Document:

EXHIBIT
10.11

THIS CONVERTIBLE PROMISSORY NOTE AND THE SHARES ISSUABLE
UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE “SECURITIES ACT”) OR ANY
SECURITIES LAW OF ANY STATE OF THE UNITED STATES. THIS
CONVERTIBLE PROMISSORY NOTE AND THE SHARES ISSUABLE UPON CONVERSION HEREOF MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY PURSUANT
TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION.

CONVERTIBLE
PROMISSORY NOTE

	
  $250,000.00

  	
  Dallas, Texas

  	
  January 30, 2006

  

 

FOR
VALUE RECEIVED, the undersigned, Earth Biofuels, Inc., a Delaware
corporation (“Borrower”), promises to pay to
the order of Marc Weill (“Lender”),
the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), with
interest from the date of advancement on the unpaid balance hereof from time to
time remaining unpaid at a rate of 8% per annum, in (i) lawful money of
the United States of America or (ii) equity securities of the Borrower as
provided herein, both principal and interest being payable at the address
designated in numbered paragraph 15 below or at such other place as Lender may,
from time to time, designate in writing. All interest under this Note shall be
computed on the basis of the actual number of days elapsed over an assumed year
consisting of three hundred sixty-five (365) days.

The
principal of this Note shall mature and be due and payable on April 28,
2007. Simple interest payable on this Note shall be payable upon each
Conversion Date (as defined below), July 28, 2006, October 28, 2006, January 28,
2007, and on the maturity date, when the principal and remaining accrued but
unpaid interest shall be due and payable.

All
past due principal and accrued interest on this Note shall bear interest from
maturity until paid at the highest (non-usurious) rate for which Borrower may
legally contract under applicable law. All payments on past due principal and
accrued interest hereunder shall be payable in lawful money of the United
States of America which shall be legal tender for public and private debts at
the time of payment. As used herein, the term “Holder”
shall initially mean Lender, and shall subsequently mean each person or entity
to which this Note is duly assigned.

This
Note evidences indebtedness incurred by Borrower for interim financing provided
to Borrower.

1.             Conversion Option. All or
any portion of the unpaid principal of this Note, plus accrued interest hereon,
shall be convertible, at the option of Lender, into shares of Common Stock,
$0.001 par value, issued by Borrower (the “Common Stock”).
At the time of any such conversion of the aggregate of the principal amount and
accrued interest, or a portion thereof, the rights of the Lender with respect
to such portion of the aggregate of the principal amount and accrued interest
so converted shall cease and the Lender shall be deemed to have become the

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record holder of the Common
Stock issuable upon such conversion. The Borrower covenants with the Lender
that it will at all times reserve and keep available out of its authorized Common
Stock and solely for the purpose of conversion as provided herein, and
conditionally allot to the Lender, such number of shares of Common Stock as
shall then be issuable upon the conversion of this Note. The Borrower covenants
with the Lender that all shares of Common Stock which shall be so issuable
shall be duly and validly issued as fully-paid and non-assessable.

The Common Stock into which
this Note may be converted shall be referred to herein as the “Conversion Shares.”  The number of Conversion Shares shall be
determined by dividing the Conversion Amount (defined below) by the Conversion
Price Per Share (defined below). Upon any such conversion, the Lender shall
execute any and all customary and appropriate documents to implement the
foregoing. Additionally, the Lender shall be entitled to demand registration
rights and piggyback registration rights pursuant to the Registration Rights
Agreement of even date herewith, executed by Borrower and Lender (“Registration Rights Agreement”).

1.1           Definitions. Unless otherwise
specified, for purposes hereof, the following terms shall have the following
meanings:

1.1.1        “Conversion
Amount” means an amount equal to the then outstanding principal
plus any accrued but unpaid interest under this Note, or such lesser amount as
Holder shall determine.

