Document:

Exhibit
10.36

THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS
NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE. THIS NOTE AND THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS.

ALBEMARLE BIO-REFINERY, INC.

CONVERTIBLE
PROMISSORY NOTE

	
  Raleigh,
  North Carolina

  	
   

  
	
   

  	
   

  
	
  $2,000,000

  	
  May 31, 2006

  

1.         Principal. Albemarle
Bio-Refinery, Inc., a North Carolina corporation (the “Company”), having an address of 28809 US Highway
64, Jamesville, North Carolina 27846, for value received, hereby promises
to pay to the order of Earth Biofuels, Inc. (“Holder”) having an address of 3001 Knox Street,
Suite 403 Dallas, Texas 75205, in lawful
money of the United States of America, the principal amount of Two Million
Dollars ($2,000,000), together with interest as set forth below.

2.         Interest
and Maturity. The Company promises to pay simple interest on the unpaid principal amount from the date hereof
until such principal amount is paid in full at the rate of four and
85/100 percent (4.85%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable
law. Interest from the date hereof shall be computed on the basis of a
365-day year. Unless converted or prepaid earlier as set forth below, all outstanding principal and accrued
and unpaid interest on this Note shall be due and payable on June 1,
2007 (the “Maturity Date”).

3.         Prepayment.
Principal and unpaid accrued interest of this Note may be prepaid
without penalty, in whole or in part at any time at the option of the Company. Any
prepayment of this Note will be credited first against accrued interest, then
principal. Upon payment in full of the
amount of all principal and interest payable hereunder, this Note shall be
surrendered to the Company for cancellation.

4.         Conversion.

4.1       Mandatory Conversion. All
outstanding principal on this Note and all accrued and unpaid interest thereon,
as of the close of the business day immediately preceding the date of the first
closing of an Equity Financing (as defined below) of the Company, shall be
automatically converted upon the first closing of such Equity

 

Financing into such shares of capital stock of the
Company as are issued in such Equity Financing. The number of shares of capital
stock of the Company to be issued upon conversion of this Note shall be
determined by dividing the principal and accrued and unpaid interest thereon
(as set forth above) of this Note by the Conversion Price (as defined below).
For purposes of this Note, an “Equity Financing” shall
mean the Company’s closing of its issuance and sale of equity securities, in a
single transaction or series of related transactions, to the Holder. For
purposes of this Note, the “Conversion Price” is
the purchase price per share of the securities issued in the Equity Financing.

4.2       Effect of Conversion. Upon
conversion of this Note, the applicable amount of outstanding principal and
accrued and unpaid interest of the Note shall be converted without any further
action by the Holder; provided, however, that the Company shall
not be obligated to issue certificates evidencing the securities issuable upon
such conversion unless such Note is either delivered to the Company or its
transfer agent, or the holder notifies the Company or its transfer agent that
such Note has been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify it from any loss incurred by it in
connection with the loss, theft or destruction of such Note. The Company shall,
as soon as practicable after such delivery, or such agreement and indemnification, issue and deliver at such office
to the Holder of such Note, a certificate or certificates for the securities to
which the Holder shall be entitled and a check payable to the Holder in the
amount of any cash amounts payable as the result of a conversion into
fractional shares of the securities, as determined by the Board of Directors of
the Company. Such conversion shall be deemed to have been made concurrently
with the first closing of the Equity Financing. The person or persons entitled
to receive securities issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such securities on such date. In
any case, the Company shall not issue
fractional shares of securities but shall pay the dollar equivalent of any fractional shares promptly following the
closing date of the Equity Financing.

4.3       Lockup Agreement. The Holder
agrees, in connection with the Company’s initial public offering, upon request
of the Company or any underwriters managing any underwritten offering of the
Company’s securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any securities of the
Company without the prior written consent of the Company or such underwriters
for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested
by the underwriters; provided, however, that all of the Company’s
executive officers and directors agree to similar restrictions.

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

 

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,
postage prepaid, return receipt requested,
at the addresses set forth above.

7.         Acceleration. All outstanding principal of and accrued and unpaid interest on this
Note shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are expressly
waived, if (i) the Company shall default in the payment of any principal or
interest hereunder when due; (ii) the Company commences any proceeding in
bankruptcy or for dissolution, liquidation, winding up or other relief under
state or federal bankruptcy or similar laws; or (iii) any such proceeding is
commenced against the Company, or a receiver or trustee is appointed for
the Company or a substantial part of its property, and such proceeding or appointment
is not dismissed or discharged within sixty (60) days after its commencement.
Upon any such declaration of acceleration, such principal and interest shall
become immediately due and payable and the Holder shall be entitled to exercise
all of its rights and remedies hereunder
whether at law or in equity. The failure of the Holder to declare the
Note due and payable shall not be a waiver of its right to do so, and the Holder shall retain the right to declare the
Note due and payable unless it shall execute a written waiver.

8.         No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or Bylaws, each as amended to date, or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Note against dilution or other
impairment.

9.         Waiver
of Notice of Presentment. The Company hereby waives presentment, demand for performance, notice of non-performance,
protest, notice of protest and notice of dishonor. No delay on the part
of Holder in exercising any right hereunder shall operate as a waiver of such right or any other right.

