Document:

EXHIBIT
10.21

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS
AGREEMENT (“Agreement”) is made and entered into as of the 4th day of May, 2006,
by and between EARTH
BIOFUELS, INC., a Delaware
corporation having its principal place of business at 3001 Knox Street — Suite
403, Dallas, Texas 75205-7305 (the “Company”), and GREENWICH
POWER, L.L.C., a Delaware limited liability company having its
principal place of business at 537 Steamboat Road, Greenwich, Connecticut
06830-7153 (the “Holder”).

RECITALS:

A. Contemporaneously with
the execution hereof, the Holder is purchasing from the Company (i) $1,000,000
principal amount of the Company’s 7% secured promissory notes, which notes are
convertible into the Company’s common stock, $0.001 par value (the “Common
Stock”) as therein provided, and (ii) a warrant to purchase 920,810 (subject to
adjustment) shares of Common Stock (the shares of Common Stock issuable upon
conversion of the said notes and upon exercise of the said warrant are
hereinafter referred to as the “Shares”).

B. The Holder has requested,
and the Company has agreed, as a condition to the Holder’s obligation to acquire
the said notes and warrant, to register the Shares under the Securities Act,
upon the terms, and subject to the conditions, hereinafter set forth.

NOW, THEREFORE, in
consideration of the premises and the mutual covenants and agreements contained
herein and other good, valuable and sufficient consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:

1. Demand Registration.
The Company agrees that the Company will, not later than sixty (60) days following
the date on which it receives a request therefor by the Holder (but no earlier
than August 31, 2006), file a registration statement (the “Registration Statement”)
with the Securities and Exchange Commission (“Commission”) relating to the
Shares. The Company shall use its best efforts to cause such Registration
Statement promptly to become effective under the Securities Act and to qualify
the same under the blue sky laws of such states as may be requested. Provided
that such registration enables the Holder to dispose of substantially all of
the Shares, the Company shall be obligated to effect registration and qualification
pursuant to a request of the Holder no more than once.

2. Incidental
Registration. If at any time the Company proposes to register any equity
securities under the Securities Act for its own account or for the account of
any of its stockholders, in connection with an underwritten public offering of
such securities, on a form that would also permit registration of the Shares,
the Company shall, each such time, give the Purchaser not less than twenty (20)
days’ written notice of such proposed registration. Upon the written request of
the Holder, given within twenty (20) days after receipt of any such notice from
the Company, the Company shall cause to be included in such registration all of

 

the
Shares the Holder requests be registered in such registration. There shall be
no restriction with respect to the number of times the Holder may request such incidental
registration.

3. Expenses.
All of its costs and expenses of the registration and qualifications pursuant
to this Agreement shall be borne by the Company. Such costs and expenses shall
include, without limitation, the fees and expenses of counsel for the Company
and of its accountants, all other costs, fees and expenses of the Company
incident to the preparation, printing and filing under the Securities Act of
the registration statement and all amendments and supplements thereto, the cost
of furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters, dealers and other
purchasers of the Shares and the costs and expenses (including fees and
disbursements of counsel) incurred in connection with the qualification of the
Shares under the blue sky laws of various jurisdictions. The Company shall not,
however, pay any underwriting discount or commissions to the extent related to
the sale of Shares sold in any registration and qualification.

4. Procedures.

(a) The Company will keep
the Holder advised in writing as to the initiation of proceedings for such
registration and qualification and as to the completion thereof, and will
advise the Holder, upon request, of the progress of such proceedings.

(b) The Company will keep
the registration and qualifications under this Agreement effective (and in
compliance with the Securities Act) by such action as may be necessary or
appropriate until such time, if any as the Shares shall have been sold. The
Company’s obligations under this Section 4(b) shall include, without
limitation, the filing of post-effective amendments and supplements to any
registration statement or prospectus necessary to keep the Registration
Statement current and the further qualification under any applicable blue sky
or other state securities laws to permit such sale or distribution, all as
requested by the Holder. The Company will immediately notify the Holder at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing.

(c) Without limiting any
other provision hereof, in connection with any registration of Shares under
this Agreement, the Company will use its best efforts to comply with the Securities
Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
all applicable rules and regulations of the Commission.

