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SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
PURE BIOFUELS CORP.
AND
PLAINFIELD PERU I LLC
PLAINFIELD PERU II LLC
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Dated as of September 12, 2007
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .......................................................1
ARTICLE II SALE AND PURCHASE ................................................12
SECTION 2.1. Agreement to Sell and to Purchase; Purchase Price.............12
SECTION 2.2. Closing.......................................................12
ARTICLE III THE NOTES.........................................................12
SECTION 3.1. Authorization of the Notes....................................12
SECTION 3.2. No Optional Prepayments.......................................12
SECTION 3.3. Purchase of Notes.............................................12
SECTION 3.4. Change of Control.............................................13
SECTION 3.5. Convertibility................................................14
SECTION 3.6. Anti-Dilution Adjustments.....................................15
SECTION 3.7. Forced Conversion.............................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................19
SECTION 4.1. Company Status................................................19
SECTION 4.2. Power and Authority...........................................19
SECTION 4.3. No Violation..................................................19
SECTION 4.4. Approvals.....................................................19
SECTION 4.5. True and Complete Disclosure..................................20
SECTION 4.6. Use of Proceeds...............................................20
SECTION 4.7. Capital Stock.................................................20
SECTION 4.8. Private Offering..............................................21
SECTION 4.9. Brokers and Finders...........................................21
SECTION 4.10. Representations and Warranties in Other Documents.............21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................22
SECTION 5.1. Organization; Authorization; Enforceability...................22
SECTION 5.2. Private Placement.............................................22
SECTION 5.3. Brokers or Finders............................................23
SECTION 5.4. Transfer or Resale; Legends...................................23
SECTION 5.5. No Violation; Consents........................................25
SECTION 5.6. Short Position................................................25
ARTICLE VI AFFIRMATIVE COVENANTS.............................................25
SECTION 6.1. Access to Books and Records...................................25
SECTION 6.2. Use of Proceeds...............................................25
SECTION 6.3. Periodic Information..........................................25
SECTION 6.4. Directors and Officers Insurance; Indemnification.............26
SECTION 6.5. Conversion Shares.............................................26
SECTION 6.6. Stockholders Meeting..........................................26
SECTION 6.7. Plainfield Director...........................................26
SECTION 6.8. Information Covenants.........................................27
SECTION 6.9. Information Covenants.........................................30
(i)
Table of Contents
(Continued)
Page
SECTION 6.10. Maintenance of Property; Insurance............................30
SECTION 6.11. Maintenance of Property; Insurance............................30
SECTION 6.12. Compliance with Statutes, etc.................................30
SECTION 6.13. Compliance with Environmental Laws............................30
SECTION 6.14. End of Fiscal Years; Fiscal Quarters..........................31
SECTION 6.15. Performance of Obligations....................................31
SECTION 6.16. Payment of Taxes..............................................31
SECTION 6.17. Annual Business Plan..........................................31
SECTION 6.18. ERISA.........................................................32
ARTICLE VII NEGATIVE COVENANTS................................................32
SECTION 7.1. Encumbrances..................................................32
SECTION 7.2. Consolidation, Merger, Purchase or Sale of Assets, etc........33
SECTION 7.3. Dividends.....................................................33
SECTION 7.4. Indebtedness..................................................33
SECTION 7.5. Advances, Investments and Loan................................34
SECTION 7.6. Transactions with Affiliates..................................34
SECTION 7.7. Capital Expenditures..........................................34
SECTION 7.8. Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements; Limitations on Voluntary
Payments, etc................................................34
SECTION 7.9. Limitation on Issuance of Capital Stock.......................35
SECTION 7.10. Business; etc.................................................35
ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING..................................35
SECTION 8.1. Conditions to the Company's Obligations.......................35
SECTION 8.2. Conditions to Purchaser's Obligations.........................36
ARTICLE IX EVENTS OF DEFAULT.................................................37
SECTION 9.1. Events of Default.............................................37
ARTICLE X REMEDIES ON DEFAULT, ETC..........................................39
SECTION 10.1. Acceleration..................................................39
