Document:

EXHIBIT
10.12

MEMBERSHIP
INTERESTS PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTERESTS
PURCHASE AGREEMENT (this “Agreement”),
dated as of the 1st day of March, 2006, is made by and between
Earth Biofuels, Inc., a Delaware corporation (“Buyer”),
and Dr. Miguel J. Dabdoub (“Seller”).

 

RECITALS:

A.            Seller currently owns an aggregate
one hundred percent (100%) membership interest in Earth Biofuels Technology Company, a Texas limited liability
company (the “Company”).

B.            Buyer wishes to pay Seller the sum
of Two Hundred Twenty-Five Thousand Dollars ($225,000.00); shares of Apollo
Resources International, Inc. and shares of the Buyer’s Common Stock as
consideration for the purchase of fifty percent (50%)
of Seller’s entire membership interests in the Company, its capital accounts,
all rights represented by such membership interests, and all goodwill
associated therewith (the “Interests”).

C.            Seller wishes to sell the Interests
to Buyer upon the terms and subject to the conditions set forth in this
Agreement.

Agreement

NOW, THEREFORE, in
consideration of the foregoing premises and the representations, warranties,
and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1.             Sale and Purchase.
Subject to the terms and conditions herein set forth, and in reliance upon the
representations, warranties and covenants contained herein, Buyer agrees to
purchase the Interests from Seller, and Seller agrees to sell the Interests to
Buyer.

2.             Purchase
Price.  The purchase
price for the Interests shall be as follows:

(a)           the
sum of Two Hundred Twenty-Five Thousand Dollars ($225,000.00);

(b)                               one
million eight hundred thousand (1,800,000) shares of the common stock of Buyer;
and

(c)                                one
hundred thousand (100,000) shares of the common stock of Apollo Resources
International, Inc.

3.             Closing.
Closing of the transactions contemplated herein (the “Closing”) shall be made effective on March 1, 2006.
(The date on which the Closing is held shall be referred to in this Agreement
as the “Closing Date.”)

(a)           At the Closing, Seller shall deliver
to Buyer (i) a Bill of Sale and Assignment in the forms of Exhibit A
attached hereto, (ii) all of the Company’s books of

 

account and business
records, and (iii) the resignations of all officers, directors and
managers of the Company, against delivery of the item specified in Paragraph 3(b).

(b)           At the Closing, Buyer shall deliver
the sum of Two Hundred Twenty-Five Thousand Dollars ($225,000.00) to Seller in
the form of a cashier’s check or wire transfer of immediately available funds;
and shall cause to be delivered certificates representing the shares described
in Section 2 of this Agreement.

4.             Representations and Warranties of Seller. Seller
hereby represents and warrants to Buyer that:

(a)           Seller owns all of the issued and
outstanding Interests in the Company.

(b)           Seller is, and will continue to be
until Closing, the sole legal and beneficial owner of the Interests, free and
clear of any and all liens, claims, and encumbrances, with full power to
transfer the same as contemplated herein.

(c)           Seller is not party to or bound by
any contract, promissory note, agreement, commitment, or obligation, creating
or securing indebtedness, obligations, or liabilities, a breach or default of
which would be triggered by Seller’s execution and delivery of this Agreement.

(d)           The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. To the best of Seller’s knowledge, there are no pending
actions or proceedings (i) to limit or impair the Company’s power to
engage in business or (ii) to dissolve the Company.

(e)           The Company will not enter into any
new contracts or agreements between the date of this Agreement and the Closing,
except in the ordinary course of business.

5.             Representations,
Warranties and Covenants of Buyer. Buyer hereby represents and
warrants to Seller that:

(a)           Buyer is a company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to enter into, perform and
carry out all of its duties and obligations in the transaction contemplated by
this Agreement.

(b)           The execution, delivery and
performance of this Agreement and the consummation of the transactions on the
part of Buyer contemplated hereunder have been duly authorized by all necessary
[corporate] action on the part of Buyer. This Agreement is (or will be when
executed and delivered pursuant hereto) the legal, valid and binding obligation
of Buyer, enforceable in accordance with its terms.

(c)           Neither the execution and delivery of
this Agreement by Buyer, nor Buyer’s compliance with any of the terms and
provisions of this Agreement, nor the

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consummation of the transactions contemplated hereby, will conflict
with or result in a violation of, or constitute a material default under, its [Articles
of Incorporation, Bylaws] or any other agreement, contract or commitment to
which it is a party; nor will the performance by Buyer of its obligations
hereunder violate any judgment, order, injunction, decree, regulation or ruling
of any court or governmental authority to which Buyer is subject.

