DRAFT 11/9/2007
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "GUARANTY") is executed as of November
[__], 2007, by the entities listed on the SCHEDULE OF EBOF SUBSIDIARIES attached
hereto as EXHIBIT A (each, a "GUARANTOR," and collectively, the "GUARANTORS"),
for the ratable benefit of the lenders listed that are signatories hereto
(collectively, the "LENDERS").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Radcliffe SPC, Ltd. for and on behalf of the Class A
Convertible Crossover Segregated Portfolio ("RADCLIFFE"), Castlerigg Master
Investments Ltd. ("CASTLERIGG"), and Capital Ventures International ("CVI";
collectively, the "INITIAL BRIDGE LENDERS") are parties to a Securities Purchase
Agreement, dated as of June 7, 2006 (the "INITIAL BRIDGE SECURITIES PURCHASE
AGREEMENT") with Earth Biofuels, Inc. ("EBOF"), pursuant to which EBOF issued,
among other things, warrants to purchase 1,500,000 shares of common stock,
$0.001 par value (the "COMMON STOCK"), of EBOF at the exercise price of $2.93
(the "INITIAL BRIDGE WARRANTS") and in connection with the Initial Bridge
Securities Purchase Agreement, EBOF executed a Registration Rights Agreement
(the "INITIAL BRIDGE REGISTRATION RIGHTS AGREEMENT," collectively with the
Initial Bridge Securities Purchase Agreement and the Initial Bridge Warrants,
the "INITIAL BRIDGE TRANSACTION DOCUMENTS") under which it agreed to cooperate
in the registration of the securities under the Initial Bridge Securities
Purchase Agreement;
WHEREAS, Castlerigg (the "SECOND BRIDGE LENDER") is a party to a
Securities Purchase Agreement, dated as of July 10, 2006 (the "SECOND BRIDGE
SECURITIES PURCHASE AGREEMENT") with EBOF, pursuant to which EBOF issued, among
other things, warrants to purchase 1,500,000 shares of Common Stock at the
exercise price of $2.50 (the "SECOND BRIDGE WARRANTS") and in connection with
the Second Bridge Securities Purchase Agreement, EBOF executed a Registration
Rights Agreement (the "SECOND BRIDGE REGISTRATION RIGHTS AGREEMENT,"
collectively with the Second Bridge Securities Purchase Agreement, Second Bridge
Warrants, the "SECOND BRIDGE TRANSACTION DOCUMENTS") under which it agreed to
cooperate in the registration of the securities under the Second Bridge
Securities Purchase Agreement;
WHEREAS, Radcliffe, Castlerigg, CVI, YA Global Investments, L.P.
(formerly known as Cornell Capital, L.P. ("YORKVILLE")), Cranshire Capital L.P.
("CRANSHIRE"), Portside Growth and Opportunity Fund ("PORTSIDE"), Evolution
Master Fund Ltd. SPC, Segregated Portfolio M ("EVOLUTION"), and Kings Road
Investments Ltd. ("KINGS Road"; collectively, the "NOTEHOLDERS") are parties to
a Securities Purchase Agreement, dated as of July 24, 2006 (the "SECURITIES
PURCHASE AGREEMENT") with EBOF, pursuant to which EBOF issued (i) 8% Senior
Convertible Notes (collectively, the "NOTES") in the aggregate principal amount
of $52.5 million, which were unsecured and convertible into shares of Common
Stock at $2.90 per share, and (ii) warrants to purchase in excess of 9,000,000
shares of common stock of EBOF at the exercise price of $2.90 (the "WARRANTS")
and in connection with the Securities Purchase Agreement, EBOF executed a
Registration Rights Agreement (the "REGISTRATION RIGHTS Agreement," collectively
with the Initial Bridge Transaction Documents, the Second Bridge Transaction
Documents, the Securities Purchase Agreement, Notes, and Warrants, the
"TRANSACTION DOCUMENTS") under which it agreed to cooperate in the registration
of the securities under the Securities Purchase Agreement;
DRAFT 11/9/2007
WHEREAS, certain Noteholders individually delivered an Event of
Default Redemption Notice to EBOF identifying various events of default under
the Notes and demanding that EBOF redeem the Noteholders' interest in the Notes
at the so-called Event of Default Redemption Price, and EBOF failed to remit the
Event of Default Redemption Price;
WHEREAS, the Guarantors acknowledge that Events of Default (as defined
in the Transaction Documents) have occurred and are continuing;
WHEREAS, EBOF and the Guarantors acknowledge that the aggregate amount
of the outstanding amount due and owing to the Noteholders is $100,651,173.00
(as of September 28, 2007), plus fees, costs and expenses, and such amount is
payable to the Noteholders without set-off, counterclaim, deduction, offset or
defense (the "TOTAL Debt");
