Document:

Exhibit
10.80

SCHEDULE OF BUYERS

 

	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  	
  (7)

  	
   

  
	
  Buyer

  	
   

  	
  Address and

  Facsimile Number

  	
   

  	
  Aggregate

  Principal

  Amount of

  Notes

  	
   

  	
  Number of 

  Series A

  Warrant Shares

  	
   

  	
  Number of 

  Series B

  Warrant Shares

  	
   

  	
  Purchase Price

  	
   

  	
  Legal

  Representative’s

  Address

  and Facsimile

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Excalibur Limited Partnership

  	
   

  	
  33
  Prince Arthur Avenue

  Toronto, Ontario

  Canada M5R 1B2

  Attention: Will Hecter

  Facsimile: (204) 848-4427

  Telephone: (416) 964-9077

  Residence: Canada

  	
   

  	
  $

  	
  500,000

  	
   

  	
  86,207

  	
   

  	
  —

  	
   

  	
  $

  	
  500,000

  	
   

  	
  N/A

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Whalehaven Capital Fund Ltd.

  	
   

  	
  3rd Floor, 14 Par –
  La Villa Road

  PO Box HM 1027

  Hamilton, HMDX - Bermuda

  Attention: Evan Schemenauer

  Facsimile: (441) 295-5224

  Telephone: (441)  295-5262

  Residence: Bermuda

  	
   

  	
  $

  	
  600,000

  	
   

  	
  103,448

  	
   

  	
  —

  	
   

  	
  $

  	
  600,000

  	
   

  	
  N/A

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  1,100,000

  	
   

  	
  189,665

  	
   

  	
  —

  	
   

  	
  $

  	
  1,100,000Exhibit
10.81

REGISTRATION
RIGHTS AGREEMENT

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated as of August 11, 2006, by and among Earth Biofuels, Inc., a Delaware
corporation, with headquarters located at 3001 Knox Street, Suite 403, Dallas,
Texas 75205, (the “Company”), and
the undersigned buyers (each, a “Buyer”,
and collectively, the “Buyers”).

WHEREAS:

A.            In connection with the
Securities Purchase Agreement, dated as of August 11, 2006, by and among the
Company and the Buyers (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to
the conditions set forth in the Securities Purchase Agreement, to issue and
sell to each Buyer (i) senior convertible notes of the Company (the “Notes”), which will, among other things, be
convertible into shares of the Company’s common stock, $0.001 par value per
share (the ”Common Stock”, as
converted, the “Conversion Shares”)
in accordance with the terms of the Notes, and (ii) two series of warrants (the
“Warrants”), which will be exercisable
to purchase shares of Common Stock (as exercised collectively, the “Warrant Shares”).

B.            In accordance with the
terms of the Securities Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the “1933 Act”),
and applicable state securities laws.

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

1.             Definitions.

Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings set
forth in the Securities Purchase Agreement. 
As used in this Agreement, the following terms shall have the following
meanings:

a.             “Business
Day” means any day other
than Saturday, Sunday or any other day on which commercial banks in The City of
New York are authorized or required by law to remain closed.

b.             “Closing
Date” shall have the meaning
set forth in the Securities Purchase Agreement.

c.             “Effective
Date” means the date the
Registration Statement has been declared effective by the SEC.

d.             “Effectiveness
Deadline” means the date
which is (i) in the event that the Registration Statement is not subject to a
review by the SEC, 60 calendar days after July 

 

24, 2006 or (ii) in the
event that the Registration Statement is subject to a review by the SEC, 120
calendar days after July 24, 2006.

e.             “Filing
Deadline” means 30 calendar
days after July 24, 2006.

f.              “Investor” means a Buyer or any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement in accordance
with the requirements of the Transaction Documents and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement in accordance with the requirements of the
Transaction Documents and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.

g.             “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

h.             “register,” “registered,” and “registration” refer to a registration effected by
preparing and filing one or more Registration Statements (as defined below) in
compliance with the 1933 Act and pursuant to Rule 415 and the declaration or
ordering of effectiveness of such Registration Statement(s) by the SEC.

i.              “Registrable
Securities” means
(i) the Conversion Shares issued or issuable upon conversion or redemption
of the Notes, (ii) the Warrant Shares issued or issuable upon exercise of
the Warrants, (iii) any shares of Common Stock issuable upon exercise of
warrants issued to any placement agent as compensation in connection with the
financing that is the subject of the Securities Purchase Agreement, (iv) any
shares of Common Stock issuable upon payment of the Make-Whole Amount (as such
term is defined in the Notes) pursuant to the Notes and (v) any capital
stock of the Company issued or issuable with respect to the Conversion Shares,
the Notes, the Warrant Shares, or the Warrants as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of the Notes or exercises of
the Warrants.

