DRAFT 11/9/2007
ESCROW AGREEMENT
Escrow Agreement dated as of November [__], 2007 (the "AGREEMENT
DATE") among (i) XXXXXXX XXXX & XXXXX LLP ("SRZ"); (ii) LENDERS that are
signatories hereto (collectively, the "LENDERS"); (iii) EARTH BIOFUELS, INC., a
Delaware Corporation, ("EBOF"); (iv) XXXXXX XXXXXXXXXX, ("XXXXXXXXXX") an
individual; and (v) entities listed on the SCHEDULE OF EBOF SUBSIDIARIES
attached hereto as Schedule A (individually, a "SUBSIDIARY" and collectively,
the "SUBSIDIARIES"). SRZ, the Lenders, EBOF, XxXxxxxxxx, and the Subsidiaries
shall each be referred to herein as a "PARTY" and collectively, the "PARTIES."
WHEREAS, EBOF and certain Noteholders(1) are parties to a Securities
Purchase Agreement, dated as of July 24, 2006 (the "SECURITIES PURCHASE
AGREEMENT"), pursuant to which EBOF issued (i) 8% Senior Convertible Notes in
the aggregate principal amount of $52.5 million, which were unsecured and
convertible into shares of EBOF's 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; and in connection with the Securities Purchase
Agreement, EBOF executed a Registration Rights Agreement under which it agreed
to cooperate in the registration of the securities under the Securities Purchase
Agreement.
WHEREAS, on July 11, 0000, Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxx
and Evolution (collectively, the "PETITIONING CREDITORS") commenced an
involuntary bankruptcy proceeding against EBOF pursuant to Title 11 of the
United States Code in the United States Bankruptcy Court for the District of
Delaware (the "BANKRUPTCY COURT"), Case No. 07-10928 (CSS) (the "BANKRUPTCY
CASE");
WHEREAS, pursuant to the Interim Restructuring Agreement dated
November [__], 2007 (the "INTERIM RESTRUCTURING AGREEMENT"), the parties thereto
agreed to execute the Interim Restructuring Agreement and related exhibits and
to place the executed agreement and related exhibits in escrow with SRZ pending
the release condition described below;
WHEREAS, pursuant to the Purchase and Sale Agreements, each dated
November [__], 2007 (the "PURCHASE AND SALE AGREEMENTS"), the parties thereto
agreed to execute the Purchase and Sale Agreements and to place each executed
agreement in escrow with SRZ pending the release condition described below;
WHEREAS, pursuant to the Release, dated November [__], 2007 (the
"RELEASE") the parties thereto agreed to execute the Release and to place the
executed Release in escrow with SRZ pending the release condition described
below;
WHEREAS, pursuant to the Guaranty by Xxxxxx XxXxxxxxxx, dated November
[__], 2007 (the "XXXXXXXXXX GUARANTY") the parties thereto agreed to execute the
XxXxxxxxxx
--------------------------
(1) "Noteholders" shall mean Castlerigg Master Investments Ltd. ("CASTLERIGG");
Radcliffe SPC, Ltd. for and on behalf of the Class A Convertible Crossover
Segregated Portfolio ("RADCLIFFE"); Cranshire Capital L.P. ("CRANSHIRE"); and YA
Global Investments, L.P. (formerly known as Cornell Capital, L.P.
("YORKVILLE")), Portside Growth and Opportunity Fund ("PORTSIDE"), Capital
Ventures International, Evolution Master Fund Ltd. SPC, Segregated Portfolio M
("EVOLUTION"), and Kings Road Investments Ltd.
DRAFT 11/9/2007
Guaranty and to place the executed XxXxxxxxxx Guaranty in escrow with SRZ
pending the release condition described below;
WHEREAS, pursuant to the Guaranty by the Subsidiaries, dated November
[__], 2007 (the "SUBSIDIARY GUARANTY") the parties thereto agreed to execute the
Subsidiary Guaranty and to place the executed Subsidiary Guaranty in escrow with
SRZ pending the release condition described below;
WHEREAS, pursuant to the Confessions of Judgment, each dated November
[__], 2007 (the "CONFESSIONS OF JUDGMENT") EBOF agreed to execute the
Confessions of Judgment and to place the executed Confessions of Judgment in
escrow with SRZ pending the release condition described below;
WHEREAS, SRZ has agreed to serve as escrow agent pursuant to the terms
and conditions hereof and to hold and release the (i) Interim Restructuring
Agreement; (ii) Purchase and Sale Agreements; (iii) Release; (iv) XxXxxxxxxx
Guaranty; (v) Subsidiary Guaranty; and (vi) Confessions of Judgment
(collectively, the "ESCROW DOCUMENTS") in accordance with section 3 of this
Escrow Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, the Parties hereto agree as follows:
1. APPOINTMENT OF AND ACCEPTANCE BY SRZ. The Parties hereby appoint SRZ
to serve as escrow agent hereunder. SRZ hereby accepts such appointment and,
upon receipt of the Escrow Documents, agrees to hold and release the Escrow
Documents in accordance with this Escrow Agreement. SRZ does not have any
interest in the Escrow Documents but is serving as escrow agent only and having
only possession thereof.