10.       Non
Waiver. The failure of the Holder to enforce or exercise any right or remedy provided in this Note or at law or in
equity upon any default or breach shall not be construed as waiving the rights
to enforce or exercise such or any other right or remedy at any later
date. No exercise of the rights and powers granted in or held pursuant to this Note by the Holder, and no delays
or omissions in the exercise of such rights and powers shall be held to exhaust
the same or be construed as a waiver thereof, and every such right and power may be exercised at any time and
from time to time.

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

 

12.       No Stockholder
Rights. Nothing contained in this Note shall be construed as conferring
upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder of the
Company.

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

14.            Holder
Representations. The Holder hereby
represents and warrants as follows:

14.1         Investment Representations. It is the Holder’s
present intention to acquire the Note and
any shares of common stock issuable upon conversion or exercise of the Note
(collectively, the “Securities”) which it may receive pursuant to this
Note, for its own account and that
each such Security is being and will be acquired by it for the purpose
of investment and not with a view to distribution or resale. The Holder warrants
and agrees that it will not sell or transfer
any such Security without registration under applicable federal and
state securities laws, or the availability of appropriate exemptions therefrom. The Holder agrees that each such
Security will bear a restrictive legend or legends stating that the same has not been registered under applicable
federal and state securities laws 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 and experience in financial and business matters that it is capable of evaluating
the merits and risks of this investment and has substantial experience
in making investment decisions of the type contemplated hereby. The Holder can
bear the economic risks of this investment, can afford a complete loss of its investment and has no present need for
liquidity in conjunction with the purchase
of the Securities. During the course of this transaction and prior to the sale
of the Securities hereunder, the
Holder acknowledges that it has had the opportunity to ask questions of, and
has received satisfactory answers from, management of the Company concerning
the terms and conditions of this investment and the business and operations of
the Company.

14.3     Power and Authority. The Holder confirms that it has full power and authority and has taken all required action
necessary to permit it to purchase this Note. The Holder represents and warrants that this Note is the legal, valid
and binding obligation of such Holder, enforceable in accordance with
its terms.

14.4     Accredited Investor. 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 Company harmless for any damages, loss, reasonable attorney’s fees or any
other costs arising out of any claim or action arising out of a breach by
Holder of Holder’s representations and warranties set forth in this Section 14.

 

This Note is
hereby issued by the Company, and agreed and acknowledged by Holder, as of the year and date first above
written.

	
  

  	
   

  	
   

  	
  COMPANY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ALBEMARLE BIO-REFINERY, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ William R. Horton

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William R. Horton

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  CEO / President

  	
   

  
							

Acknowledged and agreed with regard to Section 14
above:

	
  Earth Biofuels, Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ George Lowrance

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  George Lowrance

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice PresidentExhibit
10.37

THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS
NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION
FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE 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 an
address of 28809 US Highway 64, Jamesville, North Carolina 27846, for value
received, hereby promises to pay to the order of Earth Biofuels, Inc. (“Holder”) having an
address of 3001 Knox Street, Suite 403 Dallas, Texas 75205, in lawful money of
the United States of America, the principal amount of Three Million Dollars
($3,000,000), together with interest as set forth below.

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

3.         Prepayment.
Principal and unpaid accrued interest of this Note may be prepaid without
penalty, in whole or in part at any time at the option of the Company. Any prepayment
of this Note will be credited first against accrued interest, then principal.
Upon payment in full of the amount of all principal and interest payable
hereunder, this Note shall be surrendered to the Company for cancellation.

 

4.        Conversion.

4.1       Mandatory
Conversion. All outstanding principal on this Note and all accrued and
unpaid interest thereon, as of the close of the business day immediately
preceding the date of the first closing of an Equity Financing (as defined
below) of the Company, shall be automatically converted upon the first closing
of such Equity financing into such shares of capital stock of the Company as
are issued in such Equity Financing. The number of shares of capital stock of
the Company to be issued upon conversion of this Note shall be determined by
dividing the principal and accrued and unpaid interest thereon (as set forth
above) of this Note by the Conversion Price (as defined below). For purposes of
this Note, an “Equity
Financing” shall mean the Company’s closing of its issuance and
sale of equity securities, in a single transaction or series of related
transactions, to the Holder. For purposes of this Note, the “Conversion Price” is
the purchase price per share of the securities issued in the Equity Financing.

4.2       Effect
of Conversion. Upon conversion of this Note, the applicable amount of
outstanding principal and accrued and unpaid interest of the Note shall be
converted without any further action by the Holder; provided, however,
that the Company shall not be obligated to issue certificates evidencing the
securities issuable upon such conversion unless such Note is either delivered
to the Company or its transfer agent, or the holder notifies the Company or its
transfer agent that such Note has been lost, stolen or destroyed and executes
an agreement satisfactory to the Company to indemnify it from any loss incurred
by it in connection with the loss, theft or destruction of such Note. The
Company shall, as soon as practicable after such delivery, or such agreement and
indemnification, issue and deliver at such office to the Holder of such Note, a
certificate or certificates for the securities to which the Holder shall be
entitled and a check payable to the Holder in the amount of any cash amounts
payable as the result of a conversion into fractional shares of the securities,
as determined by the Board of Directors of the Company. Such conversion shall
be deemed to have been made concurrently with the first closing of the Equity
Financing. The person or persons entitled to receive securities issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such securities on such date. In any case, the Company shall not
issue fractional shares of securities but shall pay the dollar equivalent of
any fractional shares promptly following the closing date of the Equity
Financing.

