AMENDEDAND RESTATED PLEDGE AND SECURITY AGREEMENT

 

AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of June 26, 2008 (this "Agreement"), made by Earth Biofuels, Inc., a Delaware corporation ("EBOF"), and each of the undersigned existing Subsidiaries (collectively, the "Existing Subsidiaries") and each other Subsidiary of EBOF hereafter becoming party hereto (together with EBOF and the Existing Subsidiaries, each a "Grantor" and, collectively, the "Grantors"), in favor of Castlerigg Master Investments, Ltd., a company organized under the laws of the British Virgin Islands, in its capacity as collateral agent (in such capacity, the "Collateral Agent") for certain of the holders (each a "Holder" and collectively, the "Holders") of the 2008 Amendment Notes (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, each Holder purchased 8% Senior Convertible Notes (collectively, the "Existing Notes") pursuant to a Securities Purchase Agreement with EBOF, dated as of July 24, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the "Securities Purchase Agreement");

 

WHEREAS, pursuant to a Guaranty Agreement, dated as of November 13, 2007 (the "Existing Guaranty"), the Existing Subsidiaries jointly and severally guaranteed the payment of the Total Debt (as defined in the Existing Guaranty) to the Holders;

 

WHEREAS, pursuant to a Pledge and Security Agreement, dated as of December 20, 2007 (the "Existing Security Agreement"), EBOF granted to each Holder a perfected security interest in certain assets of EBOF and the stock, equity interests and assets of certain of EBOF's subsidiaries;

 

WHEREAS, in order to pay for expenses due under the Securities Purchase Agreement, EBOF has authorized a new series of senior subordinated secured convertible exchangeable notes of EBOF, in the form attached as Exhibit A to the Exchange Agreement (as defined below) (the "Series B Notes");

 

WHEREAS, the Collateral Agent desires to enter into an Amendment and Exchange Agreement (the "Exchange Agreement"), with EBOF, pursuant to which, among other things, EBOF and the Collateral Agent shall amend and restate all of the Collateral Agent's Existing Notes for a senior secured convertible exchangeable note in the form attached as Exhibit B to the Exchange Agreement (the "Amended and Restated Notes", and together with the Series B Notes, the "2008 Amendment Notes");

 

WHEREAS, each of the Lenders have agreed to release certain of the Company's subsidiaries from their respective obligations under the Existing Guaranty and the Existing Security Agreement, pursuant to separate Release, Consent and Waivers (each a "Release Agreement", and collectively, the "Release Agreements") by and among each Lender, the Company, Earth LNG, Inc., Arizona LNG, L.L.C., Fleet Star, Inc., Earth Leasing, Inc. f/k/a Alternative Dual Fuels, Inc. and Applied LNG Technologies USA, L.L.C, effective upon the closing of the transactions contemplated by the Exchange Agreement;

 

 

WHEREAS, pursuant to the Exchange Agreement, the Existing Subsidiaries will amend and restate the Existing Guaranty in the form attached as Exhibit E to the Exchange Agreement (as amended or modified from time to time in accordance with their terms, the "Amended and Restated Guaranty"), and the Grantors will amend and restate the Existing Security Agreement in this Agreement (as amended or modified from time to time in accordance with their terms) to reaffirm the granting of a security interest in the Existing Security Agreement;

WHEREAS, each of the Grantors has determined that the execution, delivery and performance of this Agreement and the Amended and Restated Guaranty directly benefit, and are in the best interest of the Grantors; and

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Holders to enter into the Exchange Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the Holders, as follows:

 

SECTION 1.                                Definitions.

 

(a)           Reference is hereby made to the Exchange Agreement for a statement of the terms thereof.  All terms used in this Agreement and the recitals hereto which are defined in the Exchange Agreement or in Articles 8 or 9 of the Uniform Commercial Code (the "UCC") as in effect from time to time in the State of New York, and which are not otherwise defined herein shall have the same meanings herein as set forth therein; provided that terms used herein which are defined in the UCC as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute, except as the Collateral Agent may otherwise determine.

 

(b)           The following terms shall have the respective meanings provided for in the UCC:  "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim", "Commodity Account", "Commodity Contracts", "Deposit Account", "Documents", "Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security", "Record", "Security Account", "Software", and "Supporting Obligations".

 

(c)           As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

 

"2008 Amendment Notes" has the meaning set forth in the recitals hereto.

 

"Amended and Restated Guaranty" has the meaning set forth in the recitals hereto.

 

"Business Day" means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close.

 

 

"Copyright Licenses" means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to use or sell any works covered by any copyright (including, without limitation, all Copyright Licenses set forth in Schedule II hereto).

 

"Copyrights" means all domestic and foreign copyrights, whether registered or not, including, without limitation, all copyright rights throughout the universe (whether now or hereafter arising) in any and all media (whether now or hereafter developed), in and to all original works of authorship fixed in any tangible medium of expression, acquired or used by any Grantor (including, without limitation, all copyrights described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.

 

          "Event of Default" means any defined event of default under any one or more of the Transaction Documents, in each instance, after giving effect to any notice, grace, or cure periods provided for in the applicable Transaction Documents.

 

"Exchange Agreement" has the meaning set forth in the recitals hereto.

 

"Existing Guaranty" has the meaning set forth in the recitals hereto.

 

"Existing Liens" means any of the Liens described in Schedule VII annexed hereto, but only to the extent such Liens are valid and in existence as of the date of this Agreement and such Liens shall not include any PACA Liens.

 

"Existing Notes" has the meaning set forth in the recitals hereto.

 

"Existing Security Agreement" has the meaning set forth in the recitals hereto.

 

"Farm Products" means all of the Grantors' now owned or hereafter existing or acquired farm products of every kind and nature, including, without limitation, crops and supplies used or produced in farming operations, and products of crops wherever located.

 

"Farm Products Sellers" means, individually and collectively, sellers or suppliers to the Grantors of any farm product (as such term is defined in both the Food Security Act and the Code), including any perishable agricultural commodity (as defined in PACA).

 

"Food Security Act" means the Food Security Act of 1984, 7 USC § 1631 et seq., as the same now exists or may hereafter from time to time be amended, modified, recodified or supplemented, together with all rules and regulations thereunder.

 

"Food Security Act Notices" has the meaning set forth in Section 4(m)(i).

 

"Governmental Authority" means any federal, state, local, or other governmental or administrative body, instrumentality, department, or agency or any court,

 

 

tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

 

"Guaranteed Obligations" has the meaning set forth in the Amended and Restated Guaranty.

 

"Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under any other bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

"Intellectual Property" means the Copyrights, Trademarks and Patents.

 

"Licenses" means the Copyright Licenses, the Trademark Licenses and the Patent Licenses.

          "Lien" means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security, and any PACA Lien.

 

"PACA" shall mean the Perishable Agricultural Commodities Act of 1930, as amended, 7 USC § 499a et seq., as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

 

"PACA Lien" means any statutory trust arising under the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq.

 

"Patent Licenses" means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensee or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses set forth in Schedule II hereto).

 

"Patents" means all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how, formulae, rights of publicity and other general intangibles of like nature, now existing or hereafter acquired (including, without limitation, all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how and formulae described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office, or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.

 

"Permitted Liens" means (i) any Existing Liens, (ii) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (iii) any Lien (other than a PACA Lien) created by operation of law, such as materialmen's liens, mechanics' liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clauses (i) and (iii) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (v) Liens granted hereunder securing the Obligations; (vi) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Grantor's business, not interfering in any material respect with the business of a Grantor, (vii) Liens arising from judgments, decrees or attachments in circumstances not constituting an 'event of default" under any of the Transaction Documents, and (viii) Liens that are contractual rights of set-off (a) relating to the establishment of depository relations with banks not given in connection with the issuance of indebtedness, (b) relating to pooled deposit or sweep accounts of a Grantor to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business or (c) relating to purchase orders and other agreements entered into with customers of a Grantor in the ordinary course of business.

 

"Person" means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

 

"Series B Notes" has the meaning set forth in the recitals hereto.