6.             Conditions
Precedent to Buyer’s Obligations. Buyer’s obligation to
purchase the Interests under this Agreement is subject to the satisfaction, at
or before the Closing, of all the following conditions:

(a)          Seller shall execute and deliver to
Buyer the form of Bill of Sale and Assignment attached as Exhibit A;

(b)         Seller shall deliver to Buyer all of
the Company’s books of account and business records; and

(b)           Seller shall deliver to Buyer, the
resignations of all officers, directors and managers of the Company.

Buyer may waive
any or all of these conditions, in whole or in part, without prior notice;
provided, however, that no such waiver of a condition shall constitute a waiver
by Buyer of any of its other rights or remedies, at law or in equity, for the
Seller’s breach of any of its representations, warranties, or covenants under
this Agreement.

7.             Seller’s
Indemnities. For a period of one (1) year after the Closing,
Seller shall indemnify and hold Buyer harmless from and against any and all
claims, losses, costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies (including interest, penalties, and reasonable attorney,
expert witness and consultant fees), incurred by Buyer in connection with
Seller’s breach of or failure to perform, any of its representations,
warranties, or covenants in this Agreement.

8.             Attorney Fees. If
any legal action or other proceeding is brought for the enforcement of this
Agreement or any other agreement, document, contract, instrument or other
writing entered into in connection herewith, because of an alleged dispute,
breach, default, or misrepresentation, in connection with any of the provisions
of this Agreement or such other writing, the successful or prevailing party
shall be entitled to recover its reasonable attorney fees, and other costs and expenses,
incurred in such action or proceeding, in addition to any other relief to which
it or they may be entitled.

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9.             Notices. In order
to be effective all notices, consents, approvals and disapprovals (“Notice”) required
by this Agreement must be in writing, signed by the party giving such Notice,
or in the case of Buyer, by an officer thereof, and either (i) personally
delivered; (ii) placed in the mail, properly addressed and certified,
return receipt requested, with postage prepaid thereon; or (iii) deposited
for delivery by a recognized, private overnight courier for next business
morning delivery, properly addressed, and with the full waybill prepaid. Notice
shall be deemed received and effective on the earlier of the date actually
received, or, if applicable, three (3) business days after being sent as
specified in clause (ii) of this Paragraph 9. Notices must be addressed to
the parties hereto at the following addresses, unless the same shall be changed
by Notice in accordance herewith:

	
  If to Seller:

  	
  Dr. Miguel J. Dabdoub

  
	
   

  	
  Rua Bernardino
  De Campos 786 Ap. 71

  
	
   

  	
  Ribeirao Preto,
  Sp

  
	
   

  	
  Sao Paulo,
  Brazil CEP 14015-130

  
	
   

  	
  migjodab@usp.br

  
	
   

  	
   

  
	
  If to Buyer:

  	
  Attn: Dennis G. McLaughlin, Chief Executive Officer

  
	
   

  	
  3001 Knox
  Street, Suite 403

  
	
   

  	
  Dallas, Texas
  75205

  
	
   

  	
  Facsimile: 214
  389 9805

  

10.          Entire
Agreement; Amendments. Each of the parties represents that no
promise or agreement which is not expressed in this Agreement, has been made to
such party in executing this Agreement, and neither of the parties is relying
upon any statement or representation not contained in this Agreement. This
Agreement, including the Exhibit hereto, constitutes the entire
understanding between the parties hereto relative to the subject matter hereof,
superseding any and all prior agreements, arrangements, and understandings,
written or oral, between the parties. This Agreement may be amended only by a
written instrument signed by the parties.

11.          Binding
Effect; Permissibility of Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

12.          Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to its conflict of laws rules.

13.          No
Brokers. Each party represents and warrants that it has dealt with
no broker or finder in connection with the transaction contemplated by this
Agreement, and that no broker or other person is entitled to any commission or
finder’s fee in connection with this transaction. Each party agrees to
indemnify, defend and hold harmless the other party against any commission or
finder’s fee alleged to be payable because of any act, omission or statement of
the indemnifying party.

14.          Severability.
If any provision of this Agreement is held to be invalid or unenforceable by
any court of competent jurisdiction, it is the intent of all of the parties
that all

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other provisions
of this Agreement be construed to remain fully valid, enforceable and binding
on the parties.

15.          Covenant of Good Faith and
Fair Dealing. With regard to
their respective obligations and commitments under this Agreement, each of
Buyer and Seller covenants that it shall act in good faith and deal fairly with
the other party.

