Document:

Exhibit 10.6

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is made and
entered into as of the       day of October, 2005,
between R. BRUCE BLACKWELL (the “Lessor”), and EARTH BIOFUELS, LLC,
a Mississippi limited liability company (the “Lessee”).

STATEMENT OF BACKGROUND INFORMATION

The Lessor is the
owner of that certain parcel of real property and the improvements thereon
located in Grenada County, Mississippi and more particularly described on Exhibit
A attached hereto (the “Leased Premises”).

The Lessor desires
to lease to the Lessee and the Lessee desires to lease from the Lessor the
Leased Premises on the terms and conditions described herein.

STATEMENT OF AGREEMENT

NOW, THEREFORE,
for and in consideration of the mutual covenants and conditions contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:

1.    Term. The Lessee shall use and occupy
the Leased Premises for a Term of five years commencing on the date hereof, and
ending five years after such date (the “Term”), unless sooner terminated
as hereinafter provided.

2.    Rent. During the Term, the Lessee
shall pay to the Lessor as rent (the “Rent”) for the Leased Premises the
sum of $120,000.00 per year (the “Annual Rental”), payable in equal
monthly installments. Monthly installments of Rent shall be paid in advance on
the first day of each and every calendar month during the Term.

3.    Maintenance and Repairs. During the
Term of this Lease, the Lessee covenants to keep the Leased Premises
(including, without limitation, the exterior and structure of the building, all
improvements thereon and all heating, plumbing, electrical, air-conditioning,
mechanical and other fixtures and equipment now or hereafter on the Leased
Premises) in good order, condition and repair, reasonable use and wear only
excepted, and to make all repairs and replacements.

4.    Utilities. The Lessee shall pay or
cause to be paid all charges for gas, water, sewer, electricity, heat, air
conditioning, telephone or other utility or service used in connection with the
Leased Premises during the Term. The Lessor shall be under no obligation to
furnish any utilities to the Leased Premises and shall not be liable for any
interruption or failure in the supply of any such utilities.

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5.    Taxes and Insurance. The Lessee shall
pay all ad valorem taxes and assessments levied on the Leased Premises during
the Term. The Lessee also shall obtain and keep in force during the Term fire
and extended coverage property insurance covering the Leased Premises in an
amount not less than the full cost of the replacement value thereof, against
all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, and special extended perils (“all risk” as such
term is used in the insurance industry) naming the Lessor as insured. In
addition, the Lessee shall obtain and keep in force comprehensive public
liability insurance in amounts acceptable to Lessor and with the Lessor named
as an additional insured. All personal property belonging to the Lessee located
in or about the Leased Premises shall be at the sole risk of the Lessee.

6.    Compliance with Law. The Lessee shall
make all repairs, alterations, additions or replacements to the Leased Premises
required by any law or ordinance of any public authority; keep the Leased
Premises equipped with all safety appliances so required; and to comply with
the orders and regulations of all governmental authorities with respect to zoning,
building, fire, health, environmental regulations and other codes, regulations,
ordinances or laws applicable to the Leased Premises.

7.    Surrender at End of Term. The Lessee
shall quit and surrender the Leased Premises at the expiration of the Term or
earlier termination of this Lease in as good condition as reasonable use will
permit, damage by fire and elements accepted.

8.    Damage by Fire or Other Cause. If the
Leased Premises shall be partially damaged by fire or other cause, the damage
shall be repaired by the Lessor to the extent of insurance proceeds received by
the Lessor. If all or substantially all of the Leased Premises becomes unfit
for occupancy and use as a result of fire or other cause, the Lessor may elect
(a) to terminate this Lease as of the time when the Leased Premises are
made unfit for occupancy and use by giving written notice to the Lessee within
fifteen (15) days after that date, or (b) to repair, restore or
rehabilitate the Leased Premises to the extent of insurance proceeds received
by the Lessor within one hundred eighty (180) days after the Lessor is able to
take possession of the Leased Premises and undertake reconstruction or repairs,
in which latter event this Lease shall not terminate but the Rent shall be
abated on a per diem basis while the Leased Premises are unfit for occupancy
and use. If the Lessor elects to restore, repair or rehabilitate the Leased
Premises and does not substantially complete the work within said one hundred
eighty (180) day period, either party shall have the right to terminate this
Lease as of the time when the Leased Premises became unfit for occupancy and
use by written notice to the other party not later then ten (10) days after the
expiration of said period. In the event of such termination of this Lease, the
Lessee’s liability for the Rent shall cease as of the date the Leased Premises
were made unfit for occupancy and use.