j.              “Registration
Statement” means a
registration statement or registration statements of the Company filed under
the 1933 Act covering the Registrable Securities.

k.             “Required
Holders” means the holders
of at least a majority of the Registrable Securities.

l.              “Required
Registration Amount” means
130% (or such lesser amount as the SEC may permit as evidenced in comments
received to a filed Registration Statement) of the sum of (i) the number of
Conversion Shares issued and issuable pursuant to the Notes as of the trading
day immediately preceding the applicable date of determination, and (ii) the
number of Warrant Shares issued and issuable pursuant to the Warrants as of the
trading day immediately preceding the applicable date of determination, all
subject to adjustment as provided in Section 2(e) (without regard to any
limitations on conversion of the Notes or exercise of the Warrants).

 2
 

 

m.            “Rule
415” means Rule 415 under
the 1933 Act or any successor rule providing for offering securities on a
continuous or delayed basis.

n.             “SEC” means the United States Securities and
Exchange Commission.

2.             Registration.

a.             Mandatory Registration.  The
Company shall prepare, and, as soon as practicable but in no event later than
the Filing Deadline, file with the SEC the Registration Statement on Form S-3
covering the resale of all of the Registrable Securities issuable upon then
outstanding Securities.  In the event
that Form S-3 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration on another appropriate
form reasonably acceptable to the Required Holders, subject to the provisions
of Section 2(d).  The Registration
Statement prepared pursuant hereto shall register for resale at least the
number of shares of Common Stock equal to the Required Registration Amount as
of date the Registration Statement is initially filed with the SEC.  The Registration Statement shall contain
(except if otherwise directed by the Required Holders) the “Selling
Stockholders” and “Plan of Distribution” sections in substantially
the form attached hereto as Exhibit B. 
The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the Effectiveness Deadline. 
By 9:30 am on the date following the Effective Date, the Company shall
file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.

b.             Allocation of Registrable Securities.  The
initial number of Registrable Securities included in any Registration Statement
and any increase in the number of Registrable Securities included therein shall
be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof is
declared effective by the SEC.  In the
event that an Investor sells or otherwise transfers any of such Investor’s
Registrable Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. 
Any shares of Common Stock included in a Registration Statement and
which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities
then held by such Investors which are covered by such Registration
Statement.  Other than as set forth in Schedule
2(b), in no event shall the Company include any securities other than
Registrable Securities on any Registration Statement without the prior written
consent of the Required Holders.

c.             Legal Counsel. 
Subject to Section 5 hereof, the Required Holders shall have the right
to select one legal counsel to review and oversee any registration pursuant to
this Section 2 (“Legal
Counsel”).  The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company’s obligations
under this Agreement.

 3
 

 

d.             Ineligibility for Form S-3.  In
the event that Form S-3 is not  available
for the registration of the resale of Registrable Securities hereunder, the
Company shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably acceptable to the Required Holders and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available, provided that the Company shall maintain the effectiveness
of the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

e.             Sufficient Number of Shares Registered.  In
the event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to Section
2(b), the Company shall amend the applicable Registration Statement, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required Registration Amount
as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable,
but in any event not later than thirty (30) days after the necessity therefor
arises.  The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.  For purposes of the foregoing provision, the
number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the
number of shares of Common Stock available for resale under the Registration
Statement is less than the product determined by multiplying (i) the Required
Registration Amount as of such time by (ii) 0.90.  The calculation set forth in the foregoing
sentence shall be made without regard to any limitations on the conversion of
the Notes or the exercise of the Warrants and such calculation shall assume
that the Notes are then convertible into shares of Common Stock at the then
prevailing Conversion Rate (as defined in the Notes) and that the Warrants are
then exercisable for shares of Common Stock at the then prevailing Exercise
Price (as defined in the Warrants).

f.              Effect of Failure to File and Obtain and
Maintain Effectiveness of Registration Statement. 
Subject to Section 4(a), if (i) a Registration Statement covering all of
the Registrable Securities required to be covered thereby and required to be
filed by the Company pursuant to this Agreement is (A) not filed with the SEC
on or before the respective Filing Deadline (a “Filing Failure”) or
(B) not declared effective by the SEC on or before the respective Effectiveness
Deadline (an “Effectiveness
Failure”) or (ii) on any day
after the Effective Date sales of all of the Registrable Securities required to
be included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r)) pursuant to such
Registration Statement or otherwise (including, without limitation, because of
a failure to keep such Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, to register a sufficient number of shares of Common Stock or to
maintain the listing of the Common Stock) (a “Maintenance Failure”)
then, as partial relief for the damages to any holder by reason of any such
delay in or reduction of its ability to sell the underlying Shares of Common
Stock (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Company shall pay to each holder of Registrable Securities
relating to such Registration Statement an amount in cash equal to one and
one-half percent (1.5%) of the 