 

"Subsidiary" means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

 

"Trademark Licenses" means all licenses, contracts or other agreements, whether written or oral, naming any Grantor as licensor or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill connected with and symbolized by any such trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or lease any and all Inventory now or hereafter owned by any Grantor and now or hereafter covered by such licenses (including, without limitation, all Trademark Licenses described in Schedule II hereto).

 

"Trademarks" means all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a's, Internet domain names, trade styles, designs, logos and other source or business identifiers and all general intangibles of like nature, now or hereafter owned, adopted, acquired or used by any Grantor (including, without limitation, all domestic and foreign trademarks, service marks, collective

 

marks, certification marks, trade names, business names, d/b/a's, Internet domain names, trade styles, designs, logos and other source or business identifiers described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof, together with all goodwill of the business symbolized by such marks and all customer lists, formulae and other Records of any Grantor relating to the distribution of products and services in connection with which any of such marks are used.

 

"Transaction Documents" means (i) the "Documents" (as defined in the Amended and Restated Guaranty), (ii) the Amended and Restated Guaranty, (iii) this Agreement and (iv) any other agreement, instrument, and other document executed and delivered pursuant thereto or otherwise evidencing or securing any of the Obligations.

 

SECTION 2.                                Confirmation and Grant of Security Interest.  

 

(a)           Each Grantor hereby confirms, ratifies and reaffirms that the Existing Liens granted pursuant to the Existing Security Agreement are continuing and are and shall remain unimpaired and continue to constitute fully perfected, first priority liens (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the Holders, with the same force, effect and priority in effect both immediately prior to and after entering into this Agreement and the Transaction Documents.  Each Grantor affirms and agrees that such Liens granted pursuant to the Existing Security Agreement will continue to secure all of the Obligations (as defined in Section 3 hereof).

 

(b)           As collateral security for all of the "Obligations" (as defined in Section 3 hereof), each Grantor hereby pledges and assigns to the Collateral Agent for the benefit of the Holders, and grants to the Collateral Agent for the benefit of the Holders a continuing security interest in, all personal property of such Grantor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description, tangible or intangible (collectively, the "Collateral"), including, without limitation, the following:

 

(i)           all Accounts;

 

(ii)           all Chattel Paper (whether tangible or electronic);

 

(iii)           the Commercial Tort Claims specified on Schedule VI hereto;

 

(iv)           all Deposit Accounts (including, without limitation, all cash, and all other property from time to time deposited therein and the monies and property in the possession or under the control of the Collateral Agent or Holder or any affiliate, representative, agent or correspondent of the Collateral Agent or Holder);

 

(v)           all Documents;

 

(vi)           all Equipment;

 

(vii)           all Fixtures;

 

(viii)                      all General Intangibles (including, without limitation, all Payment Intangibles);

 

(ix)           all Goods;

 

(x)           all Instruments (including, without limitation, Promissory Notes and each certificated Security);

 

(xi)           all Inventory;

 

(xii)           all Investment Property;

 

(xiii)                      all Copyrights, Patents and Trademarks, and all Licenses;

 

(xiv)                      all Letter-of-Credit Rights;

 

(xv)           all Supporting Obligations;

 

(xvi)                      all other tangible and intangible personal property of such Grantor (whether or not subject to the UCC), including, without limitation, all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of such Grantor described in the preceding clauses of this Section 2 (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by such Grantor in respect of any of the items listed above), and all books, correspondence, files and other Records, including, without limitation, all tapes, desks, cards, Software, data and computer programs in the possession or under the control of such Grantor or any other Person from time to time acting for such Grantor that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 2 or are otherwise necessary or helpful in the collection or realization thereof; and

 

(xvii)                      all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;

 

in each case howsoever such Grantor's interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

 

SECTION 3.                                Security for Obligations.  The security interest confirmed and created hereby in the Collateral constitutes continuing collateral security for all of the following obligations, whether now existing or hereafter incurred (collectively, the "Obligations"):

 

(a)           (i) the payment by EBOF, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by it in respect of the Securities Purchase Agreement, the 2008 Amendment Notes and the other Transaction Documents, and (ii) the payment by each of the Existing Subsidiaries

 

 

and each other Grantor other than EBOF as and when due and payable of all Guaranteed Obligations under the Amended and Restated Guaranty; and

 

(b)           the due performance and observance by each Grantor of all of its other obligations from time to time existing in respect of any of the Transaction Documents.

 

SECTION 4.                                Representations and Warranties.  Each Grantor represents and warrants as follows:

 

(a)           Schedule I hereto sets forth (i) the exact legal name of such Grantor, and (ii) the organizational identification number of such Grantor or states that no such organizational identification number exists.

 

(b)           To its best knowledge, there is no pending or written notice threatening any action, suit, proceeding or claim affecting such Grantor before any governmental authority or any arbitrator, or any order, judgment or award by any governmental authority or arbitrator, that would reasonably be expected to adversely affect the grant by such Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral, or the exercise by the Collateral Agent of any of its rights or remedies hereunder.

 

(c)           Except as set forth in Schedule 4(c), all Federal, state and local tax returns and other reports required by applicable law to be filed by such Grantor have been filed, or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon such Grantor or any property of such Grantor (including, without limitation, all federal income and social security taxes on employees' wages) and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof in accordance with generally accepted accounting principles consistently applied ("GAAP").

 

            (d)           All Equipment, Fixtures, Goods and Inventory of such Grantor now existing are, and all Equipment, Fixtures, Goods and Inventory of such Grantor hereafter existing will be, located and/or based at the addresses specified therefor in Schedule III hereto, except that such Grantor will give the Collateral Agent not less than 5 days' prior written notice of any change of the location of any such Collateral, other than to locations set forth on Schedule III and with respect to which the Collateral Agent has filed financing statements and otherwise fully perfected its Liens thereon.  Such Grantor's chief place of business and chief executive office, the place where such Grantor keeps its Records concerning Accounts and all originals of all Chattel Paper are located at the addresses specified therefor in Schedule III hereto.  None of the Accounts is evidenced by Promissory Notes or other Instruments.  Set forth in Schedule IV hereto is a complete and accurate list, as of the date of this Agreement, of (i) each Promissory Note, Security and other Instrument owned by each Grantor and (ii) each Deposit Account, Securities Account and Commodities Account of each Grantor, together with the name and address of each institution at which each such Account is maintained, the account number for each such Account and a description of the purpose of each such Account.  Set forth in Schedule I hereto is a complete and correct list of each trade name used by each Grantor and the name of,

 

 

and each trade name used by, each person from which such Grantor has acquired any substantial part of the Collateral.

 

(e)           Such Grantor has delivered to the Collateral Agent complete and correct copies of each License described in Schedule II hereto, including all schedules and exhibits thereto, which represents all of the Licenses existing on the date of this Agreement.  Each such License sets forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby or the rights of such Grantor or any of its affiliates in respect thereof.  Each material License now existing is, and any material License entered into in the future will be, the legal, valid and binding obligation of the parties thereto, enforceable against such parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of a party’s rights generally and by general equitable principles.  No default under any material License by any such party has occurred, nor does any defense, offset, deduction or counterclaim exist thereunder in favor of any such party.

 

(f)           Such Grantor owns and controls, or otherwise possesses adequate rights to use, all Trademarks, Patents and Copyrights, which are the only trademarks, patents, copyrights, inventions, trade secrets, proprietary information and technology, know-how, formulae, rights of publicity necessary to conduct its business in substantially the same manner as conducted as of the date hereof.  Schedule II hereto sets forth a true and complete list of all registered copyrights, issued patents, Trademarks, and Licenses annually owned or used by such Grantor as of the date hereof.  To the best knowledge of each Grantor, all such Intellectual Property of such Guarantor is subsisting and in full force and effect, has not been adjudged invalid or unenforceable, is valid and enforceable and has not been abandoned in whole or in part.  Except as set forth in Schedule II, no such Intellectual Property is the subject of any licensing or franchising agreement.  Such Grantor has no knowledge of any material conflict with the rights of others to any Intellectual Property and, to the best knowledge of such Grantor, such Grantor is not now infringing or in conflict with any such rights of others in any material respect, and to the best knowledge of such Grantor, no other Person is now infringing or in conflict in any material respect with any such properties, assets and rights owned or used by such Grantor.  Such Grantor has not received any notice that it is violating or has violated the trademarks, patents, copyrights, inventions, trade secrets, proprietary information and technology, know-how, formulae, rights of publicity or other intellectual property rights of any third party.