WHEREAS, on July 11, 2007, Radcliffe, Yorkville, Portside, Castlerigg
and Evolution commenced an involuntary bankruptcy proceeding against EBOF
pursuant to Title 11 of the United States Code (the "BANKRUPTCY CODE") in the
United States Bankruptcy Court for the District of Delaware, Case No. 07-10928
(CSS) (the "BANKRUPTCY CASE");
WHEREAS, EBOF wishes to explore the possibility of restructuring and
modifying the existing rights and obligations under the Transaction Documents
with the Noteholders through one or more definitive documents to be negotiated
during the course of the next 6 to 12 months (the "RESTRUCTURING TRANSACTION");
WHEREAS, at EBOF's request, the Lenders are willing, subject to and on
the terms and conditions set forth in the Interim Restructuring Agreement (as
defined below) and the documents to be executed in connection therewith, to
forbear from exercising rights and remedies under the Transaction Documents and
to consent to dismissal of the Bankruptcy Case in exchange for the terms hereof
and of the Interim Restructuring Agreement and the other documents to be
executed in connection therewith;
WHEREAS, pursuant to the Interim Restructuring Agreement, dated
November [__], 2007 (the "INTERIM RESTRUCTURING AGREEMENT"), EBOF has, among
other things, executed confessions of judgment (the "CONFESSIONS OF JUDGMENT"),
which shall not be filed until the occurrence of certain events specified in the
Interim Restructuring Agreement;
WHEREAS, to facilitate a consensual restructuring and the dismissal of
the Bankruptcy Case, without which the Guarantors could themselves end up in
bankruptcy and without the support of EBOF, the Guarantors have agreed to
guarantee the full amount of the Total Debt for the ratable benefit of the
Lenders.
WHEREAS, interests in each Guarantor are owned directly or indirectly
(as the case may be) by EBOF, and each Guarantor will directly benefit from the
restructuring negotiations.
NOW, THEREFORE, as an inducement to the Lenders to negotiate a
restructuring, and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties do hereby agree
as follows:
DRAFT 11/9/2007
ARTICLE I
NATURE AND SCOPE OF GUARANTY
Section 1.1 GUARANTY OF DEBT. Each Guarantor hereby irrevocably,
unconditionally, and jointly and severally guarantees for the ratable benefit(1)
of each Lender the prompt payment of each such Lender's Pro Rata Share of the
Total Debt, which shall be immediately due and payable upon demand after the
occurrence of any of the following events:
(a) prior to the Restructuring Consummation Deadline (as defined in
section 1.1(e) below), either (x) an order for relief is entered
in a case under the Bankruptcy Code with respect to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, EBOF, or any Subsidiary, or (y) an involuntary
bankruptcy petition is filed against EBOF or any Subsidiary and
such petition is not dismissed on or before sixty (60) days after
the date such petition is filed;
(b) failure of EBOF to execute security documents (in form and
substance acceptable to the Lenders holding 66?% of the aggregate
face amount of the Notes then outstanding (the "REQUIRED
LENDERS"), as determined by the Required Lenders in their sole
discretion) sufficient to provide the Lenders with liens, subject
only to any then-valid existing liens, on all of EBOF's assets to
secure EBOF's obligations under the Confessions of Judgment
and/or the Transaction Documents on or before ten (10) days after
the date that the order dismissing the Bankruptcy Case is entered
on the docket(2);
(c) failure of all of EBOF's subsidiaries (collectively, the
"SUBSIDIARIES") to execute security documents (in form and
substance acceptable to the Required Lenders as determined by the
Required Lenders in their sole discretion) in favor of the
Lenders, subject only to any then-valid existing liens, securing
their respective obligations under this Guaranty on or before ten
(10) days after the Dismissal Date;
(d) failure of EBOF and Subsidiaries to execute a term sheet with the
material terms of a restructuring (in form and substance
acceptable to the Required Lenders in their sole discretion) (the
----------------------
(1) The ratable benefit will be determined by calculating the Lender's pro rata
share ("PRO RATA SHARE"), which means the ratio determined by dividing (x) the
face amount of the Notes then held by such Lender by (y) the face amount of
Notes then held by all Lenders.