 4
 

 

aggregate
Purchase Price (as such term is defined in the Securities Purchase Agreement)
of such Investor’s Notes relating to the Registrable Securities included in
such Registration Statement on each of the following dates: (i) the day of a
Filing Failure and on every thirtieth day (pro rated for periods totaling less
than thirty days) after a Filing Failure until such Filing Failure is cured;
(ii) the day of an Effectiveness Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) after an Effectiveness Failure
until such Effectiveness Failure is cured; and (iii) the initial day of a
Maintenance Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) after a Maintenance Failure until such Maintenance
Failure is cured; provided, however, that in no event shall the Company be
liable for more than one and one-half percent (1.5%) of penalties during any
thirty day period or for multiple events during any thirty day period.  The payments to which a holder shall be
entitled pursuant to this Section 2(g) are referred to herein as “Registration Delay Payments.” 
Registration Delay Payments shall accrue on the day of the Filing
Failure, Effectiveness Failure and the initial day of a Maintenance Failure, as
applicable, and thereafter shall accrue and be paid on the earlier of (I) the
thirtieth day after the event or failure giving rise to the Registration Delay
Payments has occurred and (II) the Business Day after the event or failure
giving rise to the Registration Delay Payments is cured.  In the event the Company fails to make
Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of one and one-half percent (1.5%) per
month (prorated for partial months) until paid in full.  Notwithstanding anything herein to the
contrary, in no event shall the Registration Delay Payments exceed twelve and
one-half percent (12.5%) of the aggregate Purchase Price for all Investors (the
“Registration Delay Payments Cap”).  Any amount in excess of the Registration
Delay Payments Cap (the “Excess Registration
Delay Payments”) shall cause the Conversion Price of the Investor’s
Notes to be lowered by an amount equal to the quotient of the amount of such
Investors Excess Registration Delay Payments divided by the then outstanding
amount of such Investor’s Notes. 
Notwithstanding anything to the contrary contained herein, in no event
shall the Company be liable for any damages in connection with the Warrant or
Warrant Shares.

3.             Related
Obligations.

At such time as the
Company is obligated to file a Registration Statement with the SEC pursuant to
Section 2(a), 2(d) or 2(e), the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the
following obligations:

a.     The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its reasonable best efforts
to cause such Registration Statement relating to the Registrable Securities to
become effective as soon as practicable after such filing (but in no event
later than the Effectiveness Deadline). 
Subject to Allowable Grace Periods, the Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under the 1933 Act or (ii) the date on which the Investors shall have sold all
of the Registrable Securities covered by such Registration Statement (the “Registration Period”). 
The Company shall ensure that each Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit 

 5
 

 

to state a material fact required to be stated therein, or necessary to
make the statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading other than such
information as provided in writing by Investors for use in such Registration
Statement or prospectus.  The term “best
efforts” shall mean, among other things, that the Company shall submit to the
SEC, within two (2) Business Days after the later of the date that (i) the
Company learns that no review of a particular Registration Statement will be
made by the staff of the SEC or that the staff has no further comments on a
particular Registration Statement, as the case may be, and (ii) the approval of
Legal Counsel (which shall not be unreasonably withheld or delayed) pursuant to
Section 3(c) (which approval is immediately sought), a request for acceleration
of effectiveness of such Registration Statement to a time and date not later than
two (2) Business Days after the submission of such request.

b.             The Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement.  In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-QSB, Form 10-KSB or any
analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall have incorporated such
report by reference into such Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement such Registration Statement.

c.             The Company shall (A) permit Legal Counsel
and the Investors to review and comment upon (i) a Registration Statement at
least three (3) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-KSB, and Reports on Form 10-QSB and any similar or successor
reports) within a reasonable number of days prior to their filing with the SEC,
and (B) not file any Registration Statement or amendment or supplement thereto
in a form to which Legal Counsel or any Investor reasonably objects; provided,
however, that no liquidated damages under Section 2 shall be due to any
Investor if Legal Counsel or any Investor shall have unnecessarily objected to
the filing or effectiveness of any Registration Statement such as to delay its
filing or effectiveness.  The Company
shall furnish to Legal Counsel and the Investors, without charge, (i) copies of
any correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, to the extent
containing information which the Company believes does not constitute material,
nonpublic information concerning the Company and (ii) promptly after the same
is prepared and filed with the SEC, one copy of any Registration Statement and
any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor (if
not available pursuant to Rule 424(b)). 
The Company shall reasonably cooperate with Legal Counsel and the
Investors in performing the Company’s obligations pursuant to this Section 3.

