Document:

EXHIBIT
10.59

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS
AGREEMENT (“Agreement”) is made and entered into as of the 21th day of July,
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 LANCE A.
BAKROW, whose office address is 537 Steamboat Road, Greenwich,
Connecticut 06830-7153 (the “Holder”).

RECITALS:

A. Contemporaneously with
the execution hereof, the Holder is purchasing from the Company (i) a warrant
to purchase 4,000,000 (subject to adjustment) shares of the Company’s common
stock, $0.001 par value (the “Common Stock”) as therein provided (the shares of
Common Stock issuable 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 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, file a registration
statement (the “Registration Statement”) with the Securities and Exchange
Commission (“Commission”) relating to the Shares. Such Registration Statement may,
at the election of the Holder, be in connection with an underwritten public
offering of the Shares and in appropriate form therefor. 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; in the event that such registration does not enable
the Holder to dispose of substantially all of the Shares, the Company shall
cause Earth to effectuate not less than one additional such registration upon
like request by the Holder.

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, 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, one counsel for the Holder and 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 New York 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.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  	
   

  	
  /s/ LANCE A. BAKROW

  
	
  Dennis G. McLaughlin, III

  Its President

  	
   

  	
   

  	
  LANCE A. BAKROW

  

 

 5EXHIBIT 10.60

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE 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.

July 21, 2006

WARRANT TO PURCHASE SHARES
OF COMMON STOCK

- of -

EARTH BIOFUELS, INC.

For value received, EARTH
BIOFUELS, INC., a Delaware corporation (the “Company”), pursuant
to the 2006 Stock Option and Award Plan of the Company, hereby grants to LANCE A. BAKROW, or his registered
successor or assigns (the “Holder”) the right to purchase from the Company
shares of the Common Stock of the Company (the “Common Stock”), at the option
of the Holder, upon surrender hereof at the principal office of the Company,
with the subscription form attached hereto duly executed, and simultaneous
payment therefor as hereinafter provided of the Warrant Exercise Price
multiplied by the number of shares of Common Stock for which the Warrant is exercised.
The number and Warrant Exercise Price of such shares of Common Stock are subject
to adjustment as provided below.

This Warrant (the “Warrant”) is duly authorized and issued by the
Company. In furtherance thereof, and in consideration of the premises,
covenants, promises, representations and warranties hereinafter set forth, the
Company hereby agrees as follows:

1.    Term of Warrant. Subject to the
terms and conditions set forth herein, this Warrant shall be exercisable, in
whole or in part, during the term commencing on the date hereof and ending on
May 31, 2011.

2.    Number of Shares and Warrant Exercise
Price. The Holder shall be entitled to subscribe for and purchase from the
Company 4,000,000 validly issued, fully paid and non

 

assessable shares (the “Warrant Shares”) of the Company’s Common Stock,
par value $0.001 per share, at a purchase price equal to the Warrant Exercise
Price. The “Warrant Exercise Price” is $0.25 per share.  Contemporaneously with the issuance to Holder
of this Warrant, Holder has paid to the Company the amount of $100,000, which
amount shall not constitute a pre-payment of the Warrant Exercise Price.

3.    Exercise of Warrant.

3.1.          Duration and Exercise of Warrant. The purchase
rights represented by this Warrant may be exercised by the Holder, in whole or
in part, at any time after the date hereof and prior to the expiration of the
term of this Warrant, by the surrender of this Warrant and the Notice of
Exercise attached hereto as Exhibit A duly executed, at the principal
office of the Company (or such other office of the Company as it may designate
by notice in writing to the Holder at the address of the Holder), upon payment
(i) in cash, by check or by wire transfer, (ii) by cancellation by the Holder
of indebtedness of the Company, to the Holder, or (iii) by a combination of (i)
and (ii), of the Warrant Exercise Price multiplied by the number of shares of
Common Stock to be purchased. Any notice of exercise of this Warrant may, at
the election of the Holder, be stated to be effective upon the future
effectiveness of a registration statement with respect to the Warrant Shares.

3.2.          Net Issue Election (Cashless Exercise). The Holder may
elect to receive, without the payment by the Holder of any additional
consideration, shares equal to the value of this Warrant or any portion hereof
by surrender of this Warrant or such portion to the Company with the net issue
election notice annexed hereto duly executed, at the office of the Company.
Thereupon, the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the following
formula:

X = Y (A-B)

A

Where                                                            X =          the
number of shares to be issued to the Holder pursuant to this Section 3.2.

Y
=                              the number of shares covered by this Warrant
in respect of which the net issue election is made pursuant to this Section
3.2.

A
=                            the fair market value of one share of Common
Stock, as determined in accordance with the provisions of this Section 3.2.

B
=                              the Purchase Price in effect under this
Warrant at the time the net issue election is made pursuant to this Section
3.2.