 

(g)           Such Grantor is and will be at all times the sole and exclusive owner of, or otherwise has and will have adequate rights in, the Collateral free and clear of any Liens, except for Permitted Liens.  To such Grantor’s best knowledge, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing office except (A) such as may have been filed in favor of the Collateral Agent relating to this Agreement, and (B) such as may have been filed to perfect any of the Existing Liens.

 

(h)           The exercise by the Collateral Agent of any of its rights and remedies hereunder will not contravene any law or any contractual restriction binding on or otherwise

 

 

 

affecting such Grantor or any of its properties and will not result in or require the creation of any Lien, upon or with respect to any of its properties.

 

(i)           No authorization or approval or other action by, and no notice to or filing with, any governmental authority or other regulatory body, or any other Person, is required for (i) the grant by such Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral, or (ii) the exercise by the Collateral Agent of any of its rights and remedies hereunder, except (A) for the filing under the UCC as in effect in the applicable jurisdiction of the financing statements, all of which financing statements, have been duly filed and are in full force and effect, (B) with respect to the perfection of the security interest created hereby in the Intellectual Property, for the recording of the appropriate Assignment for Security, substantially in the form of Exhibit A hereto, as applicable, in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and (C) with respect to the perfection of the security interest created hereby in foreign Intellectual Property and Licenses, for registrations and filings in jurisdictions located outside of the United States and covering rights in such jurisdictions relating to the Intellectual Property and Licenses.

 

(j)           This Agreement creates in favor of the Collateral Agent a legal, valid and enforceable security interest in the Collateral, as security for the Obligations.  The Collateral Agent's having possession of all Instruments and cash constituting Collateral from time to time, the recording of the appropriate Assignment for Security executed pursuant hereto in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, and the filing of the financing statements and the other filings and recordings, as applicable, described in Schedule V hereto and, with respect to the Intellectual Property hereafter existing and not covered by an appropriate Assignment for Security, the recording in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, of appropriate instruments of assignment, result in the perfection of such security interests; provided, however, that each Holder may keep possession of certificates representing its pro rata portion of shares of capital stock of PNG Ventures, Inc. constituting Collateral hereunder, subject to the terms of this Agreement, which possession shall result in perfection of such Holder's security interests in such shares under this Agreement.  Such security interests are, or in the case of Collateral in which such Grantor obtains rights after the date hereof, will be, perfected, first priority security interests, subject only to Permitted Liens and the recording of such instruments of assignment.  Such recordings and filings and all other action necessary or desirable to perfect and protect such security interest have been duly taken, except for the Collateral Agent's having possession of Instruments and cash constituting Collateral after the date hereof and the other filings and recordations described in Section 4(l) hereof.

 

(k)           As of the date hereof, such Grantor does not hold any Commercial Tort Claims nor is aware of any such pending claims, except for such claims described in Schedule VI.

 

(l)           Each of the Existing Subsidiaries is a Subsidiary of EBOF and are the only Subsidiaries of EBOF, as of the date hereof, owned in the respective percentages shown on Schedule VIII annexed hereto.

 

(m)           Notices from Farm Products Sellers, etc.

 

(i)           Except as set forth in Schedule 4(m) hereto, no Grantor has, within the one (1) year period prior to the date hereof, received any written notice pursuant to the applicable provisions of the Food Security Act, or pursuant to the UCC or any state agricultural or producers' lien laws or any other applicable local laws from (i) any Farm Products Seller or (ii) any lender to any Farm Products Seller or any other Person with a security interest in the assets of any Farm Products Seller or (iii) the Secretary of State (or equivalent official) or other Governmental Authority of any State, Commonwealth or political subdivision thereof in which any Farm Products purchased by any Grantor are produced, in any case advising or notifying any Grantor of the intention of such Farm Products Seller or other Person to preserve the benefits of any trust, lien or other interest applicable to any assets of such Grantor established in favor of such Farm Products Seller or other Person under any other law or claiming a Lien or security interest in and to any perishable agricultural commodity or any other Farm Products which may be or have been purchased by such Grantor or any related or other assets of such Grantor (all of the foregoing, together with any such notices as the Grantors may at any time hereafter receive, collectively, the "Food Security Act Notices").

 

(ii)           No Grantor is engaged in farming operations.

 

(iii)           Each Grantor's contract with each of its corn growers provides that not more than 33-1/3% of the aggregate payments to each such grower are due within 30 days after receipt and acceptance by such Grantor of the last shipment of corn from each such corn grower.

 

SECTION 5.                                Covenants as to the Collateral.  So long as any of the Obligations shall remain outstanding, unless the Collateral Agent shall otherwise consent in writing:

 

(a)           Further Assurances.  Each Grantor will at its expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that the Collateral Agent may reasonably request in order to:  (i) perfect and protect the security interest purported to be created hereby; (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise effect the purposes of this Agreement, including, without limitation:  (A) marking conspicuously all Chattel Paper with a principal balance in excess of $5,000 and each License and, at the request of the Collateral Agent, each of its Records pertaining to the Collateral with a legend, in form and substance reasonably satisfactory to the Collateral Agent, indicating that such Chattel Paper, License or Collateral is subject to the security interest created hereby, (B)  delivering possession of (or granting control over) and pledging to the Collateral Agent hereunder each Promissory Note, Security, Chattel Paper or other Instrument, in each case with a principal balance in excess of $5,000, now or hereafter owned by such Grantor, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (C) executing and filing (to the extent, if any, that such Grantor's signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, as may be necessary or desirable or that the Collateral Agent may reasonably request in order to perfect and preserve the security interest purported to be created hereby, (D) furnishing to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral in each case as the Collateral Agent may reasonably request, all

 

 

 

 

in reasonable detail, (E) if any Collateral shall be in the possession of a third party, notifying such Person of the Collateral Agent's security interest created hereby and obtaining a written acknowledgment from such Person that such Person holds possession of the Collateral for the benefit of the Collateral Agent, which such written acknowledgement shall be in form and substance satisfactory to the Collateral Agent, (F) if at any time after the date hereof, such Grantor acquires or holds any Commercial Tort Claim, promptly notifying the Collateral Agent in a writing signed by such Grantor setting forth a brief description of such Commercial Tort Claim and granting to the Collateral Agent a security interest therein and in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance satisfactory to the Collateral Agent; (G) upon the acquisition after the date hereof by such Grantor of any motor vehicle or other Equipment subject to a certificate of title or ownership (other than a Motor Vehicle or Equipment that is subject to a purchase money security interest), at the Collateral Agent's written request, causing the Collateral Agent to be listed as a lienholder on such certificate of title or ownership and delivering evidence of the same to the Collateral Agent in accordance with the Securities Purchase Agreement; and (H) taking all actions required by any earlier versions of the UCC or by other law, as applicable, in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction.

 

(b)           Location of Equipment and Inventory.  Each Grantor will keep the Equipment and Inventory at the locations specified therefor in Section 4(g) hereof or, upon not less than five (5) days' prior written notice to the Collateral Agent accompanied by a new Schedule V hereto indicating each new location of the Equipment and Inventory, at such other locations in the United States.

 

(c)           Condition of Equipment.  Each Grantor will maintain or cause the Equipment (necessary or useful to its business) to be maintained and preserved in good condition, repair and working order, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or damage to any Equipment of such Guarantor within a commercially reasonable time after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable, consistent with past practice, or which the Collateral Agent may request to such end.  Such Grantor will promptly furnish to the Collateral Agent a statement describing in reasonable detail any such loss or damage in excess of $100,000 to any Equipment.

 

(d)           Taxes, Etc.  Each Grantor agrees to pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, Equipment that is necessary or useful for its business and Inventory, except to the extent the validity thereof is being contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves in accordance with GAAP have been set aside for the payment thereof.

 

(e)           Insurance.

