities or
Options (or if no such record is taken, the date on which such Convertible
Securities or Options are issued), to receive the aggregate number of
Convertible Securities or Options which the Holder would have received with
respect to the shares of Common Stock issuable upon such exercise (without
giving effect to any limitations on such exercise contained in this Warrant or 

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the Securities
Purchase Agreement) had the Holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to
receive such Convertible Securities or Options (or if no such record is taken,
the date on which such Convertible Securities or Options were issued).

(e)           Dilutive Issuances.

(i)            Adjustment Upon Dilutive Issuance.  If, at any time after the Issue Date, the
Company issues or sells, or in accordance with Section 6(e)(ii) is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Exercise Price on the date of such
issuance or sale (or deemed issuance or sale) (a “Dilutive Issuance”), then the Exercise
Price shall be adjusted as follows:

(A)          if such Dilutive Issuance occurs on or
prior to the eighteen (18) month anniversary of the Issue Date, then effective
immediately upon such Dilutive Issuance, the Exercise Price shall be adjusted
so as to equal the consideration received or receivable by the Company (on a
per share basis) for the additional shares of Common Stock so issued, sold or
deemed issued or sold in such Dilutive Issuance (which, in the case of a deemed
issuance or sale, shall be calculated in accordance with Section 6(e)(ii)
below).  Notwithstanding the foregoing,
no adjustment shall be made pursuant to this Section 6(e)(i)(A) if such adjustment
would result in an increase in the Exercise Price.

(B)           if such Dilutive Issuance occurs
after the eighteen (18) month anniversary of the Issue Date, then effective
immediately upon the Dilutive Issuance, the Exercise Price shall be adjusted so
as to equal an amount determined by multiplying such Exercise Price by the
following fraction:

N0 + N1

N0 + N2

where:

N0 =        the
number of shares of Common Stock outstanding immediately prior to such Dilutive
Issuance (without taking into account any Convertible Securities or Options,
including the Notes and Warrants);

N1 =        the
number of shares of Common Stock which the aggregate consideration, if any,
received or receivable by the Company for the total number of such additional
shares of Common Stock so issued, sold or deemed issued or sold in such
Dilutive Issuance (which, in the case of a deemed issuance or sale, shall be
calculated in accordance with Section 6(e)(ii) below) would purchase at the Exercise
Price in effect immediately prior to such Dilutive Issuance; and

N2 =        the number of such additional shares of Common Stock so
issued,

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sold or deemed issued or sold in such Dilutive Issuance.

Notwithstanding the
foregoing, no adjustment shall be made pursuant hereto if such adjustment would
result in an increase in the Exercise Price.

(ii)           Effect On Exercise Price Of
Certain Events.  For purposes of
determining the adjusted Exercise Price under Section 6(e)(i), the following will be
applicable:

(A)          Issuance Of Options.  If the Company issues or sells any Options, whether
or not immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options (and the price of any conversion
of Convertible Securities, if applicable) is less than the Exercise Price in
effect on the date of issuance or sale of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion, exercise or exchange of Convertible Securities, if
applicable) shall, as of the date of the issuance or sale of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon the exercise of such Options”
shall be determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of all such
Options, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion, exercise or exchange thereof (determined in accordance with the
calculation method set forth in Section 6(e)(ii)(B) below) at the time such Convertible
Securities first become convertible, exercisable or exchangeable, by (y) the
maximum total number of shares of Common Stock issuable upon the exercise of
all such Options (assuming full conversion, exercise or exchange of Convertible
Securities, if applicable). No further adjustment to the Exercise Price shall
be made upon the actual issuance of such Common Stock upon the exercise of such
Options or upon the conversion, exercise or exchange of Convertible Securities
issuable upon exercise of such Options. 
To the extent that shares of Common Stock or Convertible Securities are
not delivered pursuant to such Options, upon the expiration or termination of
such Options, the Exercise Price shall be readjusted to the Exercise Price that
would then be in effect had the adjustments made upon the issuance of such
Options been made on the basis of delivery of only the number of shares of Common
Stock actually delivered.

(B)           Issuance Of Convertible Securities.  If the Company issues or sells any
Convertible Securities, whether or not immediately convertible, exercisable or
exchangeable, and the price per share for which Common Stock is issuable upon
such conversion, exercise or exchange is less than the Exercise Price in effect
on the date of issuance or sale of such Convertible Securities, then the
maximum total number of shares of Common Stock issuable upon the conversion,
exercise or exchange of all such Convertible Securities shall, as of the date
of the issuance or sale of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. If the Convertible Securities so issued or sold do not have a
fluctuating conversion or exercise price or exchange ratio, then for the
purposes of the immediately preceding sentence, the “price per share for which
Common Stock is issuable upon such conversion, exercise or exchange” shall be
determined by dividing (A) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate 