(d) In connection with any
registration of Shares under this Agreement, the Company will provide, if
appropriate, a transfer agent and registrar for the Shares not later than the
effective date of such Registration Statement.

(e) In connection with any
registration of Shares under this Agreement, the Company will, if requested by
the underwriters for any Shares included in such registration, enter into 

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an
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation, provisions
relating to indemnification and contribution.

5. Indemnification.
The Company will indemnify and hold harmless the Holder and each person, if
any, who controls the Holder within the meaning of the Securities Act against
any losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorneys’ fees and expenses and reasonable costs of
investigation) to which the Holder or such controlling person may be subject,
under the Securities Act or otherwise, insofar as any thereof arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Registration Statement under which the
Holder’s Shares were registered under the Securities Act pursuant to this
Agreement, any prospectus or preliminary prospectus contained therein, or any
amendment or supplement thereto or (B) any other document incident to the
registration of the Shares under the Securities Act or the qualification of the
Shares under any state securities laws applicable to the Company, (ii) the
omission or alleged omission to state in any item referred to in the preceding
clause (i) a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any other
federal or state securities law, rule or regulation applicable to the Company
and relating to action or inaction by the Company in connection with any such
registration or qualification, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
alleged untrue statement or omission or alleged omission based upon information
furnished to the Company in writing by the Holder expressly for use therein
(with respect to which information the Holder shall so indemnify and hold
harmless the Company, any underwriter for the Company and each person, if any,
who controls the Company or such underwriter within the meaning of the
Securities Act).

6. Notices.
Any notice or demand required or permitted to be made or given hereunder shall
be deemed sufficiently made and given if given by personal service or by the
mailing of such notice or demand by certified or registered mail, return
receipt requested, or by overnight courier service providing for proof of
delivery, addressed, if to the Company, at the Company’s address first above
written, with a copy to Roger A. Crabb, Esq., Scheef & Stone, L.L.P., 5956
Sherry Lane — Suite 1400, Dallas, Texas 75225-8031; or if to the Holder, at the
Holder’s address first above written, with a copy in like manner to Hilary B.
Miller, Esq., 112 Parsonage Road, Greenwich, Connecticut 06830-3942. Either
party may change its address by like notice to the other party.

7. Governing
Law; Forum. This Agreement shall be construed and enforced in accordance
with the substantive laws of the State of Delaware without regard to conflict
of law principles. Each party hereby consents and submits to the exclusive
personal and subject matter jurisdiction of the state and federal courts
located in New York County, New York for 

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purposes
of any action or proceeding related to this Agreement. Trial by jury in any
action arising, proceeding or counterclaim arising hereunder is hereby waived.

8. Binding
Effect; Assignment; Third Party Beneficiaries. This Agreement shall be
binding upon the parties and their respective successors and assigns and shall
inure to the benefit of the parties and their respective successors and
assigns. No person (including, without limitation, any employee of a party)
shall be, or be deemed to be, a third party beneficiary of this Agreement.

9. Miscellaneous.
This Agreement constitutes the entire contract between the parties with respect
to the subject matter hereof and cancels and supersedes all of the previous contracts,
commitments, representations, warranties and understandings (whether oral or
written) by, between or among the parties with respect to the subject matter
hereof. No addition to, and no cancellation, renewal, extension, modification
or amendment of, this Agreement shall be binding upon a party unless such
addition, cancellation, renewal, extension, modification or amendment is set
forth in a written instrument which states that it adds to, amends, cancels,
renews, extends or modifies this Agreement and has been approved by all of the
parties hereto. No waiver of any provision of this Agreement shall be binding
upon a party unless such waiver is expressly set forth in a written instrument
which is executed and delivered by such party or on behalf of such party by an
officer of, or attorney-in-fact for, such party. Such waiver shall be effective
only to the extent specifically set forth in such written instrument. Neither
the exercise (from time to time and at any time) by a party of, nor the delay
or failure (at any time or for any period of time) to exercise, any right,
power or remedy shall constitute a waiver of the right to exercise, or impair,
limit or restrict the exercise of, such right, power or remedy or any other
right, power or remedy at any time and from time to time thereafter. No waiver
of any right, power or remedy of a party shall be deemed to be a waiver of any
other right, power or remedy of such party or shall, except to the extent so
waived, impair, limit or restrict the exercise of such right, power or remedy.
If any provision of this Agreement shall hereafter be held to be invalid,
unenforceable or illegal, in whole or in part, in any jurisdiction under any
circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal while preserving the intent of the parties as expressed in, and the benefits
to the parties provided by, this Agreement or (ii) if such provision cannot be
so reformed, such provision shall be severed from this Agreement and an
equitable adjustment shall be made to this Agreement (including, without
limitation, addition of necessary further provisions to this Agreement) so as
to give effect to the intent as so expressed and the benefits so provided. Such
holding shall not affect or impair the validity, enforceability or legality of
such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or impair
the legality, validity or enforceability of any other provision of this
Agreement.