1.1.2        “Conversion Price Per Share” means a price per share of
Common Stock equal to the lower of (i) $0.50 per share or (ii) 70% of
the volume weighted average price per share of the Common Stock (“VWAP”). Notwithstanding the
foregoing, the price set forth in part (i) of the preceding sentence shall
be lowered from $0.50 per share to $0.30 per share if both of the following
shall have occurred within the 10-month time frame commencing 60 days
from the date of this note and ending 12 months from the date of this
note:  (A) the VWAP shall have
fallen below $0.50 per share and (B) Borrower shall have more than
200,000,000 shares of Common Stock issued and outstanding. The VWAP shall be determined
as follows:  (x) the daily volume
weighted average price of the Common Stock for such date on the OTC Bulletin
Board as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m.
Eastern Time to 4:02 p.m. Eastern Time); (y) if the Common Stock is
not then listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by the Pink
Sheets, LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported; or (z) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith
by the Holder and reasonably acceptable to the Borrower.

1.2           Conversion Procedures.

1.2.1        Holder may exercise
its conversion right by giving written notice (in the form attached hereto, the
“Conversion Notice”)
to the Borrower of the exercise of such right. The conversion of this Note (or
such portion thereof as Holder shall determine) will be deemed to have been
effected as of the date of receipt of the Conversion Notice

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(the “Conversion Date”).
If Holder has exercised its conversion right, the outstanding principal (or
such portion thereof as Holder shall determine) and any accrued but unpaid
interest under this Note shall be automatically converted into such number of
shares of the Common Stock to be issued by Borrower equaling the quotient of (i) the
Conversion Amount, and (ii) the Conversion Price Per Share.

1.2.2        Within five business
days of the Conversion Date, the Holder shall surrender this Note at the
principal office of the Borrower, for replacement or cancellation.

1.2.3        Within five business
days of the surrender of the Note by Holder, the Borrower will deliver to the
converting Holder (a) a certificate or certificates representing
Conversion Shares and (b) a replacement note for the unconverted principal
balance (if any) of this Note. Borrower agrees that its issuance of this Note
shall constitute full authority to its officers, agents, and transfer agents
who are charged with the duty of executing and issuing stock certificates to execute
and issue the necessary certificates for shares of Common Stock upon the
conversion of this Note.

1.2.4        On the Conversion
Date, the rights of the Holder of this Note to receive payment of such portion
of the principal and interest as Holder has converted hereunder will cease and
the person or persons in whose name or names any certificate or certificates
for Conversion Shares are to be issued upon such conversion will be deemed to
have become the holder or holders of record of the shares represented thereby.

1.2.5        The issuance of
certificates for the Conversion Shares will be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Borrower in connection with such conversion and the related issuance of Conversion
Shares.

1.2.6        If any fractional
interest in Conversion Shares would, except for the provisions of this Section 1,
be deliverable upon any conversion of this Note, in lieu of delivering the
fractional share therefor, the number of Conversion Shares shall be rounded to
the nearest whole number.

2.             Adjustment of Conversion Price
Per Share. The Conversion Price Per Share, the number of Conversion Shares,
and the number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 1.2, shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:

2.2.1        Merger, Sale of Assets. If the Borrower
at any time shall consolidate with or merge into or sell or convey all or
substantially all its assets to any other corporation, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase such number and kind of shares or
other securities and property as would have been issuable or distributable on
account of such consolidation,

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merger,
sale or conveyance, upon or with respect to the securities subject to the
conversion or purchase right immediately prior to such consolidation, merger,
sale or conveyance. The foregoing provision shall similarly apply to successive
transactions of a similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the anti-dilution provisions of this Section shall
apply to such securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.

2.2.2        Reclassification. If the Borrower at any
time shall, by reclassification or otherwise, change the Common Stock into the
same or a different number of securities of any class or classes that may be
issued or outstanding, this Note, as to the unpaid principal portion thereof
and accrued interest thereon, shall thereafter be deemed to evidence the right
to purchase an adjusted number of such securities and kind of securities as
would have been issuable as the result of such change with respect to the
Common Stock immediately prior to such reclassification or other change.

2.2.3        Stock Splits, Combinations and Dividends.
If the shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is paid on the
Common Stock in shares of Common Stock, the Conversion Price shall be
proportionately reduced in case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of shares, in each such
case by the ratio which the total number of shares of Common Stock outstanding
immediately after such event bears to the total number of shares of Common
Stock outstanding immediately prior to such event.

Whenever the Conversion Price
Per Share is adjusted pursuant to this Section 2.2, the Borrower shall
promptly mail to the Holder a notice setting forth the Conversion Price Per
Share after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.