 

(i)           Each Grantor will, at its own expense, maintain insurance (including, without limitation, commercial general liability and property insurance) with respect to the Equipment and Inventory in such amounts, against such risks, in such form and with

 

 

responsible and reputable insurance companies or associations as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event, in amount, adequacy and scope reasonably satisfactory to the Collateral Agent.  Each such policy for liability insurance shall provide for all losses to be paid on behalf of the Collateral Agent and such Grantor as their respective interests may appear, and each policy for property damage insurance shall provide for all losses to be adjusted with, and paid directly to, the Collateral Agent during the continuance of an Event of Default.  Each such policy shall in addition (A) name the Collateral Agent as an additional insured party thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as their interests may appear, (B) contain an agreement by the insurer that any loss thereunder shall be payable to the Collateral Agent on its own account notwithstanding any action, inaction or breach of representation or warranty by such Grantor, (C) provide that there shall be no recourse against the Collateral Agent for payment of premiums or other amounts with respect thereto, and (D) provide that at least 30 days' prior written notice of cancellation, lapse, expiration or other adverse change shall be given to the Collateral Agent by the insurer.  Such Grantor will, if so requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate policies of such insurance and, as often as the Collateral Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance.  Such Grantor will also, at the request of the Collateral Agent, execute and deliver instruments of assignment of such insurance policies and cause the respective insurers to acknowledge notice of such assignment.

 

(ii)           Reimbursement under any liability insurance maintained by a Grantor pursuant to this Section 5(e) may be paid directly to the Person who shall have incurred liability covered by such insurance.  In the case of any loss involving damage to Equipment or Inventory, any proceeds of insurance maintained by a Grantor pursuant to this Section 5(e) shall be paid to the Collateral Agent, such Grantor will make or cause to be made the necessary repairs to or replacements of such Equipment or Inventory, and any proceeds of insurance maintained by such Grantor pursuant to this Section 5(e) shall be paid by the Collateral Agent to such Grantor as reimbursement for the costs of such repairs or replacements.

 

(iii)           All insurance payments in respect of such Equipment or Inventory shall be paid to the Collateral Agent and applied as specified in Section 7(b) hereof during the continuance of an Event of Default.

 

(f)           Provisions Concerning the Accounts and the Licenses.

 

(i)           Each Grantor will (A) give the Collateral Agent at least 30 days' prior written notice of any change in such Grantor's name, identity or organizational structure, (B) maintain its jurisdiction of incorporation as set forth in Section 4(b) hereto, (C) promptly notify the Collateral Agent upon obtaining an organizational identification number, if on the date hereof such Grantor did not have such identification number, and (D) keep adequate records concerning the Accounts and Chattel Paper and permit representatives of the Collateral Agent during normal business hours on reasonable notice to such Grantor, to inspect and make abstracts from such Records and Chattel Paper.

 

 

(ii)           Each Grantor will, except as otherwise provided in this subsection (f), continue to collect, at its own expense, all amounts due or to become due under the Accounts.  In connection with such collections, such Grantor may take such action as such Grantor may deem necessary or advisable to enforce collection or performance of the Accounts; provided, however, that the Collateral Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to the Collateral Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent or its designated agent and, upon such notification and at the expense of such Grantor and to the extent permitted by law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done.  After receipt by a

Grantor of a notice from the Collateral Agent that the Collateral Agent has notified, intends to notify, or has enforced or intends to enforce a Grantor's rights against the account debtors or obligors under any Accounts as referred to in the proviso to the immediately preceding sentence, if an Event of Default has occurred and is continuing, (A) all amounts and proceeds (including Instruments) received by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and applied as specified in Section 7(b) hereof, and (B) such Grantor will not adjust, settle or compromise the amount or payment of any Account or release wholly or partly any account debtor or obligor thereof or allow any credit or discount thereon.  In addition, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may (in its sole and absolute discretion) direct any or all of the banks and financial institutions with which such Grantor either maintains a Deposit Account or a lockbox or deposits the proceeds of any Accounts to send immediately to the Collateral Agent by wire transfer (to such account as the Collateral Agent shall specify, or in such other manner as the Collateral Agent shall direct) all or a portion of such securities, cash, investments and other items held by such institution.  Any such securities, cash, investments and other items so received by the Collateral Agent shall (in the sole and absolute discretion of the Collateral Agent) be held as additional Collateral for the Obligations or distributed in accordance with Section 7 hereof.

 

(iii)           Upon the occurrence and during the continuance of any breach or default under any material License referred to in Schedule II hereto by any party thereto other than a Grantor, the Grantor party thereto will, promptly after obtaining knowledge thereof, give the Collateral Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and proposes to take with respect thereto and thereafter will take reasonable steps to protect and preserve its rights and remedies in respect of such breach or default, or will obtain or acquire an appropriate substitute License.

 

(iv)           Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of each notice or other communication received by it by which any other party to any material License referred to in Schedule II hereto purports to terminate its obligations thereunder, together with a copy of any reply by such Grantor thereto.

 

 

(v)           Each Grantor will use commercially reasonable efforts in performing and observing in all respects all of its obligations under each material License and will take all action reasonably necessary to maintain such Licenses in full force and effect.  No Grantor will, without the prior written consent of the Collateral Agent (which consent shall not be unreasonably withheld or delayed), cancel, terminate, amend or otherwise modify in any respect, or waive any provision of, any material License referred to in Schedule II hereto.

 

(g)           Transfers and Other Liens.

 

(i)           No Grantor will sell, assign (by operation of law or otherwise), lease, license, exchange or otherwise transfer or dispose of any of the Collateral, except (A) Inventory in the ordinary course of business, (B) worn-out or obsolete assets not necessary to the business, (C) leases, subleases, licenses or sublicenses of property in the ordinary course of business and which do not materially interfere with the value of such property, (D) transfers of property subject to any condemnation or eminent domain (or deed in lieu thereof) upon receipt of the casualty proceeds of such event, (E) dispositions in the ordinary course of business consisting of the abandonment of intellectual property rights which, in the reasonable good faith determination of such Grantor, are not material to the conduct of the business of such Grantor, (F) dispositions of overdue accounts receivable arising in the ordinary course of business, but only in connection with the collection or compromise thereof; and (G), dispositions of cash equivalent investments in the ordinary course of business; provided, however, that the exceptions in clauses (E), (F) and (G) shall not apply during the continuance of an Event of Default.

 

(ii)           No Grantor will create, suffer to exist or grant any Lien upon or with respect to any Collateral other than a Permitted Lien.

 

(h)           Intellectual Property.

 

(i)           If applicable, each Grantor shall, upon the Collateral Agent's written request, duly execute and deliver the applicable Assignment for Security in the form attached hereto as Exhibit A.  Each Grantor (either itself or through licensees) will, and will cause each licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full force and effect, including, without limitation, using the proper statutory notices and markings and using the Trademarks on each applicable trademark class of goods in order to so maintain the Trademarks in full force and free from any claim of abandonment for non-use, and such Grantor will not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Intellectual Property may become invalidated; provided, however, that so long as no Event of Default has occurred and is continuing, such Grantor shall not have an obligation to use or to maintain any Intellectual Property (A) that relates solely to any product or work, that has been, or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced with Intellectual Property substantially similar to the Intellectual Property that may be abandoned or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such replacement Intellectual Property is subject to the Lien created by this Agreement or (C) that is substantially the same as another Intellectual Property that is in full force, so long the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such other Intellectual Property is subject to the

 

 

Lien and security interest created by this Agreement.  Each Grantor will cause to be taken all necessary steps in any proceeding before the United States Patent and Trademark Office and the United States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each registration of the Intellectual Property (other than the Intellectual Property described in the proviso to the immediately preceding sentence), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees.  If any Intellectual Property (other than Intellectual Property described in the proviso to the first sentence of subsection (i) of this clause (h)) is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, such Grantor shall (x) upon learning of such infringement, misappropriation, dilution or other violation, promptly notify the Collateral Agent and (y) to the extent such Grantor shall deem appropriate under the circumstances, promptly sue for infringement, misappropriation, dilution or other violation, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation, dilution or other violation, or take such other actions as such Grantor shall deem appropriate under the circumstances to protect such Intellectual Property.  Each Grantor shall furnish to the Collateral Agent from time to time upon its request statements and schedules further identifying and describing the Intellectual Property and Licenses and such other reports in connection with the Intellectual Property and Licenses as the Collateral Agent may reasonably request, all in reasonable detail and promptly upon request of the Collateral Agent, following receipt by the Collateral Agent of any such statements, schedules or reports, such Grantor shall modify this Agreement by amending Schedule II hereto, as the case may be, to include any Intellectual Property and License, as the case may be, which becomes part of the Collateral under this Agreement and shall execute and authenticate such documents and do such acts as shall be necessary or, in the judgment of the Collateral Agent, desirable to subject such Intellectual Property and Licenses to the Lien and security interest created by this Agreement.  Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, such Grantor may not abandon or otherwise permit any Intellectual Property to become invalid without the prior written consent of the Collateral Agent, and if any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, such Grantor will take such action as the Collateral Agent shall deem appropriate under the circumstances to protect such Intellectual Property.

