**Exhibit10.37**

THIS NOTE AND THESECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THISNOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION ORRESALE. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY NOT BESOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT ANEFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,AND ANY APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTIONFROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, ANDAPPLICABLE STATE SECURITIES LAWS.

**ALBEMARLE BIO-REFINERY, INC.CONVERTIBLE PROMISSORY NOTE**

Raleigh, North Carolina

 
| $3,000,000 |   | July 19, 2006 |
|------------|--------|---------------|

1.         Principal.Albemarle Bio-Refinery, Inc., a North Carolina corporation (the “***Company***”), having anaddress of 28809 US Highway 64, Jamesville, North Carolina 27846, for valuereceived, hereby promises to pay to the order of Earth Biofuels, Inc. (“***Holder***”) having anaddress of 3001 Knox Street, Suite 403 Dallas, Texas 75205, in lawful money ofthe United States of America, the principal amount of Three Million Dollars($3,000,000), together with interest as set forth below.

2.         Interestand Maturity. The Company promises to pay simple interest on the unpaidprincipal amount from the date hereof until such principal amount is paid infull at the rate of four and 85/100 percent (4.85%) per annum, or such lesserrate as shall be the maximum rate allowable under applicable law. Interest fromthe date hereof shall be computed on the basis of a 365-day year. Unlessconverted or prepaid earlier as set forth below, all outstanding principal andaccrued and unpaid interest on this Note shall be due and payable on July 18,2007, (the “***MaturityDate***”***)***.

3.         Prepayment.Principal and unpaid accrued interest of this Note may be prepaid withoutpenalty, in whole or in part at any time at the option of the Company. Any prepaymentof this Note will be credited first against accrued interest, then principal.Upon payment in full of the amount of all principal and interest payablehereunder, this Note shall be surrendered to the Company for cancellation.

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4.        Conversion.

4.1       MandatoryConversion. All outstanding principal on this Note and all accrued andunpaid interest thereon, as of the close of the business day immediatelypreceding the date of the first closing of an Equity Financing (as definedbelow) of the Company, shall be automatically converted upon the first closingof such Equity financing into such shares of capital stock of the Company asare issued in such Equity Financing. The number of shares of capital stock ofthe Company to be issued upon conversion of this Note shall be determined bydividing the principal and accrued and unpaid interest thereon (as set forthabove) of this Note by the Conversion Price (as defined below). For purposes ofthis Note, an “***EquityFinancing***” shall mean the Company’s closing of its issuance andsale of equity securities, in a single transaction or series of relatedtransactions, to the Holder. For purposes of this Note, the “***Conversion Price***” isthe purchase price per share of the securities issued in the Equity Financing.

4.2       Effectof Conversion. Upon conversion of this Note, the applicable amount ofoutstanding principal and accrued and unpaid interest of the Note shall beconverted without any further action by the Holder; provided, however,that the Company shall not be obligated to issue certificates evidencing thesecurities issuable upon such conversion unless such Note is either deliveredto the Company or its transfer agent, or the holder notifies the Company or itstransfer agent that such Note has been lost, stolen or destroyed and executesan agreement satisfactory to the Company to indemnify it from any loss incurredby it in connection with the loss, theft or destruction of such Note. TheCompany shall, as soon as practicable after such delivery, or such agreement andindemnification, issue and deliver at such office to the Holder of such Note, acertificate or certificates for the securities to which the Holder shall beentitled and a check payable to the Holder in the amount of any cash amountspayable as the result of a conversion into fractional shares of the securities,as determined by the Board of Directors of the Company. Such conversion shallbe deemed to have been made concurrently with the first closing of the EquityFinancing. The person or persons entitled to receive securities issuable uponsuch conversion shall be treated for all purposes as the record holder orholders of such securities on such date. In any case, the Company shall notissue fractional shares of securities but shall pay the dollar equivalent ofany fractional shares promptly following the closing date of the EquityFinancing.

4.3       LockupAgreement. The Holder agrees, in connection with the Company’s initialpublic offering, upon request of the Company or any underwriters managing anyunderwritten offering of the Company’s securities, not to sell, make any shortsale of, loan, grant any option for the purchase of, or otherwise dispose ofany securities of the Company without the prior written consent of the Companyor such underwriters for such period of time (not to exceed 180 days) from theeffective date of such registration as may be requested by the underwriters; provided,however, that all of the Company’s executive officers and directorsagree to similar restrictions.

5.         Attorney’sFees. If the indebtedness represented by this Note or any part thereof iscollected in bankruptcy, receivership or other judicial proceedings or if thisNote is placed in the hands of attorneys for collection after default, theCompany agrees to pay, in addition to the principal and interest payablehereunder, reasonable attorneys’ fees and costs incurred by Holder.

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6.         Notices.All notices hereunder shall be in writing and shall be deemed given three (3)business days after being sent by certified or registered mail, postageprepaid, return receipt requested, at theaddresses set forth above.