3.             Optional Prepayment. This
Note may be prepaid by Borrower in whole or in part without the consent of the
Lender and without prepayment penalty of any kind.

4.             Default; Remedies. For the
purposes of this Agreement, an Event of Default (herein so called) shall have
occurred if (i) Borrower shall fail to pay when due any principal of or
interest on this Note, and such failure shall continue for a period of ten (10) days
after the due date, (ii) Borrower shall have failed to perform any
covenant or other obligation contained herein or in the Registration Rights
Agreement, and such failure shall continue for a period of ten (10) business
days after Lender shall have given Borrower written notice of such failure, (iii) Borrower
shall commence a voluntary case or other proceeding seeking liquidation or
reorganization with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make
a general assignment for the benefit of creditors, and such case or other
proceeding shall remain undismissed and unstayed for a period of 30 consecutive
days; or (iv) an involuntary case or other proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar
now or hereafter in effect or seeking the appointment of a trustee, liquidator,
receiver, custodian or other similar

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official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 consecutive days.

If
Borrower fails or refuses to pay any part of the principal of or interest upon
this Note as the same becomes due, or upon the occurrence of an Event of
Default hereunder, then in any such event the Holder hereof may, at its option (i) declare
the entire unpaid balance of principal and accrued interest on this Note to be
immediately due and payable without notice, (ii) reduce any claim to
judgment, and/or (iii) demand, pursue and enforce any of Lender’s rights
and remedies, pursuant to any applicable law or agreement. Each right and
remedy available to Lender shall be cumulative of and in addition to each other
such right and remedy. No delay on the part of Lender in the exercise of any
right or remedy available to Lender shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude other or further exercise
thereof or exercise of any other such right or remedy.

5.             Representations, Warranties and
Covenants of Borrower. Borrower represents and warrants that Borrower has
authority and has obtained all approvals and consents necessary to enter into
this Note and Borrower’s execution, delivery, and performance of this Note will
not violate or conflict with the terms of Borrower’s Certificate of
Incorporation. Borrower will use of the proceeds of this Note for development
of Borrower’s biodiesel plant located in Durant, Oklahoma, and for fees
associated with this Note. Subject
to the provisions of Regulation FD, upon request of Lender, Borrower shall
provide to Lender such information and materials as Lender may request,
including unaudited monthly and quarterly and audited yearly financial
statements, an annual budget, internal management documents, reports of
operations, reports of adverse developments, copies of any management letters,
communications with shareholders or directors, press releases and registration
statements, and access to all senior managers.

6.     Representations and
Warranties of Lender.

6.1  Suitability. The
Lender is an “accredited investor” as such term is defined in Regulation D issued
by the Securities and Exchange Commission, and such Lender’s financial
condition is such that it is able to bear the economic risk of its investment
in the Note. Lender has such knowledge and experience in financial and business
matters as is necessary to make an investment in the Note.

6.2  Purchase for Own Account. This Note is
being acquired by Lender for investment purposes only and not with a view to
the distribution of all or any part thereof. Lender has no present intention of
selling, transferring, disposing or granting any participation in the Note and
is not a party to any contract, agreement or understanding that would result in
any such sale, transfer or disposition of all or any portion of this Note.

7.             No Waiver; Cumulative Rights.
No delay on the part of the Holder of this Note in the exercise of any power or
right under this Note shall operate as a waiver thereof, nor shall a single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right.

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8.             Waiver. Borrower waives
demand, presentment, protest, notice of dishonor, notice of nonpayment, notice
of intention to accelerate, notice of acceleration, notice of protest and any
and all lack of diligence or delay in collection or the filing of suit hereon
which may occur, and agrees to all extensions and partial payments, before or
after maturity, without prejudice to the Holder hereof.

9.             Collection Costs. In the
event that, upon an Event of Default, any amount under this Note is collected
in whole or in part through suit, arbitration or mediation, then and in any
such case there shall be added to the unpaid principal balance hereof all costs
of collection, (including, but not limited to, reasonable attorneys’ fees and
expenses) whether or not suit is filed.

10.           Governing Law. This Note shall
be governed by and construed in accordance with the laws of the State of Texas.
In the event of a dispute involving this Note or any other instruments executed
in connection herewith, the parties irrevocably agree that exclusive venue for
such dispute shall lie in any court of competent jurisdiction in Dallas County,
Texas, and the parties waive any claim that such forum is inappropriate or
inconvenient.

