CONSENT AND AMENDMENT AGREEMENT
This
Consent and Amendment Agreement (this "Consent") is dated as
of December __, 2008, by and between Earth Biofuels, Inc., a Delaware
corporation, with its corporate headquarters located at 0000 Xxxx Xxxxxx, Xxxxx
000, Xxxxxx, Xxxxx 00000 (the "Company") and
___________________ (the "Investor").
WHEREAS:
A. On
June 25, 2008, the Company and certain investors (including the Investor) (the
"Investors") each
entered into an Amendment and Exchange Agreement (collectively, the "Existing Amendment and Exchange
Agreements"), pursuant to which the Company issued to each of the
Investors, in exchange for the cancellation of certain portions of securities
and other obligations of the Company, an (a) Amended and Restated Senior Secured
Convertible Exchangeable Notes (the "Existing Series A Notes"),
convertible into shares (the "Existing Series A Conversion
Shares") of common stock of the Company, par value $0.001 per share (the
"Common Stock"), in
accordance with the terms thereof and exchangeable into common stock, par value
$0.001 per share (the "PNG
Common Stock") of PNG Ventures, Inc., a Nevada corporation ("PNG") in accordance with the
terms thereof and (b) a Senior Secured Convertible Exchangeable Notes (the
"Existing Series B
Notes", and together with the Existing Series A Notes, the "Existing Notes"), convertible
into shares (the "Existing
Series B Conversion Shares" and together with the Existing Series A
Conversion Shares, the "Existing Conversion Shares")
of Common Stock, in accordance with the terms thereof and exchangeable into PNG
Common Stock, in accordance with the terms thereof.
B. On
or prior to the date hereof, Castlerigg PNG Investments LLC ("Castlerigg") pursuant to (i)
an Exchange Notice (as defined in the Existing Series A Notes) to the Company
electing to exchange $55,000,000 of the Existing Series A Note of Castlerigg for
5,500,000 shares of PNG Common Stock (the "Initial Exchange Notice") and
(ii) a subsequent Exchange Notice electing to exchange an additional $1,000,000
of the Existing Series A Note of Castlerigg for 100,000 shares of PNG Common
Stock (the "Additional Exchange
Notice", and together with the Initial Exchange Notice, the "Exchange Notices"), exchanged
$56,000,000 of the Existing Series A Note of Castlerigg for 5,600,000 shares of
PNG Common Stock.
C. The
Company and Castlerigg (the "Participating Investor") are
entering into an Amendment and Exchange Agreement in the form attached hereto as
Exhibit A (the,
"Exchange Agreement" and
the date the transactions described therein are consummated, the “Exchange Date”), pursuant to
which, among other things, (i) the Company shall (A) exchange a portion of the
outstanding principal amount of such Existing Series A Note for a senior secured
convertible note in form attached to the Exchange Agreement as Exhibit A thereto
(the "Series C Note"),
which shall be convertible into Common Stock (as converted, the "Series C Conversion Shares"),
in accordance with the terms thereof and (B) decrease the remaining outstanding
principal amount of the Participating Investor's Existing Series A Note to
$5,000,000 and (ii) the Company and the Investor shall amend and restate the
Investor's Existing Series B Note for a senior secured convertible note in the
form attached to the Exchange Agreement as Exhibit B thereto (the "Series D Notes", and together
with the Series C Notes, the "December
Amendment Notes"), which shall
be convertible into Common Stock (as converted, the "Series D Conversion Shares"
and together with the Series C Conversion Shares, the "December Amendment Conversion
Shares ").
D. The
Company requires the consent of the Investor, as a holder of Existing Notes, to
the transactions contemplated by the Exchange Agreement.
E. Concurrently
herewith, the Company has also requested waivers from the other holders of
Existing Notes pursuant to waivers in form and substance identical to this
Consent (the "Other
Consents", and together with this Consent, the "Consents").
NOW,
THEREFORE, in consideration of the premises set forth above, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined
Terms. Capitalized terms used and not otherwise defined in
this Consent shall have the meanings given to them in the Exchange
Agreement.