SECTION 10.2. Other Remedies................................................40
SECTION 10.3. Rescission....................................................40
SECTION 10.4. No Waivers or Election of Remedies, Expenses, etc.............41
ARTICLE XI AMENDMENT AND WAIVER..............................................41
SECTION 11.1. Requirements..................................................41
SECTION 11.2. Solicitation of Holders of Notes..............................41
SECTION 11.3. Binding Effect, etc...........................................42
SECTION 11.4. Notes held by Company, etc....................................42
ARTICLE XII REGISTRATION; EXCHANGE; SUBSTITUTION AND PAYMENT OF NOTES.........42
SECTION 12.1. Registration of Notes.........................................42
(ii)
Table of Contents
(Continued)
Page
SECTION 12.2. Transfer and Exchange of Notes................................42
SECTION 12.3. Replacement of Notes..........................................43
ARTICLE XIII MISCELLANEOUS....................................................43
SECTION 13.1. Indemnification...............................................43
SECTION 13.2. Notices.......................................................44
SECTION 13.3. Governing Law; Submission to Jurisdictionl Venue; Waiver
of Jury Trial................................................45
SECTION 13.4. Headings Descriptive..........................................46
SECTION 13.5. Exhibits and Schedules........................................46
SECTION 13.6. Expenses......................................................46
SECTION 13.7. Press Releases and Public Announcements.......................47
SECTION 13.8. Assignment; No Third Party Beneficiaries......................47
SECTION 13.9. Severability..................................................47
SECTION 13.10. Counterparts.................................................47
SECTION 13.11. Further Assurances...........................................47
SECTION 13.12. No Waiver; Remedies Cumulative...............................47
SECTION 13.13. Specific Performance.........................................48
SECTION 13.14. Confidentiality..............................................48
(iii)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of September 12, 2007 (this
"Agreement"), by and between PURE BIOFUELS CORP., a Nevada corporation (the
"Company"), and PLAINFIELD PERU I LLC, a Delaware limited liability company
("LLC1"), and PLAINFIELD PERU II LLC, a Delaware limited liability company
("LLC2" and together with LLC1, the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires, subject to the terms and conditions set
forth herein, to issue and sell to Purchaser, and Purchaser desires, subject to
the terms and conditions set forth herein, to purchase $10,000,000 aggregate
principal amount of the 10%/12% Senior Convertible PIK Election Notes due 2012
(the "Notes", such term to include any such notes issued in substitution
therefor pursuant to Section 12 of this Agreement and any notes issued in kind
as interest pursuant to the terms of the Notes), convertible into 16,666,667
shares of Common Stock (subject to adjustment) representing, in the aggregate,
10.1% of the fully diluted shares of Common Stock, as of the date hereof;
WHEREAS, the Company desires, subject to the terms and conditions set
forth herein, to issue to Purchaser, and Purchaser desires, subject to the terms
and conditions set forth herein, to subscribe for, 11,000,000 shares of Common
Stock (the "Issue Date Common Stock") representing, in the aggregate, 6.6% of
the fully diluted shares of Common Stock, as of the date hereof;
WHEREAS, the Company desires, subject to the terms and conditions set
forth herein, to issue to Purchaser, and Purchaser desires, subject to the terms
and conditions set forth herein, to subscribe for, warrants to purchase shares
of Common Stock (the "Warrants," and together with the Notes and the Issue Date
Common Stock, the "Securities"), which shall be exercisable into 56,938,245
shares of Common Stock (subject to adjustment) representing, in the aggregate,
34.4% of the fully diluted shares of Common Stock, as of the date hereof;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows.
ARTICLE I
DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
following meanings:
"2006 Private Placement Warrants" means the aggregate 3,702,101
warrants with an exercise price of $1.50 issued to certain private placement
investors prior to the date hereof.
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"Affiliate" means, with respect to any Person, any other Person
(including, but not limited to, all directors and officers of such Person)
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power (a) to vote
20% or more of the securities having ordinary voting power for the election of
directors (or equivalent governing body) of such Person or (b) to direct or
cause the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise; provided,
however, that none of the Purchaser, any Holder or any of their respective
Affiliates shall be considered an Affiliate of the Company or its Subsidiaries.
"Applicable Law" means (a) any United States federal, state, local or
foreign law, statute, rule, regulation, order, writ, injunction, judgment,
decree or permit of any Governmental Authority and (b) any rule or listing
requirement of any applicable national stock exchange or listing requirement of
any national stock exchange or Commission recognized trading market on which
securities issued by the Company, or any of the Subsidiaries are listed or
quoted.