(2) The date that the order dismissing the Bankruptcy Case is entered on the
docket and such order is not subject to any stay shall be referred to herein as
the "DISMISSAL DATE."
DRAFT 11/9/2007
"RESTRUCTURING TERM SHEET") on or before thirty (30) days after
the Dismissal Date;
(e) failure of EBOF and Subsidiaries to consummate the transactions
contemplated in the Restructuring Term Sheet fully (as determined
by the Required Lenders in their reasonable discretion) on or
before one hundred and twenty (120) days after the Dismissal Date
(the "RESTRUCTURING CONSUMMATION DEADLINE");
(f) any action is commenced to void, avoid, invalidate, subordinate,
recharacterize, reduce or recover (in whole or in part) any or
all of the Release, the ▇▇▇▇▇▇▇▇▇▇ Guaranty, the Noteholders'
claims against EBOF, the Confessions of Judgment, this Guaranty
(each as described in the Interim Restructuring Agreement and
collectively, the "COLLATERAL DOCUMENTS"), any claim of the
Lenders under any of the Notes or the any of other Transaction
Documents, any lien granted to secure any such claim or any
obligation under any of the Collateral Documents or any of the
Transaction Documents (including, without limitation, the actions
described in sections 5(b) and (c) of the Interim Restructuring
Agreement), or any payment made in respect of any such claim or
obligation; or
(g) EBOF or any Subsidiary grants or permits to exist any lien not in
existence as of the date of this Guaranty on any of its assets.
Section 1.2 ELIMINATION OF GUARANTY. If EBOF and its Subsidiaries
fully consummate the transactions contemplated by the Restructuring Term Sheet
(as determined by the Required Lenders in their reasonable discretion) on or
before the Restructuring Consummation Deadline, this Guaranty shall terminate
and no longer be of any force and effect unless there is an action commenced
seeking to void, avoid, invalidate, subordinate, recharacterize, reduce or
recover (in whole or in part) any such transactions or any lien granted to
secure, or any payment made on, any obligation owing to the Lenders in
connection with any such transactions, any of the Transaction Documents, or any
of the Collateral Documents.
Section 1.3 NATURE OF GUARANTY. This Guaranty is an irrevocable,
absolute, continuing guaranty of payment and performance and not a guaranty of
collection. The obligations of each Guarantor to the Lenders under this Guaranty
shall be joint and several. This Guaranty shall not be discharged by the
assignment or negotiation of all or part of the Notes.
Section 1.4 GUARANTEED OBLIGATIONS NOT REDUCED BY OFFSET. The Guaranty
and obligations of the Guarantors to the Lenders shall not be reduced,
discharged or released because or by reason of any existing or future offset,
claim or defense of EBOF or any of its Subsidiaries, or any other party, against
the Lenders.
Section 1.5 PAYMENT BY GUARANTOR. If all or any part of the
obligations under this Guaranty shall not be punctually paid when due, the
Guarantors shall, immediately upon demand by the Lenders pay in lawful money of
the United States of America, the amounts due to
DRAFT 11/9/2007
the Lenders at the addresses as set forth herein for the Lenders. Such demand
shall be deemed made, given and received in accordance with the notice
provisions hereof.