2. Consent. The
Investor hereby consents to the transactions contemplated by the Exchange
Agreement, including, without limitation, the amendments to the Existing
Transaction Documents set forth therein. For the avoidance of doubt,
the Investor acknowledges and agrees that (a) neither the issuance of the Series
C Note or the Series D Note shall result an adjustment of the conversion price
of any Existing Notes pursuant to Section 8(a) of the Existing Notes and (b)
notwithstanding Section 19 of the Existing Series A Notes, the Company's right
of Mandatory Conversion set forth in Section 2 of the Exchange Agreement shall
not be applicable to the Investor's Existing Series A Note.
3. Ranking. The
Investor hereby acknowledges and agrees that (i) the Series C Note will rank
pari passu with the Existing Series A Notes that remain outstanding after the
Closing Date (as defined in the Exchange Agreement) and the Series D Note will
rank pari passu with the Existing Series B Notes that remain outstanding after
the Closing Date, (ii) the Existing Series B Note and Series D Notes will rank
junior to the Series C Note and the Existing Series A Notes and senior to all
outstanding and future indebtedness of the Company, other than Permitted Senior
Indebtedness (as defined in the Series C Note as of the Exchange Date), and
(iii) each of the Existing Notes and the December Amendment Notes will be
secured by a perfected security interest in certain of the assets of the Company
and the stock, equity interests and assets of certain of the Company's
subsidiaries as evidenced by the Security Documents (as defined in the Existing
Amendment and Exchange Agreements) and that certain Reaffirmation Agreement in
the form attached to the Exchange Agreement as Exhibit C thereto
(the "Reaffirmation
Agreements").
4. Redemptions. The
Investor hereby acknowledges and agrees that (i) any redemptions required to be
made by the Company pursuant to the terms of the Existing Series A Notes on a
pro rata basis, including without limitation pursuant to Sections 9, 11(b) and
12, shall be made on a pro rata basis for all Existing Series A Notes and all
Series C Notes simultaneously, determined as if all were one series and (ii) any
redemptions required to be made by the Company pursuant to the terms of the
Existing Series B Notes on a pro rata basis,
including
without limitation pursuant to Sections 11(b) and 12, shall be made
on a pro rata basis for all Existing Series B Notes and all Series D Notes
simultaneously, determined as if all were one series. For purposes of
(a) the Existing Series A Notes, the term “Holder Pro Rata Percentage” shall
mean a fraction (1) the numerator of which is the Principal amount of the
relevant holder’s Existing Series A Note as of June 26, 2008 and (2) the
denominator of which is $105,000,000 and (b) the Existing Series B Notes, the
term “Holder Pro Rata Percentage” shall mean a fraction (1) the numerator of
which is the Principal amount of the relevant holder’s Existing Series B Note as
of June 26, 2008 and (2) the denominator of which is $3,434,557.85.
5. Amendments. The
second sentence of Section 12(a) of each of the Investor's Existing Notes shall
be amended and restated in its entirety as follows:
"The
portion of this Note subject to redemption at a price equal to the Principal
amount pursuant to this Section 12 shall be redeemed by the Company or such
Subsidiary, as applicable, in cash in an amount equal to the product of the
Holder Pro Rata Percentage and the Mandatory Prepayment Amount (the "Mandatory Prepayment Price");
provided, however, that if such amount is greater than the sum of (i) the
outstanding Principal amount of this Note plus (ii) the amount of any accrued
but unpaid Interest on such Conversion Amount being redeemed and accrued and
unpaid Late Charges, if any, with respect to such Conversion Amount and Interest
(the “Outstanding
Amount”) on the Mandatory Prepayment Date, then the Mandatory Prepayment
Price shall equal the Outstanding Amount."
The
foregoing amendment to the Investor's Existing Notes shall become effective (a)
with respect to its Existing Series A Note, at such time as the Company receives
the Exchange Agreement and Consents, duly executed by Castlerigg and the other
holders of the Existing Series A Notes constituting the Required Holders (as
defined in the Existing Series A Notes), containing identical amendments to
Section 12(a) of such holders' Existing Series A Notes and (b) with respect to
its Existing Series B Note, at such time as the Company receives Consents, duly
executed by the other holders of the Existing Series B Notes (other than
Castlerigg) constituting the Required Holders (as defined in the Existing Series
B Notes), containing identical amendments to Section 12(a) of such holders'
Existing Series B Notes and (b).