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amount of additional consideration, if any, payable to
the Company upon the conversion, exercise or exchange thereof (determined in
accordance with the calculation method set forth in this Section 6(e)(ii)(B))
at the time such Convertible Securities first become convertible, exercisable
or exchangeable, by (B) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. If the Convertible Securities so issued or sold have a fluctuating
conversion or exercise price or exchange ratio (a “Variable Rate Convertible Security”),
then for purposes of the first sentence of this Section 6(e)(ii)(B), the “price per
share for which Common Stock is issuable upon such conversion, exercise or
exchange” shall be deemed to be the lowest price per share which would be
applicable (assuming all holding period and other conditions to any discounts
contained in such Variable Rate Convertible Security have been satisfied) if
the conversion price of such Variable Rate Convertible Security on the date of
issuance or sale thereof were equal to the actual conversion price on such date
(or such higher minimum conversion price if such Variable Rate Convertible
Security is subject to a minimum conversion price) (the “Assumed Variable Market Price”),
and, further, if the conversion price of such Variable Rate Convertible
Security at any time or times thereafter is less than or equal to the Assumed
Variable Market Price last used for making any adjustment under this Section 6(e) with
respect to any Variable Rate Convertible Security, the Exercise Price in effect
at such time shall be readjusted to equal the Exercise Price which would have
resulted if the Assumed Variable Market Price at the time of issuance of the
Variable Rate Convertible Security had been equal to the actual conversion
price of such Variable Rate Convertible Security existing at the time of the
adjustment required by this sentence; provided,
however, that if the conversion or exercise price or exchange ratio
of a Convertible Security may fluctuate solely as a result of provisions
designed to protect against dilution, such Convertible Security shall not be
deemed to be a Variable Rate Convertible Security.  No further adjustment to the Exercise Price
shall be made upon the actual issuance of such Common Stock upon conversion,
exercise or exchange of such Convertible Securities.

(C)           Change In Option Price Or
Conversion Rate.  If there is a
change at any time in (x) the amount of additional consideration payable to the
Company upon the exercise of any Options; (y) the amount of additional
consideration, if any, payable to the Company upon the conversion, exercise or
exchange of any Convertible Securities; or (z) the rate at which any
Convertible Securities are convertible into or exercisable or exchangeable for Common
Stock (in each such case, other than under or by reason of provisions designed
to protect against dilution), the Exercise Price in effect at the time of such
change shall be readjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities still
outstanding provided for such changed additional consideration or changed
conversion, exercise or exchange rate, as the case may be, at the time
initially issued or sold.

(D)          Calculation Of Consideration Received.  If any Common Stock, Options or Convertible
Securities are issued or sold for cash, the consideration received therefor
will be the amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration part
or all of which shall be other than cash, including in the case of a strategic
or similar arrangement in which the other entity will provide services to the
Company, purchase

 

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services from the Company or otherwise provide
intangible consideration to the Company, the amount of the consideration other
than cash received by the Company (including the net present value of the
consideration expected by the Company for the provided or purchased services)
shall be the fair market value of such consideration. In case any Common Stock,
Options or Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The independent members of the Company’s Board of Directors shall
calculate reasonably and in good faith, using standard commercial valuation
methods appropriate for valuing such assets, the fair market value of any
consideration.

(iii)          Exceptions To Adjustment Of Exercise
Price.  Notwithstanding the
foregoing, no adjustment to the Exercise Price shall be made pursuant to this Section 6(e) upon the
issuance of any Excluded Securities.

 (iv)         Notice
Of Adjustments.  Upon the occurrence
of each adjustment or readjustment of the Exercise Price pursuant to this Section 6(e)
resulting in a change in the Exercise Price by more than one percent (1%), or
any change in the number or type of stock, securities and/or other property
issuable upon exercise of this Warrant, the Company, at its expense, shall
promptly compute such adjustment, readjustment or change and prepare and
furnish to the Holder a certificate setting forth such adjustment, readjustment
or change and showing in detail the facts upon which such adjustment, readjustment
or change is based.  The Company shall,
upon the written request at any time of the Holder, furnish to the Holder a
like certificate setting forth (i) such adjustment, readjustment or change,
(ii) the Exercise Price at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon exercise of this Warrant.

(v)           Adjustments; Additional Shares,
Securities or Assets.  In the event
that at any time, as a result of an adjustment made pursuant to this Section 6, the Holder
of this Warrant shall, upon exercise of this Warrant, become entitled to
receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 6.  Any adjustment made herein that results in a
decrease in the Exercise Price shall also effect a proportional increase in the
number of shares of Common Stock into which this Warrant is exercisable.

7.             MISCELLANEOUS.

(a)           Failure to Exercise Rights not
Waiver.  No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude any 

 11
 

 

other or further
exercise thereof. All rights and remedies of the Holder hereunder are
cumulative and not exclusive of any rights or remedies otherwise available. In
the event that the Company breaches any of its obligations hereunder to issue
Warrant Shares or pay any amounts as and when due, the Company shall bear all
costs incurred by the Holder in collecting such amount, including without
limitation reasonable legal fees and expenses.

(b)           Notices. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Warrant 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

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy (for informational purposes only) to:

  
	
   

  	
   

  
	
   

  	
   

  	
  Scheef & Stone, LLP

  
	
   

  	
   

  	
  Telephone:

  	
  214.706.4200

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
  214.706.4242

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Roger A. Crabb, Esq.