Section 1.6 NO DUTY TO PURSUE OTHERS. It shall not be necessary for
the Lenders (and the Guarantors hereby waive any rights that the Guarantors may
have to require the Lenders), in order to enforce the obligations of the
Guarantors hereunder, first to (a) institute suit or exhaust its remedies
against EBOF or any Subsidiary or others liable under the Transaction Documents
or the Confessions of Judgment or any other person, (b) enforce the Lenders'
rights against any collateral which shall ever have been given to secure any of
the obligations of EBOF or its Subsidiaries, (c) enforce the Lenders' rights
against any other guarantors, (d) join EBOF or its Subsidiaries or any others
liable on the Total Debt in any action seeking to enforce this Guaranty, or (f)
resort to any other means of obtaining payment of the Total Debt. The Lenders
shall not be required to mitigate damages or take any other action to reduce,
collect or enforce the Total Debt.
Section 1.7 PAYMENT OF EXPENSES. In the event that any Guarantor
should breach or fail to timely perform any provision of this Guaranty, the
Guarantors shall, immediately upon demand by the Lenders, pay the Lenders all
reasonable out-of-pocket costs and expenses (including court costs and
attorneys' fees) incurred by the Lenders in the enforcement hereof or the
preservation of the Lenders' rights hereunder. For the avoidance of doubt, the
foregoing payment obligation shall be a joint and several obligation of the
Guarantors.
Section 1.8 EFFECT OF BANKRUPTCY. In the event that, pursuant to any
insolvency, bankruptcy, reorganization, receivership or other debtor relief law,
or any judgment, order or decision thereunder, the Lenders must rescind or
restore any payment, or any part thereof, received by the Lenders in
satisfaction of the obligations hereunder, any prior release or discharge from
the terms of this Guaranty given to Guarantors by the Lenders shall be without
effect, and this Guaranty shall remain in full force and effect. It is the
intention of the Guarantors that the Guarantors' obligations hereunder shall not
be discharged except by the Guarantors' indefeasible payment of such obligations
and then only to the extent of such performance.
Section 1.9 WAIVER OF SUBROGATION, REIMBURSEMENT AND CONTRIBUTION.
Notwithstanding anything to the contrary contained in this Guaranty, each
Guarantor hereby unconditionally and irrevocably waives, releases and abrogates
any and all rights it may now or hereafter have under any agreement, at law or
in equity (including, without limitation, any law subrogating the Guarantor to
the rights of the Lenders), to assert any claim against or seek contribution,
indemnification or any other form of reimbursement from EBOF, its Subsidiaries,
or any other party liable for payment of any or all of the Total Debt for any
payment made by any Guarantor under or in connection with this Guaranty or
otherwise.
DRAFT 11/9/2007
ARTICLE II
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Each Guarantor hereby consents and agrees to each of the following,
and agrees that the Guarantors' obligations under this Guaranty shall not be
released, diminished, impaired, reduced or adversely affected by any of the
following, and waives any common law, equitable, statutory or other rights
(including without limitation rights to notice) except as otherwise expressly
provided herein which the Guarantors might otherwise have as a result of or in
connection with any of the following:
Section 2.1 MODIFICATIONS. Any renewal, extension, increase,
modification, alteration or rearrangement of all or any part of the Total Debt
under the Transaction Documents.
Section 2.2 ADJUSTMENT. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by the Lenders to EBOF.
Section 2.3 CONDITION OF EBOF, SUBSIDIARIES, OR GUARANTORS. The
insolvency, bankruptcy, arrangement, adjustment, composition, liquidation,
disability, dissolution or lack of power of EBOF or any Subsidiary or any other
party at any time liable for the payment of all or part of the Total Debt; or
any dissolution of EBOF or any Subsidiary, or any sale, lease or transfer of any
or all of the assets of EBOF or any Subsidiary, or any changes in the
shareholders, partners or members of EBOF or any Subsidiary; or any
reorganization of EBOF, any Subsidiary, or the Guarantors.
Section 2.4 INVALIDITY OF GUARANTEED OBLIGATIONS. The invalidity,
illegality or unenforceability of all or any part of the Total Debt, or any
document or agreement executed in connection with the Total Debt, for any reason
whatsoever is illegal, uncollectible or unenforceable.