9.    Condemnation. If any part of the
Leased Premises shall be taken or condemned for any public use by any legally
constituted authority by right of eminent domain and a part thereof remains
which, in the Lessor’s judgment, is suitable for the full conduct of the Lessee’s
business, this Lease as to the part to be taken shall terminate as of the date
title vests in the

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condemnor (or such
earlier date on which possession of the Leased Premises must be given to the
condemnor), the Lessor shall promptly restore the portion of the Leased
Premises not taken, and the rent payable hereunder shall be adjusted equitably.
If Lessor determines that the aforementioned taking renders the remainder of
the Leased Premises unsuitable for the Lessee’s use, the Lessor may terminate
this Lease as of the date when the Lessor determines that the Leased Premises
are unsuitable for the Lessee’s use by giving notice to that effect within
thirty (30) days after such determination.

If all or
substantially all of the Leased Premises are taken or condemned or so much
thereof that the use by the Lessee shall be substantially impaired, this Lease
shall terminate. All compensation awarded or granted shall be the property of
the Lessor. Notwithstanding the provisions herein, the Lessee shall have the
right to make a separate claim with the condemning authority for the value of
the Lessee’s trade fixtures and relocation expenses.

10.  Default by the Lessee. If (a) the
Lessee defaults in the payment of the Rent or any additional charge or cost to
be paid by the Lessee as provided in this Lease and such default shall continue
uncorrected for a period of five (5) days after written notice, or (b) the
Lessee defaults in the performance and observance of any of the terms and
conditions of this Lease to be performed or observed by the Lessee and such
default shall continue uncorrected for a period of thirty (30) days after written
notice, or (c) any execution, attachment, or other order of court shall be
issued upon or against the interest of the Lessee in this Lease and shall
continue for a period of thirty (30) days after written notice, then and in any
such event, interest shall accrue on all monetary obligations owed under this
Lease at the lesser of the prime rate of BancorpSouth Bank (or its successor)
plus four percent (4%), or the maximum rate permissible by law, and in addition
to any and all rights and remedies allowed by law and equity, the Lessor may
terminate this Lease with written notice to the Lessee.

11.  Default by the Lessor. The Lessor’s
failure to perform or observe any of the Lessor’s obligations under this Lease
after a period of thirty (30) days after the Lessor receives written notice
from Lessee shall be a default by the Lessor. Upon the happening of a default
by the Lessor, the Lessee shall have the right, but not the obligation, to
perform the Lessor’s obligation and deduct any cost incurred by the Lessee from
the Rent due hereunder. In addition, the Lessee may pursue any other legal or
equitable remedies, including terminating this Lease.

12.  Indemnification. The Lessee shall save
Lessor harmless, and exonerate and indemnify Lessor from and against any and
all claims, liabilities or penalties asserted by or on behalf of any person,
firm, corporation or public authority on account of injury, death, damage or
loss to person or property in or upon the Leased Premises arising out of the
use or occupancy of the Leased Premises by Lessee or by any person claiming by,
through or under Lessee (including, without limitation, all patrons, employees
and customers of Lessee), or arising out of any delivery to or service supplied
to the Leased Premises, or on account of or based upon anything whatsoever done
on the Leased Premises, except if the same was caused by the gross negligence
or willful misconduct of Lessor, its agents, servants or employees. In respect
of all of the foregoing, Lessee shall indemnify Lessor from and against all
costs, expenses (including reasonable attorneys fees) and liabilities incurred
in or in connection with any such claim, action

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or proceeding brought
thereon; and, in case of any action or proceeding brought against Lessor by
reason of any such claim, Lessee, upon notice from Lessor and at Lessee’s
expense shall resist or defend such action or proceeding and employ counsel
therefor reasonably satisfactory to Lessor.