  	
   

  
							

 

and if to the
Holder, to the address and facsimile number as to which the Holder has notified
the Company in writing. 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.

(c)           Amendments.  No amendment, modification or other change
to, or waiver of any provision of, this Warrant may be made unless such
amendment, modification or change is set forth in writing and is signed by the
Company and the Holder.

(d)           Transfer of Warrant.  The Holder may sell, transfer or otherwise
dispose of all or any part of this Warrant (including without limitation
pursuant to a pledge) to any person or entity as long as such sale, transfer or
disposition is the subject of an effective registration statement under the
Securities Act of 1933, as amended, and applicable state securities laws, or is
exempt from registration thereunder, and is otherwise made in accordance 

 12
 

 

with the
applicable provisions of the Securities Purchase Agreement.  From and after the date of any such sale,
transfer or disposition, the transferee hereof shall be deemed to be the holder
of the portion of this Warrant acquired by such transferee, and the Company
shall, as promptly as practicable, issue and deliver to such transferee a new
Warrant identical in all respects to this Warrant, in the name of such
transferee. The Company shall be entitled to treat the original Holder as the
holder of this entire Warrant unless and until it receives written notice of
the sale, transfer or disposition hereof.

(e)           Lost or Stolen Warrant.  Upon receipt by the Company of evidence of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnity or security reasonably satisfactory to
the Company, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant identical in
all respects to this Warrant.

(f)            Governing Law.  This Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable to contracts made and to be performed
entirely within the State of New York.

(g)           Successors
and Assigns.  The terms and
conditions of this Warrant shall inure to the benefit of and be binding upon
the respective successors (whether by merger or otherwise) and permitted
assigns of the Company and the Holder. The Company may not assign its rights or
obligations under this Warrant except as specifically required or permitted
pursuant to the terms hereof.

                (h)           Taxes.  The
issue of stock certificates on exercises of this Warrant shall be made without
charge to the exercising Holder for any tax in respect of the issue
thereof.  The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of stock in any name other than that of the
Holder of any Warrant exercised, and the Company shall not be required to issue
or deliver any such stock certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the reasonable satisfaction of the Company
that such tax has been paid.

[Signature Page to Follow]

 

 13

 

IN WITNESS
WHEREOF, the Company has duly executed and delivered this Warrant as of the
Issue Date.

	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
   

  	
  Name: Dennis G. McLaughlin, III

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

                 
 

 

 

EXHIBIT A to WARRANT

EXERCISE NOTICE

The undersigned Holder hereby irrevocably exercises
the right to purchase                 
of the shares of Common Stock (“Warrant Shares”) of EARTH BIOFUELS, INC.
evidenced by the attached Warrant (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

1.             Form
of Exercise Price.  The Holder intends
that payment of the Exercise Price shall be made as:

       a Cash
Exercise with respect to                  
Warrant Shares; and/or

       a Cashless
Exercise with respect to                  
Warrant Shares, as permitted by Section 5(b) of the attached Warrant.

2.    Payment of Exercise Price.  In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $                
to the Company in accordance with the terms of the Warrant.

	
  Date: 

  
	
   

  
	
   

  	
   

  
	
  Name of Registered
  Holder

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

By tendering this Exercise Notice, the Holder
represents to the Company that it is an “accredited
investor” as that term is defined in Rule 501 of Regulation D, and that it is
acquiring the Warrants Shares solely for its own account, and not with a
present view to the public resale or distribution of all or any part thereof,
except pursuant to sales that are registered under the Securities Act or are
exempt from the registration requirements of the Securities Act; provided,
however, that, in making such representation, the Holder does not agree to hold the Warrants Shares for
any minimum or specific term and reserves the right to sell, transfer or
otherwise dispose of the Warrants Shares at any time in accordance with the
provisions of the Warrant and with Federal and state securities laws applicable
to such sale, transfer or disposition.EXHIBIT 10.33

Execution Copy

AMENDED
AND RESTATED

REGISTRATION RIGHTS AGREEMENT

This AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT (this “Agreement”), dated as of May
26, 2006, is by and between Earth Biofuels, Inc., a Delaware corporation (the “Company”), and each of the entities
whose names appear on the signature pages hereof.  Such entities are each referred to herein as “Purchaser” and, collectively, as the
“Purchasers”.

The
Company and the Purchasers are party to a Securities Purchase Agreement, dated
as of May 26, 2006 (the “Original Purchase
Agreement”), and a Registration Rights Agreement, dated as of
May 26, 2006 (the “Original Registration Rights Agreement”).
 Pursuant
to Section 4.21 of the Original Purchase Agreement, the Company and the Purchasers
desire to amend and restate the Original Purchase Agreement, the Original
Registration Rights Agreement, the Notes and the Warrants (each, as defined
below) to reflect the more favorable terms contained in the Subsequent Closing
(as defined in the Original Purchase Agreement).  References in this Agreement to the
Securities Purchase Agreement, the Notes and the Warrants shall be deemed to
include the Securities Purchase Agreement, the Notes and the Warrants, as
amended and restated in connection herewith and as may be further amended
and/or restated from time to time in accordance with their respective terms.

