Document:

EXHIBIT 10.29

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

THIS WARRANT AMENDS, RESTATES AND SUPERCEDES
WARRANT NO. 1 FOR 750,00 SHARES OF COMMON STOCK PREVIOUSLY ISSUED TO EVOLUTION
MASTER FUND, LTD. ON MAY 26, 2006.

WARRANT

TO PURCHASE COMMON STOCK

OF

EARTH BIOFUELS, INC.

Issue Date: May 26, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                             Warrant
No. 1r

THIS CERTIFIES
that EVOLUTION MASTER FUND, LTD or any subsequent holder hereof (the “Holder”), has the right to purchase
from EARTH BIOFUELS, INC., a Delaware corporation (the “Company”),
up to 750,000 fully paid and nonassessable shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”),
subject to adjustment as provided herein, at a price per share equal to the
Exercise Price (as defined below), at any time and from time to time beginning
on the date on which this Warrant is issued (the “Issue
Date”) and ending at 5:00 p.m., eastern time, on the fifth (5th) anniversary of the Issue
Date or, if such day is not a Business Day, on the next succeeding Business Day
(the “Expiration Date”). This
Warrant is issued pursuant to the Amended and Restated Securities Purchase
Agreement, dated as of May 26, 2006 (the “Securities Purchase
Agreement”). Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Securities Purchase
Agreement.

1.                                       EXERCISE.

(a)                                  Right
to Exercise; Exercise Price. The Holder shall have the right to exercise
this Warrant at any time and from time to time during the period beginning on
the Issue Date and ending on the Expiration Date as to all or any part of the
shares of Common Stock covered hereby (the “Warrant
Shares”). The “Exercise Price”
for each Warrant Share purchased by the

 

 

Holder upon the
exercise of this Warrant shall be $2.50, subject to adjustment for the events
specified in Section 6 below.

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

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

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

(e)                                  Charter
Amendment. In the event there are insufficient shares of Common Stock
authorized, unreserved and available for issuance upon exercise of this
Warrant, the Company shall use its best efforts to effect an amendment of its
certificate of incorporation so as to increase the authorized shares of Common
Stock to accommodate such exercise.

(f)                                    Principal
Market Regulation. The Company shall not be obligated to issue any

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shares of Common
Stock upon exercise of this Warrant if the issuance of such shares of Common
Stock would exceed that number of shares of Common Stock which the Company may
issue upon exercise of this Warrant without breaching the Company’s obligations
under the rules or regulations of the Principal Market (the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company (A) obtains the
approval of its shareholders as required by the applicable rules of the
Principal Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably
satisfactory to the holders of the Warrant representing at least a majority of
the shares of Common Stock underlying the Warrants then outstanding issued
under the Securities Purchase Agreement. Until such approval or written
opinion is obtained, no Purchaser shall be issued, upon exercise of any
Warrants, shares of Common Stock in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is the total
number of shares of Common Stock issued to such Purchaser pursuant to the
Securities Purchase Agreement on the Issuance Date and the denominator of which
is the aggregate number of shares of Common Stock issued to the Purchasers
pursuant to the Securities Purchase Agreement on the Issuance Date (with
respect to each Purchaser, the “Exchange Cap Allocation”“). In
the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s
Warrants, the transferee shall be allocated a pro rata portion of such
Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any holder of
Warrants shall exercise all of such holder’s Warrants into a number of shares
of Common Stock which, in the aggregate, is less than such holder’s Exchange
Cap Allocation, then the difference between such holder’s Exchange Cap
Allocation and the number of shares of Common Stock actually issued to such
holder shall be allocated to the respective Exchange Cap Allocations of the
remaining holders of Warrants on a pro rata basis in proportion to the shares
of Common Stock underlying the Warrants then held by each such holder. In
the event that the Company is prohibited from issuing any Warrant Shares for
which an Exercise Notice has been received as a result of the operation of this
Section 1(f), the Company shall pay
cash in exchange for cancellation of such Warrant Shares, at a price per
Warrant Share equal to the difference between the closing sale price and the
Exercise Price as of the date of the attempted exercise.