For purposes of this Section 3.2, the “fair market value” per share of
the Company’s Common Stock shall mean the last reported sale price of the
Common Stock on the effective date of exercise of the net issue election, or if
the last reported sale price information is not available for such day, the
average of the mean of the closing bid and asked prices for such day.

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3.3.          Delivery of Warrant; Fractional Shares

(a)           This Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date (the “Exercise Date”). Not later than three business days after any
Exercise Date, the Company will deliver or cause to be delivered to the Holder
a certificate or certificates representing the Warrant Shares. The Company
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 the Company 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 the Holder by the third business day after a Exercise Date, The
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such exercise, in which event the Company shall immediately return this
Warrant. Moreover, if the Company fails for any reason to deliver to the Holder
such certificate or certificates by the third business day after the Exercise
Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, 1% per business day of the fair market value of the Warrant
Shares (increasing to 2% per business day after ten business days after such
damages begin to accrue) for each business day until such certificates are delivered.
Such liquidated damages are intended solely to compensate the Holder for the
delay in issuing such certificates and in no way shall be construed to relieve
the Company of its obligation to issue and deliver such certificates or in lieu
of any other remedies to compel delivery of such certificates. The Company’s
obligations to issue and deliver the Warrant Shares upon exercise of this
Warrant in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder 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 the Holder or any other person of any obligation to the Company or
any violation or alleged violation of law by the Holder or any other person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Warrant Shares. In the event that the Holder shall elect exercise this Warrant
in whole or in any part, the Company may not refuse exercise based on any claim
that the Holder or anyone associated or affiliated with the Holder 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 exercise of
all or part of this Warrant shall have been sought and obtained and the Company
posts a surety bond for the benefit of the Holder in the amount of 150% of the
fair market value of the Warrant Shares, 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 the Holder to the extent
it obtains judgment. In the absence of an injunction precluding the same, the
Company shall issue Warrant Shares upon a properly noticed exercise.

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Nothing herein shall limit the Holder’s right
to other remedies for the Company’s failure to deliver Warrant Shares within
the period specified herein, and the Holder 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 the Holder from seeking to enforce damages
pursuant to any other provision hereof or under applicable law. In the alternative
and at the Holder’s election, if the Company fails for any reason to deliver to
the Holder such certificate or certificates by the third business day after the
Exercise date, and if after such third business day the Holder 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 the Holder of the Warrant
Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”),
then the Company shall (i) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount by which (x) the
Holder’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 the Holder anticipated receiving from the
exercise 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 the option of the Holder, either
reissue this Warrant in amount equal to the attempted conversion or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its delivery requirements hereunder.

(b)           No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares, the Company shall deliver to
the Holder one whole share.

4.    Replacement of Warrant. On receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of loss, theft, or
destruction, on delivery of an indemnity agreement reasonably satisfactory in
form and substance to the Company or, in the case of mutilation, on surrender
and cancellation of this Warrant, the Company shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.

5.    Rights of Stockholders. Until the
Warrant shall have been exercised and the shares of Common Stock purchasable
upon the exercise hereof shall have been issued, nothing contained herein shall
be construed to confer upon the Holder, as such, any of the rights of a stockholder
of the Company or any right to vote upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
or to receive dividends or subscription rights or the like, except as may be
otherwise provided herein or in the Note and Warrant Purchase Agreement.

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6.    Divisibility of Warrant; Transfer of
Warrant.

(a)           Subject to the provisions of this
Section 6, this Warrant may be divided into no more than ten (10) warrants of
one thousand (1,000) shares or multiples thereof, upon surrender at the
principal office of the Company, without charge to any Warrantholder. Upon such
division, the Warrants may be transferred of record as the then Warrantholder
may specify without charge to such Warrantholder (other than any applicable
transfer taxes). In addition, subject to the provisions of this Section 6, the
Warrantholder shall also have the right to transfer this Warrant in its
entirety to any person or entity; provided, however, that any
such transfer is in compliance with any and all applicable securities laws and
is exempt from registration.

(b)           The Company will maintain a register
(the “Warrant Register”) containing the name and address of the Holder. The
Holder may change its address as shown on the Warrant Register by written
notice to the Company requesting such change. Any notice or written communication
required or permitted to be given to the Holder may be delivered or given by
mail to such Holder as shown on the Warrant Register and at the address shown
on the Warrant Register. Until this Warrant is transferred on the Warrant
Register, the Company may treat the Holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.

(c)           The Warrant and the Common Stock
shall not be transferable except upon the conditions specified in this Section
6, which conditions are intended to ensure compliance with the provisions of
the Act. Each holder of this Warrant or Common Stock issuable hereunder will
cause any proposed transferee of the Warrant and the Common Stock to agree to
take and hold such securities subject to the provisions and upon the conditions
specified in this Section 6.

