Document:

EXHIBIT 10.35

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

	
  $500,000.00

  	
   

  	
  Dallas, Texas

  	
   

  	
  June 2, 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 Five Hundred Thousand and No/100 Dollars ($500,000.00), 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,
merger, sale or conveyance, upon or with respect to the securities subject to
the conversion or purchase right immediately prior to such consolidation,

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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 $ 500,000.00 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
10.36

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 President

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