 6
 

 

d.             The Company shall furnish to each Investor
whose Registrable Securities are included in any Registration Statement,
without charge,  (i) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request) and (iii) such other documents, including copies of any preliminary or
final prospectus, as such Investor may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by such
Investor.

e.             The Company shall use its best efforts to (i)
register and qualify, unless an exemption from registration and qualification
applies, the resale by Investors of the Registrable Securities covered by a
Registration Statement under such other securities or “blue sky” laws of all
applicable jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. 
The Company shall promptly notify Legal Counsel and each Investor who
holds Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any of
the Registrable Securities for sale under the securities or “blue sky” laws of
any jurisdiction in the United States or its receipt of notice of the
initiation or threatening of any proceeding for such purpose.

f.              The Company shall notify Legal Counsel and
each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(r), promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). 
The Company shall also promptly notify Legal Counsel and each Investor
in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by
facsimile or e-mail on the same day of such effectiveness), (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of 

 7
 

 

the
Company’s determination that a post-effective amendment to a Registration
Statement would be appropriate.

g.             The Company shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of notice of the initiation or threat of any
proceeding for such purpose.

h.             If, after the execution of this Agreement, an
Investor believes, after consultation with its legal counsel, that it could
reasonably be deemed to be an underwriter of Registrable Securities, at the
request of such Investor, the Company shall furnish to such Investor, on the
date of the effectiveness of the Registration Statement and thereafter from time
to time on such dates as an Investor may reasonably request (i) a letter, dated
such date, from the Company’s independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to
the Investors, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the Investors.

i.              If after the execution of this Agreement an
Investor believes, after consultation with its legal counsel, that it could
reasonably be deemed to be an underwriter of Registrable Securities, at the
request of such Investor, the Company shall make available for inspection by
(i) any Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
agents retained by the Investors (collectively, the “Inspectors”), all pertinent financial and other records,
and pertinent corporate documents and properties of the Company (collectively,
the “Records”), as shall be reasonably deemed necessary
by each Inspector, and cause the Company’s officers, directors and employees to
supply all information which any Inspector may reasonably request; provided,
however, that each Inspector shall agree to hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this
Agreement.  Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.  Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.

 8
 

 

j.              The Company shall hold in confidence and not
make any disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to comply with
federal or state securities laws or the rules and regulations of any applicable
trading market, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final
order from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement.  The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

k.             The Company shall use its best efforts either
to (i) cause all of the Registrable Securities covered by a Registration
Statement to be listed on each securities exchange on which securities of the
same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange or (ii) secure the inclusion for quotation of all of the
Registrable Securities on the Nasdaq National Market or (iii) if, despite the
Company’s best efforts, the Company is unsuccessful in satisfying the preceding
clauses (i) and (ii), to secure the inclusion for quotation of all of the
Registrable Securities on the American Stock Exchange for such Registrable Securities
and, without limiting the generality of the foregoing, to use its best efforts
to arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. (“NASD”) as such with
respect to such Registrable Securities or (iv) if, despite the Company’s best
efforts, the Company is unsuccessful in satisfying the preceding clauses
(i)-(iii), to secure the inclusion for quotation of all of the Registrable
Securities on the NASD’s OTC Bulletin Board. 
The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(k).

l.              The Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.

m.            If requested by an Investor, the Company
shall (i) as soon as practicable incorporate in a prospectus supplement or
post-effective amendment such information as an Investor reasonably requests to
be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the purchase price
being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make all
required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) as soon as practicable,
supplement or make amendments 

 9
 

 

to
any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

n.             The Company shall use its best efforts to
cause the Registrable Securities covered by a Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

o.             The Company shall make generally available to
its security holders as soon as practical, but not later than ninety (90) days
after the close of the period covered thereby, an earnings statement (in form
complying with, and in the manner provided by, the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first
day of the Company’s fiscal quarter next following the effective date of a
Registration Statement.

p.             The Company shall otherwise use its best
efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.

q.             Within two (2) Business Days after a
Registration Statement which covers Registrable Securities is declared effective
by the SEC, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC in the form attached hereto as Exhibit A.

