**EXHIBIT 10.18**

**AGREEMENT**

**BY AND BETWEEN**

**EARTH BIOFUELS, INC.**

**AND**

**HPS DEVELOPMENT, L.L.C.**

ThisAgreement is made as of the dates set forth below, and is effective as to eachparty as of their respective dates of execution, by and between HPSDevelopment, L.L.C. a Louisiana limited liability company domiciled inPlaquemines Parish, Louisiana (hereafter sometimes referred to as “HPS”),represented herein by its duly authorized Managers William Hurst, John Paul,and Kennett Stewart, and Earth Biofuels, Inc., a Delaware corporation with itsprincipal place of business in Dallas, Texas (hereafter sometimes referred toas “EB”), represented herein by its duly authorized President and ChiefExecutive Officer Dennis G. McLaughlin, III. HPS and EB are sometimes collectivelyreferred to as the “Parties.”

**RECITALS:**

**WHEREAS**, pursuant toLetter of Intent dated April 24, 2006, (LOI 1) the Parties agreed to pursue ingood faith a transaction in which EB would acquire a 50% interest in the formerMississippi River Alcohol Company ethanol plant (sometimes referred to as “Plant”)in exchange for cash and stock consideration to HPS and further advances to ayet to be formed entity, said advances to be used to retrofit the Plant;

**WHEREAS**, pursuant to asecond letter of intent dated June 13, 2006 (LOI 2), the Parties furtherclarified the due dates of the payments and other terms and conditions of thetransaction;

**WHEREAS**, the Partieswish to establish certain additional binding obligations between them as abasis upon which to proceed with the transaction;

NOWTHEREFORE, in consideration of the premises and other good and valuableconsideration, the receipt and sufficiency of which are acknowledged, theparties covenant and agree as follows:

# **1.****                                     **ACKNOWLEDGMENTOF RECEIPT OF PAYMENTS FROM EB

TheParties confirm that EB has made the following payments to HPS (as of August 1,2006) pursuant to LOI 1 and LOI 2:
|            | ** ** | **Date**   | ** ** | **Amount Paid** | ** ** |
|------------|------------|------------|------------|----------------------|------------|
| ** ** | ** ** | ** ** | ** ** | ** **           | ** ** |
| a.         |       | 4/27/2006  |       | $                    | 1 million  |   |
| b.         |       | 5/11/2006  |       | $                    | 1 million  |   |
| c.         |       | 6/02/2006  |       | $                    | 1 million  |   |

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| d.     |       | 6/13/2006 |       | $     | 2 million       |       |
|--------|------------|-----------|------------|-------|-----------------|------------|
| e.     |       | 6/19/2006 |       | $     | 2 million       |       |
| f.     |       | 7/12/2006 |       | $     | 2 million       |       |
| g.     |       | 7/25/2006 |       | $     | 3 million       |       |
|   | ** ** | **TOTAL** | ** ** | **$** | **12  million** | ** ** |

 

# **2.****                                      AMENDEDPAYMENT SCHEDULE**

EBagrees that the following payment schedule applies for payments due by EB toHPS and shall supersede and replace the payment schedule set forth in LOI 2:
| a. |   | $10 million due  upon execution of this Agreement;                          |   |
|----|--------|-----------------------------------------------------------------------------|--------|
| b. |   | $5 million due  on or before August 31, 2006;                               |   |
| c. |   | $4 million due on  or before September 15, 2006;                            |   |
| d. |   | $4 million due  on or before September 30, 2006;                            |   |
| e. |   | $15 million (to  be deposited in escrow) due on or before October 30, 2006. |   |

 

# **3.****                                      CLOSING**

Theclosing of all transactions contemplated by LOI 1 and LOI 2 (with the exceptionof the Morgan Keegan financing (or other acceptable third party financing),which shall occur as soon as reasonably possible) shall occur on or beforeOctober 30, 2006.

# **4.****                                      ACKNOWLEDGMENTOF ONGOING NEGOTIATIONS AND OBLIGATION TO NEGOTIATE IN GOOD FAITH**

TheParties confirm and acknowledge the continuing negotiations of definitivedocumentation necessary to close the contemplated transactions, including, butnot limited to, a Purchase Agreement and an Operating Agreement for SouthLouisiana Ethanol, L.L.C. The Parties further agree to negotiate in good faiththe final provisions of such definitive documentation.