The Company has agreed, on the terms and subject to
the conditions set forth in the Amended and Restated Securities Purchase
Agreement, dated as of May 26, 2006 (the “Securities Purchase
Agreement”), to issue and sell to each Purchaser named therein
(A) an 8% Senior Note in the form attached to the Securities Purchase Agreement
(each, a “Note” and, collectively, the “Notes”) and (B) a Warrant in the
form attached to the Securities Purchase Agreement (each, a “Warrant” and, collectively, the “Warrants”).

The Notes are convertible, subject to the conditions
specified in the Securities Purchase Agreement, into shares (the “Conversion Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common
Stock”). The Warrants are exercisable into shares of Common
Stock (the “Warrant Shares”) in
accordance with their terms.

In order to induce each Purchaser to enter into the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the “Securities Act”), and under
applicable state securities laws.

 

In consideration
of each Purchaser entering into the Securities Purchase Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree that the Original Registration Rights
Agreement is amended and restated to read in its entirety as follows:

1.             DEFINITIONS.

For purposes of this Agreement, the following terms
shall have the meanings specified:

“Business Day” means any day
other than a Saturday, a Sunday or a day on which the Commission is closed or
on which banks in the City of New York are authorized by law to be closed.

“Commission”
means the Securities and Exchange Commission.

“Effective Date”
means the date on which the Registration Statement is declared effective by the
Commission.

“Filing Deadline”
means the date that is the earliest of the following:  (i) the date on which the Company files a
registration statement covering any of its securities issued on or after
January 1, 2006; (ii) the date on which the Company is contractually required
to file a registration statement covering any of its securities (other than the
Registrable Securities) issued after the Closing Date; and (iii) the date that
is the sixtieth (60th) calendar day following the Closing Date.

“Holder”
means any person owning or having the right to acquire, through conversion of the
Notes or exercise of the Warrants or otherwise, Registrable Securities,
including initially each Purchaser and thereafter any permitted assignee
thereof.

“Registrable Securities”
means the Conversion Shares, the Warrant Shares, and any other shares of Common
Stock issuable pursuant to the terms of the Note or the Warrants, and any
shares of capital stock issued or issuable from time to time (with any
adjustments) in replacement of, in exchange for or otherwise in respect of the
Conversion Shares and the Warrant Shares.

“Registration Deadline”
means the earliest of (i) the one hundred and twentieth (120th) calendar day following the
Closing Date, (ii) the sixtieth (60th)
calendar day following the Filing Deadline, and (iii) the fifth (5th) Business Day after the Company learns
that no review of the Registration Statement will be made by the staff of the
Commission or that the staff of the Commission has no further comments on the
Registration Statement.

“Registration Period”
has the meaning set forth in Section 2(c)
below.

“Registration Statement”
means a registration statement or statements prepared in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act (“Rule 415”) or any successor rule
providing for the offering of securities on a continuous or delayed basis.

 2
 

 

Capitalized terms used
herein and not otherwise defined shall have the respective meanings specified
in the Securities Purchase Agreement.

2.             REGISTRATION.

(a)           Filing
of Registration Statement.  On or
before the Filing Deadline, the Company shall prepare and file with the
Commission a Registration Statement on Form SB-2 as a “shelf” registration
statement under Rule 415 covering the resale of a number of shares of
Registrable Securities equal to one hundred and fifty percent (150%) of the
number of shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants (such number to be determined using the Conversion
Price (as defined in the Notes) and Exercise Price (as defined in the Warrants)
in effect on the date on which the Registration Statement is filed and without
regard to any restriction on such conversion or exercise). Such Registration
Statement shall state, to the extent permitted by Rule 416 under the Securities
Act, that it also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon the conversion of the Notes and
exercise of the Warrants in order to prevent dilution resulting from stock
splits, stock dividends or similar events. 
The Company shall retain Akin, Gump, Strauss, Hauer & Feld LLP or a
comparable national law firm that is reasonably satisfactory to the Purchasers
to handle the preparation of the Registration Statement and the process of
getting such Registration Statement effective.

(b)           S-1/S-3
Registration Statement. 
Notwithstanding the foregoing Section 2(a),
if at the Filing Deadline the Company does not meet the eligibility
requirements for filing a Registration Statement on Form SB-2, then in each
such case the Company shall instead prepare and file with the Commission a
Registration Statement meeting the foregoing requirements on Form S-1. In the
event that the Company files a Registration Statement on Form S-1 or Form
SB-2,  and thereafter meets the
eligibility requirements to use Form S-3 for the resale of Registrable
Securities by the Purchaser, the Company shall re-file such Registration
Statement, or file a new Registration Statement covering at least the number of
shares then registered on the existing Registration Statement(s) (and not
previously sold pursuant to an existing Registration Statement or pursuant to
Rule 144 under the Securities Act (“Rule 144”)),
on Form S-3 as promptly as practicable (but in no event later than thirty (30)
days) after the Company meets such requirements.