r.              Notwithstanding anything to the contrary
herein, at any time after the Effective Date, the Company may delay the
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company (following consultation with its counsel), in the
best interest of the Company (a “Grace
Period”); provided, that the
Company shall promptly (i) notify the Investors in writing that such
determination has been made (provided that in each notice the Company will not
disclose the content of such material, non-public information to the Investors)
and the date on which the Grace Period will begin, and (ii) notify the
Investors in writing of the date on which the Grace Period ends; and, provided
further, that during any three hundred sixty five (365) day period such Grace
Periods shall not exceed an aggregate of thirty (30) days and the first day of
any Grace Period must be at least two (2) trading days after the last day of
any prior Grace Period (each, an “Allowable
Grace Period”).  For purposes of determining the length of a
Grace Period above, the Grace Period shall begin on and include the date the
Investors receive the notice referred to in clause (i) and shall end on and
include the later of the date the Investors receive the notice referred to in
clause (ii) and the date referred to in such notice.  The provisions of Section 3(g) hereof shall
not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable. 
Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement
in connection with any sale of Registrable Securities with respect to which 

 10
 

 

an
Investor has entered into a contract for sale and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless an
exemption from such prospectus delivery requirement exists) prior to the
Investor’s receipt of the notice of a Grace Period and for which the Investor
has not yet settled.

4.             Obligations of the
Investors.

a.             At least five (5) Business Days prior to the
first anticipated filing date of a Registration Statement, the Company shall
notify each Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
(and to the Company’s liability for damages under Section 2(f) to such
Investor) that such Investor shall furnish to the Company a completed and
updated “Selling Stockholder Questionnaire,” in the form attached hereto as Exhibit
C, and such other information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the effectiveness of the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.

b.             Each Investor, by such Investor’s acceptance
of the Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor’s election to exclude all of
such Investor’s Registrable Securities from such Registration Statement.

c.             Each Investor agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 3(g) or the first sentence of 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor’s receipt
of the copies of the supplemented or amended prospectus contemplated by Section
3(g) or the first sentence of 3(f) or receipt of notice that no supplement or
amendment is required.  Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor’s receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g) or the
first sentence of 3(f) and for which the Investor has not yet settled.

d.             Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in
connection with sales of Registrable Securities pursuant to the Registration
Statement.

 11
 

 

5.             Expenses of
Registration.

All reasonable expenses,
other than underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company. 
The Company shall also reimburse the Investors for the fees and
disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement which amount shall
be limited to $10,000.

6.             Indemnification.

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

a.             To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’
fees, amounts paid in settlement or expenses, joint or several, (collectively,
“Claims”) incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon:  (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other “blue sky” laws of any jurisdiction
in which Registrable Securities are offered (“Blue Sky Filing”),
or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in the light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or (iv) any
violation of this Agreement (the matters in the foregoing clauses (i) through
(iv) being, collectively, “Violations”). 
Subject to Section 6(c), the Company shall reimburse the Indemnified
Persons, promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. 
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a):  (i) shall not apply to a Claim by an 

 12
 

 

Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person for such Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or any such amendment
thereof or supplement thereto, if such prospectus was timely made available by
the Company pursuant to Section 3(d) and (ii) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld or delayed.  Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.

b.             In connection with any Registration Statement
in which an Investor is participating, each such Investor agrees to severally
and not jointly indemnify, hold harmless and defend, to the same extent and in
the same manner as is set forth in Section 6(a), the Company, each of its
directors, each of its officers who signs the Registration Statement and each
Person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act (each, an “Indemnified
Party”), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such Investor will reimburse any legal or other expenses
reasonably incurred by an Indemnified Party in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld or delayed;
provided, further, however, that the Investor shall be liable under this
Section 6(b) for only that amount of a Claim or Indemnified Damages as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.

c.             Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the 

 13
 

 

Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding.  In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person which relates to such
action or Claim.  The indemnifying party
shall keep the Indemnified Party or Indemnified Person reasonably apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto.  No indemnifying party
shall be liable for any settlement of any action, claim or proceeding effected
without its prior written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent
to entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person of a release from all
liability in respect to such Claim or litigation, and such settlement shall not
include any admission as to fault on the part of the Indemnified Party.  Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms or corporations relating to the matter for which indemnification has been
made.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 6, except to
the extent that the indemnifying party is prejudiced in its ability to defend
such action.

d.             The indemnification required by this Section
6 shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.

e.             The indemnity agreements contained herein
shall be in addition to  (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

7.             Contribution.

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

 14
 

 

contribution from
any Person involved in such sale of Registrable Securities who was not guilty
of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant
to such Registration Statement.

