EXECUTION COPY
WARRANT EXCHANGE AGREEMENT
WARRANT EXCHANGE AGREEMENT, dated as of August 5, 2008 (this "Agreement"),
by and between PURE BIOFUELS CORP., a Nevada corporation (the "Company"), and
PLAINFIELD PERU II LLC, a Delaware limited liability company ("LLCII").
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Securities Purchase Agreement, dated as of
September 12, 2007, as amended by an amendment executed on March 26, 2008 (the
"Purchase Agreement"), by and between the Company, LLCII and PLAINFIELD PERU I
LLC ("LLCI"), a Delaware limited liability company (together with LLCII, the
"Purchaser") or the Loan Agreement (as defined in the Purchase Agreement) if
such capitalized term is not defined in the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, (A) LLCII is a holder of warrants to purchase (i) 59,104,912
shares of Common Stock at an exercise price of $0.30 and (ii) 122,605 shares of
Common Stock at an exercise price of $0.01; and (B) LLCII has the rights to
acquire warrants to purchase 57,823,130 shares of Common Stock at an exercise
price to be determined but not greater than $0.30 (the "Warrant Rights" and
together with the warrants described in subclause (A) above, the "Warrants");
WHEREAS, LLCII desires, for valid business reasons, to consummate an
exchange of the Warrants pursuant to the terms hereof;
WHEREAS, the Company has determined that it is in its best interest to
recapitalize its capital structure through the exchange of the Warrants pursuant
to the terms hereof as a plan of reorganization; and
WHEREAS, for Federal income tax purposes, it is intended that this
Agreement shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and of the
representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Agreement to Exchange. LLCII and the Company agree that LLCII shall
exchange all of the Warrants for 78,033,765 shares of Common Stock (the
"Exchange Shares"). Upon issuance of the Exchange Shares to LLCII, the Warrants
will be null and void and of no further force or effect. The parties agree to
issue the Exchange Shares in the name of PLAINFIELD PERU II LLC.
2. Surrender of Warrant Certificates. Concurrently with the execution of
this Agreement and the issuance of the Exchange Shares, LLCII shall surrender
the Warrants it holds
in certificated form (which do not include the uncertificated Warrant Rights) to
the Company, upon which surrender LLCII shall be deemed to be the holder of
record of the Exchange Shares.
3. Issuance of Exchange Shares. Upon surrender by LLCII of the Warrants it
holds in certificated form (which do not include the uncertificated Warrant
Rights) pursuant to Section 2 hereof, the Company agrees to adopt this plan of
reorganization and shall issue and deliver to LLCII the Exchange Shares issuable
to LLCII pursuant to this Agreement, registered in the name of LLCII with the
Transfer Agent.
4. Registration Rights. The Company and LLCII agree that the Exchange
Shares shall constitute "Registrable Securities" under the Registration Rights
Agreement.
5. Representations and Warranties of the Company. In order to induce LLCII
to enter into this Agreement, the Company hereby represents and warrants to and
agrees with LLCII that:
(i) All Exchange Shares shall, when issued in exchange for the
Warrants, be duly authorized, validly issued, fully paid and
non-assessable, and free of any liens, encumbrances and preemptive or
similar rights, and shall not be in violation of the Company's Articles of
Incorporation or Bylaws or any Applicable Law.
(ii) The Company has the corporate power and authority to execute,
deliver and perform the terms and provisions of this Agreement and has
taken all necessary corporate action to authorize the execution, delivery
and performance by it of this Agreement. The Company has duly executed and
delivered this Agreement, and this Agreement constitutes its legal, valid
and binding obligation enforceable in accordance with its terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
(iii) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by,
any Governmental Authority is required to be obtained or made by, or on
behalf of, the Company to authorize, or is required to be obtained or made
by, or on behalf of, the Company in connection with (a) the execution,
delivery and performance of this Agreement, (b) the legality, validity,
binding effect or enforceability of this Agreement, or (c) the issuance of
the Exchange Shares to LLCII and the registration of the Exchange Shares
with the Transfer Agent.