16.          Reasonable
Cooperation. Each party hereto agrees to execute and deliver such
instruments and take such other action as the other party may reasonably
request in order to carry out the intent of this Agreement.

17.          Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

IN WITNESS
WHEREOF, the parties hereto have caused their duly authorized representatives
to execute this Agreement as of the date first above written.

“Buyer”

	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
  Dennis G.
  McLaughlin, III

  
	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  “Seller”

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ DR. MIGUEL J. DABDOUB

  	
   

  
	
   

  	
  Dr. Miguel
  J. Dabdoub

  
				

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Exhibit A

BILL OF SALE AND ASSIGNMENT

THIS BILL OF SALE AND ASSIGNMENT (this “Bill of Sale”),
dated as of March 1, 2006 (the “Closing
Date”), is made and delivered by and between Earth Biofuels, Inc.
(“Buyer”), and Dr. Miguel
J. Dabdoub (“Seller”). This
Bill of Sale is being executed and delivered pursuant to the terms of that
certain Membership Interests Purchase Agreement, dated as of the Closing Date
(the “Purchase Agreement”),
by and among Seller and Buyer. Capitalized terms used in this Bill of Sale and
not otherwise defined shall have the meanings assigned in the Agreement.

Recitals

A.            Seller
is the owner of an undivided one hundred percent (100%) membership interest in Earth Biofuels Technology Company, a Texas limited liability company
(“Company”).

B.            Seller
desires to assign to Buyer fifty percent (50%) membership interest in Company,
including all of its related rights and capital account and all associated
goodwill.

C.            Buyer
desires to accept such assignment and pay Seller the agreed upon Purchase Price
therefor established in the Purchase Agreement.

Agreement

IN
CONSIDERATION OF the foregoing premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1.             Seller
hereby assigns, transfers, conveys, and sells to Buyer fifty percent (50%) of
Seller’s entire one hundred percent (100%) membership interest in Company,
together with Seller’s related capital account, all rights represented by such
membership interest, and all goodwill associated therewith (collectively, the “Interest”).

2.             Seller
hereby represents, warrants and certifies to Buyer that on or before the date
hereof, Seller has delivered to Company all Company property in its possession
or control or to which it has had access during its association with the
Company, and that it has retained no copy thereof.

3.             Seller
hereby acknowledges receipt of the Purchase Price (as defined in the Agreement)
due and payable as of the Closing Date.

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4.             Each
party shall promptly execute and deliver to the other party all such further
instruments, assignments, assurances and other documents as such party may
reasonably request in connection with its performance under this Bill of Sale
and the transactions contemplated hereby and by the Purchase Agreement.

5.             Seller,
for itself and its personal representatives and assigns, covenants and agrees
to warrant and defend the transfer, assignment and conveyance of the Interest
and Buyer’s title thereto.

7.             This
Bill of Sale shall be governed by and construed in accordance with the laws of
the State of Texas, and shall inure to the benefit of and be binding upon the
parties hereto, their heirs, personal representatives, successors and assigns.

IN WITNESS WHEREOF, the
undersigned have executed and delivered this Bill of Sale effective as of the
day and year first written above.

	
  “Buyer”

  
	
   

  
	
  EARTH
  BIOFUELS, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Dennis G.
  McLaughlin, III

  	
   

  
	
   

  	
  Dennis G.
  McLaughlin, III

  	
   

  
	
   

  	
  Chief Executive
  Officer

  	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  “Seller”

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Miguel J.
  Dabdoub

  	
   

  

 

 7EXHIBIT 10.13

REGISTRATION
RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 29,
2006, is made by and between Earth Biofuels, Inc., a Delaware corporation
(the “Company”), and Josh Cohen (the “Investor”).

WHEREAS:

A.            In
connection with the Convertible Promissory Note in the principal amount of $50,000
of even date herewith by and between the Company and the Investor (the “Note”), the Company has agreed to
issue to the Investor shares of the Company’s common stock (the “Common Stock”) upon the terms and
subject to the limitations and conditions set forth in the Note; and

B.            To
induce the Investor to execute the Note, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder (collectively, the “1933 Act”), and applicable state
securities laws;

NOW,
THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Investor hereby agree as follows:

1.             DEFINITIONS.

As used in this Agreement,
the following terms shall have the following meanings:

(i)            “Investor”
means the Investor and any transferee or assignee who agrees to become bound by
the provisions of this Agreement in accordance with Section 9 hereof.

(ii)           “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a Registration Statement in compliance
with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration
of effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the “SEC”).