2. DELIVERY OF ESCROW DOCUMENTS TO SRZ. Each Party hereto agrees to
deliver original versions of the executed Escrow Documents (applicable to such
Party) to SRZ.
3. RELEASE CONDITIONS. SRZ shall hold the Escrow Documents until the date
that is the earlier of (i) an order dismissing the Bankruptcy Case (a "DISMISSAL
ORDER") is entered on the Bankruptcy Court's docket and such order is not
subject to a stay (the "DISMISSAL DATE"); and (ii) December 21, 2007. If the
Dismissal Date occurs on or before December 21, 2007 (or such later date as may
be agreed in writing by all Lenders prior to the expiration of such date or
dates), the provisions of the Escrow Documents not already effective shall
become effective upon the Dismissal Date with no further action required by any
Party, and SRZ shall release the Escrow Documents to the respective Parties that
are signatories to such documents. If the Dismissal Date fails to occur on or
before December 21, 2007 (or such later date as may be agreed in writing by all
Lenders prior to the expiration of such date or dates) (a "FAILURE EVENT"),
then, (a) EBOF shall immediately file a notice of withdrawal of the joint motion
to dismiss the Bankruptcy Case (the "WITHDRAWAL NOTICE"), which the Lenders that
are Petitioning Creditors hereby authorize upon the occurrence of a Failure
Event (or if EBOF fails to do so, EBOF hereby authorizes the Lenders that are
Petitioning Creditors to do so on EBOF's behalf), and (b) the Escrow Documents
shall be of no further force or effect, and SRZ shall return the Escrow
Documents to the respective Parties that delivered such documents to SRZ upon
entry of the
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DRAFT 11/9/2007
Withdrawal Notice on the docket of the Bankruptcy Court, provided that a
Dismissal Order has not been previously docketed. If the joint motion to dismiss
the Bankruptcy Case is denied, or a Withdrawal Notice is filed before a
Dismissal Order (if any) is entered as provided above, in each case, to the
fullest extent possible each of the Parties shall be restored to the position it
held immediately before the Agreement Date, the Escrow Documents shall be of no
further force or effect, and SRZ shall return the Escrow Documents to the
respective Parties that delivered such documents to SRZ.
4. TERMINATION OF PURCHASE AND SALE AGREEMENT. If any Purchase and Sale
Agreement terminates prior to the Dismissal Date in accordance with section 2(c)
thereof, such Purchase and Sale Agreement shall be null, void and of no further
force and effect, and SRZ shall return such Purchase and Sale Agreement and the
related Release to the parties that delivered such documents to SRZ.
5. DUTIES AND RESPONSIBILITIES OF SRZ. The Parties acknowledge and agree
that SRZ (i) shall be obligated only for the performance of such duties as are
specifically set forth in this Escrow Agreement; (ii) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction, instrument, statement, request or document furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper person, and shall have no responsibility for determining the
accuracy thereof.
6. EXCULPATION AND INDEMNIFICATION. SRZ shall not be liable for, and each
Party shall jointly and severally indemnify and hold SRZ harmless from and
against, any and all losses, liabilities, claims, actions, damages and expenses,
including attorneys' fees and disbursements, arising out of or in connection
with this Escrow Agreement. This section shall survive termination of this
Escrow Agreement.
7. TERMINATION. This Escrow Agreement shall continue in effect until the
earlier of the following to occur: (i) all Escrow Documents are released, or
(ii) December 21, 2007, unless such date is extended in writing by all Lenders.
8. NOTICES. Any written notice required to be given under this Escrow
Agreement 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 SRZ:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq. (xxxxx.xxxxxxx@xxx.xxx)
Xxxxxxx X. Xxxxx, Esq. (xxxxxxx.xxxxx@xxx.xxx)
If to EBOF, Xxxxxx XxXxxxxxxx, or the Subsidiaries:
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx XxXxxxxxxx
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with a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to Castlerigg (to the extent a signatory hereto):
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Cem Hacioglu (xxxxxxxxx@xxxxxxxxxxx.xxx)
Xxxxxxx Xxxxxxx (xxxxxxxx@xxxxxxxxxxx.xxx)
with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq. (xxxxx.xxxxxxx@xxx.xxx)
Xxxxxxx X. Xxxxx, Esq. (xxxxxxx.xxxxx@xxx.xxx)
If to Radcliffe (to the extent a signatory hereto):
c/o RG Capital Management, L.P.