10. Remedies.
The rights, powers and remedies of the parties set forth herein for a breach of
or default under this Agreement are cumulative and in addition to, and not in
lieu of, any rights or remedies that any party may otherwise have under this
Agreement, at law or in equity. The parties acknowledge that the Shares are
unique, and that any violation of this 

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Agreement
cannot be compensated for by damages alone. Accordingly, in addition to all of
the other remedies which may be available hereunder or under applicable law,
any party shall have the right to any equitable relief which may be appropriate
to remedy a breach or threatened breach by any other party hereunder,
including, without limitation, the right to enforce specifically the terms of
this Agreement by obtaining injunctive relief in respect of any violation or
non-performance hereof, and any party shall have the right to seek recovery of
and be awarded attorneys’ fees and expenses in any proceeding with respect to
this Agreement as reasonably determined by the court in which such proceeding
is brought.

11. Headings;
Counterparts. The headings set forth in this Agreement have been inserted
for convenience of reference only, shall not be considered a part of this
Agreement and shall not limit, modify or affect in any way the meaning or
interpretation of this Agreement. This Agreement may be signed in any number of
counterparts, each of which (when executed and delivered) shall constitute an
original instrument, but all of which together shall constitute one and the
same instrument. It shall not be necessary when making proof of this Agreement
to account for any counterparts other than a sufficient number of counterparts
which, when taken together, contain signatures of all of the parties. A
photocopy or electronic facsimile of this Agreement or any signature hereon
shall be valid as an original.

IN WITNESS WHEREOF, the
parties have duly executed and delivered this Agreement as of the date first
above written.

	
  EARTH BIOFUELS, INC. 

  	
   

  	
  GREENWICH POWER, L.L.C. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: /s/ DENNIS
  G. MCLAUGHLIN, III

  	
   

  	
  By:  /s/ LANCE A. BAKROW

  
	
  Dennis G. McLaughlin, III 

  	
   

  	
  Lance A. Bakrow 

  
	
  Its President

  	
   

  	
  Its Manager

  

 

 5EXHIBIT
10.22

NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THIS
SECURITY, FILED AND MADE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND SUCH APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF
COUNSEL ADDRESSED AND SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
REGISTRATION UNDER SUCH ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.

CONVERTIBLE SECURED PROMISSORY NOTE — BRIDGE LOAN

	
  $1,000,000.00

  	
   

  	
  Dallas,
  Texas, May 4, 2006

  

 

FOR VALUE RECEIVED,
EARTH BIOFUELS, INC., a Delaware corporation
having its principal place of business at 3001 Knox Street — Suite 403, Dallas,
Texas 75205-7305 (“Borrower”), hereby covenants and promises to pay to GREENWICH POWER, L.L.C., a Delaware
limited liability company having its principal place of business at 537
Steamboat Road, Greenwich, Connecticut 06830-7153 (“Lender”), or order, at Lender’s
address first above written or at such other address as Lender may designate in
writing, ONE MILLION AND NO/100 ($1,000,000.00) DOLLARS, lawful money of the
United States of America, together with simple interest thereon computed from
the date hereof at the rate of seven (7%) percent per annum, which principal
and interest shall be payable thirty (30) days after demand.

Borrower covenants and
agrees with Lender as follows:

1.Borrower will pay the indebtedness evidenced by
this Note as provided herein.

2. In the event of a default
hereunder, Lender shall have all rights and remedies of a secured party
provided by the Uniform Commercial Code in effect in the State of Delaware.