Section 2.5 RELEASE OF OBLIGORS. Any full or partial release of the
liability of EBOF or any Subsidiary on the Total Debt or any part thereof, or of
any co-guarantors, or any other person or entity now or hereafter liable,
whether directly or indirectly, jointly, severally, or jointly and severally, to
pay, perform, guarantee or assure the payment of the Total Debt, or any part
thereof.
Section 2.6 OTHER COLLATERAL. The taking or accepting of any other
security, collateral or guaranty, or other assurance of payment, for all or any
part of the Total Debt.
Section 2.7 OFFSET. Any existing or future right of offset, claim or
defense of EBOF or any Subsidiary against Lenders, or any other person, or
against payment of the Total Debt, whether such right of offset, claim or
defense arises in connection with the Total Debt or otherwise.
Section 2.8 MERGER. The reorganization, merger or consolidation of
EBOF or any Subsidiary into or with any other corporation or entity.
DRAFT 11/9/2007
Section 2.9 PREFERENCE. Any payment by EBOF or any Subsidiary to
Lenders is held to constitute a preference under bankruptcy laws, or for any
reason Lenders are required to refund such payment or pay such amount to EBOF or
any Subsidiary or someone else.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to negotiate a restructuring of the Total Debt,
each Guarantor represents and warrants to the Lenders as follows:
Section 3.1 BENEFIT. EBOF is the direct or indirect owner of interests
in each Guarantor (as the case may be), and each Guarantor has received, or will
receive, direct and indirect benefits from the making of this Guaranty.
Section 3.2 FAMILIARITY AND RELIANCE. Each Guarantor is familiar with,
and has independently reviewed books and records regarding, the financial
condition of EBOF and its Subsidiaries; however, no Guarantor is relying on such
financial condition as an inducement to enter into this Guaranty.
Section 3.3 NO REPRESENTATION BY LENDERS. None of the Lenders, or any
other party has made any representation, warranty or statement to any Guarantor
in order to induce a Guarantor to execute this Guaranty.
Section 3.4 GUARANTORS' FINANCIAL CONDITION. As of the date hereof,
and after giving effect to this Guaranty and the contingent obligation evidenced
hereby, each Guarantor is, and will be, solvent, and has and will have assets
which, fairly valued, exceed its obligations, liabilities (including contingent
liabilities) and debts, and has and will have property and assets sufficient to
satisfy and repay all of its obligations and liabilities.
Section 3.5 LEGALITY. The execution, delivery and performance by each
Guarantor of this Guaranty and the consummation of the transactions contemplated
hereunder do not, and will not, contravene or conflict with any law, statute or
regulation whatsoever to which such Guarantor is subject or constitute a default
(or an event which with notice or lapse of time or both would constitute a
default) under, or result in the breach of, any indenture, mortgage, deed of
trust, charge, lien, or any contract, agreement or other instrument to which
such Guarantor is a party or which may be applicable to such Guarantor. This
Guaranty is a legal and binding obligation of each Guarantor and is enforceable
in accordance with its terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors'
rights.
Section 3.6 SURVIVAL. All representations and warranties made by the
Guarantors herein shall survive the execution hereof.
DRAFT 11/9/2007
ARTICLE IV
MISCELLANEOUS
Section 4.1 EFFECTIVE DATE. This Guaranty shall be placed into escrow
pursuant to an escrow agreement (the form of which is attached hereto as Exhibit
B) and shall be released from escrow and become effective as of the Dismissal
Date.
Section 4.2 LIMITATION OF LIABILITY. Each Guarantor hereby confirms
that it intends that its obligations under this Guaranty will not constitute
fraudulent transfers or conveyances under the Bankruptcy Code, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any similar
foreign, federal, or state law. To the extent necessary to effectuate the
foregoing intention, each Guarantor irrevocably agrees that its obligations
under this Guaranty at any time shall be limited to the maximum amount as will
result in such obligations not constituting a fraudulent transfer or conveyance
under such foreign, federal, or state law.
Section 4.3 OTHER CONTRACTUAL OBLIGATIONS. To the extent that any
provision of this Guaranty results in an event of default under any agreement
entered between any Guarantor and a third party before the effective date of
this Guaranty, such provision of this Guaranty shall become null and void only
to the extent such provision results in the event of default.