(iv) Neither the execution, delivery or performance by the Company of
this Agreement, nor compliance by it with the terms and provisions thereof,
(a) will contravene any provision of any law, statute, rule or regulation
or any order, writ, injunction or decree of any court or Governmental
Authority, (b) will conflict with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to
create or impose) any Encumbrance, upon any of the property or assets of
the Company or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust,
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credit agreement or loan agreement, or any other agreement, contract or
instrument, in each case to which Company or any of its Subsidiaries is a
party or by which it or any of the Company or any of its Subsidiaries or
property or assets is bound or to which the Company or any of its
Subsidiaries may be subject, except for any violation of the terms of the
applicable provisions of the Purchase Agreement, the Notes, the Loan
Agreement and the Loan Documents that are being waived pursuant to Section
7 of this Agreement or on the signature pages hereto, or (c) will violate
any provision of the certificate or articles of incorporation, certificate
of formation, limited liability company agreement or by-laws (or equivalent
organizational documents), as applicable, of the Company or any of its
Subsidiaries.
(v) (a) Upon issuance of the Exchange Shares, the authorized Capital
Stock of the Company will consist solely of 250,000,000 shares of Common
Stock and 1,000,000 shares of preferred stock, of which 155,721,636 shares
of Common Stock (assuming no additional exercises of existing stock options
described in Schedule 4.7 to this Agreement) and no shares of preferred
stock will be issued and outstanding, no shares are held in treasury and
71,153,414 shares of Common Stock (such amount does not include any shares,
warrants or other convertible or exchangeable securities that may be issued
pursuant to the Agreement and Plan of Merger, dated as of December 4, 2007,
by and among the Company, Pure Biofuels del Peru S.A.C., Interpacific Oil
S.A.C. and certain Target Stockholders identified therein, as amended on
January 23, 2008 (the "Merger Agreement"), Section 3.6(m) of the Purchase
Agreement, or the Notes as PIK Interest (as defined in the Notes)) will be
reserved for issuance upon the exercise of outstanding warrants, options
and other convertible or exchangeable securities (other than the Exchange
Shares). Schedule 4.7 to this Agreement sets forth the capitalization of
the Company as of the issuance of the Exchange Shares.
(b) Except as set forth on Schedule 4.7 to this Agreement, as of the
date of this Agreement, there are and upon issuance of the Exchange Shares
there will be (i) no outstanding options, warrants, agreements, conversion
rights, exchange rights, preemptive rights or other rights (whether
contingent or not) to subscribe for, purchase or acquire any issued or
unissued shares of Capital Stock of the Company or any Subsidiary, and (ii)
no restrictions upon, or Contracts or understandings of the Company or any
Subsidiary, or, to the knowledge of the Company, Contracts or
understandings of any other Person, with respect to, the voting or transfer
of any shares of Capital Stock of the Company or any Subsidiary.
(vi) No agent, broker, Person or firm acting on behalf of the Company
or its Affiliates is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any
Person controlling, controlled by, or under common control with any of the
parties hereto, in connection with this Agreement or any of the
transactions contemplated hereby.
6. Representations and Warranties of LLCII. LLCII represents and warrants
to the Company that:
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(i) LLCII has the power to execute, deliver and perform its
obligations under this Agreement and has taken all action necessary to
authorize the execution, delivery and performance by it of this Agreement
and to consummate the transactions contemplated hereby. No other
proceedings on the part of LLCII are necessary for such authorization,
execution, delivery and consummation. LLCII has duly executed and delivered
this Agreement. This Agreement constitutes a legal, valid and binding
obligation of LLCII, enforceable against LLCII in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the enforcement of creditors' rights generally or
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution, delivery and performance by LLCII of this
Agreement does not and will not (a) violate any organizational document of
LLCII, (b) contravene any material Applicable Law, (c) require any consent
of any Governmental Authority or other Person, except where the failure to
obtain such consent would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the ability of LLCII to
perform its obligations under this Agreement, or (d) constitute a default
under any Contract binding upon LLCII, except for any such defaults that
would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the ability of LLCII to perform its
obligations under this Agreement.
(iii) LLCII has not engaged any brokers, finders or agents, and
neither the Company has, nor will, incur, directly or indirectly, as a
result of any action taken by LLCII, any liability for brokerage or
finders' fees or agents' commissions or any similar charges under this
Agreement or the transactions contemplated hereby.