3.In the event any payment due hereunder shall not
be paid on the date when due, such payment shall bear interest at the lesser of
eighteen (18%) percent per annum or the highest lawful rate permitted under
applicable law, from the date when such payment was due until paid. In
addition, Borrower shall pay a late payment premium of five (5%) percent of any
principal or interest payment made more than three (3) days after the due date
thereof, which premium shall be paid with such late payment. This paragraph
shall not be deemed to extend or otherwise modify or amend the date when such
payments are due hereunder. The obligations of Borrower under this Note are
subject to the limitation that payments of interest shall not be required to
the extent that the charging of or the receipt of any such payment by Lender of
this Note would be contrary to the provisions of law applicable to Lender of
this

 

Note
limiting the maximum rate of interest which may be charged or collected by Lender
of this Note.

4.Borrower shall have the right to prepay the
indebtedness evidenced by this Note, in whole or in part, without penalty, at
any time upon giving Lender notice of Borrower’s intention to prepay as
hereinafter set forth.

5. At any time after the date hereof until this
Note is no longer outstanding, this Note shall be convertible into shares of Borrower’s
common stock, $0.001 par value (“Common Stock”) at the option of Lender, in
whole or in part, at any time and from time to time, at a conversion price (the
“Conversion Price”) equal to $1.086 per share, as the same may be adjusted as hereinafter
provided. The conversion of this Note shall be subject to the following terms:

a.               Lender shall effect conversions by delivering to Borrower
a notice specifying the principal amount and accrued interest of this Note to
be converted and the date on which such conversion is to be effected (a “Conversion
Date”). If no Conversion Date is specified in the notice, the Conversion Date
shall be the date that such notice is provided hereunder. Any notice of
conversion of this Note may, at the election of the holder hereof, be stated to
be effective upon the future effectiveness of a registration statement with
respect to the Conversion Shares. To effect conversions hereunder, Lender shall
not be required to physically surrender this Note to Borrower unless the entire
principal amount of this Note plus all accrued and unpaid interest hereon has
been so converted.

b.              The number of shares of Common Stock issuable
upon a conversion hereunder “Conversion Shares”) shall be the quotient obtained
by dividing (i) the outstanding principal amount and accrued interest of this
Note to be converted by (ii) the Conversion Price.

c.               Not later than three business days after any
Conversion Date, Borrower will deliver or cause to be delivered to Lender a
certificate or certificates representing the Conversion Shares. Borrower shall,
if available and if allowed under applicable securities laws, use its best
efforts to deliver any certificate or certificates required to be delivered by Borrower
under this paragraph electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions. If such
certificate or certificates are not delivered to or as directed by Lender by
the third business day after a Conversion Date, Lender shall be entitled by
written notice to Borrower at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event Borrower shall immediately return this Note. Moreover, if Borrower fails
for any reason to deliver to Lender such certificate or certificates by the
third business day after the Conversion Date, Borrower shall pay to Lender, in
cash, as liquidated damages and not as a penalty, for each $1,000 of principal
amount being converted, $10 per business day (increasing to $20 per business day
after ten business days after such damages

 2
 

 

begin
to accrue) for each business day until such certificates are delivered. Borrower’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Note in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by Lender to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by Lender or any other person of any obligation to Borrower or any
violation or alleged violation of law by Lender or any other person, and
irrespective of any other circumstance which might otherwise limit such obligation
of Borrower to Lender in connection with the issuance of such Conversion
Shares. In the event that Lender shall elect to convert any or all of the
outstanding principal and accrued interest hereof, Borrower may not refuse
conversion based on any claim that Lender or anyone associated or affiliated
with Lender has been engaged in any violation of law, agreement or for any
other reason, unless an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of this Note shall have been sought and obtained
and Borrower posts a surety bond for the benefit of Lender in the amount of
150% of the principal amount of this Note outstanding, which is subject to the
injunction, which bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to Lender
to the extent it obtains judgment. In the absence of an injunction precluding
the same, Borrower shall issue Conversion Shares upon a properly noticed
conversion. Nothing herein shall limit Lender’s right to pursue additional remedies
for Borrower’s failure to deliver Conversion Shares within the period specified
herein, and Lender shall have the right to pursue all remedies available to it
at law or in equity including without limitation a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not prohibit Lender
from seeking to enforce damages pursuant to any other provision hereof or under
applicable law. In the alternative and at Lender’s election, if Borrower fails
for any reason to deliver to Lender such certificate or certificates by the
third business day after the Conversion Date, and if after such third business day
Lender is required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by Lender
of the Conversion Shares which Lender anticipated receiving upon such
conversion (a “Buy-In”), then Borrower shall (i) pay in cash to Lender (in addition
to any other remedies available to or elected by Lender) the amount by which
(x) Lender’s total purchase price (including brokerage commissions, if any) for
the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Lender anticipated receiving from
the conversion at issue multiplied by (2) the actual sale price of the Common
Stock at the time of the sale (including brokerage commissions, if any) giving
rise to such purchase obligation and (ii) at