11.           Headings. The headings of the
sections of this Note are inserted for convenience of reference only and shall
not be deemed to constitute a part hereof.

12.           Usury. All agreements between
Borrower and the Holder of this Note, whether now existing or hereafter arising
and whether written or oral, are expressly limited so that in no contingency or
event whatsoever, whether by acceleration of the maturity of this Note or
otherwise, shall the amount paid, or agreed to be paid, to the Holder hereof
for the use, forbearance or detention of the money to be loaned hereunder or
otherwise, exceed the maximum amount permissible under applicable law. If from
any circumstances whatsoever fulfillment of any provision of this Note, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity, and
if from any such circumstances the Holder of this Note shall ever receive
anything of value as interest or deemed interest by applicable law under this
Note or otherwise in an amount that would exceed the highest lawful rate, such
amount that would be excessive interest shall be applied to the reduction of
the principal amount owing under this Note, and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal of this
Note, such excess shall be refunded to Borrower. In determining whether or not
the interest paid or payable with respect to any indebtedness of Borrower to
the Holder hereof, under any specific contingency, exceeds the highest lawful
rate, Borrower and the Holder hereof shall, to the maximum extent permitted by
applicable law, (i) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest, (ii) amortize, prorate, allocate
and spread the total amount of interest throughout the full term of such
indebtedness so that the actual rate of interest on account of such
indebtedness is uniform throughout the term thereof, and/or (iii) allocate
interest between portions of such indebtedness, to the end that no such portion
shall bear interest at a rate greater than that permitted by law. The terms and
provisions of this paragraph shall control and supersede every other
conflicting provision of all agreements between Borrower and the Holder hereof.

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13.           Successors and Assigns. All of
the stipulations, promises and agreements in this Note made by or on behalf of
Borrower shall bind the successors and assigns of Borrower, whether so expressed
or not, and inure to the benefit of the successors and assigns of Borrower and
Lender. Any assignee of Borrower or Lender shall agree in writing prior to the
effectiveness of such assignment to be bound by the provisions hereof. The
Lender from time to time also may sell to one or more financial institutions,
institutional investors or other persons a participation interest in all or any
undivided portion of the rights, powers, privileges, remedies and interests of
the Lender under this Note.

14.           Severability. In the event any
one or more of the provisions contained in this Note shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof, and
this Note shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

15.           Notices. All notices and other
communications hereunder shall be in writing or by telecopy, and shall be
deemed to have been duly made when delivered in person or sent by telecopy,
same day or overnight courier, or 72 hours after having been deposited in the
United States registered or certified mail return receipt requested, postage
prepaid, to a party at the address set forth below (which may be changed in
accordance with these notice procedures):

If to Lender:

Name:  Marc Weill

Address:
440 Roundhill Road

Greenwich,
CT  06831-2639

Fax number: (203) 629-0679

If to Borrower:

Earth Biofuels, Inc.

3001 Knox Street, Suite 403

Dallas, TX  75205

Fax Number: (214) 389-9805

Attention:  Chief Executive Officer

With a copy to:

Roger A. Crabb

Scheef & Stone, LLP

5956
Sherry Lane, Suite 1400

Dallas,
TX  75225

Fax number:  (214) 706-4242

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THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN
BORROWER AND LENDER CONCERNING THE MATTERS HEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

IN
WITNESS WHEREOF, the undersigned have executed this Convertible Promissory Note
on and as of the date first set forth above.

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
  Name:

  	
  Dennis G. McLaughlin, III

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  Marc Weill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ MARC WEILL

  	
   

  
	
   

  	
  Marc Weill, individually

  
					

 

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FORM OF

NOTICE OF
CONVERSION

(To be Executed by
the Registered Holder in order to Convert the Note)

The undersigned hereby
irrevocably elects to convert $ 250,000.00 of the principal amount of the above
Note into shares of Common Stock of Earth Biofuels, Inc. according to the
conditions of such Note, as of the date written below.