7. Waiver of the Purchase Agreement and the Notes. Notwithstanding anything
to the contrary contained in the Purchase Agreement and the Notes, the Purchaser
waives compliance by the Company of its applicable obligations contained in the
applicable provisions of the Purchase Agreement only with respect to this
Agreement, the Purchaser acknowledges and agrees that as a result of such waiver
the execution of this Agreement by the Company and performance of its
obligations hereunder will not violate the terms of the applicable provisions of
the Purchase Agreement or the Notes and the issuance of the Exchange Shares
shall not cause any adjustment to the Conversion Price of the Notes. LLCI is
executing this Agreement only with respect to this Section 7.
8. Purchase Agreement and Transaction Documents. The waiver in Section 7
above is limited as specified and shall not constitute a modification,
acceptance or waiver of any other provision of the Purchase Agreement, or the
other Transaction Documents. Except as set forth in Section 7 above, the
Purchase Agreement and the other Transaction Documents shall continue in full
force and effect in accordance with their terms.
9. Certain Taxes. The Company shall pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
the Exchange Shares.
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10. Incorporation of Provisions from the Purchase Agreement. The provisions
of Sections 13.2 and 13.3 of the Purchase Agreement are incorporated by
reference herein (as if set forth in full in this section) so that this
Agreement shall be subject to the terms and provisions of such sections of the
Purchase Agreement.
11. Waiver; Exercise of Rights and Remedies. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed by LLCII and the Company (and in the case of any amendment
of Section 7 only, LLCI). No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with each of the parties hereto.
13. Reorganization. The Company, LLCI and LLCII intend, and shall take the
position, that the exchange of the Warrants pursuant to this Agreement should be
characterized as a reorganization within the meaning of Section 368(a) of the
Code and shall not take any position on any United States tax filing that is
inconsistent with such characterization.
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IN WITNESS WHEREOF, LLCII, LLCI and the Company have each duly caused this
Agreement to be executed on the day and year first written above.
PURE BIOFUELS CORP.
By: /s/ Xxxx Xxxxxxxx
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Name: XXXX XXXXXXXX
Title: CEO
PLAINFIELD PERU II LLC
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Authorized Individual
PLAINFIELD PERU I LLC (only with respect
to Section 7 of this Agreement)
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Authorized Individual
Notwithstanding anything to the contrary contained in the Loan Agreement
and the Loan Documents, the Lender and the Administrative Agent waive compliance
by the Company, the Borrowers and the Subsidiary Guarantors of their applicable
obligations contained in the applicable provisions of the Loan Agreement and the
Loan Documents only with respect to this Agreement and the transactions
contemplated hereby and the Lender and the Administrative Agent acknowledge and
agree that the execution of this Agreement by the Company and performance of its
obligations hereunder will not violate the terms of the applicable provisions of
the Loan Agreement and the Loan Documents. The waiver in this paragraph is
limited as specified and shall not constitute a modification, acceptance or
waiver of any other provision of the Loan Agreement or the other Loan Documents.
Except as set forth in this paragraph, the Loan Agreement and other Loan
Documents shall continue in full force and effect in accordance with their
terms. Each of the Company and the Subsidiary Guarantor hereby ratifies and
confirms its Guaranty.
PLAINFIELD SPECIAL SITUATIONS MASTER
FUND LIMITED
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Authorized Individual
PURE BIOFUELS CORP.
By: /s/ Xxxx Xxxxxxxx
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Name: XXXX XXXXXXXX
Title: CEO
PURE BIOFUELS DEL PERU S.A.C.
By: /s/ Xxxx Xxxxxxxx
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Name: XXXX XXXXXXXX
Title: APODERADO
PALMA INDUSTRIAL S.A.C.
By: /s/ Xxxx Xxxxxxxx
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Name: XXXX XXXXXXXX
Title: APODERADO
ACEITE PUCALLPA S.A.C.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: General Manager
PALMAS TROPICALES S.A.C.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: General Manager
PUCAPALMA S.A.C.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: General Manager
ECOPALMA S.A.C.
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: General Manager
PALMAS DE ORIENTE S.A.C.
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: General Manager