(c)           Effectiveness.  The Company shall use reasonable best efforts
to cause the Registration Statement to become effective as soon as practicable
following the filing thereof, but in no event later than the Registration
Deadline.  The Company shall respond
promptly to any and all comments made by the staff of the Commission on with
respect to a Registration Statement, and shall submit to the Commission, within
two (2) Business Days after the Company learns that no review of such
Registration Statement will be made by the staff of the Commission or that the
staff of the Commission has no further comments on such Registration Statement,
as the case may be, a request for acceleration of the effectiveness of such
Registration Statement to a time and date not later than two (2) Business Days
after the submission of such request. 
The Company will maintain the effectiveness of each Registration
Statement filed pursuant to this Agreement until the earliest to occur of (i)
the date on which all of the Registrable Securities eligible for resale
thereunder have been publicly sold pursuant to either the Registration
Statement or Rule 144, (ii) the date on which all of the Registrable Securities
remaining to be sold under such Registration Statement (in the reasonable
opinion of counsel to the Company) may be immediately sold to the public under 

 3
 

 

 

Rule 144(k) under the Securities Act (“Rule 144(k)”) or any successor
provision and (iii) the date that is the second (2nd) anniversary of the  Effective Date (the period beginning on the
Closing Date and ending on the earliest to occur of (i), (ii) or (iii) above
being referred to herein as the “Registration Period”).

(d)           Registration
Default.  If (i) the Registration
Statement is not filed on or before the Filing Deadline or declared effective
by the Commission on or before the Registration Deadline, (ii) after a
Registration Statement has been declared effective by the Commission, sales of
Registrable Securities (other than such Registrable Securities as are then freely
saleable pursuant to Rule 144(k)) cannot be made by a Holder under a
Registration Statement for any reason not within the exclusive control of such
Holder, or (iii) an amendment or supplement to a Registration Statement, or a
new registration statement, required to be filed pursuant to the terms of Section 3(j) below, is not filed on
or before the date required by such section (each of the foregoing clauses (i),
(ii) and (iii) being referred to herein as a “Registration
Default”), the Company shall make cash payments to each Holder
equal to such Holder’s pro rata share
(based on the aggregate number of Registrable Securities then held by or
issuable to such Holder as of the occurrence of the Registration Deadline)
equal to one percent (1%) of the aggregate Purchase Price paid by such Holder
for such Holder’s Note and Warrants for each thirty (30) day period (pro rated
for partial periods) in which a Registration Default exists, up to a maximum of
four percent (4%) of the aggregate Purchase Price paid by such Holder for such
Holder’s Note and Warrants; provided, however, that
such maximum shall be increased to six percent (6%) of the aggregate Purchase
Price paid by such Holder if the Registration Statement is not filed on or
before August 31, 2006. Notwithstanding any provision of this Agreement to the
contrary, the Company shall be permitted to suspend the Registration Statement
for one or more periods (provided that the aggregate length of such suspension
shall not exceed ten (10) consecutive Business Days or an aggregate of twenty
(20) Business Days in any 365 day period, with at least thirty calendar days
between each such suspension) the actions required under Section
2(a) of this Agreement to the extent that the Board of Directors
of the Company concludes reasonably and in good faith that the disclosure of
information in the prospectus is not in the best interest of the Company.  Each such payment required to be made under
this Section 2(d) shall be made within
five (5) Business Days following the last day of each calendar month in which a
Registration Default exists. Any such payment made following such five (5)
Business Day window shall be subject to interest at the lower of sixteen
percent (16%) and the maximum rate permitted by applicable law.  Any such payment shall be in addition to any
other remedies available to each Holder at law or in equity, whether pursuant
to the terms hereof, the Securities Purchase Agreement, the Notes, or
otherwise.

(e)           Allocation of Conversion Shares
and Warrant Shares. The initial number of Conversion Shares and Warrant
Shares included in any Registration Statement and each increase in the number
thereof included therein shall be allocated pro rata among
the Holders based on the aggregate number of Registrable Securities issuable to
each Holder at the time the Registration Statement covering such initial number
of Registrable Securities or increase thereof is declared effective by the
Commission (such number to be determined using the Conversion Price or Exercise
Price, as applicable, in effect at such time and without regard to any
restriction on the ability of a Holder to convert such Holder’s Note or
exercise such Holder’s Warrant as of such date).  In the event that a Holder sells or otherwise
transfers any of such Holder’s Registrable Securities, each transferee shall be
allocated the portion of the then remaining number of Registrable Securities
included in such Registration Statement allocable to the transferor.

 4
 

 

(f)            Registration of Other Securities.  During the period beginning on the date
hereof and ending on the Effective Date, the Company shall refrain from filing
any registration statement (other than (i) a Registration Statement filed
hereunder, (ii) a registration statement on Form S-8 with respect to stock option
plans and agreements and stock plans currently in effect and disclosed in the
Securities Purchase Agreement or the schedules thereto, or (iii) a registration
statement on Form S-4 with respect to an acquisition or other business
combination involving the Company.