"Authorized Representative" means ▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ or
any person or persons that has or have been authorized by the Board of Directors
or the board of directors of Pure Biofuels del Peru S.A.C. and Palma Industrial
S.A.C. and are otherwise reasonably acceptable to Plainfield Special Situations
Master Fund Limited.
"Binding Letter of Intent" means the binding letter of intent between
Pure Biofuels del Peru S.A.C. and Interpacific Oil S.A.C. entered into on May
11, 2007.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day except Saturday, Sunday and any day which
shall be in New York, New York, a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Capital Expenditures" means, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with GAAP
or International GAAP, as the case may be, and, without duplication, the amount
of Capitalized Lease Obligations incurred by such Person.
"Capitalized Lease Obligations" means, with respect to any Person, all
rental obligations of such Person which, under GAAP or International GAAP, as
the case may be, are or will be required to be capitalized on the books of such
Person, in each case taken at the amount thereof accounted for as indebtedness
in accordance with such principles.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock and (ii) with respect to any
other Person, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means, as to any Person, (a) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof
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(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the date of
acquisition, (b) marketable direct obligations issued by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof maturing within six months from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or ▇▇▇▇▇'▇, and (c) U.S. dollar-denominated time
deposits, certificates of deposit and bankers acceptances of any commercial bank
having, or which is the principal banking subsidiary of a bank holding company
having, a long-term unsecured debt rating of at least "A" or the equivalent
thereof from S&P or "A2" or the equivalent thereof from ▇▇▇▇▇'▇ with maturities
of not more than six months from the date of acquisition by such Person.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as the same has been amended and may hereafter be
amended from time to time, 42 U.S.C. Section 9601 et seq.
"Change of Control" means the occurrence of any of the following:
(i) any Person (including a Person's Affiliates), other than a Permitted Holder,
becomes the beneficial owner (as defined under Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of 20% or more of the total
voting power of the Company's Common Stock, (ii) there shall be consummated any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which the Common Stock of the
Company would be converted into cash, securities or other property, other than a
merger or consolidation of the Company in which the holders of the common stock
of the Company outstanding immediately prior to the consolidation or merger
hold, directly or indirectly, at least a majority of the voting power of the
common stock of the surviving corporation immediately after such consolidation
or merger, (iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company has been
approved by a majority of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors, (iv) either of Pure Biofuels Del Peru S.A.C. or Palma
Industrial S.A.C. ceases to be a wholly-owned Subsidiary of the Company, or (v)
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (i) transfers, in one or a series of transactions, more
than 10% of the Company's Common Stock or (ii) ceases to control (as such term
is used in clause (b) of the definition of "Affiliate") each of the Company and
its Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Commission" means the United States Securities and Exchange
Commission.
"Commission Filings" means, with respect to any point in time, all
reports, registration statements and other filings filed by the Company or any
Subsidiary with the Commission (and all notes, exhibits and schedules thereto
and all documents incorporated by
3
reference therein) filed by the Company or any Subsidiary, prior to such point
in time, pursuant to the Exchange Act.
"Common Stock" means the common stock, par value $.001 per share, of
the Company.
"Company Disclosure Schedule" means the Company disclosure schedule
delivered to the Purchaser concurrently with the date hereof.
"Contingent Obligation" means, as to any Person, any obligation of
such Person as a result of such Person being a general partner of any other
Person, unless the underlying obligation is expressly made non-recourse as to
such general partner, and any obligation of such Person guaranteeing or intended
to guarantee any Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the holder of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Contract" means any contract, lease, loan agreement, mortgage,
security agreement, trust indenture, note, bond, instrument, or other agreement
or arrangement (whether written or oral).
"Conversion Price" means $0.60, subject to adjustments set forth in
Section 3.6.
"Conversion Shares" means the shares of Common Stock issuable upon the
conversion of the Notes.
"Credit Parties" has the meaning ascribed to such term in the Loan
Agreement.