 

(ii)           In no event shall a Grantor, either itself or through any agent, employee, licensee or designee, file an application for the registration of any Trademark or Copyright or the issuance of any Patent with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, or in any similar office or agency of the United States or any country or any political subdivision thereof unless it gives the Collateral Agent prior written notice thereof.  Upon request of the Collateral Agent, each Grantor shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent's security interest hereunder in such Intellectual Property and the General Intangibles of such Grantor relating thereto or represented thereby, and such Grantor hereby appoints the Collateral Agent its attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall be irrevocable until the indefeasible payment in full in cash of all of the Obligations in full and the termination of each of the Transaction Documents.

 

 

(i)           Deposit, Commodities and Securities Accounts.  Upon the Collateral Agent's written request each Grantor shall use commercially reasonable efforts to cause each bank and other financial institution with an account referred to in Schedule IV hereto to execute and deliver to the Collateral Agent a control agreement, in form and substance reasonably satisfactory to the Collateral Agent, duly executed by such Grantor and such bank or financial institution, or enter into other arrangements in form and substance satisfactory to the Collateral Agent, pursuant to which such institution shall irrevocably agree, inter alia, that (i) it will comply at any time with the instructions originated by the Collateral Agent to such bank or financial institution directing the disposition of cash, Commodity Contracts, securities, Investment Property and other items from time to time credited to such account, without further consent of such Grantor, which instructions the Collateral Agent will not give to such bank or other financial institution in the absence of a continuing Event of Default, (ii) all cash, Commodity Contracts, securities, Investment Property and other items of such Grantor deposited with such institution shall be subject to a perfected, first priority security interest in favor of the Collateral Agent, (iii) any right of set off, banker's Lien or other similar Lien, security interest or encumbrance shall be fully waived as against the Collateral Agent, and (iv) upon receipt of written notice from the Collateral Agent during the continuance of an Event of Default, such bank or financial institution shall immediately send to the Collateral Agent by wire transfer (to such account as the Collateral Agent shall specify, or in such other manner as the Collateral Agent shall direct) all such cash, the value of any Commodity Contracts, securities, Investment Property and other items held by it.  Without the prior written consent of the Collateral Agent, such Grantor shall not make or maintain any Deposit Account, Commodity Account or Securities Account except for the accounts set forth in Schedule IV hereto.  The provisions of this paragraph 5(i) shall not apply to (i) Deposit Accounts for which the Collateral Agent is the depositary and (ii) Deposit Accounts specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of a Grantor's salaried employees.

 

(j)           Motor Vehicles.

 

(i)           Upon the Collateral Agent's written request, each Grantor shall deliver to the Collateral Agent originals of the certificates of title or ownership for all motor vehicles with a fair market value in excess of $10,000 owned by it with the Collateral Agent listed as lienholder, for the benefit of the Holders.

(ii)           Each Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective the date hereof and terminating upon the termination of this Agreement, for the purpose of (A) executing on behalf of such Grantor title or ownership applications for filing with appropriate state agencies to enable motor vehicles now owned or hereafter acquired by such Grantor to be retitled and the Collateral Agent listed as lienholder thereof, (B) filing such applications with such state agencies, and (C) executing such other documents and instruments on behalf of, and taking such other action in the name of, such Grantor as the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for the purpose of creating in favor of the Collateral Agent a perfected Lien on the motor vehicles and exercising the rights and remedies of the Collateral Agent hereunder).  This appointment as attorney-in-fact is coupled with an interest and is irrevocable until all of the Obligations are indefeasibly paid in full in cash and after all Transaction Documents have been

 

 

terminated.  Collateral Agent agrees to exercise this appointment as attorney-in-fact only upon the occurrence and during the continuance of an Event of Default.

 

(iii)           Any certificates of title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for each motor vehicle covered thereby.

 

(iv)           So long as no Event of Default shall have occurred and be continuing, upon the request of such Grantor, the Collateral Agent shall execute and deliver to such Grantor such instruments as such Grantor shall reasonably request to remove the notation of the Collateral Agent as lienholder on any certificate of title for any motor vehicle; provided, however, that any such instruments shall be delivered, and the release effective, only upon receipt by the Collateral Agent of a certificate from such Grantor stating that such motor vehicle is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss) and the amount that such Grantor will receive as sale proceeds or insurance proceeds.  During the continuance of an Event of Default, any proceeds of such sale or casualty loss shall be paid to the Collateral Agent hereunder immediately upon receipt, to be applied to the Obligations then outstanding.

 

(k)           Control.  Each Grantor hereby agrees to take any or all action that may be necessary or desirable or that the Collateral Agent may reasonably request in order for the Collateral Agent to obtain control in accordance with Sections 9-105 – 9-107 of the UCC with respect to the following Collateral:  (i) Electronic Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.

 

(l)           Inspection and Reporting.  Each Grantor shall permit the Collateral Agent, or any agent or representatives thereof or such professionals or other Persons as the Collateral Agent may designate, not more than once a year in the absence of an Event of Default, (i) to examine and make copies of and abstracts from such Grantor's records and books of account, (ii) to visit and inspect its properties, (iii) to verify materials, leases, Instruments, Accounts, Inventory and other assets of such Grantor from time to time, (iii) to conduct audits, physical counts, appraisals and/or valuations, examinations at the locations of such Grantor.  Each Grantor shall also permit the Collateral Agent, or any agent or representatives thereof or such professionals or other Persons as the Collateral Agent may designate to discuss such Grantor's affairs, finances and accounts with any of its directors, officers, managerial employees, independent accountants or any of its other representatives.

 

(m)           Future Subsidiaries.  If any Grantor shall hereafter create or acquire any Subsidiary, simultaneously with the creation of acquisition of such Subsidiary, such Grantor shall cause such Subsidiary to become a party to the Amended and Restated Guaranty as an additional "Guarantor" thereunder and to this Agreement as an additional "Grantor" hereunder, and to duly execute and/or deliver such opinions of counsel and other documents, in form and substance acceptable to the Collateral Agent, as the Collateral Agent shall reasonably request with respect thereto.

 

(n)           Agricultural Products.

 

 

(i)           To the extent that any Grantor is subject to PACA, such Grantor shall pay, not later than seven (7) Business Days prior to the date required for payment therein, the amount of any outstanding invoices for the purchase of perishable agricultural commodities (as defined in PACA) which is required to be paid within thirty (30) days of such Grantor's acceptance of such commodities unless such Grantor has obtained from the Farm Products Seller of such commodities a waiver of its rights under PACA in form and substance acceptable to the Collateral Agent; provided, however, that in the event that any such invoice requires payment upon delivery, payment shall be made on the date of delivery unless such Grantor and seller have agreed to different payment terms in writing.  Each Grantor shall at all times comply with all existing and future Food Security Act Notices during their periods of effectiveness under the Food Security Act, including, without limitation, directions to make payments to the Farm Products Seller by issuing payment instruments directly to the secured party with respect to any assets of the Farm Products Seller or jointly paying to the Farm Products Seller and any secured party with respect to the assets of such Farm Products Seller, as specified in the Food Security Act Notice, so as to terminate or release the Lien in any farm products maintained by such Farm Products Seller or any secured party with respect to the assets of such Farm Products Seller under the Food Security Act.