2.                                       DELIVERY OF WARRANT SHARES UPON EXERCISE.

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

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Common Stock (the “Transfer Agent”) participates in the
Depository Trust Company (“DTC”) Fast
Automated Securities Transfer program (“FAST”), by crediting
the account of the Holder or its nominee at DTC (as specified in the applicable
Exercise Notice) with the number of Warrant Shares required to be delivered, no
later than the close of business on such Delivery Date. In the event that the
Transfer Agent is not a participant in FAST, or if the Holder so specifies in
an Exercise Notice or otherwise in writing on or before the Exercise Date, the
Company shall effect delivery of Warrant Shares by delivering to the Holder or
its nominee physical certificates representing such Warrant Shares, no later
than the close of business on such Delivery Date. If any exercise would create
a fractional Warrant Share, such fractional Warrant Share shall be disregarded
and the number of Warrant Shares issuable upon such exercise, in the aggregate,
shall be the nearest whole number of Warrant Shares. Warrant Shares delivered
to the Holder shall not contain any restrictive legend unless such legend is
required pursuant to the terms of the Securities Purchase Agreement.

3.                                       FAILURE TO DELIVER WARRANT SHARES.

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

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

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4.                                       EXERCISE LIMITATION.

In no
event shall the Holder be permitted to exercise this Warrant, or part thereof,
if, upon such exercise, the number of shares of Common Stock beneficially owned
by the Holder (other than shares which may be deemed beneficially owned except
for being subject to a limitation on exercise or exercise analogous to the
limitation contained in this Section 4),
would exceed 4.99% of the number of shares of Common Stock then issued and
outstanding, it being the intent of the Company and the Holder that the Holder
not be deemed at any time to have the power to vote or dispose of greater than
4.99% of the number of shares of Common Stock issued and outstanding at any
time. Nothing contained herein shall be deemed to restrict the right of the
Holder to exercise this Warrant at such time as such exercise will not violate
the provisions of this Section 4. As
used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of (i) Securities Exchange Act of 1934, as amended, and the rules
thereunder. To the extent that the limitation contained in this Section 4 applies (and without
limiting any rights the Company may otherwise have), the Company may rely on
the Holder’s determination of whether this Warrant is exercisable pursuant to
the terms hereof, the Company shall have no obligation whatsoever to verify or
confirm the accuracy of such determination, and the submission of an Exercise
Notice by the Holder shall be deemed to be the Holder’s representation that
this Warrant is exercisable pursuant to the terms hereof. The Company shall
have no liability to any person if the Holder’s determination of whether this
Warrant is exercisable pursuant to the terms hereof is incorrect.

5.                                       PAYMENT OF THE EXERCISE PRICE; CASHLESS EXERCISE.

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

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

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

X = Y
x (A-B)/A

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

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

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

B = the Exercise Price.

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

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

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

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

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

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

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

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

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Stock on the record date
for the determination of stockholders entitled to receive such Convertible
Securities or Options (or if no such record is taken, the date on which such
Convertible Securities or Options were issued).

(e)                                  Dilutive
Issuances.

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

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

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

N0 + N1

N0 + N2

where:

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

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

N2 = the number of such
additional shares of Common Stock so issued, sold or deemed issued or sold in
such Dilutive Issuance.

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

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

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

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

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

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

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

 10
 

 

 

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

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

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

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

7.                                       MISCELLANEOUS.

(a)                                  Failure
to Exercise Rights not Waiver. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
power, right or privilege preclude any other or further exercise thereof. All
rights and remedies of the Holder hereunder are cumulative and not exclusive of
any rights or remedies otherwise available. In the event that the Company breaches
any of its obligations hereunder to issue Warrant Shares or pay any amounts as
and when due, the Company shall bear all costs incurred by the Holder in
collecting such amount,

 11
 

 

 

including without
limitation reasonable legal fees and expenses.

(b)                                 Notices.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Warrant must be in writing and will be deemed
to have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

	
  if to the Company:

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  Earth Biofuels, Inc.

  
	
   

  	
  3001 Knox Street, Suite 403,

  
	
   

  	
  Dallas, Texas 75205

  
	
   

  	
  Telephone:

  	
  214.389.9800

  
	
   

  	
  Facsimile:

  	
  214.389.9806

  
	
   

  	
  Attention:

  	
  Dennis McLaughlin

  
	
   

  	
   

  	
   

  	 

	
  with a copy (for
  informational purposes only) to:

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  Scheef & Stone, LLP

  
	
   

  	
  Telephone:

  	
  214.706.4200

  
	
   

  	
  Facsimile:

  	
  214.706.4242

  
	
   

  	
  Attention:

  	
  Roger A. Crabb, Esq.

  
						

 

and if to the Holder, to
the address and facsimile number as to which the Holder has notified the
Company in writing. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii)
above, respectively.