# **5.****                                      TERMINATION**

## a.                                       Reasonsfor Termination. Anything herein or elsewhere to the contrarynotwithstanding, this Agreement may be terminated at any time after the datehereof but not later than the Closing:

### i.                                          bythe mutual consent of HPS and Earth Biofuels;

### ii.                                       atthe election of Earth Biofuels if the Closing has not occurred by October 30,2006 because of the acts or omissions of HPS;

### iii.                                    atthe election of HPS if the Closing has not occurred by October 30, 2006;

### iv.                                   atthe election of HPS if EB fails to meet any of the payment deadlines in Section2 above;

----

### v.                                      uponthe failure of EB and HPS to agree to terms and conditions of final and definitiveagreements, after negotiating in good faith. The failure of either party toagree to terms and conditions already negotiated between the parties (whetherverbally or in writing), except as modified in this Agreement shall be deemednegotiation in bad faith by such party.

Inthe event of any termination pursuant to Section 5(a) hereof, written noticethereof shall forthwith be given to the other Parties and the transactionscontemplated hereby shall thereupon be terminated, without further action bythe Parties.

## b.                                      ProcedureUpon and Effect of Termination.

### i.                                          Inthe event of any termination pursuant to Section 5(a)(i), as mutually agreed bythe Parties.

### ii.                                       Inthe event of any termination pursuant to Sections 5(a)(iii), or (iv), or in theevent of a termination pursuant to Section 5(a)(v), provided HPS has negotiatedin good faith, the effect of such termination shall be as set forth in Section5(c), below.

### iii.                                    Inthe event of any termination pursuant to Section 5(a)(ii), or in the event of atermination pursuant to Section 5(a)(v) (provided HPS has negotiated in badfaith), HPS shall return all previous payments made by EB to HPS. HPS shallhave 90 days from the date of termination to return such payments.

## c.                                       Inthe event of a termination described in Section 5(b)(ii), the following termsand provisions apply:

### i.                                          HPSshall be entitled to retain $5 million as a termination fee;

### ii.                                       HPSshall deliver to EB a standard form promissory note, in the principal amount ofall payments made by EB to HPS, less the $5 million termination fee, payablequarterly over seven years, said payments to begin the first full quarter afterbeginning operations at the Plant, bearing no interest except in the case ofdefault by HPS.

### iii.                                    HPSshall use its best efforts to secure third party financing, with commerciallyreasonable terms and conditions, as early as reasonably possible, in an amountsufficient to pay EB the remaining principal on the note described in Section5(c)(ii) above, or in such amount as HPS can reasonably borrow pursuant tocommercially reasonable terms and conditions.

## d.                                      Theremedies set forth in this Section 5 shall be the exclusive remedies availableto the Parties in the event of termination.

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# **6.****                                      INTERESTON ADVANCES BY HPS TO SOUTH LOUISIANA ETHANOL, L.L.C. (SLE)**

EBagrees that HPS may make one or more loans to SLE, with simple interest not toexceed 10%, which loans shall be a permitted liability of SLE and shall berepaid by SLE to HPS upon closing of Morgan Keegan or other third partyfinancing.

# **7.****                                      MISCELLANEOUS.**

## a.                                       NoThird-Party Beneficiaries. This Agreement shall not confer any rights orremedies upon any Person other than the Parties and their respective successorsand permitted assigns.

## b.                                      EntireAgreement. This Agreement (including the documents referred to herein)constitutes the entire agreement among the Parties and supersedes any priorunderstandings, agreements, or representations by or among the Parties, writtenor oral, to the extent they related in any way to the subject matter hereof.

## c.                                       Counterparts.This Agreement may be executed in one or more counterparts, each of which shallbe deemed an original but all of which together will constitute one and thesame instrument.

## d.                                      Headings.The section headings contained in this Agreement are inserted for convenienceonly and shall not affect in any way the meaning or interpretation of thisAgreement.