13.  Improvements, Fixtures and Trade Fixtures.
It is expressly understood and agreed that any and all signs, fixtures, trade
fixtures, machinery, fencing, furniture, appliances and equipment erected or
installed by the Lessee, whether or not attached to the Leased Premises, shall
remain the property of the Lessee and may be removed by the Lessee at or before
the expiration of this Lease and any renewals hereof, including the period of
any “holding over”, provided the Lessee repairs all damage which may be caused
by any such removal in a good and workman-like manner. The building and other
improvements located on the Leased Premises (excluding the items described
above), whether constructed or renovated by the Lessor or the Lessee, shall
remain the property of the Lessor at the termination of the Lease and any
renewals hereof.

14.  Quiet Enjoyment. The Lessor covenants
and agrees that upon the Lessee paying the Rent as provided herein and
performing all of the covenants and conditions herein set forth, the Lessee
shall and may peaceably and quietly have, hold and enjoy the Leased Premises
for the Term and for the intended uses and purposes, subject nevertheless to
the provisions of this Lease.

15.  Lessor’s Right to Enter. The Lessee
covenants and agrees to permit the Lessor and its agents to enter and examine
the Leased Premises at reasonable times and upon reasonable notice to the
Lessee and, during the last six months of the Term of the Lease, to keep
affixed in suitable places notices of availability of the Leased Premises.

16.  Ownership of Leased Premises. The
Lessor represents that the Lessor owns the Leased Premises in fee simple and
has the right to lease the same to the Lessee. The Lessor agrees to deliver to
the Lessee the Leased Premises free from the tenancy of any person or entity
other that the Lessee.

17.  Assignment and Subletting. The Lessee
may not convey, transfer, encumber or otherwise assign or sublease, whether
voluntarily or involuntarily or by operation of law, all or any part of its
interest in the Leased Premises without the express written consent of the Lessor,
which shall not be unreasonably withheld; provided, however, that the Lessee
may assign the Lease to a limited liability company controlled by the Lessee
without the requirement of obtaining the Lessor’s consent. For purposes of this
Section, an assignment of this Lease shall be deemed to include any change in
control of Lessee or any transaction pursuant to which Lessee is merged or
consolidated with another entity or pursuant to which all or substantially all
of Lessee’s assets are transferred to any other entity, as if such change in
control or transaction were an assignment of this Lease. No subletting or
assignment shall in any way impair the continuing primary liability of Lessee
under this Lease, and no consent to any subletting or assignment in a
particular instance shall be deemed to be a waiver of the obligation to obtain
the Lessor’s written approval in the case of any other subletting or
assignment. Any subletting,

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assignment or other
transfer of Lessee’s interest in this Lease in contravention of this Section
shall be voidable at Lessor’s option.

18.  Rights of Mortgagees. This Lease, and
all rights of Lessee hereunder, are and shall be subject and subordinate to all
mortgages, which may now or hereafter affect the Leased Premises, to each and
every advance made or hereafter to be made under such mortgages, and to all
renewals, modifications, replacements and extensions of such mortgages. This
Section shall be self-operative and no further instrument of subordination
shall be required. In confirmation of such subordination, Lessee shall promptly
execute, acknowledge and deliver any instrument that Lessor or the holder of
any such mortgage may reasonably request to evidence such subordination. Any
mortgage to which this Lease is, at the time referred to, subject and
subordinate, is herein called a “Superior Mortgage” and the holder of a
Superior Mortgage is herein called the “Superior Mortgagee”.