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

(d)                                 Transfer
of Warrant. The Holder may sell, transfer or otherwise dispose of all or
any part of this Warrant (including without limitation pursuant to a pledge) to
any person or entity as long as such sale, transfer or disposition is the
subject of an effective registration statement under the Securities Act of
1933, as amended, and applicable state securities laws, or is exempt from
registration thereunder, and is otherwise made in accordance with the
applicable provisions of the Securities Purchase Agreement. From and after the
date of any such sale, transfer or disposition, the transferee hereof shall be
deemed to be the holder of the portion of this Warrant acquired by such
transferee, and the Company shall, as promptly as practicable, issue and
deliver to such transferee a new Warrant identical in all respects to this

 12
 

 

 

Warrant, in the name of
such transferee. The Company shall be entitled to treat the original Holder as
the holder of this entire Warrant unless and until it receives written notice
of the sale, transfer or disposition hereof.

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

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

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

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

[Signature Page to
Follow]

 13

 

 

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

	
  

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  
	
   

  	
   

  	
  Name: Dennis G.
  McLaughlin, III

  
	
   

  	
   

  	
  Title: Chief
  Executive Officer

  

 

 

 

EXHIBIT A to WARRANT

EXERCISE NOTICE

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

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

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

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

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

	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name of Registered Holder

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

By
tendering this Exercise Notice, the Holder represents to the Company that it is
an “accredited investor” as that term is defined in Rule 501 of Regulation D,
and that it is acquiring the Warrants Shares solely for its own account, and
not with a present view to the public resale or distribution of all or any part
thereof, except pursuant to sales that are registered under the Securities Act
or are exempt from the registration requirements of the Securities Act; provided,
however, that, in making such representation, the Holder does not agree
to hold the Warrants Shares for any minimum or specific term and reserves the
right to sell, transfer or otherwise dispose of the Warrants Shares at any time
in accordance with the provisions of the Warrant and with Federal and state
securities laws applicable to such sale, transfer or disposition.EXHIBIT
10.30

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

WARRANT

TO PURCHASE COMMON STOCK

OF

EARTH BIOFUELS, INC.

	
  Issue Date: May 26, 2006

  	
  Warrant
  No. 2

  

 

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

1.             EXERCISE.

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

 

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

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

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

 

 2
 

 

 

2.             DELIVERY OF WARRANT SHARES UPON EXERCISE.

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

 3
 

 

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

3.             FAILURE
TO DELIVER WARRANT SHARES.

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

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

 4
 

 

4.             EXERCISE
LIMITATION.

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

5.             PAYMENT
OF THE EXERCISE PRICE; CASHLESS EXERCISE.

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

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

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

	
   

  	
   

  	
  X = Y x (A-B)/A

  
	
   

  	
   

  	
   

  
	
  where:

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  

 

 5
 

 

 

	
  

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B = the Exercise Price.

  

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

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

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

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

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

 6
 

 

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

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

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

 7
 

 

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

(e)           Dilutive Issuances.

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

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

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

N0 + N1

N0 + N2

where:

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

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

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

 8
 

 

sold or deemed issued or sold in such Dilutive Issuance.

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

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

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

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

 9
 

 

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

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

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

 

 10

 

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

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

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

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

7.             MISCELLANEOUS.

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

 11
 

 

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

(b)           Notices. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Warrant must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii)
one Business Day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

	
   

  	
   if to the Company:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Earth Biofuels, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
  3001 Knox Street, Suite 403,

  	
   

  	
   

  
	
   

  	
   

  	
  Dallas, Texas 75205

  
	
   

  	
   

  	
  Telephone:

  	
  214.389.9800

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
  214.389.9806

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Dennis McLaughlin

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy (for informational purposes only) to:

  
	
   

  	
   

  
	
   

  	
   

  	
  Scheef & Stone, LLP

  
	
   

  	
   

  	
  Telephone:

  	
  214.706.4200

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
  214.706.4242

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Roger A. Crabb, Esq.

  	
   

  
							

 

and if to the
Holder, to the address and facsimile number as to which the Holder has notified
the Company in writing. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or (iii)
above, respectively.

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

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

 12
 

 

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

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

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

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

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

[Signature Page to Follow]

 

 13

 

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

	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
   

  	
  Name: Dennis G. McLaughlin, III

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

                 
 

 

 

EXHIBIT A to WARRANT

EXERCISE NOTICE

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

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

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

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

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

	
  Date: 

  
	
   

  
	
   

  	
   

  
	
  Name of Registered
  Holder

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

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

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