"Dividend" means, with respect to any Person, that such Person has
declared or paid a dividend, distribution or returned any equity capital to its
stockholders, partners or members or authorized or made any other distribution,
payment or delivery of property (other than common Capital Stock of such Person)
or cash to its stockholders, partners or members in their capacity as such, or
redeemed, retired, purchased or otherwise acquired, directly or indirectly, for
a consideration any shares of any class of its capital stock or any other
Capital Stock outstanding on or after the Closing Date (or any options or
warrants issued by such Person
4
with respect to its Capital Stock), or set aside any funds for any of the
foregoing purposes, or shall have permitted any of its Subsidiaries to purchase
or otherwise acquire for a consideration any shares of any class of the Capital
Stock of such Person outstanding on or after the Closing Date (or any options or
warrants issued by such Person with respect to its Capital Stock). Without
limiting the foregoing, "Dividends" with respect to any Person shall also
include all payments made or required to be made by such Person with respect to
any stock appreciation rights, plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing purposes.
"Domestic Subsidiary" means any Subsidiary of the Company other than a
Foreign Subsidiary.
"Encumbrance" means any mortgage, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
the UCC or any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (a) any and all Claims by Governmental Authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief in connection with alleged injury or threat of injury to
health, safety or the environment due to the presence of Hazardous Materials.
"Environmental Law" means any statute, law, treaty, convention, rule,
regulation, ordinance, code, guideline, policy or principal of law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any order or consent decree or
any agreement entered into with any Governmental Authority ("Law"), relating to
the environment, employee health and safety or Hazardous Materials, applicable
to the Company or any of its Subsidiaries or their respective operations or
assets or Real Property owned, leased, or operated by the Company or any of its
Subsidiaries , including, without limitation, any state, provincial, regional or
local Law of Peru, and any federal, state or local law of the United States,
relating to the environment, employee health and safety or Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
5
"ERISA Affiliate" means each person (as defined in Section 3(9) of
ERISA) which together with any of the Company or its Subsidiaries or would be
deemed to be a "single employer" (i) within the meaning of Section 414(b), (c),
(m) or (o) of the Code or (ii) as a result of any of the Company or its
Subsidiaries being or having been a general partner of such person.
"Exchange Act" means the Securities Exchange Act of 1934, and the
rules and regulations of the Commission promulgated thereunder.
"Excluded Stock" means (i) shares of Common Stock issued upon
conversion of the Notes; (ii) shares of Common Stock issued by the Company in
transactions that are described in Section 3.6(a) hereof; (iii) any shares of
Common or warrants Stock issued by the Company in connection with the Binding
Letter of Intent (iv) all options, warrants, and any other type of securities
and any securities to be issued upon exercise or conversion thereof issued by
the Company and outstanding as of the date hereof and listed on Schedule 4.7;
and (v) shares of Common Stock issued upon exercise of the Warrants.
"Existing Indebtedness" has the meaning ascribed to such term in the
Loan Agreement.
"Fair Market Value" means, with respect to any asset (including any
Capital Stock of any Person), the price at which a willing buyer, not an
Affiliate of the seller, and a willing seller who does not have to sell, would
agree to purchase and sell such asset, as determined in good faith by the board
of directors or other governing body or, pursuant to a specific delegation of
authority by such board of directors or governing body, an Authorized
Representative, of the Person selling such asset.
"Final Maturity Date" means September 12, 2012.
"Foreign Subsidiary" means any Subsidiary of the Company that is not
organized under the laws of the United States of America or any State thereof or
the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time.
"Governmental Authority" means the government of the United States,
Peru, any other nation or any political subdivision thereof, whether state,
provincial or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of "hazardous substances,"
"hazardous waste," "hazardous materials," "extremely hazardous substances,"
"restricted hazardous waste," "toxic substances," "toxic pollutants,"
"contaminants," or "pollutants," or words of similar import, under any
applicable Environmental Law; and (c) any chemical, material or substance, the
use of, exposure to, or Release of which is prohibited,
6
limited or regulated by any applicable Governmental Authority or could give rise
to an Environmental Claim.
"Holder" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 12.1.