(iii)         “Registrable Securities”
means the all of the shares of Common Stock issued or issuable upon conversion
pursuant to the Note.

(iv)          “Registration Statement”
means a registration statement of the Company under the 1933 Act.

 

 

2.             REGISTRATION.

a.             Mandatory
Registration. The
Investor shall be entitled to make written request for registration of the
Registrable Securities, no later than 90 days following conversion of the Note.
Provided that the Investor has made a timely request therefore, the Company
shall effect the registration of the Registrable Securities. Within forty-five
(45) days of receipt of written request from the Investor, the Company shall file
with the SEC a Registration Statement to effect the registration of the
Registrable Securities that the Company has been requested to register for
disposition as described in the request of the Investor.

b.             Piggy-Back
Registrations. Subject
to the last sentence of this Section 2(b), if at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall determine
to file with the SEC a Registration Statement relating to an offering for its
own account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 relating
to equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with stock
option or other employee benefit plans), the Company shall send to the Investor
written notice of such determination and, if within fifteen (15) days after the
effective date of such notice, the Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities the Investor requests to be registered. If an offering
in connection with which the Investor is entitled to registration under this Section 2(b) is
an underwritten offering, then the Investor shall, unless otherwise agreed by
the Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the Investor
pursuant to this Section 2(b) shall only be available in the event
the Company fails to timely file, obtain effectiveness or maintain effectiveness
of any Registration Statement to be filed pursuant to Section 2(a) in
accordance with the terms of this Agreement.

c.             Eligibility
for Form SB-2. The Company represents and warrants that it meets the requirements
for the use of SB-2 for registration of the sale by the Investor of the
Registrable Securities.  The Company
agrees to file all reports required to be filed by the Company with the SEC in
a timely manner so as to remain eligible or become eligible, as the case may
be, and thereafter to maintain its eligibility, for the use of Form SB-2.

3.             OBLIGATIONS
OF THE COMPANY.

In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:

a.             The Company shall keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as
is the earlier of (i) the date on which all of the Registrable Securities
have been sold and (ii) the date on which the Registrable Securities (in
the opinion of counsel to the Investor) may be immediately sold to the public
without registration or restriction (including, without limitation, as to
volume by the holder thereof) under the 1933 Act (the “Registration
Period”), which Registration Statement (including any amendments
or

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supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein not misleading.

b.             The Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to
the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition thereof as set forth in the
Registration Statement.

c.             The Company shall furnish to the Investor (i) promptly
(but in no event more than two (2) business days) after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of each Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and (ii) promptly (but in no event more than two (2) business
days) after the Registration Statement is declared effective by the SEC, such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as the Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Investor. The Company will immediately notify the Investor
by facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly (but in no event more than
five (5) business days) respond to any and all comments received from the
SEC (which comments shall promptly be made available to the Investor upon
request), with a view towards causing each Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as practicable,
shall promptly file an acceleration request as soon as practicable (but in no
event more than two (2) business days) following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that any such Registration Statement or any amendment thereto will not be
subject to review and shall promptly file with the SEC a final prospectus as
soon as practicable (but in no event more than two (2) business days)
following receipt by the Company from the SEC of an order declaring the Registration
Statement effective.

d.             The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or “blue sky” laws of such jurisdictions in the
United States as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a
condition thereto to (a) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(d), (b) subject
itself to general taxation in any such jurisdiction, (c) file a general

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consent to service of
process in any such jurisdiction, or (d) provide any undertakings that
cause the Company undue expense or burden.

e.             As promptly as practicable after becoming
aware of such event, the Company shall notify the Investor of the happening of
any event, of which the Company has knowledge, as a result of which the
prospectus included in any Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to any Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to the
Investor as the Investor may reasonably request.

f.              The Company shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
any Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify the Investor
of the issuance of such order and the resolution thereof.

g.             The Company shall take all other reasonable
actions necessary to expedite and facilitate disposition by the Investor of
Registrable Securities pursuant to a Registration Statement.

4.             OBLIGATIONS
OF THE INVESTOR.

In
connection with the registration of the Registrable Securities, the Investor
shall have the following obligations:

a.             The Investor shall furnish to the Company
such information regarding himself, the Registrable Securities held by him and
the intended method of disposition of the Registrable Securities held by him as
shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify the Investor of the information the Company requires
from the Investor.

b.             The Investor agrees to cooperate with the
Company as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder.

c.             The Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in Section 3(e) or
3(f), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor’s receipt of the copies of a supplemented or
amended prospectus and, if so directed by the Company, the Investor shall
deliver to the Company or destroy (and deliver to the Company a certificate of
destruction) all copies in the Investor’ possession, of the prospectus covering
such Registrable Securities current at the time of receipt of such notice.