7.         Acceleration. All outstanding principal of and accrued and unpaid interest on thisNote shall automatically become immediately due and payable, withoutpresentment, demand, protest or notice of any kind, all of which are expresslywaived, if (i) the Company shall default in the payment of any principal orinterest hereunder when due; (ii) the Company commences any proceeding inbankruptcy or for dissolution, liquidation, winding up or other relief understate or federal bankruptcy or similar laws; or (iii) any such proceeding iscommenced against the Company, or a receiver or trustee is appointed for theCompany or a substantial part of its property, and such proceeding orappointment is not dismissed or discharged within sixty (60) days after itscommencement. Upon any such declaration of acceleration, such principal andinterest shall become immediately due and payable and the Holder shall beentitled to exercise all of its rights and remedies hereunder whether at law orin equity. The failure of the Holder to declare the Note due and payable shallnot be a waiver of its right to do so, and the Holder shall retain the right todeclare the Note due and payable unless it shall execute a written waiver.

8.         NoDilution or Impairment. The Company will not, by amendment of itsCertificate of Incorporation or Bylaws, each as amended to date, or through anyreorganization, transfer of assets,consolidation, merger, dissolution, issue or sale of securities or any othervoluntary action, avoid or seek to avoid the observance or performance of anyof the terms of this Note, but will at all times in good faith assist inthe carrying out of all such terms and in the takingof all such action as may be necessary or appropriate in order to protect therights of the holder of this Note against dilution or other impairment.

9.         Waiver of Notice of Presentment. The Company hereby waives presentment, demandfor performance, notice of non-performance, protest, notice of protest andnotice of dishonor. No delay on the part ofHolder in exercising any right hereunder shall operate as a waiver of suchright or any other right.

10.       Non-Waiver. The failure of the Holder to enforce or exercise any right or remedyprovided in this Note or at law or in equity upon any default or breach shallnot be construed as waiving the rights to enforce or exercise such orany other right or remedy at any later date. No exercise of the rights and powers granted in or held pursuant to thisNote by the Holder, and no delays or omissions in the exercise of suchrights and powers shall be held to exhaust the same or be construed as a waiver thereof, and every such right and power may beexercised at any time and from time to time.

11.            Governing Law. This Note shall be construed in accordance with the laws of the Stateof North Carolina, without regard to its conflicts of laws or choice of lawprovisions.

12.       NoStockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person theright to vote or to consent or to receive notice as a stockholder of theCompany.

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13.       Amendment.This Note may not be amended or waived in any way except by a writing signed bythe Company and the Holder.

14.       Holder Representations. The Holder hereby represents and warrants asfollows:

14.1     Investment Representations. It is the Holder’s present intention to acquirethe Note and any**shares of common stock issuable uponconversion or exercise of the Note (collectively,the ***“Securities”***)**which it may receive pursuant to thisNote, for its own account and thateach such Security is being and will be acquired by it for the purpose ofinvestment and not with a view todistribution or resale. The Holder warrants and agrees that it will not sell ortransfer any such Security withoutregistration under applicable federal and state securities laws, or the availability of appropriate exemptionstherefrom. The Holder agrees that each such Security will bear a restrictive legend or legends stating that the samehas not been registered under applicable federal and state securitieslaws and referring to restrictions on its transferability and sale.

14.2     Knowledge,Experience and Due Diligence. The Holder acknowledges that it is a sophisticated investor and has such knowledge andexperience in financial and business matters that it is capable of evaluating the merits and risks of this investmentand has substantial experience inmaking investment decisions of the type contemplated hereby. The Holder can bear the economic risks of this investment, canafford a complete loss of its investment and has no present need for liquidity in conjunction with the purchase of theSecurities. During the course of thistransaction and prior to  the sale of theSecurities hereunder, the Holder acknowledgesthat it has had the opportunity to ask questions of, and has receivedsatisfactory answers from, managementof the Company concerning the terms and conditions of this investment and the business and operations of theCompany.

14.3     Power and Authority. The Holder confirms that it has full power andauthority and has taken all requiredaction necessary to permit it to purchase this****Note. The Holder representsand warrants that this Note is the legal, valid and binding obligation of suchHolder, enforceable in accordancewith its terms.

14.4     AccreditedInvestor. The Holder meets the criteria of an “accredited investor” as defined in Rule 501 of Regulation D**adopted under the Securities Act of 1933,as amended.

14.5     Indemnification. Holder hereby agrees to defend, indemnify and hold the Companyharmless for any damages, loss, reasonable attorney’s fees or any other costsarising out of any claim or actionarising out of a breach by Holder of Holder’s representations and warranties set forth in this Section 14.

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ThisNote is hereby issued by the Company, and agreed and acknowledged by Holder, as of the year and date first abovewritten.
|        | ** ** | **COMPANY:**                     |
|--------|------------|----------------------------------|
|   | ** ** |                             |
|   | ** ** | **ALBEMARLE BIO-REFINERY, INC.** |
|   | ** ** | ** **                       |
|   | ** ** | ** **                       |
|   |       | By:                              | /s/ William R. Horton |   |
|   |       | Name:                            | William R. Horton |   |
|   |       | Title:                           | CEO/President |   |

 

Acknowledged and agreedwith regard to Section 14 above:
| **Earth Biofuels, Inc.** |
|--------------------------|
| ** **               |
| By:                      | /s/ George Lowrance |   |
| Name:                    | George Lowrance |   |
| Title:                   | Vice President |   |

 

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