## e.                                       Notices.All notices, requests, demands, claims, and other communications hereunder willbe in writing. Any notice, request, demand, claim, or other communicationhereunder shall be deemed duly given if (and then two business days after) itis sent by registered or certified mail, return receipt requested, postageprepaid, and addressed to the intended recipient. Any Party may send anynotice, request, demand, claim, or other communication hereunder to theintended recipient at the address set forth above using any other means(including personal delivery, expedited courier, messenger service, telecopy,telex, ordinary mail, or electronic mail), but no such notice, request, demand,claim, or other communication shall be deemed to have been duly given unlessand until it actually is received by the intended recipient. Any Party maychange the address to which notices, requests, demands, claims, and other communicationshereunder are to be delivered by giving the other Parties notice in the mannerherein set forth.

## f.                                         GoverningLaw, Venue and Jurisdiction. This Agreement shall be governed by andconstrued in accordance with the domestic laws of the State of Louisianawithout giving effect to any choice or conflict of law provision or rule(whether of the State of Louisiana or any other jurisdiction) that would causethe application of the laws of any jurisdiction other than the State ofLouisiana.

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## g.                                      Amendmentsand Waivers. No amendment of any provision of this Agreement shall be validunless the same shall be in writing and signed by the Parties. No waiver by anyParty of any default, misrepresentation, or breach of warranty or covenanthereunder, whether intentional or not, shall be deemed to extend to any prioror subsequent default, misrepresentation, or breach of warranty or covenanthereunder or affect in any way any rights arising by virtue of any prior orsubsequent such occurrence.

## h.                                      Severability.Any term or provision of this Agreement that is invalid or unenforceable in anysituation in any jurisdiction shall not affect the validity or enforceabilityof the remaining terms and provisions hereof or the validity or enforceabilityof the offending term or provision in any other situation or in any otherjurisdiction.

## i.                                          Construction.The Parties have participated jointly in the negotiation and drafting of thisAgreement. In the event an ambiguity or question of intent or interpretationarises, this Agreement shall be construed as if drafted jointly by the Partiesand no presumption or burden of proof shall arise favoring or disfavoring anyParty by virtue of the authorship of any of the provisions of this Agreement.

## j.                                          SpecificPerformance. Each of the Parties acknowledges and agrees that the otherParties would be damaged irreparably in the event any of the provisions of thisAgreement are not performed in accordance with their specific terms orotherwise are breached. Accordingly, each of the Parties agrees that the otherParties shall be entitled to an injunction or injunctions to prevent breachesof the provisions of this Agreement and to enforce specifically this Agreementand the terms and provisions hereof, in addition to any other remedy to which theymay be entitled, at law or in equity.

## k.                                       FacsimileSignatures. This agreement may be executed by facsimile signature, whichshall be deemed to be an original.

TheParties hereto have executed this Agreement on the dates set forth below.
|        |    | EARTH BIOFUELS, INC.            |
|--------|---------|---------------------------------|
|   |    |                            |
|   |    | /s/ Dennis G.  McLaughlin, III  |
| Date:  | 8/02/06 |                            |   | BY: DENNIS G.  MCLAUGHLIN, III |
|   |    | TITLE: CHIEF EXECUTIVE  OFFICER |
|        |         |                                 |  |  |

----

 
|        |   | HPS DEVELOPMENT, L.L.C. |
|--------|--------|-------------------------|
|   |   |                    |
|   |   |                    |
| Date:  | 8/3/06 |                    |   | /s/ William Hurst |
|   |   | BY: WILLIAM  HURST      |
|   |   | TITLE: MANAGER          |
|   |   |                    |
|   |   |                    |
| Date:  | 8/3/06 |                    |   |   | /s/ John Paul |
|   |   | BY: JOHN PAUL           |
|   |   | TITLE: MANAGER          |
|   |   |                    |
|   |   |                    |
| Date:  | 8/3/06 |                    |   |   | /s/ Kenneth Stewart |
|   |   | BY: KENNETT  STEWART    |
|   |   | TITLE: MANAGER          |
|   |   |                    |
|   |   |                    |
| Date:  | 8/2/06 |                    |   |   | /s/ Darren Miles |
|   |   |                    |   |   | BY: DARREN MILES |
|        |        |                         |  |  |  |  |

 

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