3.             OBLIGATIONS OF
THE COMPANY.

In addition to performing its obligations hereunder,
including without limitation those pursuant to Section 2 above, the Company
shall, with respect to each Registration Statement:

(a)           prepare
and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act or to maintain the effectiveness of such Registration Statement
during the Registration Period, or as may be reasonably requested by a Holder
in order to incorporate information concerning such Holder or such Holder’s
intended method of distribution and further incorporating such additional information
as may be reasonably requested by such Holder;

(b)           at
such time following the Closing that the Company is eligible to do so, use
commercially reasonable efforts to secure the listing on the Principal Market
of all Registrable Securities issuable upon conversion of the Notes and
exercise of the Warrants, and at any Holder’s request, provide such Holder with
reasonable evidence thereof;

(c)           so
long as a Registration Statement is effective covering the resale of the
applicable Registrable Securities owned by a Holder, furnish to each Holder
such number of copies of the prospectus included in such Registration
Statement, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such Holder may
reasonably request in order to facilitate the disposition of such Holder’s
Registrable Securities;

(d)           use
commercially reasonable efforts to register or qualify the Registrable
Securities under the securities or “blue sky” laws of such jurisdictions within
the United States as shall be reasonably requested from time to time by a
Holder, and do any and all other acts or things which may reasonably be
necessary or advisable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities in such jurisdictions; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such jurisdiction;

(e)           notify
each Holder immediately after becoming aware of the occurrence of (i) any
request by the SEC or any other federal/state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related prospectus or for additional
information or (ii) any other event (but shall not, without the prior written
consent of such Holder, disclose to such Holder any facts or circumstances 

 5
 

 

constituting material non-public information) as a result
of which the prospectus included in such Registration Statement, as then in
effect, contains an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and as promptly as practicable prepare and file with the Commission
and furnish to each Holder a reasonable number of copies of a supplement or an
amendment to such prospectus as may be necessary so that such prospectus does
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;

(f)            use
commercially reasonable efforts to prevent the issuance of any stop order or
other order suspending the effectiveness of such Registration Statement and, if
such an order is issued, to notify each Holder immediately after becoming aware
thereof and to use commercially reasonable efforts obtain the withdrawal
thereof at the earliest possible time and to notify each Holder in writing of
the issuance of such order and the resolution thereof;

(g)           furnish
to each Holder, on the date that such Registration Statement, or any successor
registration statement, becomes effective, a letter, dated such date, signed by
an officer of or counsel to the Company and addressed to such Holder,
confirming such effectiveness and, to the knowledge of such counsel, the
absence of any stop order;

(h)           provide
to each Holder and its representatives the reasonable opportunity to conduct a
reasonable inquiry of the Company’s financial and other records during normal
business hours and make available during normal business hours and with
reasonable advance notice its officers, directors and employees for questions
regarding information which such Holder may reasonably request in order to
fulfill any due diligence obligation on its part;

(i)            permit
counsel for each Holder to review such Registration Statement and all
amendments and supplements thereto, and any comments made by the staff of the
Commission concerning such Holder and/or the transactions contemplated by the
Transaction Documents and the Company’s responses thereto, within a reasonable
period of time prior to the filing thereof with the Commission (or, in the case
of comments made by the staff of the Commission, within a reasonable period of
time following the receipt thereof by the Company);

(j)            in
the event that, at any time, the number of shares available under the
Registration Statement is insufficient to cover one hundred and twenty-five
percent (125%) of the Registrable Securities issuable under the Notes and
Warrants (such number to be determined using the Conversion Price or Exercise
Price, as applicable, in effect at such time and without regard to any
restriction on the ability of any Holder to convert such Holder’s Note or
exercise such Holder’s Warrant) the Company shall promptly amend such
Registration Statement or file a new registration statement, in any event as
soon as practicable, but not later than the tenth (10th) day following notice from a
Holder of the occurrence of such event, so that such Registration Statement or
such new registration statement, or both, covers no less than one hundred and
fifty percent (150%) of the Registrable Securities eligible for resale
thereunder and issuable under the Notes and Warrants (such number to be
determined using the Conversion Price or Exercise Price, as applicable, in effect
at the time of such amendment or filing and without regard to any restriction
on the ability of any Holder

 6
 

 

to convert such Holder’s Note or exercise such Holder’s
Warrant). The Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. Any Registration Statement filed pursuant to this Section 3(j) shall state that, to
the extent permitted by Rule 416 under the Securities Act, such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Note and exercise of the
Warrants in order to prevent dilution resulting from stock splits, stock
dividends or similar events. Unless and until such amendment or new
Registration Statement becomes effective, each Holder shall have the rights
described in Section 2(d) above;

(k)           cause
to be furnished to each Holder, upon request therefor, comfort letters from the
Company’s independent auditors and/or outside counsel, with respect to such
Holder’s status as an underwriter; and

(l)            cause
to be timely furnished to each Holder, earnings statements of the Company
conforming to the requirements of Rule 158 under the Securities Act.