 3
 

 

the
option of Lender, either reissue Notes in principal amount equal to the principal
amount of the attempted conversion or deliver to Lender the number of shares of
Common Stock that would have been issued had Borrower timely complied with its
delivery requirements hereunder.

d.              Borrower covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the Notes, as
herein provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than Lender not less than such number of
shares of the Common Stock as shall be issuable upon the conversion of the
outstanding principal and accrued interest amount of this Note.  Borrower covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if a registration statement
is then effective under the Securities Act, registered for public sale in
accordance with such registration statement.

e.               Upon a conversion hereunder Borrower shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock but Lender shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.

f.                 The issuance of certificates for shares of the
Common Stock on conversion of this Note shall be made without charge to Lender
hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate.

g.              If Borrower, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of Borrower, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.

h.              If Borrower or any subsidiary thereof, as
applicable, at any time while this Note is outstanding, shall sell, grant any
option to purchase or offer, sell or grant any right to reprice its securities,
or otherwise dispose of or issue any Common Stock or Common Stock equivalents
entitling any person to acquire shares of Common Stock, at an effective price
per share less than the then Conversion Price (such lower price, the “Base
Conversion Price,” and such 

 4
 

 

issuances
collectively, a “Dilutive Issuance”), as adjusted hereunder, then the
Conversion Price shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued.  Anything in this Note to the
contrary notwithstanding, Borrower shall not be required to make any adjustment
to the Conversion Price in connection with (i) securities issued pursuant to
the conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the date hereof, (ii) the shares of Common Stock
issuable upon the exercise of warrants issued to Lender, (iii) Common Stock
issued or options to purchase Common Stock granted or issued pursuant to
Borrower’s stock option and award plans, or (iv) an anticipated issuance of
securities of Borrower in connection with Borrower’s investment in an
agricultural conglomerate, provided such issuances do not exceed 7,500,000
shares (with any increase therein to be approved by Lender, such approval not
to be unreasonably withheld).

i.                  If Borrower, at any time while this Note is
outstanding, shall distribute to all holders of Common Stock (and not to Lender
under this Note) evidences of its indebtedness or assets (including cash and
cash dividends) or rights or warrants to subscribe for or purchase any security,
then in each such case the Conversion Price shall be adjusted by multiplying
such Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) determined as of
the record date mentioned above, and of which the numerator shall be such volume
weighted average price on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the board of directors of Borrower in good faith.

j.                  If, at any time while this Note is outstanding, (i)
Borrower effects any merger or consolidation of Borrower with or into another entity,
(ii) Borrower effects any sale of all or substantially all of its assets in one
or a series of related transactions, (iii) any tender offer or exchange offer
(whether by Borrower or another person) is completed pursuant to which holders
of Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (iv) Borrower effects any reclassification of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property (any such case, a “Fundamental Transaction”), then upon any subsequent
conversion of this Note, Lender shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion immediately
prior to the occurrence of such Fundamental Transaction, the same kind and
amount 

 5
 

 

of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of Common Stock.

k.               Whenever the Conversion Price is adjusted as
herein provided, Borrower shall promptly mail to Lender a notice setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.