(d)           Each certificate representing (i)
this Warrant, (ii) the Common Stock and (iii) any other securities issued in
respect to the Common Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless otherwise
permitted by the provisions of this Section 6 or unless such securities have
been registered under the Act) be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.

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(e)           The Holder of this Warrant and each
person to whom this Warrant is subsequently transferred represents and warrants
to the Company (by acceptance of such transfer) that it will not transfer the
Warrant (or Common Stock issuable upon exercise hereof) except (i) to an affiliate,
(ii) pursuant to an effective registration statement under the Act, or (iii)
upon the Company’s reasonable determination, upon advice of counsel to the
Company, that no applicable securities laws would be violated as a result of
such transfer. The Company may require an opinion of counsel acceptable to the
Company to the effect that such transfer (whether by sale, encumbrance,
assignment or otherwise) may be effected without registration under the Act.

7.    Registration Rights. Upon exercise
of this Warrant for Common Stock, the Company shall take whatever action
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 Common Stock, if any.

8.    Shares to be Fully Paid; Reservation of
Shares. The Company covenants and agrees that all shares of Common Stock
which may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder and free
of all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved, for the purpose of issue or transfer upon
exercise of the purchase rights conveyed by this Warrant, a sufficient number
of shares of authorized but unissued Common Stock, or other securities and property,
when and as required to provide for the exercise of the rights represented by
this Warrant. The Company will take all action as may be necessary or advisable
to assure that such shares of Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements
of any domestic securities exchange upon which the Common Stock may be listed.

9.    Amendments. This Warrant may be
amended only with the written consent of the Holder. No waiver of or exceptions
to any term, condition or provision of this Warrant, in any one or more
instances, shall be deemed or construed as a further or continuing waiver of
any such term, condition or provision.

10.    Adjustments; Anti-Dilution. The
number of Warrant Shares purchasable hereunder and the Warrant Exercise Price
are subject to adjustment from time to time as follows:

(a)           Merger, Sale of Assets, Etc.
If at any time, while this Warrant, or any portion thereof, is outstanding and
unexpired there shall be (i) a reorganization (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation of the Company with or into another
corporation in

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which the Company is not the surviving
entity, or a reverse triangular merger in which the Company is the surviving
entity but the shares of the Company’s capital stock outstanding immediately
prior to the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash, or otherwise, or (iii) a sale or
transfer of the Company’s properties and assets as, or substantially as, an
entirety to any other person, and if, as a part of such reorganization, merger,
consolidation, sale or transfer, provisions are made so that the holders of
capital stock are thereafter entitled to receive shares of stock or other securities
or property of the successor corporation resulting from such reorganization,
merger, consolidation, sale or transfer, the Company shall then ensure that the
Holder also shall be entitled to shares of stock or other securities or
property of the successor corporation resulting from such reorganization,
consolidation, merger, sale or transfer as if this Warrant had been exercised
in full immediately prior to such reorganization, merger, consolidation, sale
or transfer, all subject to further adjustment as provided in this Section 10.
The obligations of this Section 10 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation which are at the time receivable upon
the exercise of this Warrant. If the per share consideration payable to the
Holder for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be jointly determined by the Company and the Holder. In all events, appropriate
adjustment shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction,
to the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other
property deliverable after that event upon exercise of this Warrant.

(b)           Reclassification, Etc. If the
Company, at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired, by reclassification of securities or otherwise,
intends to change any of the securities as to which purchase rights under this
Warrant exist into the same or a different number of securities of any other
class or classes, this Warrant shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as the result of
such change with respect to the securities which were subject to the purchase
rights under this Warrant immediately prior to such reclassification or other
change and the number of Warrant Shares purchasable hereunder shall be appropriately
adjusted, all subject to further adjustment as provided in this Section 10.

(c)           Split, Subdivision or Combination
of Shares. If the Company at any time while this Warrant, or any portion
thereof, remains outstanding and unexpired shall split, subdivide or combine
the securities as to which purchase rights under this Warrant exist, into a
different number of securities of the same class, the Company warrants that the
number of Warrant Shares purchasable hereunder shall be proportionately
adjusted.

(d)           Adjustments for Dividends in Stock
or Other Securities or Property.

(i)            If
while this Warrant, or any portion hereof, remains outstanding and unexpired,
holders of Common Stock shall have received, or, on or after the record

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date fixed for the determination of eligible stockholders, shall have
become entitled to receive, without payment therefor, cash of the Company by
way of dividend, then and in each case, the Warrant Exercise Price shall be
reduced by adding the amount of cash of the Company which such holder would
have received had it been the Holder of record of the security on the date such
dividend was paid to the numerator used to calculate the Warrant Exercise Price
as set forth in Section 2 of this Warrant;

(ii)           If
while this Warrant, or any portion hereof, remains outstanding and unexpired,
holders of Common Stock shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend,
then and in each case, this Warrant shall represent the right to acquire, in
addition to the number of shares of the security receivable upon exercise of
this Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company which such holder would hold on the date of such
exercise had it been the Holder of record of the security receivable upon
exercise of this Warrant on the date thereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all appropriate adjustments provided by
this Section 10.