4.             OBLIGATIONS
OF EACH HOLDER.

In connection with the registration of Registrable Securities pursuant
to a Registration Statement, each Holder shall:

(a)           timely
furnish to the Company (i) a completed Shareholder Questionnaire and (ii) such
information in writing regarding itself and the intended method of disposition
of such Registrable Securities as the Company shall reasonably request in order
to effect the registration thereof;

(b)           upon
receipt of any notice from the Company of the happening of any event of the
kind described in Sections 3(e) or 3(f), immediately discontinue any
sale or other disposition of such Registrable Securities pursuant to such
Registration Statement until the filing of an amendment or supplement as
described in Section 3(e) or withdrawal of
the stop order referred to in Section 3(f),
and use commercially reasonable efforts to maintain the confidentiality of such
notice and its contents;

(c)           to
the extent required by applicable law, deliver a prospectus to the purchaser of
such Registrable Securities;

(d)           notify
the Company when it has sold all of the Registrable Securities held by it; and

(e)           notify the Company in the event that
any information supplied by such Holder in writing for inclusion in such
Registration Statement or related prospectus is untrue or omits to state a
material fact required to be stated therein or necessary to make such
information not misleading in light of the circumstances then existing;
immediately discontinue any sale or other disposition of such Registrable Securities
pursuant to such Registration Statement until the filing of an amendment or
supplement to such prospectus as may be necessary so that such prospectus does
not contain an 

 7
 

 

untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing; and use commercially reasonable efforts to assist
the Company as may be appropriate to make such amendment or supplement
effective for such purpose.

5.             INDEMNIFICATION.

In the event that any Registrable Securities are
included in a Registration Statement under this Agreement:

(a)           To
the extent permitted by law, the Company shall indemnify and hold harmless each
Holder, the officers, directors, employees, agents and representatives of such
Holder, and each person, if any, who controls such Holder within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against any losses,
claims, damages, liabilities or reasonable out-of-pocket expenses (whether
joint or several) (collectively, including reasonable legal expenses or other
expenses reasonably incurred in connection with investigating or defending
same, “Losses”), insofar as any such
Losses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement
under which such Registrable Securities were registered, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  Subject to the
provisions of Section 5(c) below, the
Company will reimburse such Holder, and each such officer, director, employee,
agent, representative or controlling person, for any reasonable legal expenses
or other out-of-pocket expenses as reasonably incurred by any such entity or
person in connection with investigating or defending any Loss; provided, however, that the foregoing indemnity shall not
apply to amounts paid in settlement of any Loss if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be obligated to indemnify any person for any
Loss to the extent that such Loss arises out of or is based upon (i) any
disclosure or any omission or alleged omission (to state a material fact
required to be stated therein or necessary to make statements therein not
misleading) that is based upon or in conformity with written information
furnished (or not furnished, in the case of an omission) by such person
expressly for use in such Registration Statement or (ii) a failure of such
person to deliver or cause to be delivered the final prospectus contained in
the Registration Statement and made available by the Company, if such delivery
is required by applicable law.

(b)           To
the extent permitted by law, each Holder who is named in such Registration
Statement as a selling shareholder, acting severally and not jointly, shall
indemnify and hold harmless the Company, the officers, directors, employees,
agents and representatives of the Company, and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, against any Losses to the extent (and only to the extent) that any such
Losses arise out of or are based upon (i) any disclosure or any omission or
alleged omission (to state a material fact required to be stated therein or
necessary to make statements therein not misleading) that is based upon or in
conformity with written information furnished (or not furnished, in the case of
an omission) by such person expressly for use in such Registration Statement,
or (ii) a failure of such Holder to deliver or cause to be delivered the final
prospectus contained in the Registration 

 8
 

 

Statement and made available by the Company, if such
delivery is required under applicable law. Subject to the provisions of Section 5(c) below, such Holder will
reimburse any legal or other expenses as reasonably incurred by the Company and
any such officer, director, employee, agent, representative, or controlling
person, in connection with investigating or defending any such Loss; provided, however, that the foregoing indemnity shall not
apply to amounts paid in settlement of any such Loss if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld); and provided, further,
that, in no event shall any indemnity under this Section
5(b) exceed the net proceeds resulting from the sale of the
Registrable Securities sold by such Holder under such Registration Statement.

(c)           Promptly
after receipt by an indemnified party under this Section 5 of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5, promptly deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel selected by the indemnifying party and reasonably
acceptable to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the reasonably incurred fees and expenses of one such counsel for all
indemnified parties to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate under applicable standards of professional conduct due to
actual or potential conflicting interests between such indemnified party and
any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the
indemnifying party within a reasonable time of the delivery of notice of any
such action, to the extent prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 5 with respect to such action, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 5 or with respect to any other action unless the indemnifying party is
materially prejudiced as a result of not receiving such notice.