If any Superior
Mortgagee or its nominee shall succeed to the rights of Lessor under this
Lease, then at the request of such party so succeeding to Lessor’s rights (the “Successor
Landlord”) and upon such Successor Landlord’s written agreement to accept
Lessee’s attornment, Lessee shall attorn to and recognize such Successor
Landlord as Lessee’s landlord under this Lease and shall promptly execute and
deliver any instrument that such Successor Landlord may reasonably request to
evidence such attornment. Upon such attornment, this Lease shall continue in
full force and effect as a direct lease between the Successor Landlord and
Lessee upon all of the terms, conditions and covenants as set forth in this
Lease. Lessee agrees at any time and from time to time to execute a suitable
instrument in confirmation of Lessee’s agreement to attorn, as aforesaid.

19.  Assigns. The terms, covenants and
conditions contained in this Lease shall bind and inure to the benefit of the
Lessor and the Lessee and their legal representatives, successors and assigns,
subject to Section 17 herein.

20.  Severability. In case any one or more
of the provisions contained in this Lease shall 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 Lease
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein unless to do so would materially alter the benefits
and burdens the parties hereto have bargained for.

21.  Entire Agreement. This lease contains
the entire agreement between the parties and shall not be modified in any
manner except by an instrument in writing executed by the parties or their
respective successors in interest.

22.  Memorandum of Lease. This Lease may not
be recorded in the land records. Upon request of the Lessee, the Lessor shall
execute a “short form” or memorandum of lease providing notice of Lessee’s
interest in the Leased Premises.

23.  Attorneys Fees. In the event it becomes
necessary for either party to enforce the terms of this Lease, the prevailing
party shall be entitled, in addition to such damages or other

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relief as may be granted,
to recover reasonable attorneys’ fees and costs, such attorneys’ fees to
include those incurred on any appeal.

IN WITNESS
WHEREOF, the parties have executed this Lease effective as of date first above written.

	
  

  	
   

  	
  - LESSOR -

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ R. Bruce Blackwell

  
	
   

  	
   

  	
  R. BRUCE BLACKWELL

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  - LESSEE -

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EARTH BIOFUELS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. Bruce Blackwell

  
	
   

  	
   

  	
  R. Bruce Blackwell, Manager

  

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EXHIBIT A

Legal Description of Leased Premises

See attached

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  253 HWY 7 NORTH

  
	
   

  	
   

  	
  GRENADA, MS

  

 

EXHIBIT “A”

3.898
acres of land, more or less, lying in the East 1¤2 of Section
14, T-23-N, R-4-E, Choctaw Meridian, Grenada County, Mississippi, and more
particularly described as follows:

Beginning
at a iron bar at the intersection of South R.O.W. of Mississippi Highway
No. 7 with the Westerly R.O.W. of Country Meadows Road located 1482.2 feet
West and 2805.5 feet North of the Southeast corner of said Section 14,
thence S 32° 58’ East along the Westerly line of Country Meadows Road for 438.0
feet to an iron bar, thence S 65° 34’ West along a fence for 459.7 feet to an
iron bar on the East line of a gravel road, thence N 28° 02’ West along the
Easterly line of a gravel road for 333.5 feet to an iron bar on the Southerly
R.O.W. of Mississippi Highway No. 7, thence run N 52° East along the said
Highway R.O.W. for 427.6 feet, more or less, to the Point of Beginning.

	
  SIGNED FOR IDENTIFICATION

  	
   

  
	
   

  	
   

  
	
  BY:

  	
  /s/ Richard B Blackwell

  	
   

  
	
  RICHARD B BLACKWELL

  	
   

  
			

 

 8EXHIBIT
10.7

INTERCOMPANY CREDIT AGREEMENT

This INTERCOMPANY CREDIT AGREEMENT (this “Agreement”) by and between Apollo
Resources International, Inc., a Utah corporation (“ARI”), and Earth Biofuels,
Inc, a Delaware corporation (“EBF”), is effective as of January 1, 2006.