Section 4.4 WAIVER. No failure to exercise, and no delay in
exercising, on the part of the Collateral Agent or Lenders, any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right. The rights of the Lenders hereunder shall be in addition to all
other rights provided by law. No modification or waiver of any provision of this
Guaranty, nor consent to departure therefrom, shall be effective unless in
writing and no such consent or waiver shall extend beyond the particular case
and purpose involved. No notice or demand given in any case shall constitute a
waiver of the right to take other action in the same, similar or other instances
without such notice or demand.
(a) NOTICES. Any written notice required to be given under this
Guaranty shall be sent to the following by mail, electronic mail or facsimile,
and shall be deemed given upon such mailing and sending by facsimile:
If to EBOF or the Guarantors:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
DRAFT 11/9/2007
with a copy to:
Akin Gump ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to ▇▇▇▇▇▇▇ (to the extent a signatory hereto)
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Cem Hacioglu (▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇)
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.(▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇.▇▇▇)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.(▇▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇.▇▇▇)
If to Radcliffe (to the extent a signatory hereto):
c/o RG Capital Management, L.P.
▇ ▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇)
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
DRAFT 11/9/2007
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(▇▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇)
If to Yorkville(to the extent a signatory hereto):
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
(▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇)
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
(▇▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇)
If to Cranshire (to the extent a signatory hereto):
▇▇▇▇▇▇▇▇▇ Traurig LLP
▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq. (▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇)
If to Evolution (the extent it executes this Agreement):
c/o Evolution Capital Management LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇ (▇▇▇▇▇.▇▇▇@▇▇▇▇▇▇▇.▇▇▇)
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(▇▇▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇.▇▇▇)
DRAFT 11/9/2007
If to Kings Road (the extent it executes this Agreement):
c/o Polygon Investment Partners LP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇
(▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇)
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq. (▇▇▇▇.▇▇▇▇▇@▇▇.▇▇▇)
If to CVI (the extent it executes this Agreement):
c/o Heights Capital Management
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇.▇▇▇)
with a copy to:
Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq. (▇▇▇▇▇@▇▇▇▇▇.▇▇▇)
If to Portside (the extent it executes this Agreement):
c/o Ramius Capital Group, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇)
▇▇▇▇▇ ▇▇▇▇ (▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇)
▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇)
DRAFT 11/9/2007
with a copy to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. (▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇)
Section 4.5 GOVERNING LAW, JURISDICTION, JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Guaranty shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each Guarantor hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each Guarantor hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Guaranty and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED
HEREBY.
Section 4.6 AMENDMENTS. This Guaranty may be amended only by an
instrument in writing executed by the party or an authorized representative of
the party against whom such amendment is sought to be enforced.
Section 4.7 PARTIES BOUND; ASSIGNMENT; JOINT AND SEVERAL. This
Guaranty shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns and legal representatives; PROVIDED,
HOWEVER, that no Guarantor may, without the prior written consent of the
Lenders, assign any of its rights, powers, duties or obligations hereunder.
Section 4.8 HEADINGS. Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty.
Section 4.9 RECITALS. The recital and introductory paragraphs hereof
are a part hereof, form a basis for this Guaranty and shall be considered prima
facie evidence of the facts and documents referred to therein.
DRAFT 11/9/2007
Section 4.10 RIGHTS AND REMEDIES. The exercise by the Lenders of any
right or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy.
Section 4.11 Intentionally Omitted.
Section 4.12 EXTENSIONS OF DEADLINES AND NOTICE OF TRIGGER EVENTS. Any
deadline under this Guaranty, including but not limited to, the timeframes set
forth in sections 1.1(a)-(g) herein may be extended by the mutual written
agreement of the Lenders and EBOF (on behalf of the Guarantors). In the event of
any default under this Guaranty, including but not limited to, the expiration of
any deadline set forth in sections 1.1(a)-(g), the defaulting party shall be
entitled to three (3) business days' notice of the default and the opportunity
to cure such default.
Section 4.13 RECOVERY BY LENDERS. Any proceeds recovered by any Lender
under this Guaranty in excess of its Pro Rata Share of the Total Debt shall be
held by such Lender in trust for the pro rata benefit of the other Lenders and
distributed accordingly. This provision shall survive termination of this
Guaranty.