"Indebtedness" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (b) the maximum amount available to be drawn or
paid under all letters of credit, bankers' acceptances, bank guaranties, surety
and appeal bonds and similar obligations issued for the account of such Person
and all unpaid drawings and unreimbursed payments in respect of such letters of
credit, bankers' acceptances, bank guaranties, surety and appeal bonds and
similar obligations, (c) all indebtedness of the types described in clause (a),
(b) and (d) of this definition secured by any Encumbrance on any property owned
by such Person, whether or not such indebtedness has been assumed by such Person
(provided that, if the Person has not assumed or otherwise become liable in
respect of such indebtedness, such indebtedness shall be deemed to be in an
amount equal to the lesser of the Fair Market Value of the property to which
such Encumbrance relates and the stated amount of such Indebtedness), (d) all
obligations of such Person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations and (e) all Contingent Obligations of such Person. The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is directly liable therefor as a result of such Person's ownership interest in
or other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor. Notwithstanding
the foregoing, Indebtedness shall not include trade payables, accrued expenses
and deferred tax and other credits incurred by any Person in accordance with
customary practices and in the ordinary course of business of such Person.
"International GAAP" shall mean generally accepted accounting
principles outside the United States as in effect from time to time.
"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Loan Agreement" means the loan agreement, dated September 12, 2007,
among Pure Biofuels del Peru S.A.C. and Palma Industrial S.A.C., as Borrowers,
the Company, as Guarantor, the lenders from time to time party thereto and
Plainfield Special Situations Master Fund Limited, as administrative agent.
"Loan Documents" has the meaning ascribed to such term in the Loan
Agreement.
"Management Agreements" has the meaning ascribed to such term in the
Loan Agreement.
"Margin Stock" has the meaning provided in Regulation U.
7
"Market Price" as of any date (the "Reference Date") means the price
determined by the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on the American Stock Exchange, the New York
Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the
NASDAQ Capital Market, whichever is at the time the principal trading exchange
or market for the Common Stock (a "Principal Market"), the volume weighted
average price of the Common Stock on the Principal Market on which the Common
Stock is then listed or quoted for the 10 Trading Days immediately preceding the
Reference Date ; (b) if the Common Stock is not then listed or quoted on a
Principal Market and if prices for the Common Stock are then quoted on the
Over-The-Counter Bulletin Board, the volume weighted average price of the Common
Stock on the Over-The-Counter Bulletin Board for the 10 Trading Days immediately
preceding the Reference Date; (c) if the Common Stock is not then listed or
quoted on the Over-The-Counter Bulletin Board and if prices for the Common Stock
are then reported in the "Pink Sheets" published by Pink Sheets LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the average of the closing bid and ask price per share of the Common Stock so
reported for the 10 Trading Days immediately preceding the Reference Date; or
(d) in all other cases, the fair market value of a share of Common Stock as
determined by the Company's Board of Directors acting reasonably and in good
faith and evidenced by a resolution of such Board of Directors.
"Material Adverse Effect" means (a) a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole,
or (b) a material adverse effect (i) on the rights or remedies of the Holders or
Purchaser hereunder or under any other Transaction Document, or (ii) on the
ability of the Company to perform its obligations to the Holders or Purchaser
hereunder or under any other Transaction Document.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. or any successor
thereto.
"Net Insurance Proceeds" means, with respect to any Recovery Event,
the cash proceeds received by the respective Person in connection with such
Recovery Event (net of (a) reasonable costs and taxes incurred in connection
with such Recovery Event and (b) required payments of any Indebtedness which is
secured by the respective assets the subject of such Recovery Event).
"NGCL" means Chapters 78 and 92A of the Nevada Revised Statutes.
"Note Documents" means this Agreement and the Notes.
"Officer" means the Chairman, any Vice Chairman, the Chief Executive
Officer, the President, the Chief Operating Officer, any Vice President, the
Chief Financial Officer, the Treasurer, or the Secretary of the Company.
"Officers' Certificate" means a written certificate signed in the name
of the Company by any two Officers, and delivered to the Holders.
"Permitted Holders" means ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or Plainfield Asset
Management LLC, its Affiliates and their successors or assigns.
8
"Person" means any individual, partnership, joint venture, firm,
corporation, association, limited liability company, trust or other enterprise
or any Governmental Authority.
"Plan" means any "employee benefit plan" as defined in Section 3(3) of
ERISA or any "plan" subject to Section 4975 of the Code.