8.             Reports Under the
1934 Act.

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

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

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

c.             furnish to each Investor so long as such
Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual report of the Company and such other reports and documents
so filed by the Company (but only if such reports are not publicly available on
the EDGAR system), and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.

9.             Assignment of
Registration Rights.

The rights under this
Agreement shall be automatically assignable by the Investors to any transferee
of all or any portion of such Investor’s Registrable Securities if:  (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.

10.           Amendment of
Registration Rights.

Provisions of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only 

 15
 

 

with the written
consent of the Company and the holders of at least two-thirds of the
Registrable Securities.  Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. 
No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.

11.           Miscellaneous.

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

b.             Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery 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 to:

  
	
   

  
	
  Scheef & Stone, LLP

  
	
  5956 Sherry Lane, Suite
  1400

  
	
  Dallas, Texas 75225

  
	
  Telephone:

  	
  (214) 706-4200

  
	
  Facsimile:

  	
  (214) 706-4242

  
	
  Attention:

  	
  Roger A. Crabb, Esq.

  

 

If to a Buyer, to its address and facsimile number set
forth on the Schedule of Buyers attached hereto, with copies to such Buyer’s
representatives as set forth on the Schedule of Buyers, or to such other
address and/or facsimile number and/or to the attention of such other Person as
the 

 16
 

 

recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of such
change.  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 a courier or
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

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

d.             All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. 
Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

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

 17
 

 

f.              Subject to the requirements of Section 9,
this Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.

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

h.             This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. 
This Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.

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

j.              All consents and other determinations
required to be made by the Investors pursuant to this Agreement shall be made,
unless otherwise specified in this Agreement, by the Required Holders.

k.             The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rules of strict construction will be applied against any party.

l.              This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

m.            The obligations of each Buyer hereunder are
several and not joint with the obligations of any other Buyer, and no provision
of this Agreement is intended to confer any obligations on any Buyer vis-à-vis
any other Buyer.  Nothing contained
herein, and no action taken by any Buyer pursuant hereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated herein.

 18

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

	
  

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dennis G.
  McLaughlin, III

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Dennis G. McLaughlin, III 

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
					

 

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

	
  

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  EXCALIBUR LIMITED PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William Hechter

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William Hechter

  
	
   

  	
   

  	
  Title:

  	
  President of [illegible]

  
					

 

 

IN
WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

	
  

  	
  WHALEHAVEN CAPITAL FUND LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

SCHEDULE
OF BUYERS

	
  Buyer

  	
   

  	
  Buyer’s Address

  and Facsimile Number

  	
   

  	
  Buyer’s Representative’s Address 

  and Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Excalibur Limited Partnership

  	
   

  	
  33 Prince Arthur Avenue 

  Toronto, Ontario 

  Canada M5R 1B2 

  Attention: Will Hechter 

  Facsimile: (204) 848-4427 / (416) 964-8868

  Telephone: (416) 964-9077 

  Residence: Canada

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Whalehaven Capital Fund Ltd.

  	
   

  	
  3rd Floor, 14 Par –
  La Villa Road 

  PO Box HM 1027 Hamilton 

  HMDX - Bermuda 

  Attention: Evan Schemenauer 

  Facsimile:(441) 295-5224 

  Telephone:(441) 295-5262 

  Residence: Bermuda

  	
   

  	
   

  

 

 

EXHIBIT A

FORM
OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Transfer Agent]

[Address]

Attention:

Re:      EARTH
BIOFUELS, INC..

Ladies and Gentlemen:

[We are][I am]
counsel to Earth Biofuels, Inc., a Delaware corporation (the “Company”), and have represented the Company
in connection with that certain Securities Purchase Agreement (the “Securities Purchase
Agreement”) entered into by and among the Company and the buyers
named therein (collectively, the “Holders”)
pursuant to which the Company issued to the Holders senior convertible notes
(the “Notes”) convertible into the
Company’s common stock, $0.001 par value per share (the ”Common Stock”) and warrants exercisable for
shares of Common Stock (the “Warrants”).  Pursuant to the Securities Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the shares of Common Stock issuable upon
conversion of the Notes and the shares of Common Stock issuable upon exercise
of the Warrants, under the Securities Act of 1933, as amended (the “1933 Act”). 
In connection with the Company’s obligations under the Registration
Rights Agreement, on
                             ,
200     , the Company filed a Registration Statement
on Form S-3 (File No.
333-                              )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders as a selling stockholder thereunder.