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5.             EXPENSES OF REGISTRATION.

All
reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant
to Sections 2 and 3, including, without limitation, all registration, listing
and qualification fees, printers and accounting fees, and the fees and
disbursements of counsel for the Company, shall be borne by the Company.

6.             INDEMNIFICATION.

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

a.             To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) the Investor who holds such
Registrable Securities and (ii) the directors, officers, partners,
employees, agents and each person who controls the Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the “1934 Act”), if any, (each, an “Indemnified Person”), against any
joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any
regulatory or self-regulatory organization, whether commenced or threatened, in
respect thereof, “Claims”) to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained
in the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”). The Company
shall reimburse the Indemnified Person, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by the Indemnified Person in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person expressly for use in connection with the
preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any preliminary prospectus, shall not
inure to the benefit of any Indemnified Person if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented, such
corrected prospectus was timely made available by the Company pursuant to Section 3(c) hereof,
and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a Violation and such

 5
 

 

Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person.

b.             In connection with any Registration Statement
in which the Investor are participating, the Investor agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and together with an Indemnified Person, an “Indemnified
Party”), against any Claim to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation by such Investor, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that such
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.

c.             Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action), such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, 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 the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however,
that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such legal counsel shall be selected by the Investor if the Investor is
entitled to indemnification

 6
 

 

hereunder, or the Company,
if the Company is entitled to indemnification hereunder, as applicable. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under
this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.

7.             CONTRIBUTION.

To
the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section 6
to the fullest extent permitted by law; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6,
(ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation, and (iii)contribution
(together with any indemnification or other obligations under this Agreement)
by any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.

8.             REPORTS
UNDER THE 1934 ACT.

With
a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investor to sell securities of the
Company to the public without registration (“Rule 144”),
the Company agrees to:

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

b.             file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such requirements and the
filing of such reports and other documents is required for the applicable
provisions of Rule 144; and

c.             furnish to the Investor so long as the Investor
owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements
of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be reasonably requested to permit the Investor to sell such securities pursuant
to Rule 144 without registration.

 7
 

 

9.             ASSIGNMENT OF REGISTRATION
RIGHTS.

The
rights under this Agreement shall be automatically assignable by the Investor
to any transferee of all or any portion of the Note if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of the name and
address of such transferee or assignee, (iii) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, and (iv) such transferee
shall be an “accredited investor” as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

10.          AMENDMENT
OF REGISTRATION RIGHTS.

Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company and the Investor. Any
amendment or waiver effected in accordance with this Section 10 shall be
binding upon the Investor and the Company.

11.          MISCELLANEOUS.

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

b.             All notices and other communications hereunder
shall be in writing or by telecopy, and shall be deemed to have been duly made
when delivered in person or sent by telecopy, same day or overnight courier, or
72 hours after having been deposited in the United States registered or
certified mail return receipt requested, postage prepaid, to a party at the
address set forth below (which may be changed in accordance with these notice
procedures):

If to
the Company:

Earth Biofuels, Inc.

3001 Knox Street, Suite 403

Dallas, TX 75205

Fax Number: (214) 389-9805

Attention:  Chief Executive
Officer

With a copy to:

Roger A. Crabb

Scheef & Stone,
LLP

5956 Sherry Lane, Suite 1400

Dallas, TX  75225

Fax number:  (214) 706-4242

 8
 

 

If to the
Investor:

Josh Cohen

440 Round Hill Rd

Greenwich, CT 06831

Fax number: (646)
472-0212

c.             Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.

d.              This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas. In the event of a
dispute involving this Agreement or any other instruments executed in
connection herewith, the parties irrevocably agree that exclusive venue for
such dispute shall lie in any court of competent jurisdiction in Dallas County,
Texas, and the parties waive any claim that such forum is inappropriate or
inconvenient.

e.             In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.

f.              This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof. There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.

g.             Subject to the requirements of Section 9
hereof, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns.

h.             The headings in this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.

i.              This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties.
This Agreement, once executed by a party, may be delivered to the other parties
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.

j.              Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other parties may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 9
 

 

IN WITNESS WHEREOF,
the Company and the Investor have caused this Agreement to be duly executed 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

  
	
   

  	
   

  
	
   

  	
   

  
	
  JOSH COHEN

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ JOSH COHEN

  	
   

  
	
  Josh Cohen, individually

  
					

 

 10

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