ARTICLE I

DEFINITIONS

SECTION 1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:

(a)
 “ADVANCE” means, an advance by ARI, as
applicable, pursuant to Section 2.01 or 2.02, which shall include, without
limitation, advances by ARI to EBF or on behalf of ARI and amounts owed by EBF
and its Subsidiaries for fees, costs and expenses between the parties.

(b)  “EBF BALANCE” means, with respect to an
Interest Period, the net daily balance of funds owed by EBF to ARI as set forth
in the intercompany account maintained by EBF pursuant to Section 2.05 hereof.

(c)  “CODE” means, the Internal Revenue Code of
1986 as amended.

(d)  “ARI BALANCE” means, with respect to an
Interest Period, the net daily balance of funds owed by EBF to ARI as set forth
in the intercompany account maintained by ARI pursuant to Section 2.05 hereof.

(e)  “ERISA” means, the Employee Retirement Income
Security Act of 1974, together with all amendments from time to time thereto.

(f)  “ERISA AFFILIATE” means, any trade or
business (whether or not incorporated) which is under common control with EBF
within the meaning of the regulations promulgated under the Internal Revenue
Code of 1986 as amended.

(g)  “EVENT OF DEFAULT” means, any material
default of the terms of this Agreement.

(h)  “INDEBTEDNESS” means, with respect to any
Person at any time, without duplication, all obligations of such Person which,
in accordance with generally accepted accounting principles, consistently
applied, should be classified as liabilities on a consolidated balance sheet of
such Person prepared in accordance with generally accepted accounting
principles, consistently applied, but in any event shall include: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services (other than accounts payable on normal payment terms to
suppliers incurred in the ordinary course of business), (f) all obligations of
others secured by any Lien on property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (g) all
capitalized lease obligations of such Person, (h) all obligations of any
partnership or joint venture as to which such Person is or may become
personally liable, (i) all guarantees by such Person of Indebtedness of others,
and (j) all contingent obligations of such Person.

 

(i)  “INTEREST PERIOD” means, the period
commencing on the date of an Advance and ending on the date the Advance is
paid.

(j)  “INTEREST RATE” has the meaning ascribed to
it in Section 2.02.

(k)  “INVESTMENT” means, any investment in any
Person, whether by means of share purchase, capital contribution, loan or
otherwise; in determining from time to time the amount of Investments, share
purchases and capital contributions shall be taken at the original cost thereof
regardless of any subsequent appreciation or depreciation therein and loans shall
be taken at the principal amount thereof remaining unpaid.

(l)  “LIEN” means, any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument, in, of, or on any of the assets or properties, now owned
or hereafter acquired, of EBF or any Subsidiary, whether arising by agreement
or operation of law.

(m)  “PERSON” means, any natural person,
corporation, partnership, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or
other capacity.

(n)  “SUBSIDIARY” means, any corporation a
majority of the shares of the outstanding stock of which have ordinary voting
power for the election of directors is owned by EBF, either directly or through
one or more of its Subsidiaries.

ARTICLE II

ADVANCES AND CASH MANAGEMENT

SECTION 2.01 ADVANCES FROM ARI TO EBF.  
Any funds of ARI and its Subsidiaries that are not required to meet the
daily cash requirements of ARI and its Subsidiaries will be transferred to EBF
through a concentration account on a daily basis as an Advance hereunder and/or
applied, at the discretion of ARI, to decrease the outstanding balance of
Advances from EBF pursuant to Section 2.02, as applicable.  Any funds transferred from ARI to EBF will be
deemed as either an Advance to EBF, if there are no outstanding Advances from EBF
to ARI, or a decrease of Advances from EBF to ARI, if such Advances exist.  Any interest payable by EBF on an Advance
from ARI (other than interest payable upon or after termination of this
Agreement) shall be treated (effective as of the first day of the following
Interest Period) as an Advance from ARI for the purposes of this
Agreement.  Each Advance by ARI under
this Section 2.01 shall be deemed to be made by ARI notwithstanding the fact
that such Advance may involve cash of one or more Subsidiaries of ARI. All
funds which constitute Advances to EBF pursuant to this Section 2.01(and not
decreases in Advances from EBF to ARI) shall bear interest at the Interest Rate
provided for in Section 2.02.