In connection with the
foregoing, [we][I] advise you that a member of the SEC’s staff has advised
[us][me] by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER
DATE OF EFFECTIVENESS] and [we][I]
have no knowledge, after telephonic inquiry of a member of the SEC’s staff,
that any stop order suspending its effectiveness has been 

 

issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

This letter shall serve
as our standing opinion to you that the shares of Common Stock are freely
transferable by the Holders pursuant to the Registration Statement.  You need not require further letters from us
to effect any future legend-free issuance or reissuance of shares of Common
Stock to the Holders as contemplated by the Company’s Irrevocable Transfer
Agent Instructions dated July         ,
2006.

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [ISSUER’S COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  CC:   [LIST NAMES OF HOLDERS]

  	
   

  

 

 

EXHIBIT B

SELLING
STOCKHOLDERS

The shares of
Common Stock being offered by the selling stockholders are issuable upon
conversion of the convertible notes and upon exercise of the warrants.  For additional information regarding the
issuance of those convertible notes and warrants, see “Private Placement of
Convertible Notes and Warrants” above. 
We are registering the shares of Common Stock in order to permit the selling
stockholders to offer the shares for resale from time to time.  Except for the ownership of the Convertible
Notes and the Warrants issued pursuant to the Securities Purchase Agreement,
the selling stockholders have not had any material relationship with us within
the past three years.

The table below
lists the selling stockholders and other information regarding the beneficial
ownership of the shares of Common Stock by each of the selling
stockholders.  The second column lists
the number of shares of Common Stock beneficially owned by each selling
stockholder, based on its ownership of the convertible notes and warrants, as
of
             ,
200    , assuming conversion of all convertible notes and
exercise of the warrants held by the selling stockholders on that date, without
regard to any limitations on conversions or exercise.

The third column
lists the shares of Common Stock being offered by this prospectus by the
selling stockholders.

In accordance with
the terms of a registration rights agreement with the selling stockholders,
this prospectus generally covers the resale of at least 130% of the sum of (i)
the number of shares of Common Stock issuable upon conversion of the
convertible notes as of the trading day immediately preceding the date the registration
statement is initially filed with the SEC and (ii) the number of shares of
Common Stock issuable upon exercise of the related warrants as of the trading
day immediately preceding the date the registration statement is initially
filed with the SEC.  Because the conversion price of
the convertible notes and the exercise price of the warrants may be adjusted,
the number of shares that will actually be issued may be more or less than the
number of shares being offered by this prospectus.  The fourth column assumes the sale of all of
the shares offered by the selling stockholders pursuant to this prospectus.

Under the terms of
the convertible notes and the warrants, a selling stockholder may not convert
the convertible notes or exercise the warrants to the extent such conversion or
exercise would cause such selling stockholder, together with its affiliates, to
beneficially own a number of shares of Common Stock which would exceed 4.99% of
our then outstanding shares of Common Stock following such conversion or
exercise, excluding for purposes of such determination shares of Common Stock
issuable upon conversion of the convertible notes which have not been converted
and upon exercise of the warrants which have not been exercised.  The number of shares in the second column
does not reflect this limitation.  The
selling stockholders may sell all, some or none of their shares in this
offering.  See “Plan of Distribution.”

 

 

	
  Name of Selling Stockholder

  	
   

  	
  Number of Shares Owned

  Prior to Offering

  	
   

  	
  Maximum Number of Shares

  to be Sold Pursuant to this

  Prospectus

  	
   

  	
  Number of Shares Owned

  After Offering

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Excalibur
  Limited Partnership

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Whalehaven
  Capital Fund Ltd.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

PLAN OF DISTRIBUTION

We are registering
the shares of Common Stock issuable upon conversion of the convertible notes
and upon exercise of the warrants to permit the resale of these shares of
Common Stock by the holders of the convertible notes and warrants from time to
time after the date of this prospectus. 
We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of Common Stock. 
We will bear all fees and expenses incident to our obligation to
register the shares of Common Stock.

The selling
stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents.  If the shares of Common Stock are sold
through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent’s
commissions.  The shares of Common Stock
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the time of
sale, or at negotiated prices.  These
sales may be effected in transactions, which may involve crosses or block
transactions,

·                  on any national
securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale;

·                  in the
over-the-counter market;

·                  in transactions
otherwise than on these exchanges or systems or in the over-the-counter market;

·                  through the
writing of options, whether such options are listed on an options exchange or
otherwise;

·                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

·                  block trades in
which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;

·                  purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;

·                  an exchange
distribution in accordance with the rules of the applicable exchange;

·                  privately
negotiated transactions;

·                  to cover short
sales made after the date this Registration Statement is declared effective by
the SEC;

·                  sales pursuant
to Rule 144;

 

·                  broker-dealers
may agree with the selling securityholders to sell a specified number of such
shares at a stipulated price per share;

·                  a combination of
any such methods of sale; and

·                  any other method
permitted pursuant to applicable law.