l.                  If (i) Borrower shall declare a dividend (or any
other distribution) on the Common Stock; (ii) Borrower shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (iii)
Borrower shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (iv) the approval of any stockholders of Borrower shall
be required in connection with any reclassification of the Common Stock, any
consolidation or merger to which Borrower is a party, any sale or transfer of
all or substantially all of the assets of Borrower, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(v) Borrower shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of Borrower; or (vi) Borrower intends
to pay all or any portion of the principal or accrued interest of this Note, then,
in each case, Borrower shall cause to be filed at each office or agency
maintained for the purpose of conversion of this Note, and shall cause to be
mailed to Lender, at least ten calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as of which holders
of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange. Lender is entitled to convert this Note during the ten-day
period commencing the date of such notice to the effective date of the event
triggering such notice.

m.            Upon conversion of this Note in whole or in any
part, Borrower shall take whatever action is necessary such that the Holder
shall be entitled to exercise, together with all other holders of registrable
shares possessing registration rights under the Registration Rights Agreement
between the parties of even date herewith, the rights of registration granted
under the Registration Rights Agreement to the holders of such Common Stock.

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6. Borrower, and all guarantors, endorsers and
sureties of this Note, hereby waive presentment for payment, demand, protest,
notice of protest, notice of nonpayment, and notice of dishonor of this Note. Borrower
and all guarantors, endorsers and sureties consent that Lender at any time may
extend the time of payment of all or any part of the indebtedness secured
hereby, or may grant any other indulgences.

7. Any notice or demand required or permitted to be
made or given hereunder shall be deemed sufficiently made and given if given by
personal service or by the mailing of such notice or demand by certified or
registered mail, return receipt requested, or by overnight courier service
providing for proof of delivery, addressed, if to Borrower, at Borrower’s address
first above written, with a copy to Roger A. Crabb, Esq., Scheef & Stone,
L.L.P., 5956 Sherry Lane — Suite 1400, Dallas, Texas 75225-8031; or if to Lender,
at Lender’s address first above written, with a copy in like manner to Hilary
B. Miller, Esq., 112 Parsonage Road, Greenwich, Connecticut 06830-3942. Either
party may change its address by like notice to the other party.

8. Borrower shall pay all costs and expenses of
collection of the indebtedness represented by this Note, and all costs and
expenses of enforcing Borrower’s other obligation sunder this Note, including in
each case reasonable attorneys’ fees and disbursements.

9. If any provision or portion of this Note is
declared or found by any court or tribunal of competent jurisdiction to be
unenforceable or void, such provision shall be deemed severed and stricken from
this Note, and the remaining provisions and portions hereof shall continue in
full force and effect.

10. This note arises from a purely commercial
transaction, and the proceeds hereof are not to be used primarily for a
personal, household or consumer purpose.

11. No default or failure of Lender under the terms
of the Commitment Letter of even date herewith or any other agreement between
the parties shall constitute a defense to Borrower’s obligations under this
Note, the same being separate and independent covenants in all respects. Borrower
shall unconditionally pay and perform this Note notwithstanding any breach or
alleged breach by Lender of any other obligation of Lender to Borrower. Borrower
hereby agrees that it will never assert that it is entitled to an offset,
defense or counterclaim, or stay of execution of any judgment, with respect to
this Note based on any act or omission of Lender.

12.This Note may not be changed or terminated
orally, but only by an agreement in writing signed by the party against whom
enforcement of any change, modification, termination, waiver, or discharge is
sought. This Note shall be construed and enforced in accordance with the substantive
laws of the State of Delaware without regard to conflict of law principles. Borrower
hereby consents and submits to the exclusive personal and subject matter jurisdiction
of the state and federal courts located in New York County, New York for
purposes of any action or proceeding related to this Note. Trial by jury in any
action, proceeding or counterclaim arising hereunder is hereby waived. An
electronic facsimile of this Note shall be valid as an original.

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IN WITNESS WHEREOF, Borrower has executed this Note on the date
first above written.

	
  

  	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
   

  	
   

  	
  Dennis G. McLaughlin, III

  
	
   

  	
   

  	
   

  	
  Its President

  

 

PAYMENT AND ALL PERFORMANCES DUE UNDER THIS NOTE ARE UNCONDITIONALLY
GUARANTEED BY APOLLO INTERNATIONAL RESOURCES, INC. PURSUANT TO A SEPARATE
INSTRUMENT DELIVERED CONTEMPORANEOUSLY HEREWITH.

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