SECTION 2.02 INTEREST.

(a)  Subject to the other provisions of this
Section 2.03, interest shall accrue on Advances at the rate (the “Interest Rate”)
of seven per cent (7%). Interest shall be calculated on the basis of a 360 day
year for the actual number of days elapsed. 
Interest payments for Interest Periods ending (i) prior to the termination
of this Agreement shall be treated as Advances pursuant to Sections 2.01

 

and
2.02 herein, as applicable, on the first day of the following Interest Period
and (ii) on the termination of this Agreement shall be payable immediately
(each an “Interest Payment”).

(b)  The interest payable by EBF under this
Agreement shall be calculated by multiplying the Interest Rate by the EBF
Balance for the applicable days in the Interest Period.  The interest payable by ARI under this
Agreement shall be calculated by multiplying the Interest Rate by ARI Balance
for the applicable days in the Interest Period. 
The Interest Payment required to be made by each party is independent of
the Interest Payment required to be paid by the other party, and interest may
be paid by both EBF and ARI for any given Interest Period.  EBF shall calculate the amount of interest
payable by both EBF and ARI for each Interest Period and, upon request, shall
provide notice thereof to ARI, together with supporting calculations.

(c)  All calculations shall be performed by EBF.

SECTION 2.03  REPAYMENT.  During the term of this Agreement, all Advances
received by ARI from EBF shall be offset against and shall be treated as repaid
to the extent of any Advances made by such party.  Repayments can be made at any time by either party
with interest payable up to the date of repayment.  No prepayment penalty may be levied.  Upon termination of this Agreement, any
Advances that have not theretofore been repaid, together with accrued interest,
will be payable in full immediately following termination of this Agreement.

SECTION 2.04  INTERCOMPANY
ACCOUNT.  EBF shall maintain a ledger in which
all ARI Advances and all repayments of such Advances shall be recorded.  EBF shall give ARI access, during normal
business hours, to such ledger and the other records relating to Advances and
payments made with respect thereto. EBF shall have until the 30th day following
the end of each Interest Period to make any calculations required to be made by
it under the provisions of this Agreement.

SECTION 2.05 TRANSFERS OF FUNDS. 
All transfers of funds between EBF and ARI will be initiated by EBF
Treasury.  All funds will be transferred
through intercompany accounts, or as otherwise agreed by the parties.

SECTION 2.06 TAXES.  If ARI or EBF
shall be required by law to deduct any tax from or in respect of any sum
payable hereunder to the other party: (a) as soon as such party is aware that
any such deduction, withholding or payment of a tax is required, or of any
change in any such requirement, it shall notify the other party; (b) such party
shall make such deductions, or pay such tax, before any interest or penalty
becomes payable; (c) such party shall pay the full amount deducted to the
relevant taxing authority or other authority in accordance with applicable law;
and (d) within thirty (30) days after paying such tax, such party shall deliver
to the other party satisfactory evidence of that deduction, withholding or
payment and (where remittance is required) of the remittance thereof to the
relevant taxing or other authority.

SECTION 2.07 USURY. All agreements between the parties, whether now existing
or hereafter arising and whether written or oral, are hereby limited so that in
no contingency, whether by reason of demand for payment or acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged or
received by either party exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, interest would otherwise be payable
to either party in excess of the maximum lawful amount, the interest payable to
such party shall be reduced to the maximum amount permitted under applicable
law; and if from any circumstance either party shall ever receive anything of
value deemed interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive interest shall be

 

applied
to the reduction of the principal hereof and not to the payment of interest, or
if such excessive interest exceeds the unpaid balance of principal hereof such
excess shall be refunded to the party deemed to have made such payment.  All interest paid or agreed to be paid to
either party shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in
full of the principal (including the period of any renewal or extension hereof)
so that the interest hereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control all agreements
between the parties.