 

(ii)           Each Grantor shall take all other actions as may be reasonably required, if any, to ensure that any perishable agricultural commodity (in whatever form) or other Farm Products are purchased free and clear of any Lien in favor of any Farm Products Seller or any secured party with respect to the assets of any Farm Products Seller, including, without limitation, registration with all states which have established central filing systems as contemplated under the Food Security Act.

 

(iii)           Each Grantor shall notify the Collateral Agent promptly and in any event in writing within three (3) Business Days after receipt by such Grantor of any Food Security Act Notice or amendment to a previous Food Security Act Notice and including any notice from any Farm Products Seller of the intention of such Farm Products Seller to preserve the benefits of any trust applicable to any assets of any Grantor established in favor of such Farm Products Seller or other Person under the provisions of PACA or any local law, and within such three (3) Business Days, such Grantor shall provide the Collateral Agent with a true, correct and complete copy of such Food Security Act Notice or amendment or other notice, as the case may be, and including any master lists of effective financing statements delivered to any Grantor pursuant to the Food Security Act.  Grantors shall, upon the Collateral Agent's request, at any time and from time to time, furnish the Collateral Agent with a true, correct and complete list of Persons from whom any Grantor purchases any perishable agricultural commodity or other Farm Products and the outstanding amounts owed by Grantors to such Person.

 

(iv)           In the event any Grantor receives a Food Security Act Notice, such Grantor shall pay the related invoice within one (1) Business Day of receipt of such Food Security Act Notice and notify the Collateral Agent of such receipt; provided, however, that such invoice may remain unpaid if, and only so long as (i) appropriate legal or administrative action has been commenced in good faith and is being diligently pursued or defended by such Grantor, (ii) the ability of the vendor to pursue any claims or enforce any Liens or trusts provided under PACA has been stayed or otherwise legally prohibited during the pendency of such action, and (iii) such Grantor shall promptly pay or discharge such contested invoice and all additional

 

 

 

 

charges, interest, penalties and expenses, if any, and shall deliver to the Collateral Agent evidence reasonably acceptable to the Collateral Agent of such payment, if such contest is terminated or discontinued adversely to such Grantor or the conditions set forth in Section 5(n)(iii) are no longer met.

 

SECTION 6.                                Additional Provisions Concerning the Collateral.

 

(a)           Each Grantor hereby (i) authorizes the Collateral Agent to file one or more UCC financing or continuation statements, and amendments thereto, relating to the Collateral and (ii) ratifies such authorization to the extent that the Collateral Agent has filed any such financing or continuation statements, or amendments thereto, prior to the date hereof.  A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

(b)           Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent's reasonable discretion, so long as an Event of Default shall have occurred and is continuing, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of such Grantor under Section 5 hereof), including, without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (iii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) or (ii) above, (iv) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of the Collateral Agent and the Holders with respect to any Collateral, and (v) to execute assignments, licenses and other documents to enforce the rights of the Collateral Agent and the Holders with respect to any Collateral.  This power is coupled with an interest and is irrevocable until all of the Obligations are indefeasibly paid in full in cash.

 

(c)           For the purpose of enabling the Collateral Agent to exercise rights and remedies hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies during the continuance of an Event of Default, and for no other purpose, each Grantor hereby grants to the Collateral Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, assign, license or sublicense any Intellectual Property now owned or hereafter acquired by such Grantor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.  Notwithstanding anything contained herein to the contrary, but subject to the provisions of the Securities Purchase Agreement that limit the right of such Grantor to dispose of its property and Section 5(h) hereof, so long as no Event of Default shall have occurred and be continuing, such Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of its business.  In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing,

 

the Collateral Agent shall from time to time, upon the request of a Grantor, execute and deliver any instruments, certificates or other documents, in the form so requested, which such Grantor shall have certified are appropriate (in such Grantor's judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to this clause (c) as to any Intellectual Property).  Further, upon the indefeasible payment in full in cash of all of the Obligations, the Collateral Agent (subject to Section 10(e) hereof) shall release and reassign to such Grantor all of the Collateral Agent's right, title and interest in and to the Intellectual Property, and the Licenses, all without recourse, representation or warranty whatsoever.  The exercise of rights and remedies hereunder by the Collateral Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by such Grantor in accordance with the second sentence of this clause (c).  Each Grantor hereby releases the Collateral Agent from any claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Collateral Agent under the powers of attorney granted herein other than actions taken or omitted to be taken through the Collateral Agent's gross negligence or willful misconduct, as determined by a final determination of a court of competent jurisdiction.

 

(d)           If a Grantor fails to perform any agreement contained herein and an Event of Default is then continuing, the Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the name of such Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor pursuant to Section 8 hereof and shall be secured by the Collateral.

 

(e)           The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

 

(f)           Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under the Licenses and otherwise with respect to any of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not release such Grantor from any of its obligations under the Licenses or otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of this Agreement under the Licenses or with respect to any of the other Collateral, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of such Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

SECTION 7.                                Remedies Upon Event of Default.  If any Event of Default shall have occurred and be continuing:

 

(a)           The Collateral Agent may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to

 

 

the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation, transfer into the Collateral Agent's name or into the name of its nominee or nominees (to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the benefit of the Collateral Agent, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of its respective Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by such Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Collateral Agent's rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation, and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable and/or (B) lease, license or dispose of the Collateral or any part thereof upon such terms as the Collateral Agent may deem commercially reasonable.  Each Grantor agrees that, to the extent notice of sale or any other disposition of its respective Collateral shall be required by law, at least ten (10) days' notice to such Grantor of the time and place of any public sale or the time after which any private sale or other disposition of its respective Collateral is to be made shall constitute reasonable notification.  The Collateral Agent shall not be obligated to make any sale or other disposition of any Collateral regardless of notice of sale having been given.  The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  Each Grantor hereby waives any claims against the Collateral Agent and the Holders arising by reason of the fact that the price at which its respective Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree, and waives all rights that such Grantor may have to require that all or any part of such Collateral be marshalled upon any sale (public or private) thereof.  Each Grantor hereby acknowledges that (i) any such sale of its respective Collateral by the Collateral Agent shall be made without warranty, (ii) the Collateral Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and (ii) above shall not adversely effect the commercial reasonableness of any such sale of Collateral.  In addition to the foregoing, (1) upon written notice to any Grantor from the Collateral Agent, such Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright similar thereto for any purpose described in such notice; (2) the Collateral Agent may, at any time and from time to time, upon 10 days' prior notice to such Grantor, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (3) the Collateral Agent may, at any time, pursuant to the authority granted in Section 6 hereof (such authority being effective upon the occurrence and during the continuance

 

of an Event of Default), execute and deliver on behalf of such Grantor, one or more instruments of assignment of the Intellectual Property (or any application or registration thereof), in form suitable for filing, recording or registration in any country.

 

(b)           Any cash held by the Collateral Agent as Collateral and all Cash Proceeds received by the Collateral Agent in respect of any sale of or collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in whole or in part by the Collateral Agent: first, to the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Agent and its agents and counsel, and all other expenses, liabilities and advances made or incurred by the Collateral Agent in connection therewith, and all amounts for which the Collateral Agent is entitled to indemnification hereunder (in its capacity as the Collateral Agent and not as a lender) and all advances made by the Collateral Agent hereunder for the account of the applicable Grantor, and to the payment of all costs and expenses paid or incurred by the Collateral Agent in connection with the exercise of any right or remedy hereunder or under the Transaction Documents, all in accordance with the terms hereof or thereof; second, to all amounts due and payable under the Amended and Restated Notes; and third, to all amounts due and payable under the Series B Notes.  Any surplus of such cash or Cash Proceeds held by the Collateral Agent and remaining after the indefeasible payment in full in cash of all of the Obligations shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.

 

(c)           In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent and the Holders are legally entitled, such each shall be liable for the deficiency, together with interest thereon at the highest rate specified in any of the applicable Transaction Documents for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs, expenses and other client charges of any attorneys employed by the Collateral Agent to collect such deficiency.

 

(d)           Each Grantor hereby acknowledges that if the Collateral Agent complies with any applicable state, provincial, or federal law requirements in connection with a disposition of the Collateral, such compliance will not adversely affect the commercial reasonableness of any sale or other disposition of the Collateral.