If the selling
stockholders effect such transactions by selling shares of Common Stock to or
through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  In connection with sales of the shares of
Common Stock or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of
the shares of Common Stock in the course of hedging in positions they
assume.  The selling stockholders may
also sell shares of Common Stock short and deliver shares of Common Stock
covered by this prospectus to close out short positions and to return borrowed
shares in connection with such short sales. 
The selling stockholders may also loan or pledge shares of Common Stock
to broker-dealers that in turn may sell such shares.

The selling
stockholders may pledge or grant a security interest in some or all of the
convertible notes, warrants or shares of Common Stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell the shares of Common Stock from time to time
pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include
the pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.  The selling
stockholders also may transfer and donate the shares of Common Stock in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

The selling
stockholders and any broker-dealer participating in the distribution of the
shares of Common Stock may be deemed to be “underwriters” within the meaning of
the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. 
At the time a particular offering of the shares of Common Stock is made,
a prospectus supplement, if required, will be distributed which will set forth
the aggregate amount of shares of Common Stock being offered and the terms of
the offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.

Under the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers.  In addition, in some states the shares of
Common Stock may not be sold unless such shares have been registered or
qualified 

 

for sale in such state or
an exemption from registration or qualification is available and is complied with.

There can be no
assurance that any selling stockholder will sell any or all of the shares of
Common Stock registered pursuant to the shelf registration statement, of which
this prospectus forms a part.

The selling
stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person.  Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of Common Stock to engage
in market-making activities with respect to the shares of Common Stock.  All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
Common Stock.

We will pay all
expenses of the registration of the shares of Common Stock pursuant to the
registration rights agreement, estimated to be
$[     ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if
any.  We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution.  We may be indemnified by the selling
stockholders against civil liabilities, including liabilities under the
Securities Act, that may arise from any written information furnished to us by
the selling stockholder specifically for use in this prospectus, in accordance
with the related registration rights agreement, or we may be entitled to
contribution.

Once sold under
the shelf registration statement, of which this prospectus forms a part, the
shares of Common Stock will be freely tradable in the hands of persons other
than our affiliates.

 

EXHIBIT C

SELLING
STOCKHOLDER QUESTIONNAIRE

The undersigned
hereby provides the following information to the Company and represents and
warrants that such information is accurate:

1.                                      Name.

(a)           Full Legal Name of Selling
Securityholder

 

(b)                                 Full Legal Name of Registered Holder (if
not the same as (a) above) through which Registrable Securities Listed in Item
3 below are held:

 

(c)                                  Full Legal Name of Natural Control Person
(which means a natural person who directly or indirectly alone or with others
has power to vote or dispose of the securities covered by the questionnaire):

 

 

2.  Address for Notices to Selling
Securityholder:

 

 

Telephone:

Fax:

Contact Person:

 

3. 
Beneficial Ownership of Registrable Securities:

Type and Principal Amount of Registrable Securities
beneficially owned:

 

4. 
Broker-Dealer Status:

(a)                                  Are you a broker-dealer?

Yes   o
                                                    No   o

Note:                   If yes, the SEC’s staff has indicated that you should
be identified as an underwriter in the Registration Statement.

(b)                                 Are you an affiliate of a broker-dealer?

Yes   o
                                                    No   o

(c)                                  If you are an affiliate of a
broker-dealer, do you certify that you bought the Registrable Securities in the
ordinary course of business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable Securities?

Yes   o
                                                    No   o

Note:                   If no, the SEC’s staff has indicated that you should
be identified as an underwriter in the Registration Statement.

5. 
Beneficial Ownership of Other Securities of the Company Owned by the
Selling Securityholder.

Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

Type and Amount of Other Securities beneficially owned
by the Selling Securityholder:

 

6. 
Relationships with the Company:

Except
as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has
had any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.

State any exceptions
here:

 

 

The undersigned agrees to promptly notify the Company
of any inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof and prior to the Effective Date for the
Registration Statement.

By signing below, the undersigned consents to the
disclosure of the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the Registration Statement
and the related prospectus.  The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly
given, has caused this Questionnaire to be executed and delivered either in
person or by its duly authorized agent.

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

[     ]

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