	
  Date of Conversion

  	
   

  	
   

  
	
   

  
	
  Applicable Conversion Price $0.50

  
	
   

  
	
  Signature:

  	
   

  	
   

  
					

Printed Name: Marc Weill

	
  Address:

  	
  440 Round Hill Road

  
	
   

  	
  Greenwich, CT 06831

  

 

 9EXHIBIT
10.12

MEMBERSHIP
INTERESTS PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTERESTS
PURCHASE AGREEMENT (this “Agreement”),
dated as of the 1st day of March, 2006, is made by and between
Earth Biofuels, Inc., a Delaware corporation (“Buyer”),
and Dr. Miguel J. Dabdoub (“Seller”).

 

RECITALS:

A.            Seller currently owns an aggregate
one hundred percent (100%) membership interest in Earth Biofuels Technology Company, a Texas limited liability
company (the “Company”).

B.            Buyer wishes to pay Seller the sum
of Two Hundred Twenty-Five Thousand Dollars ($225,000.00); shares of Apollo
Resources International, Inc. and shares of the Buyer’s Common Stock as
consideration for the purchase of fifty percent (50%)
of Seller’s entire membership interests in the Company, its capital accounts,
all rights represented by such membership interests, and all goodwill
associated therewith (the “Interests”).

C.            Seller wishes to sell the Interests
to Buyer upon the terms and subject to the conditions set forth in this
Agreement.

Agreement

NOW, THEREFORE, in
consideration of the foregoing premises and the representations, warranties,
and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1.             Sale and Purchase.
Subject to the terms and conditions herein set forth, and in reliance upon the
representations, warranties and covenants contained herein, Buyer agrees to
purchase the Interests from Seller, and Seller agrees to sell the Interests to
Buyer.

2.             Purchase
Price.  The purchase
price for the Interests shall be as follows:

(a)           the
sum of Two Hundred Twenty-Five Thousand Dollars ($225,000.00);

(b)                               one
million eight hundred thousand (1,800,000) shares of the common stock of Buyer;
and

(c)                                one
hundred thousand (100,000) shares of the common stock of Apollo Resources
International, Inc.

3.             Closing.
Closing of the transactions contemplated herein (the “Closing”) shall be made effective on March 1, 2006.
(The date on which the Closing is held shall be referred to in this Agreement
as the “Closing Date.”)

(a)           At the Closing, Seller shall deliver
to Buyer (i) a Bill of Sale and Assignment in the forms of Exhibit A
attached hereto, (ii) all of the Company’s books of

 

account and business
records, and (iii) the resignations of all officers, directors and
managers of the Company, against delivery of the item specified in Paragraph 3(b).

(b)           At the Closing, Buyer shall deliver
the sum of Two Hundred Twenty-Five Thousand Dollars ($225,000.00) to Seller in
the form of a cashier’s check or wire transfer of immediately available funds;
and shall cause to be delivered certificates representing the shares described
in Section 2 of this Agreement.

4.             Representations and Warranties of Seller. Seller
hereby represents and warrants to Buyer that:

(a)           Seller owns all of the issued and
outstanding Interests in the Company.

(b)           Seller is, and will continue to be
until Closing, the sole legal and beneficial owner of the Interests, free and
clear of any and all liens, claims, and encumbrances, with full power to
transfer the same as contemplated herein.

(c)           Seller is not party to or bound by
any contract, promissory note, agreement, commitment, or obligation, creating
or securing indebtedness, obligations, or liabilities, a breach or default of
which would be triggered by Seller’s execution and delivery of this Agreement.

(d)           The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. To the best of Seller’s knowledge, there are no pending
actions or proceedings (i) to limit or impair the Company’s power to
engage in business or (ii) to dissolve the Company.

(e)           The Company will not enter into any
new contracts or agreements between the date of this Agreement and the Closing,
except in the ordinary course of business.

5.             Representations,
Warranties and Covenants of Buyer. Buyer hereby represents and
warrants to Seller that:

(a)           Buyer is a company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to enter into, perform and
carry out all of its duties and obligations in the transaction contemplated by
this Agreement.

(b)           The execution, delivery and
performance of this Agreement and the consummation of the transactions on the
part of Buyer contemplated hereunder have been duly authorized by all necessary
[corporate] action on the part of Buyer. This Agreement is (or will be when
executed and delivered pursuant hereto) the legal, valid and binding obligation
of Buyer, enforceable in accordance with its terms.