"Purchaser Affiliate" means (a) any direct or indirect holder of any
equity interests or securities in Purchaser (whether limited or general
partners, members, stockholders or otherwise), (b) any Affiliate of Purchaser,
(c) any director, officer, employee, representative or agent of (i) Purchaser,
(ii) any Affiliate of Purchaser or (iii) any holder of equity interests or
securities referred to in clause (a) above or (d) any person who is a "control
person" of Purchaser, as defined under Section 15 of the Securities Act or
Section 20 of the Exchange Act.
"Real Property" of any Person means all the right, title and interest
of such Person in and to land, improvements and fixtures, including Leaseholds.
"Recovery Event" means the receipt by the Company or any of its
Subsidiaries of any cash insurance proceeds or condemnation awards payable
(a) by reason of theft, loss, physical destruction, damage, taking or any other
similar event with respect to any property or assets of such Person or (b) under
any policy of insurance maintained by any of them.
"Registration Rights Agreement" means the Registration Rights
Agreement, to be dated as of the Closing Date, to be entered into by and between
the Company and Purchaser, in the form attached hereto as Exhibit B.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
any successor to all or a portion thereof.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
any successor to all or a portion thereof.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System of the United States as from time to time in effect and
any successor to all or a portion thereof.
"Release" means actively or passively disposing, discharging,
injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping,
emptying, pouring, seeping, migrating or the like, into or upon any land or
water or air, or otherwise entering into the environment.
"Required Holders" means, at any time, the Holders of at least a
majority in aggregate principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by the Company, any Subsidiary or any of their
respective Affiliates).
"Responsible Officer" means as to any Person, the Chief Executive
Officer, the President, the Chief Financial Officer, the Chief Operating Officer
or any Vice President of such
9
Person. Unless otherwise specified, all references to a Responsible Officer
herein means a Responsible Officer of the Company.
"S&P" means Standard & Poor's Ratings Service, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder.
"Stockholders Agreement" means the agreement, dated September 12,
2007, among LLC1, LLC2, the Company and the other stockholders party thereto.
"Subsidiary" means, as to any Person, (i) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Trading Day" means a day on which the Common Stock traded on the
Company's principal national securities exchange or quotation system or in the
over-the-counter market and was not suspended from trading on any national
securities exchange or quotation system or over-the-counter market at the close
of business on such day.
"Transaction Documents" means this Agreement, the Notes, the
Registration Rights Agreement, the Stockholders Agreement, the Voting Agreement
and the Warrants.
"Transactions" means the transactions contemplated by this Agreement
and the other Transaction Documents.
"Transfer Agent" means Pacific Stock Transfer Company.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.
"Voting Agreement" means the Voting Agreement, dated September 12,
2007, among LLC1, LLC2, the Company and the other stockholders party thereto.
"Warrants" has the meaning set forth in the second recital to this
Agreement. The Warrants shall be in the form attached hereto as Exhibit C.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants in accordance with the terms of the Warrants.
10
"▇▇▇▇▇▇▇ Documents" means (i) the letter agreement dated November 2,
2006 from the Company in favor of ▇▇▇▇▇▇▇ Capital Partners Ltd. and ▇▇▇▇▇▇▇
Capital Markets, LLC ("▇▇▇▇▇▇▇"), as amended and extended by the letter
agreement dated December 14, 2006; (ii) the Mutual Release dated January 30,
2007 between the Company and ▇▇▇▇▇▇▇; (iii) the letter agreement dated April 18,
2007 among the Company and ▇▇▇▇▇▇▇; (iv) the letter dated June 25, 2007 from
▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇; and (v) any amendments or supplements
to the foregoing or any other agreement, arrangement or settlement relating to
the foregoing.
"Working Capital Facility" means one or more unsecured working capital
facilities approved by Purchaser in its reasonable discretion with banks or
other lenders providing for revolving credit loans, term loans receivables
financings (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced (whether upon or after termination or otherwise) or
refinanced in whole or in part from time to time.
(b) As used in this Agreement, the following terms shall have the
meanings given thereto in the Sections set forth opposite such terms:
Term Section
------------------------ --------------------
Accredited Investor 5.2(f)
Agreement Preamble
Amendment Date 6.5
Annual Business Plan 6.17
Bankruptcy Code 9.1(e)
Closing 2.2
Closing Date 2.2
Company Preamble
Indemnified Party 13.1(b)
Indemnifying Party 13.1(c)
Investment 7.5
Legend Removal Date 5.4(b)
Losses 13.1(b)
Non-Affiliated Purchaser 5.4(b)
Notices 13.2
Permitted Encumbrance 7.1
Plainfield Director 6.7
Purchase Price 2.1
Purchaser Preamble
Securities Third whereas clause
11
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Agreement to Sell and to Purchase; Purchase Price.