(e)           Certificate as to Adjustments; No
Impairment. Upon the occurrence of each adjustment or readjustment pursuant
to this Section 10, the Company shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment or readjustment and the facts upon
which such adjustment or readjustment is based. At any time upon written
request of the Holder, the Company shall furnish to the Holder a like
certificate setting forth: (a) a description of all such adjustments and
readjustments; (b) the Warrant Exercise Price at the time in effect; and (c)
the number of shares which at the time would be received upon the exercise of
the Warrant. The Company will not, by any voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or performed
hereunder, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 10 and in the taking of all such action as
may be necessary or advisable to protect the rights of the Holder against
impairment.

11.    Representations and Warranties of the
Company. The Company hereby represents and warrants to the Holder as
follows:

(a)           Corporate Power and Authorization.
The Company has all requisite corporate power and authority to issue this
Warrant and to perform each of its obligations hereunder. All corporate action
on the part of the Company, its directors and stockholders necessary or
advisable for the authorization, execution, delivery and performance by the

 8
 

 

Company of this Warrant has been taken. This
Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.

(b)           Offering. The offer, issuance
and sale of the Warrant is, and the issuance of shares of Common Stock upon
exercise of the Warrant will be, exempt from the registration requirements of
the Act, and are exempt from the qualification requirements of any applicable
state securities laws; and neither the Company nor anyone acting on its behalf
will take any action hereafter that would cause the loss of such exemptions.

(c)           Binding Effect. This Warrant
shall be binding upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets. All of the obligations of the Company relating to the shares of Common
Stock issuable upon the exercise of this Warrant shall survive the exercise and
termination of this Warrant. All of the agreements of the Company shall inure
to the benefit of the successors and assigns of the Holder hereof. The Company
will, at the time of exercise of this Warrant whether in whole or in part, acknowledge
in writing its continuing obligation to the Holder hereof in respect of any
rights (including, without limitation, any right to registration of the shares
of Common Stock) to which the Holder hereof shall continue to be entitled after
such exercise in accordance with this Warrant; provided, that the failure of
the Company to make any such acknowledgement shall not affect the continuing
obligation of the Company to the Holder hereof in respect of such rights.

12.    Miscellaneous.

(a)           Failure to Act and Waiver. No
failure or delay by the Holder to require the performance of any term or terms
of this Warrant or to exercise any right or remedy shall constitute a waiver of
any such term or of any right, nor shall such delay or failure preclude the
Holder from exercising any such right or remedy at any later time or times.

(b)           Consent to Jurisdiction. The
Company hereby agrees and consents that any action, suit or proceeding arising
out of this Warrant shall be brought exclusively in any appropriate state or
federal court in the New York County, New York, at the sole election of the
Holder hereof, and by the issuance and execution of this Warrant the Company
irrevocably consents to the jurisdiction of each such court. Trial by jury in
any action, proceeding or counterclaim with respect hereto is hereby waived.

(c)           Governing Law. IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW  YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT
OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 9
 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first above written.

 

	
  

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  
	
   

  	
   

  	
  Dennis G.
  McLaughlin, III

  
	
   

  	
   

  	
  President

  

 

 10

 

EXHIBIT
A

NOTICE
OF EXERCISE

To:          Earth Biofuels, Inc.

(A)          The
undersigned hereby elects to purchase                   
shares of the Common Stock of Earth Biofuels, Inc. (“Common Stock”) pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.

(B)           In
exercising this Warrant, the undersigned hereby confirms and acknowledges that
the shares of Common Stock are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and for investment, and
that the undersigned will not offer, sell, or otherwise dispose of any such
shares of Common Stock except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.

(C)           Please
issue a certificate or certificates representing the purchased shares of Common
Stock in the name of the undersigned or in such other name as is specified
below:

	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
   

  	
  Name

  

 

(D)          Please
issue a new Warrant for the unexercised portion of the attached Warrant in the
name of the undersigned or in such other name as is specified below:

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

 

FORM
OF NET ISSUE ELECTION

(To be signed only on net
issue exercise of the Warrant)

The undersigned, the holder of the within Warrant,
hereby irrevocably elects to exercise this Warrant with respect to                     
shares of Common Stock of Earth Biofuels, Inc., pursuant to the net issuance
provisions set forth in this Warrant, and requests that the certificates for
the number of shares of Common Stock issuable pursuant this Warrant after
application of the net issuance formula to such                    
shares to be issued in the name of, and delivered to                              ,
Federal Taxpayer Identification Number                 ,
whose address is                                     .

 

	
  Dated

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Address)

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