(d)           In
the event that the indemnity provided in Sections 5(a) or
5(b) is unavailable or insufficient
to hold harmless an indemnified party for any reason, the Company and each
Holder agree, severally and not jointly, to contribute to the aggregate Losses
to which the Company or such Holder may be subject in such proportion as is
appropriate to reflect the relative fault of the Company and such Holder in
connection with the statements or omissions which resulted in such Losses; provided, however, that in no case shall such Holder be
responsible for any amount in excess of the net proceeds resulting from the
sale of the Registrable Securities sold by it under the Registration
Statement.  Relative fault shall be determined
by reference to whether any alleged untrue statement or omission relates to
information provided by the Company or by such Holder.  The Company and each Holder agree that it
would not be just and equitable if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above.  Notwithstanding the provisions
of this Section 5(d), 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 is
not guilty of such fraudulent misrepresentation.  For purposes of this Section 5, each person
who controls a Holder within the meaning of either the Securities Act or the
Exchange Act and each officer, director, employee, agent or representative of
such Holder shall have the same rights to contribution as such 

 9
 

 

Holder, and each person who controls the Company
within the meaning of either the Securities Act or the Exchange Act and each
officer, director, employee, agent or representative of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this Section 5(d).

(e)           The
obligations of the Company and each Holder under this Section 5 shall
survive the conversion of the Note and exercise of the Warrants in full, the
completion of any offering or sale of Registrable Securities pursuant to a
Registration Statement under this Agreement, or otherwise.

6.             REPORTS.

With a view to making available to each Holder the benefits of Rule 144
and any other similar rule or regulation of the Commission that may at any time
permit such Holder to sell securities of the Company to the public without
registration, the Company agrees to:

(a)           make
and keep public information available, as those terms are understood and
defined in Rule 144;

(b)           file
with the Commission in a timely manner all reports and other documents required
of the Company under the Exchange Act; and

(c)           furnish
to such Holder, so long as such Holder owns any Registrable Securities,
promptly upon written request (i) a written statement by the Company, if true,
that it has complied with the reporting requirements of Rule 144 and the
Exchange Act, (ii) to the extent not publicly available through the Commission’s
EDGAR database, a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company with the
Commission, and (iii) such other information as may be reasonably requested by
such Holder in connection with such Holder’s compliance with any rule or
regulation of the Commission which permits the selling of any such securities
without registration.

7.             MISCELLANEOUS.

(a)           Expenses
of Registration.  Except as otherwise
provided in the Securities Purchase Agreement, all reasonable expenses, other
than underwriting discounts and commissions and fees and expenses of counsel
and other advisors to each Holder, incurred in connection with the
registrations, filings or qualifications described herein, including (without
limitation) all registration, filing and qualification fees, printers’ and
accounting fees, the fees and disbursements of counsel for the Company, and the
fees and disbursements incurred in connection with the opinion and letter
described in Section 3(g) hereof, shall be
borne by the Company.  Except as
otherwise agreed to by such Holder, the Company shall maintain in strict
confidence, all information with respect to such Holder.

(b)           Amendment;
Waiver.  Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended or waived except pursuant to a written instrument
executed by the Company and the Holders of at least two-thirds (2/3) of the Registrable
Securities into 

 10
 

 

which all of the Note and Warrants then outstanding
are convertible or exercisable (without regard to any limitation on such
conversion or exercise). Any amendment or
waiver effected in accordance with this Section
6(b) shall be binding upon
each Holder, each future Holder and the Company.  The failure of any party to exercise any
right or remedy under this Agreement or otherwise, or the delay by any party in
exercising such right or remedy, shall not operate as a waiver thereof.

(c)           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

 

with a copy (for
informational purposes only) to:

 

Scheef & Stone, LLP

Telephone: 214.706.4200

Facsimile: 214.706.4242

Attention: Roger A. Crabb, Esq.

and if to the
Holder, to the address and facsimile number as to which the Holder has notified
the Company in writing. 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.

(d)           Assignment.  Upon the transfer of any Note, Warrants or
Registrable Securities by a Holder, the rights of such Holder hereunder with
respect to such securities so transferred shall be assigned automatically to
the transferee thereof, and such transferee shall thereupon be deemed to be a “Holder”
for purposes of this Agreement, as long as: (i) the Company is, within a
reasonable period of time following such transfer, furnished with written
notice of the name and address of such transferee, (ii) the transferee agrees
in writing with the Company to be bound by all of the provisions hereof, and
(iii) such transfer is made in accordance with the applicable requirements of
the Securities Purchase Agreement, the Notes or the Warrants, as applicable.

 11
 

 

(e)           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same instrument.  This Agreement, once executed by a party, may
be delivered to any other party hereto by facsimile transmission.

(f)            Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within the State of
New York.

(g)           Holder of Record.  A person is deemed to be a Holder whenever
such person owns or is deemed to own of record such Registrable
Securities.  If the Company receives
conflicting instructions, notices or elections from two or more persons with
respect to the same Registrable Securities, the Company shall act upon the
basis of instructions, notice or election received from the record owner of
such Registrable Securities.

(h)           Entire Agreement.
 This Agreement and the other Transaction
Documents constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. 
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This Agreement and the other Transaction Documents
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

(i)            Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

(j)            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.

[Signature Pages to Follow]

 12

 

IN WITNESS WHEREOF, the
undersigned have executed this Registration Rights Agreement as of the date
first-above written.

	
  EARTH BIOFUELS, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Dennis G. McLaughlin, III

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Dennis G. McLaughlin, III

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EVOLUTION MASTER FUND LTD.

     SPC, SEGREGATED PORTFOLIO M

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Adrian Brindle

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Adrian Brindle

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Director

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