Subject to the terms and conditions set forth in this Agreement, the Company
agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the
Company, on the Closing Date, $10,000,000 in aggregate principal amount of the
Notes, the Issue Date Common Stock and the Warrants for a purchase price of
$10,000,000 (the "Purchase Price").
SECTION 2.2. Closing. Subject to the satisfaction or waiver of the
conditions set forth in this Agreement, the purchase and sale of the Securities
hereunder (the "Closing") shall take place at 10:00 a.m. at the offices of White
& Case LLP, counsel to Purchaser, at 1155 Avenue of the Americas, New York, New
York, on September 12, 2007 or on such other date as the parties shall mutually
agree upon (the "Closing Date").
At the Closing:
(i) Purchaser shall deliver an amount equal to the Purchase Price
(net of a funding fee in the amount of $200,000) via wire transfer of
immediately available funds to such bank account as the Company shall have
designated not later than one Business Day prior to the Closing Date.
(ii) The Company shall deliver to Purchaser against payment of the
Purchase Price, a certificate or certificates representing the Securities being
purchased by Purchaser pursuant to Section 2.1, which shall be in definitive
form and registered in the name of Purchaser or its nominee or designee and in a
single certificate or in such other denominations as Purchaser shall have
requested not later than one Business Day prior to the Closing Date;
ARTICLE III
THE NOTES
SECTION 3.1. Authorization of the Notes. The Company will authorize
the issuance of $10,000,000 aggregate principal amount of the Notes to be issued
on the Closing Date and any Notes to be issued in kind as interest. The Notes
shall be substantially in the form set forth in Exhibit A.
SECTION 3.2. No Optional Prepayments. The Company may not make any
optional prepayments on any of the Notes.
SECTION 3.3. Purchase of Notes. The Company will not, and will not
permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
12
SECTION 3.4. Change of Control. (a) In the event of a Change of
Control (the date of such occurrence being the "Change of Control Date"), the
Company shall notify the Holders of the Notes in writing of such occurrence and
shall make an offer to purchase (the "Change of Control Offer") all then
outstanding Notes at a purchase price of 100% of the aggregate principal amount
thereof plus an amount in cash equal to all accrued and unpaid interest thereon
(such applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price").
(b) Within 30 days following the Change of Control Date, the
Company shall send by first class mail, postage prepaid, a notice to each Holder
of Notes at such Holder's address as it appears in the register maintained by
the Company pursuant to Section 12.1, which notice shall govern the terms of the
Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. Such notice shall state:
(i) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this Section 3.4 and that all
Notes validly tendered and not withdrawn will be accepted for payment;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 Business Days nor
later than 60 Business Days from the date such notice is mailed, other
than as may be required by law) (the "Change of Control Payment
Date");
(iii) that any Notes not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in making payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(v) that Holders accepting the offer to have any Notes
purchased pursuant to a Change of Control Offer will be required to
surrender their Notes, duly endorsed for transfer together with such
customary documents as the Company may reasonably require, in the
manner and at the place specified in the notice prior to the close of
business on the Business Day preceding to the Change of Control
Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance
if the Company receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the aggregate principal amount of Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Notes purchased;
(vii) that Holders whose Notes are purchased only in part will
be issued a new certificate representing the aggregate principal
amount of Notes equal to the unpurchased portion of the aggregate
principal amount of Notes surrendered; and
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(viii) the circumstances and relevant facts regarding such
Change of Control.
(c) The Company will comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the purchase of the
Notes in connection with a Change of Control Offer.
(d) On the Change of Control Payment Date, the Company shall (A)
accept for payment the Notes tendered pursuant to the Change of Control Offer,
(B) promptly mail to each Holder of shares so accepted payment in an amount in
cash equal to the Change of Control Purchase Price for such Notes, (C) execute
and issue a new Note equal to the aggregate principal amount of unpurchased
Notes surrendered and (D) cancel and retire each surrendered Note. Unless the
Company defaults in the payment for the Notes tendered pursuant to the Change of
Control Offer, interest will cease to accrue with respect to the Notes tendered
and all rights of Holders of such tendered Notes will terminate, except for the
right to receive payment therefor, on the Change of Control Payment Date.