6. Reaffirmation of
Obligations. The Company hereby confirms and agrees that,
except as set forth herein and in the Exchange Agreement above, (i) each of
the Existing Transaction Documents and the Existing Amendment and Exchange
Agreement is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects, except as otherwise amended hereby or in
accordance herewith; (ii) the Security Documents which purport to assign or
pledge to the holders of Existing Notes, or Xxxxxxx Asset Management Corp, as
collateral agent, or to grant to the holders of Existing Notes, or Castlerigg
PNG Investments LLC, as collateral agent, a security interest in or lien on, any
collateral as security for the obligations of the Company from time to time
existing in respect of the Existing Notes, such pledge, assignment and/or grant
of the security interest or lien are hereby ratified and confirmed in all
respects, and shall apply with respect to the obligations under the December
Amendment Notes and the Existing Notes; and (iii) the execution, delivery and
effectiveness of this Consent shall not operate as an amendment of any right,
power or remedy of the Investor under any
Existing
Transaction Document, nor constitute an amendment of any provision of any
Existing Transaction Document.
7. Fees and
Expenses. Except as otherwise set forth in this Consent and
the Transaction Documents, each party to this Consent shall bear its own
expenses in connection with transactions contemplated hereby.
8. Effectiveness. Upon
execution of Consents by the Company and each of the other holders of Existing
Notes, this Consent shall become effective as of the date first written above
(the "Effective
Date").
9. Disclosure of Transactions
and Other Material Information. On or before 5:30 p.m., New
York City time, on or prior to the first Business Day following the later of (x)
the date of the Exchange Agreement and (y) the Effective Date, the Company shall
issue a press release and file a Current Report on Form 8-K describing the terms
of the transactions contemplated by this Consent in the form required by the
1934 Act and attaching this Consent (including Exhibit A attached
hereto) as an exhibit to such filing (including all attachments, the "8-K Filing"). From
and after the filing of the 8-K Filing with the SEC, no Buyer shall be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries or any of their respective officers, directors, employees or
agents, that is not disclosed in the 8-K Filing.
10. Remedies. The
Investor and each holder of the Securities shall have all rights and remedies
set forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Consent shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Consent and to
exercise all other rights granted by law. Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge any
or all of its obligations under this Consent, any remedy at law may prove to be
inadequate relief to the Investor. The Company therefore agrees that
the Investor shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages and without
posting a bond or other security.
11. Independent Nature of
Investor's Obligations and Rights. The obligations of the
Investor under any Transaction Document, several and not joint with the
obligations of any Other Investor, and the Investor shall not be responsible in
any way for the performance of the obligations of any Other Investor under any
Transaction Documents. Nothing contained herein or in any other
Transaction Documents, and no action taken by the Investor pursuant hereto,
shall be deemed to constitute the Investor and Other Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investor and Other Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. The Company and the
Investor confirm that the Investor has independently participated in the
negotiation of the transactions contemplated hereby with the advice of its own
counsel and advisors. The Investor shall be entitled to independently
protect and enforce its rights, including, without limitation, the
rights
arising out of this Consent or out of any other Transaction Documents, and it
shall not be necessary for any Other Investor to be joined as an additional
party in any proceeding for such purpose.
12. No Third Party
Beneficiaries. This Consent is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.
13. Counterparts. This
Consent may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
14. Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Consent 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
jurisdictions other than the State of New York. Each party 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 party
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 Consent 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 PARTY
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 WAIVER OR ANY TRANSACTION CONTEMPLATED
HEREBY.
15. Severability. If
any provision of this Consent is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Consent so long as this Consent as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
16. Most Favored
Nation. The Company hereby represents and warrants as of the
date hereof and covenants and agrees from and after the date hereof that none of
the terms offered to any Person with respect to any amendment, settlement or
waiver (each a "Settlement
Document") relating to the terms, conditions and transactions
contemplated hereby, is or will be more favorable to such Person than those of
the Investor and this Consent shall be, without any further action by the
Investor or the Company, deemed amended and modified in an economically and
legally equivalent manner such that the Investor shall receive the benefit of
the more favorable terms contained in such Settlement
Document. Notwithstanding the foregoing, the Company agrees, at its
expense, to take such other actions (such as entering into amendments to the
Transaction Documents) as the Investor may reasonably request to further
effectuate the foregoing.
[Signature
Page Follows]
IN
WITNESS WHEREOF, this Consent has been executed by the Company and the Investor
as of the date first written above.
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INVESTOR:
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By:
Name:
Title:
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AGREED
TO AND ACCEPTED BY:
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EARTH
BIOFUELS, INC.
By:
Name:
Title:
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