ARTICLE III

COVENANTS OF EBF

Until
the repayment of all Advances under this Agreement, EBF will:

SECTION 3.01  CORPORATE
EXISTENCE.  Maintain, and, except as
provided in Section 3.7 hereof, cause each Subsidiary to maintain, (a) its
corporate existence in good standing under the laws of the jurisdiction of its incorporation,
(b) its right to transact business in each jurisdiction in which the character
of the properties owned or leased by it or the business conducted by it makes
such qualification necessary and the failure to so qualify would permanently
preclude EBF or such Subsidiary from enforcing its rights with respect to any
material assets or expose EBF or such Subsidiary to any material liability and
(c) conduct and operate its business in a lawful manner as presently conducted.

SECTION 3.02  COMPLIANCE WITH
LAWS, ETC.  Comply, and cause each Subsidiary
to comply, in all material respects with all applicable laws, rules,
regulations and orders (including without limitation Regulation X of the Board
of Governors of the Federal Reserve System), such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent contested in good faith by appropriate proceedings and for
which adequate reserves have been established.

SECTION 3.03  INSURANCE.  Maintain, and cause each Subsidiary to maintain,
in full force and effect insurance comparable to present policies in amounts
and risks covered plus such additional insurance, if any, as may from time to
time be required to provide coverage customarily maintained by similarly
situated companies.

ARTICLE IV

ADMINISTRATION

SECTION 4.01 LIMITATIONS ON LIABILITY. 
Neither party shall have any liability under this Agreement (including
any liability for its own negligence) for damages, losses or expenses
(including expenses or higher interest rates incurred in order to obtain
alternative financing sources) suffered by the other party or its Subsidiaries
as a result of the performance or non-performance of such party’s obligations
hereunder, unless such damages, losses or expenses are caused by or arise out
of the willful misconduct or gross negligence of such party or a breach by such
party.  In no event shall either party
have any liability to the other party for indirect, incidental or consequential
damages that such other party or its Subsidiaries or any third party may incur
or experience on account of the performance or non-performance of such party’s

 

obligations
hereunder. The provisions of this Section 4.01 shall survive any termination of
this Agreement.

SECTION 4.02 TERM OF THE AGREEMENT. 
This Agreement commences on the effective date of this Agreement as set
forth above and will continue in effect until December 1, 2012. Notwithstanding
the foregoing, this Agreement may be sooner terminated, without liability to the
terminating party:

(a)  after five years (5) by either party, upon 90
days’ notice to the other party, if ARI ceases to own, directly or indirectly,
50% or more of the outstanding stock of EBF;

(b)  by either party, immediately upon notice to
the other party, if (i) that other party makes a general assignment of all or
substantially all of its assets for the benefit of its creditors; (ii) that
other party applies for, consents to or acquiesces in the appointment of a
receiver, trustee, custodian or liquidator for its business or all or substantially
all of its assets; (iii) that other party files, or consents to or acquiesces
in a petition seeking relief or reorganization under any bankruptcy or
insolvency laws; or (iv) a petition seeking relief or reorganization under any
bankruptcy or insolvency laws is filed against that other party and is not
dismissed within 90 days after it was filed;

(c)  by either party, immediately upon notice to
the other party, if that other party’s material breach of this Agreement
continues uncured or uncorrected for 30 days after both the nature of that
breach and the necessary cure or correction has been agreed upon by the parties
or otherwise determined by the dispute resolution procedure described in Section
3.01; provided that if the parties agree or it is determined by the dispute
resolution procedure that the material breach is not capable of being cured or
corrected, the termination shall be effective immediately upon notice;

(d)  by either party, immediately upon notice to
the other party, if it determines that performance of its rights or obligations
under this Agreement is or becomes illegal;

(e)  by either party, immediately upon notice to
the other party, if payments made by the other party are subject to any
deduction or withholding for or on account of any tax, unless the other party
agrees to increase its payments such that, after all required deductions have been
made, the party receives a net amount equal to the sum it would have received
had no such deductions been made; or

(f)  by either party, immediately upon notice to
the other party, if it determines that its compliance with any law or
regulation or any guideline or request from any central bank or governmental or
regulatory authority would create a cost or increase the cost of providing
credit under this Agreement, unless the other party agrees to pay amounts
sufficient to indemnify for such cost or increase in cost.