Section 4.14 AFTER ACQUIRED CLAIMS. In the event that a Lender
acquires (and continues to hold) the Notes and Warrants (the "EXCLUDED
SECURITIES") under the Transaction Document of a Noteholder that is not a
signatory hereto (an "EXCLUDED NOTEHOLDER"), such Excluded Securities acquired
(and held) by such Lender shall be deemed to be Notes and Warrants of such
Lender governed by the terms and conditions of this Guaranty and the Collateral
Documents (and the benefits thereunder) as if such Excluded Securities were held
by such Lender as of the date of this Guaranty (but only for so long as such
Excluded Securities are held by such Lender). The Pro Rata Share of any Lender
that acquires Notes from an Excluded Noteholder (or that transfers any portion
of its Notes) shall be adjusted accordingly.
Section 4.15 ENTIRETY. THIS GUARANTY EMBODIES THE FINAL AND ENTIRE
AGREEMENT OF THE GUARANTORS WITH RESPECT TO THE GUARANTORS' GUARANTY OF THE
GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTORS AS A FINAL AND
COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING
BETWEEN OR AMONG THE GUARANTORS AND THE LENDERS, NO COURSE OF PERFORMANCE, NO
TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY. THERE
ARE NO ORAL AGREEMENTS BETWEEN OR AMONG THE GUARANTORS AND ANY LENDER.
DRAFT 11/9/2007
EXECUTED as of the day and year first above written.
Earth LNG, Inc. Earth Biofuels, Technology Co, LLC
d/b/a Advanced Biofuels Technology, LLC
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Applied LNG Technologies, USA, LLC Earth Biofuels Distribution Co.
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Alternative Dual Fuels, Inc. Earth Biofuels of Cordele, LLC
d/b/a Apollo Leasing, Inc.
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Arizona LNG, LLC B20 Customs LLC
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Fleet Star, Inc. Earth Biofuels Operating, Inc.
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
▇▇▇▇▇▇ Biofuels, LLC Earth Biofuels Retail Fuels, Co.
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
DRAFT 11/9/2007
Earth Ethanol of Washington LLC Earth Ethanol, Inc.
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
DRAFT 11/9/2007
IN WITNESS WHEREOF, the Lenders below have caused their respective
signature page to this Guaranty to be duly executed as of the date first written
above.
Castlerigg Master Investments Ltd. Kings Road Investments Ltd.
By: ▇▇▇▇▇▇▇ Asset Management Corp.
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Evolution Master Fund Ltd. SPC, Capital Ventures International
Segregated Portfolio M By: Heights Capital Management, Inc.
its authorized agent
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Radcliffe SPC, Ltd. for and on behalf YA Global Investments, L.P. (formerly,
of the Class A Convertible Crossover Cornell Capital Partners, LP
Segregated Portfolio
By: RG Capital Management Company, By: Yorkville Advisors, LLC
LLC Its: General Partner
By: RGC Management Company, LLC
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
Cranshire Capital, LP Portside Growth and Opportunity Fund
By: By:
----------------------------- ------------------------------------
Name: Name:
Title: Title:
DRAFT 11/9/2007
EXHIBIT A
SCHEDULE OF EBOF SUBSIDIARIES
SUBSIDIARY
-------------------------------------------------------------------------------
Earth LNG, Inc.
Applied LNG Technologies, USA, LLC
Alternative Dual Fuels, Inc.
d/b/a Apollo Leasing, Inc.
Arizona LNG, LLC
Fleet Star, Inc.
▇▇▇▇▇▇ Biofuels, LLC
Earth Biofuels, Technology Co, LLC
d/b/a Advanced Biofuels Technology, LLC
Earth Biofuels Distribution Co
Earth Biofuels of Cordele, LLC
B20 Customs LLC
Earth Biofuels Operating, Inc.
Earth Biofuels Retail Fuels, Co.
Earth Ethanol, Inc.
Earth Ethanol of Washington LLC
DRAFT 11/9/2007
EXHIBIT B
ESCROW AGREEMENT