 

(e)           The Collateral Agent shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the Collateral Agent's rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising.  To the extent that each Grantor lawfully may, such Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Collateral Agent's rights under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by

 

 

which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, such Grantor hereby irrevocably waives the benefits of all such laws.

 

SECTION 8.                                Indemnity and Expenses.

 

(a)           Each Grantor agrees, jointly and severally, to defend, protect, indemnify and hold the Collateral Agent and each of the Holders, jointly and severally, harmless from and against any and all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses (including, without limitation, reasonable legal fees, costs, expenses, and disbursements of such Person's counsel) to the extent that they arise out of or otherwise result from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting solely and directly from such Person's gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.

 

(b)           Each Grantor agrees, jointly and severally, to upon demand pay to the Collateral Agent the amount of any and all reasonable and out-of-pocket costs and expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the Collateral Agent and of any experts and agents (including, without limitation, any collateral trustee which may act as agent of the Collateral Agent), which the Collateral Agent may incur in connection with (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver or other modification or termination of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder, or (iv) to the extent that Collateral Agent is authorized under this Agreement to perform or observe any such provision on behalf of a Grantor, the failure by any Grantor to perform or observe any of the provisions hereof.

 

SECTION 9.                                Notices, Etc.  All notices and other communications provided for hereunder shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt requested), telecopied or delivered, if to a Grantor at its address specified below and if to the Collateral Agent to it, at its address specified below; or as to any such Person, at such other address as shall be designated by such Person in a written notice to such other Person complying as to delivery with the terms of this Section 9.  All such notices and other communications shall be effective (a) if sent by certified mail, return receipt requested, when received or three days after deposited in the mails, whichever occurs first, (b) if telecopied, when transmitted (during normal business hours) and confirmation is received, otherwise, the day after the notice was transmitted if confirmation is received, or (c) if delivered, upon delivery.

 

SECTION 10.                                Miscellaneous.

 

(a)           No amendment of any provision of this Agreement shall be effective unless it is in writing and signed by each Grantor and the Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure by a Grantor therefrom, shall be effective unless it is in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

 

(b)           No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right hereunder or under any of the other Transaction Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The rights and remedies of the Collateral Agent or any Holder provided herein and in the other Transaction Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law.  The rights of the Collateral Agent or any Holder under any of the other Transaction Documents against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under any of the other Transaction Documents against such party or against any other Person, including but not limited to, any Grantor.

 

(c)           Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

(d)           This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the indefeasible payment in full in cash of the Obligations, and (ii) be binding on each Grantor and all other Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d) of the UCC and shall inure, together with all rights and remedies of the Collateral Agent and the Holders hereunder, to the benefit of the Collateral Agent and the Holders and their respective permitted successors, transferees and assigns.  Without limiting the generality of clause (ii) of the immediately preceding sentence, without notice to any Grantor, the Collateral Agent and the Holders may assign or otherwise transfer their rights and obligations under this Agreement and any of the other Transaction Documents, to any other Person and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Collateral Agent and the Holders herein or otherwise.  Upon any such assignment or transfer, all references in this Agreement to the Collateral Agent or any such Holder shall mean the assignee of the Collateral Agent or such Holder.  None of the rights or obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written

consent of the Collateral Agent, and any such assignment or transfer without the consent of the Collateral Agent shall be null and void.

 

(e)           Upon the indefeasible payment in full in cash of the Obligations, (i) this Agreement and the security interests created hereby shall terminate and all rights to the Collateral shall revert to the respective Grantor that granted such security interests hereunder, and (ii) the Collateral Agent will, upon such Grantor's request and at such Grantor's expense, (A) return to such Grantor such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and (B) execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever.

 

(f)           THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST

 

 

CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 

(g)           ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

 

(h)           EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.

 

(i)           Each Grantor irrevocably consents to the service of process of any of the aforesaid courts in any such action, suit or proceeding by the mailing of copies thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address provided herein, such service to become effective 10 days after such mailing.

(j)           Nothing contained herein shall affect the right of the Collateral Agent to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against any Grantor or any property of such Grantor in any other jurisdiction.

 

(k)           Each Grantor irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

 

(l)           Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

 

(m)           This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together constitute one in the same Agreement.

 

(n)           This Agreement shall not become effective unless and until the "Waiver Effective Date" (as defined in the Release Agreements) shall have occurred.

 

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its officer thereunto duly authorized, as of the date first above written.

 

	Earth Biofuels, Inc. By:     /s/ Dennis G. McLaughlin, III                                                            Name: Dennis G. McLaughlin, III Title: Chief Executive Officer
	Earth Biofuels Technology Co., LLC By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: CEO of Member, Earth Biofuels, Inc.
	The Wing Sail Company d/b/a Earth Biofuels Distribution Company By:     /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: Chief Executive Officer
	Earth Biofuels of Cordele, LLC By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: Chief Executive Officer
	B20 Customs, LLC By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: CEO of Member, Earth Biofuels, Inc.
	Earth Biofuels Operating, Inc. By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: Chief Executive Officer
	Earth Biofuels Retail Fuel Company, LLC By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: CEO of Member, Earth Biofuels, Inc.
	Earth Ethanol, Inc. By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: Chief Executive Officer
	Durant Biofuels, LLC By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: Chief Executive Officer
	Earth Ethanol of Washington L.L.C. By:   /s/ Dennis G. McLaughlin, III           Name: Dennis G. McLaughlin, III Title: Chief Executive Officer

PLEDGE AND SECURITY AGREEMENT

 

ACCEPTED BY:

 

Castlerigg Master Investments Ltd.,

as Collateral Agent

By:  Sandell Asset Management Corp

 

By:  /s/ Patrick T. Burke                                                                          

Name:    Patrick T. Burke                                                                

Title:      Senior Managing Director                                                              

PLEDGE AND SECURITY AGREEMENT

 

 

LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR JURISDICTION OF ORGANIZATION

 

 

Company Names & D/B/As	State of Organization	Federal Employer I.D.	Organizational I.D.
Earth Biofuels, Inc.	Delaware	[REDACTED]	4058697
Earth Biofuels Operating, Inc.	Mississippi	[REDACTED]	877310
Earth Ethanol, Inc.	Delaware	[REDACTED]	4203063
Earth Biofuels of Cordele, LLC	Georgia	[REDACTED]	0641909
B20 Customs, LLC	Texas	[REDACTED]	0800575199
Earth Biofuels Technology Company, LLC d/b/a Advanced Biofuels Technology, LLC	Texas	[REDACTED]	800619771
Durant Biofuels, LLC	Oklahoma	[REDACTED]	3512082168
Earth Biofuels Distribution Company	Texas	[REDACTED]	080051437
Earth Ethanol of Washington L.L.C	Delaware	[REDACTED]	4271373
Earth LNG, Inc.	Texas	[REDACTED]	0800574586
Earth Biofuels Retail Fuel Company, LLC	Texas	[REDACTED]	0800800280

Sched. I-

 

 

 

INTELLECTUAL PROPERTY AND LICENSES

 

 

 

Company	Country	Trademark	Application or Registration No.	Filing Date	Registration Date	Owner/Assignee
Willie Nelson	USA	BIOWILLIE	3155150	10/10/2006	10/10/2016	Earth Biofuels, Inc.