0 Xxxx Xxxxx - Xxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
(xxxxxxxxxxx@xxxxxxxxxxxxxx.xxx)
with a copy to:
Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
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Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
(Xxxxxx.Xxxxx@xxxxxxxxxx.xxx)
If to Yorkville (to the extent a signatory hereto):
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
(xxxxxxx@xxxxxxxxxxxxxxxxx.xxx)
with a copy to:
Xxxxx Xxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: X. Xxxxxx XxXxxxxx, Esq.
(xxxxxx.xxxxxxxx@xxxxxxxxxx.xxx)
If to Cranshire (to the extent a signatory hereto):
Xxxxxxxxx Traurig LLP
00 X. Xxxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, Esq. (xxxxxx@xxxxx.xxx)
Xxxxx Xxxxxxxxx (xxxxxxxxxx@xxxxx.xxx)
If to Evolution (to the extent a signatory hereto):
c/o Evolution Capital Management LLC
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000X
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxx X. Xxx (xxxxx.xxx@xxxxxxx.xxx)
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx LLP
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(xxxxxxx.xxxxxxx@xxx.xxx)
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If to Kings Road (to the extent a signatory hereto):
c/o Polygon Investment Partners LP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X.X. Xxxxxxxxx
(xxxxxxxxxx@xxxxxxxxxx.xxx)
Xxxxxxx X. Xxxxx
(xxxxxx@xxxxxxxxxx.xxx)
with a copy to:
Xxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq. (xxxx.xxxxx@xx.xxx)
If to CVI (to the extent a signatory hereto):
c/o Heights Capital Management
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx (Xxxxxxx.Xxxxxx@xxx.xxx)
with a copy to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx, LLP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq. (xxxxx@xxxxx.xxx)
If to Portside (to the extent a signatory hereto):
c/o Ramius Capital Group, L.L.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx (xxxxxx@xxxxxx.xxx)
Xxxxx Xxxx (xxxxx@xxxxxx.xxx)
Xxxx Xxxxxxx (xxxxxxxx@xxxxxx.xxx)
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DRAFT 11/9/2007
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx, Esq. (xxxxxxxx@xxxxxxxxxx.xxx)
9. GOVERNING LAW, JURISDICTION, JURY TRIAL. All questions concerning
the construction, validity, enforcement and interpretation of this Escrow
Agreement 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. The Parties hereby irrevocably submit 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
waive, and agree 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. The Parties hereby irrevocably
waive personal service of process and consent 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 Escrow Agreement and agree 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 ESCROW AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
10. COUNTERPARTS. This Escrow Agreement may be executed in any number
of counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
11. HEADINGS. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Escrow Agreement.
12. RECITALS. The recital and introductory paragraphs hereof are a
part hereof, form a basis for this Escrow Agreement and shall be considered
prima facie evidence of the facts and documents referred to therein.
13. EFFECTIVE DATE. This Escrow Agreement shall be effective as of the
date first mentioned above.
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DRAFT 11/9/2007
IN WITNESS WHEREOF, the Parties to this Escrow Agreement have caused
their respective signature page to this Escrow Agreement to be duly executed as
of the date first written above.
Earth Biofuels, Inc. Castlerigg Master Investments Ltd.
By: Xxxxxxx 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:
Kings Road Investments Ltd.
By:
---------------------------
Name:
Title:
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DRAFT 11/9/2007
IN WITNESS WHEREOF, the parties to this Escrow Agreement have caused
their respective signature page to this Escrow Agreement to be duly executed as
of the date first written above.
-----------------------------------------
Name
-----------------------------------------
Signature
-----------------------------------------
Address
STATE OF TEXAS )
) ss.
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
XXXXXX XXXXXXXXXX, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, and in the capacity therein
stated.
Given under my hand and seal of office, this ____ day of __________,
2007.
(Seal) Notary Public, State of Texas
(Notary's Name Typed or Printed)
My Commission Expires:
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DRAFT 11/9/2007
IN WITNESS WHEREOF, the parties to this Escrow Agreement have caused
their respective signature page to this Escrow Agreement to be duly executed as
of the date first written above.
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:
Xxxxxx Biofuels, LLC Earth Biofuels Retail Fuels, Co.
By: By:
--------------------------------- ----------------------------------
Name: Name:
Title: Title:
10
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Earth Ethanol of Washington LLC Earth Ethanol, Inc.
By: By:
--------------------------------- ----------------------------------
Name: Name:
Title: Title:
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DRAFT 11/9/2007
IN WITNESS WHEREOF, the Parties to this Escrow Agreement have caused
their respective signature page to this Escrow Agreement to be duly executed as
of the date first written above.
XXXXXXX XXXX & XXXXX LLP
in its capacity as escrow agent
--------------------------------
By:
Title:
12
DRAFT 11/9/2007
SCHEDULE 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.
Xxxxxx 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
13