SECTION 4.03  RENEWAL.  The parties may consent to successive
one-year renewal terms.  If EBF wishes to
renew the term of this Agreement, it shall provide notice to ARI of that desire
by November 15, 2007 and the same date of each subsequent year. If ARI consents
to such renewal, it shall provide notice to EBF of that concurrence by November
20, 2007 of that year. If no notice of desire to renew or subsequent consent is
given, this Agreement will terminate when the then current term expires.

 

 

SECTION 4.04  NO THIRD-PARTY
BENEFICIEBFES.  Nothing expressed or implied
in this Agreement shall be construed to give any person or entity other than the
parties hereto any legal or equitable rights hereunder.

SECTION 4.05  ENTIRE
AGREEMENT.  This Agreement constitutes
the entire agreement of the parties on this subject.  This Agreement replaces and supersedes any
prior agreement or understanding of the parties, whether written or oral, on
this subject not expressed or referred to in this Agreement.

SECTION 4.06  AMENDMENT.  This Agreement may not be amended except by a
written instrument signed by the parties hereto.

SECTION 4.07 WAIVERS.  Either
party hereto may (a) extend the time for performance of any of the obligations
or other act of the other party or (b) waive compliance with any of the
agreements contained herein. No waiver of any term shall be construed as a
waiver of the same term in any other situation or a waiver of any other term of
this Agreement. The failure of any party to assert any of its rights hereunder
will not constitute a waiver of any such rights.

SECTION 4.08  SEVERABILITY.  If any provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy,
such provision shall be deemed severable and all other provisions of this
Agreement shall nevertheless remain in full force and effect.

SECTION 4.09  HEADINGS.  Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

SECTION 4.10 
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 last known.

SECTION 4.11  GOVERNING LAW.  This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Texas, without giving
effect to any choice-of-law rules that may require the application of the laws
of another jurisdiction.

SECTION 4.12  CHANGES IN
LAW.  If at any time due to the adoption
of any law, rule, regulation, treaty or directive, or any change therein or in
the interpretation or administration thereof by any court, central bank, governmental
authority, agency or instrumentality, or comparable agency charged with the
interpretation or administration thereof, or for any other reason arising
subsequent to the date of this Agreement, it shall become unlawful or
impossible for ARI to make any Advance, the obligation of ARI to provide such
Advances shall, upon the happening of such event, forthwith be suspended for
the duration of such illegality or impossibility.  If any such event shall make it unlawful or
impossible for ARI to continue any Advances previously made by it hereunder, ARI
shall, upon the happening of such event, notify EBF thereof in writing, and EBF
shall, at the time notified by ARI, repay such Advances in full, together with
accrued interest thereon.

 

SECTION 4.13  COUNTERPARTS. This
Agreement may be signed in any number of counterparts, with the same effect as
if all signatories had signed the same document.  All counterparts shall be construed together
to constitute one, and the same, document.

IN
WITNESS WHEREOF, EBF and ARI have caused this Agreement to be executed as of
the date first above written.

APOLLO
RESOURCES

INTERNATIONAL, INC.

 

	
  By:

  	
  /s/ DENNIS G. MCLAUGHLIN, III

  	
   

  
	
   

  	
  Dennis G.
  McLaughlin, III

  
	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  EARTH BIOFUELS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ DARREN MILES

  	
   

  
	
  Name: Darren Miles

  
	
  Title: Chief Financial Officer

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