Sched. II-

 

 

 

LOCATIONS OF EBOF AND THE EXISTING SUBSIDIARIES

Company	Chief Executive Office	Chief Place of Business	Books and Records	Inventory, Equipment, Etc.
Earth Biofuels, Inc.	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA
Earth Biofuels Operating, Inc.	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA 253 Highway 7 North, Grenada, MS 38901 USA 6070 I-55 South, Jackson, MS 39272 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA 253 Highway 7 North, Grenada, MS 38901 USA 6070 I-55 South, Jackson, MS 39272 USA
Earth Ethanol, Inc.	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA
Earth Biofuels of Cordele, LLC	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	404 E. 16th Ave., Cordele, GA 31015 USA 3001 Knox St. Ste 403, Dallas, TX 75205 USA	404 E. 16th Ave., Cordele, GA 31015 USA 3001 Knox St. Ste 403, Dallas, TX 75205 USA
B20 Customs, LLC	3401 Main St., Ste B, Dallas, TX 75226 USA	3401 Main St., Ste B, Dallas, TX 75226 USA	3401 Main St., Ste B, Dallas, TX 75226 USA	3401 Main St., Ste B, Dallas, TX 75226 USA
Earth Biofuels Technology Company, LLC	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA
Durant Biofuels, LLC	3001 Knox St. Ste 403, Dallas, TX 75205 USA	53 E. Main St., Durant, OK 74701 USA 3001 Knox St. Ste 403, Dallas, TX 75205 USA	53 E. Main St., Durant, OK 74701 U SA 3001 Knox St. Ste 403, Dallas, TX 75205 USA	53 E. Main St., Durant, OK 74701 USA 3001 Knox St. Ste 403, Dallas, TX 75205 USA
Earth Biofuels Distribution Company	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA
Earth Ethanol of Washington L.L.C	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA
Earth LNG, Inc.	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA
Earth Biofuels Retail Fuel Company, LLC	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA	3001 Knox St. Ste 403, Dallas, TX 75205 USA

 

Sched. III-

 

 

PROMISSORY NOTES, SECURITIES, DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS

Promissory Notes:

 

None.

 

 

Company	Description of Investment Property
SkinzWraps, Inc.	Stock Certificate #1497 for 1,250,000 shares (held by Earth Biofuels, Inc.)
SkinWraps, Inc.	Stock Certificate #1526 for 133,000 shares (held by Earth Biofuels, Inc.)
Blue Wireless & Data, Inc.	Stock certificate #2520 for 1,666,667 shares (held by Earth Biofuels, Inc.)
Applied LNG Technologies USA, L.L.C.	Stock certificate #7 for 24,019,607.84 shares (held by Earth Biofuels, Inc.)
Applied LNG Technologies USA, L.L.C.	Stock certificate #8 for 25,000,000 shares (held by Earth Biofuels, Inc.)
Truckers Corner, LP	Earth Biofuels, Inc. holds a 50% equity ownership interest in this retail facility in Hillsboro, Texas.
Biodiesel Investment Group and Bunge North America	Earth Biofuels, Inc. holds 32.86% equity ownership interest in this biodiesel production facility  in Danville, Illinois

 

 

 

Earth Ethanol, Inc.

Durant Biofuels, LLC

The Wing Sail Company d/b/a Earth Biofuels Distribution Company

Earth Ethanol of Washington L.L.C

Earth LNG, Inc.

 

 

B20 Customs, LLC – 51% membership interest

PNG Ventures, Inc. – 7,000,000 Common Stock

Earth Biofuels of Cordele, LLC – 50% membership interest

Earth Biofuels Retail Fuel Company, LLC – 50.1% membership interest

Earth Biofuels Operating, Inc. – 80% Common Stock

Earth Biofuels Technology Company, LLC – 50% membership interest

 

 

Sched. IV-

 

 

 

 

Sched. IV-

 

 

UCC-1 FINANCING STATEMENTS

 

Company Name	Secretary of State
Earth Biofuels, Inc.	Delaware
Earth Biofuels Operating, Inc.	Mississippi
Earth Ethanol, Inc.	Delaware
Earth Biofuels of Cordele, LLC	Georgia
B20 Customs, LLC	Texas
Earth Biofuels Technology Company, LLC	Texas
Durant Biofuels, LLC	Oklahoma
Earth Biofuels Distribution Company	Texas
Earth Ethanol of Washington L.L.C	Delaware
Earth Biofuels Retail Fuel Company, LLC	Texas

Sched. V-

 

 

 

 

None.

 

 

Sched. VI-

 

Oliver Kendall Kelley, Jack B. Kelley, Inc. and Golden Spread Energy, Inc. have filed UCC financing statements covering assets located at the Durant, Oklahoma facility.  These parties have agreed to subordinate their liens to Fourth Third, LLC.

JM Allen & Associates, Inc. hold a mechanic’s lien on the Durant property.

Texoma Industrial Insulation, Inc. hold a mechanic’s lien on the Durant property.

Centrifuge Systems and Controls hold a mechanic’s lien on the Durant property.

Sched. VI-

 

 

Name	Ownership
Earth LNG, Inc.	100% Earth Biofuels, Inc.
Durant Biofuels, LLC	100% Earth Biofuels, Inc.
Earth Ethanol of Washington, LLC	100% Earth Ethanol, Inc
Earth Biofuels Technology Company, LLC d/b/a Advanced Biofuels Technology Company, LLC	50% Earth Biofuels, Inc. 50% Dr. Miguel J. Dabdoub
The Wing Sail Company d/b/a Earth Biofuels Distribution Company	100% Earth Biofuels, Inc.
Earth Biofuels of Cordele, LLC	50% Earth Biofuels, Inc. 12.5% Vince M. Thompson 12.5% Brice R. Thompson 12.5% Anthony T. Lanier 12.5% Steven A. Jordan
B20 Customs, LLC	51% Earth Biofuels, Inc. 49% Peter Salaverry
Earth Biofuels Operating, Inc.	80% Earth Biofuels, Inc. 20% Tommy Johnson, William Webster, Robert Glenn, & Bruce Blackwell
Earth Biofuels Retail Fuel Company	100% Earth Biofuels, Inc
Earth Ethanol, Inc.	100% Earth Biofuels, Inc.

Sched. VI-

 

 

 

 

 

 

WHEREAS, ______________________________ (the "Assignor") [has adopted, used and is using, and holds all right, title and interest in and to, the trademarks and service marks listed on the annexed Schedule 1A, which trademarks and service marks are registered or applied for in the United States Patent and Trademark Office (the "Trademarks")] [holds all right, title and interest in the letter patents, design patents and utility patents listed on the annexed Schedule 1A, which patents are issued or applied for in the United States Patent and Trademark Office (the "Patents")] [holds all right, title and interest in the copyrights listed on the annexed Schedule 1A, which copyrights are registered in the United States Copyright Office (the "Copyrights")];

 

WHEREAS, the Assignor has entered into an Amended and Restated Security Agreement, dated as of June __, 2008 (as amended, restated or otherwise modified from time to time the "Security Agreement"), in favor of Castlerigg Master Investments Ltd., as collateral agent for certain purchasers (the "Assignee");

 

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the Assignee and granted to the Assignee for the benefit of the Holders (as defined in the Security Agreement) a continuing security interest in all right, title and interest of the Assignor in, to and under the [Trademarks, together with, among other things, the good-will of the business symbolized by the Trademarks] [Patents] [Copyrights] and the applications and registrations thereof, and all proceeds thereof, including, without limitation, any and all causes of action which may exist by reason of infringement thereof and any and all damages arising from past, present and future violations thereof (the "Collateral"), to secure the payment, performance and observance of the "Obligations" (as defined in the Security Agreement);

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell, assign, transfer and set over unto the Assignee and grants to the Assignee for the benefit of the Holders a continuing security interest in the Collateral to secure the prompt payment, performance and for the benefit of the Holders observance of the Obligations.

 

The Assignor does hereby further acknowledge and affirm that the rights and remedies of the Assignee with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein.

 

Exh. A-

 

 

IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed by its officer thereunto duly authorized as of _____________, 20__

 

[GRANTOR]

 

	By:____________________________
		Name:

Title:

PLEDGE AND SECURITY AGREEMENT

 

 

 

STATE OF ____________

ss.:

COUNTY OF __________

 

On this ____ day of _______________, 20__, before me personally came ________________, to me known to be the person who executed the foregoing instrument, and who, being duly sworn by me, did depose and say that s/he is the ________________ of _______________________________________, a ____________________, and that s/he executed the foregoing instrument in the firm name of _______________________________________, and that s/he had authority to sign the same, and s/he acknowledged to me that he executed the same as the act and deed of said firm for the uses and purposes therein mentioned.

 

 

Exh. A-

 

 

 

 

[Trademarks and Trademark Applications]

[Patent and Patent Applications]

[Copyright and Copyright Applications]

Owned by ______________________________

PLEDGE AND SECURITY AGREEMENT