(c)           Neither the execution and delivery of
this Agreement by Buyer, nor Buyer’s compliance with any of the terms and
provisions of this Agreement, nor the

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consummation of the transactions contemplated hereby, will conflict
with or result in a violation of, or constitute a material default under, its [Articles
of Incorporation, Bylaws] or any other agreement, contract or commitment to
which it is a party; nor will the performance by Buyer of its obligations
hereunder violate any judgment, order, injunction, decree, regulation or ruling
of any court or governmental authority to which Buyer is subject.

6.             Conditions
Precedent to Buyer’s Obligations. Buyer’s obligation to
purchase the Interests under this Agreement is subject to the satisfaction, at
or before the Closing, of all the following conditions:

(a)          Seller shall execute and deliver to
Buyer the form of Bill of Sale and Assignment attached as Exhibit A;

(b)         Seller shall deliver to Buyer all of
the Company’s books of account and business records; and

(b)           Seller shall deliver to Buyer, the
resignations of all officers, directors and managers of the Company.

Buyer may waive
any or all of these conditions, in whole or in part, without prior notice;
provided, however, that no such waiver of a condition shall constitute a waiver
by Buyer of any of its other rights or remedies, at law or in equity, for the
Seller’s breach of any of its representations, warranties, or covenants under
this Agreement.

7.             Seller’s
Indemnities. For a period of one (1) year after the Closing,
Seller shall indemnify and hold Buyer harmless from and against any and all
claims, losses, costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies (including interest, penalties, and reasonable attorney,
expert witness and consultant fees), incurred by Buyer in connection with
Seller’s breach of or failure to perform, any of its representations,
warranties, or covenants in this Agreement.

8.             Attorney Fees. If
any legal action or other proceeding is brought for the enforcement of this
Agreement or any other agreement, document, contract, instrument or other
writing entered into in connection herewith, because of an alleged dispute,
breach, default, or misrepresentation, in connection with any of the provisions
of this Agreement or such other writing, the successful or prevailing party
shall be entitled to recover its reasonable attorney fees, and other costs and expenses,
incurred in such action or proceeding, in addition to any other relief to which
it or they may be entitled.

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9.             Notices. In order
to be effective all notices, consents, approvals and disapprovals (“Notice”) required
by this Agreement must be in writing, signed by the party giving such Notice,
or in the case of Buyer, by an officer thereof, and either (i) personally
delivered; (ii) placed in the mail, properly addressed and certified,
return receipt requested, with postage prepaid thereon; or (iii) deposited
for delivery by a recognized, private overnight courier for next business
morning delivery, properly addressed, and with the full waybill prepaid. Notice
shall be deemed received and effective on the earlier of the date actually
received, or, if applicable, three (3) business days after being sent as
specified in clause (ii) of this Paragraph 9. Notices must be addressed to
the parties hereto at the following addresses, unless the same shall be changed
by Notice in accordance herewith:

	
  If to Seller:

  	
  Dr. Miguel J. Dabdoub

  
	
   

  	
  Rua Bernardino
  De Campos 786 Ap. 71

  
	
   

  	
  Ribeirao Preto,
  Sp

  
	
   

  	
  Sao Paulo,
  Brazil CEP 14015-130

  
	
   

  	
  migjodab@usp.br

  
	
   

  	
   

  
	
  If to Buyer:

  	
  Attn: Dennis G. McLaughlin, Chief Executive Officer

  
	
   

  	
  3001 Knox
  Street, Suite 403

  
	
   

  	
  Dallas, Texas
  75205

  
	
   

  	
  Facsimile: 214
  389 9805

  

10.          Entire
Agreement; Amendments. Each of the parties represents that no
promise or agreement which is not expressed in this Agreement, has been made to
such party in executing this Agreement, and neither of the parties is relying
upon any statement or representation not contained in this Agreement. This
Agreement, including the Exhibit hereto, constitutes the entire
understanding between the parties hereto relative to the subject matter hereof,
superseding any and all prior agreements, arrangements, and understandings,
written or oral, between the parties. This Agreement may be amended only by a
written instrument signed by the parties.

11.          Binding
Effect; Permissibility of Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

12.          Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to its conflict of laws rules.