4.3       Lockup
Agreement. The Holder agrees, in connection with the Company’s initial
public offering, upon request of the Company or any underwriters managing any
underwritten offering of the Company’s securities, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of
any securities of the Company without the prior written consent of the Company
or such underwriters for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the underwriters; provided,
however, that all of the Company’s executive officers and directors
agree to similar restrictions.

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

 

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, postage
prepaid, return receipt requested, at the
addresses set forth above.

7.         Acceleration. All outstanding principal of and accrued and unpaid interest on this
Note shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are expressly
waived, if (i) the Company shall default in the payment of any principal or
interest hereunder when due; (ii) the Company commences any proceeding in
bankruptcy or for dissolution, liquidation, winding up or other relief under
state or federal bankruptcy or similar laws; or (iii) any such proceeding is
commenced against the Company, or a receiver or trustee is appointed for the
Company or a substantial part of its property, and such proceeding or
appointment is not dismissed or discharged within sixty (60) days after its
commencement. Upon any such declaration of acceleration, such principal and
interest shall become immediately due and payable and the Holder shall be
entitled to exercise all of its rights and remedies hereunder whether at law or
in equity. The failure of the Holder to declare the Note due and payable shall
not be a waiver of its right to do so, and the Holder shall retain the right to
declare the Note due and payable unless it shall execute a written waiver.

8.         No
Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or Bylaws, each as amended to date, or through any
reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Note, but will at all times in good faith assist in
the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the holder of this Note against dilution or other impairment.

9.         Waiver of Notice of Presentment. The Company hereby waives presentment, demand
for performance, notice of non-performance, protest, notice of protest and
notice of dishonor. No delay on the part of
Holder in exercising any right hereunder shall operate as a waiver of such
right or any other right.

10.       Non-Waiver. The failure of the Holder to enforce or exercise any right or remedy
provided in this Note or at law or in equity upon any default or breach shall
not be construed as waiving the rights to enforce or exercise such or
any other right or remedy at any later date. No exercise of the rights and powers granted in or held pursuant to this
Note by the Holder, and no delays or omissions in the exercise of such
rights and powers shall be held to exhaust the same or be construed as a waiver thereof, and every such right and power may be
exercised at any time and from time to time.

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

12.       No
Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the
right to vote or to consent or to receive notice as a stockholder of the
Company.

 

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

14.       Holder Representations. The Holder hereby represents and warrants as
follows:

14.1     Investment Representations. It is the Holder’s present intention to acquire
the Note and any shares of common stock issuable upon
conversion or exercise of the Note (collectively,
the “Securities”) which it may receive pursuant to this
Note, for its own account and that
each such Security is being and will be acquired by it for the purpose of
investment and not with a view to
distribution or resale. The Holder warrants and agrees that it will not sell or
transfer any such Security without
registration under applicable federal and state securities laws, or the availability of appropriate exemptions
therefrom. The Holder agrees that each such Security will bear a restrictive legend or legends stating that the same
has not been registered under applicable federal and state securities
laws 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 and
experience in financial and business matters that it is capable of evaluating the merits and risks of this investment
and has substantial experience in
making investment decisions of the type contemplated hereby. The Holder can bear the economic risks of this investment, can
afford a complete loss of its investment and has no present need for liquidity in conjunction with the purchase of the
Securities. During the course of this
transaction and prior to  the sale of the
Securities hereunder, the Holder acknowledges
that it has had the opportunity to ask questions of, and has received
satisfactory answers from, management
of the Company concerning the terms and conditions of this investment and the business and operations of the
Company.

14.3     Power and Authority. The Holder confirms that it has full power and
authority and has taken all required
action necessary to permit it to purchase this Note. The Holder represents
and warrants that this Note is the legal, valid and binding obligation of such
Holder, enforceable in accordance
with its terms.

14.4     Accredited
Investor. 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 Company
harmless for any damages, loss, reasonable attorney’s fees or any other costs
arising out of any claim or action
arising out of a breach by Holder of Holder’s representations and warranties set forth in this Section 14.

 

This
Note is hereby issued by the Company, and agreed and acknowledged by Holder, as of the year and date first above
written.

	
  

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ALBEMARLE BIO-REFINERY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ William R. Horton

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William R. Horton

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CEO/President

  	
   

  

 

Acknowledged and agreed
with regard to Section 14 above:

	
  Earth Biofuels, Inc.

  
	
   

  
	
  By:

  	
  /s/ George Lowrance

  	
   

  
	
  Name:

  	
  George Lowrance

  	
   

  
	
  Title:

  	
  Vice President

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