13.          No
Brokers. Each party represents and warrants that it has dealt with
no broker or finder in connection with the transaction contemplated by this
Agreement, and that no broker or other person is entitled to any commission or
finder’s fee in connection with this transaction. Each party agrees to
indemnify, defend and hold harmless the other party against any commission or
finder’s fee alleged to be payable because of any act, omission or statement of
the indemnifying party.

14.          Severability.
If any provision of this Agreement is held to be invalid or unenforceable by
any court of competent jurisdiction, it is the intent of all of the parties
that all

 4
 

 

other provisions
of this Agreement be construed to remain fully valid, enforceable and binding
on the parties.

15.          Covenant of Good Faith and
Fair Dealing. With regard to
their respective obligations and commitments under this Agreement, each of
Buyer and Seller covenants that it shall act in good faith and deal fairly with
the other party.

16.          Reasonable
Cooperation. Each party hereto agrees to execute and deliver such
instruments and take such other action as the other party may reasonably
request in order to carry out the intent of this Agreement.

17.          Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

IN WITNESS
WHEREOF, the parties hereto have caused their duly authorized representatives
to execute this Agreement as of the date first above written.

“Buyer”

	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
  Dennis G.
  McLaughlin, III

  
	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  “Seller”

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ DR. MIGUEL J. DABDOUB

  	
   

  
	
   

  	
  Dr. Miguel
  J. Dabdoub

  
				

 5
 

 

Exhibit A

BILL OF SALE AND ASSIGNMENT

THIS BILL OF SALE AND ASSIGNMENT (this “Bill of Sale”),
dated as of March 1, 2006 (the “Closing
Date”), is made and delivered by and between Earth Biofuels, Inc.
(“Buyer”), and Dr. Miguel
J. Dabdoub (“Seller”). This
Bill of Sale is being executed and delivered pursuant to the terms of that
certain Membership Interests Purchase Agreement, dated as of the Closing Date
(the “Purchase Agreement”),
by and among Seller and Buyer. Capitalized terms used in this Bill of Sale and
not otherwise defined shall have the meanings assigned in the Agreement.

Recitals

A.            Seller
is the owner of an undivided one hundred percent (100%) membership interest in Earth Biofuels Technology Company, a Texas limited liability company
(“Company”).

B.            Seller
desires to assign to Buyer fifty percent (50%) membership interest in Company,
including all of its related rights and capital account and all associated
goodwill.

C.            Buyer
desires to accept such assignment and pay Seller the agreed upon Purchase Price
therefor established in the Purchase Agreement.

Agreement

IN
CONSIDERATION OF the foregoing premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:

1.             Seller
hereby assigns, transfers, conveys, and sells to Buyer fifty percent (50%) of
Seller’s entire one hundred percent (100%) membership interest in Company,
together with Seller’s related capital account, all rights represented by such
membership interest, and all goodwill associated therewith (collectively, the “Interest”).

2.             Seller
hereby represents, warrants and certifies to Buyer that on or before the date
hereof, Seller has delivered to Company all Company property in its possession
or control or to which it has had access during its association with the
Company, and that it has retained no copy thereof.

3.             Seller
hereby acknowledges receipt of the Purchase Price (as defined in the Agreement)
due and payable as of the Closing Date.

 6
 

 

4.             Each
party shall promptly execute and deliver to the other party all such further
instruments, assignments, assurances and other documents as such party may
reasonably request in connection with its performance under this Bill of Sale
and the transactions contemplated hereby and by the Purchase Agreement.

5.             Seller,
for itself and its personal representatives and assigns, covenants and agrees
to warrant and defend the transfer, assignment and conveyance of the Interest
and Buyer’s title thereto.

7.             This
Bill of Sale shall be governed by and construed in accordance with the laws of
the State of Texas, and shall inure to the benefit of and be binding upon the
parties hereto, their heirs, personal representatives, successors and assigns.

IN WITNESS WHEREOF, the
undersigned have executed and delivered this Bill of Sale effective as of the
day and year first written above.

	
  “Buyer”

  
	
   

  
	
  EARTH
  BIOFUELS, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Dennis G.
  McLaughlin, III

  	
   

  
	
   

  	
  Dennis G.
  McLaughlin, III

  	
   

  
	
   

  	
  Chief Executive
  Officer

  	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  “Seller”

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Miguel J.
  Dabdoub

  	
   

  

 

 7

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