SECTION 3.5. Convertibility. (a) The Holders of the Notes will be
entitled at any time after the Amendment Date and on or prior to the Final
Maturity Date to convert any or all of their Notes into shares of Common Stock
at the Conversion Price per share. The amount of shares of Common Stock to be
delivered shall be the aggregate principal amount of the Notes delivered for
conversion plus the amount of accrued and unpaid interest thereon divided by the
Conversion Price then in effect.
(b) Conversion of shares of the Notes may be effected by any Holder
thereof upon the surrender to the Company, at the principal office of the
Company or at the office of a conversion agent as may be designated by the Board
of Directors, of the certificate or certificates for such Notes to be converted
accompanied by a complete and manually signed Notice of Conversion (as set forth
in the form of Note attached hereto) along with appropriate endorsements and
transfer documents as required by the Company or any conversion agent The
conversion of the Notes will be deemed to have been made on the date (the
"Conversion Date") such certificate or certificates have been surrendered and
the receipt of such notice of conversion. As promptly as reasonably practicable
following the Conversion Date, the Company shall deliver or cause to be
delivered (i) certificates representing the number of validly issued, fully paid
and nonassessable full shares of Common Stock to which the Holder of Notes being
converted (or such Holder's transferee) shall be entitled, and (ii) if less than
the total aggregate principal amount of the Notes evidenced by the surrendered
certificate are being converted, a new certificate for the aggregate principal
amount of Notes evidenced by such surrendered certificate or certificates less
the aggregate principal amount of Notes being converted. On the Conversion Date,
the rights of the Holder of the Notes being converted shall cease except for the
right to receive shares of Common Stock and the Person entitled to receive the
shares of Common Stock shall be treated for all purposes as having become the
record Holder of such shares of Common Stock at such time.
(c) In connection with the conversion of Notes, no fractions of shares
of Common Stock shall be issued, but the Company shall, with respect to any
fractional interest: (i)
14
pay cash with respect to the Market Price of such fractional share; or (ii)
round up to the next whole share of Common Stock.
SECTION 3.6. Anti-Dilution Adjustments. (a) If after the Issue Date,
the Company: (1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock; (2) subdivides its outstanding shares of Common
Stock into a greater number of shares; or (3) combines its outstanding shares of
Common Stock into a smaller number of shares; then the Conversion Price in
effect immediately prior to such action shall be adjusted to the number obtained
by multiplying the Conversion Price by a fraction, the numerator which shall be
the number of shares of Common Stock outstanding immediately prior to such
action, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately following such action.
(b) If the Company issues any shares of its Common Stock (or is
deemed to have issued shares of Common Stock) at a price below the Conversion
Price, the Conversion Price shall be adjusted as follows:
X = Number of shares of Common Stock (i) outstanding immediately prior
to the issuance and (ii) then issuable upon exercise of any of the
Company's outstanding securities, including, options, warrants,
and the Notes
Y(A) = Conversion Price immediately prior to the announcement of the
issuance
Z(B) = Aggregate consideration received by the Company
Y = Number of shares of Common Stock issued (or deemed issued) in the
new issuance
Y(AB) = New Conversion Price
Y(AB) = Y(A)((X + Z(B)/ Y(A))/(X + Y))
(c) If the Company issues any shares of its Common Stock (or is
deemed to have issued shares of Common Stock) at a price below the Market Price,
the Conversion Price shall be adjusted as follows:
15
X = Number of shares of Common Stock (i) outstanding immediately prior
to the issuance and (ii) then issuable upon exercise of any of the
Company's outstanding securities, including, options, warrants,
and the Notes
Y(A) = Conversion Price immediately prior to the announcement of the
issuance
Z(B) = Aggregate consideration received by the Company
M = Market Price immediately prior to the announcement of the issuance
Y = Number of shares of Common Stock issued (or deemed issued) in the
new issuance
Y(AB) = New Conversion Price
Y(AB) = Y(A)((X + Z(B)/ M)/(X + Y))
(d) If the Company makes any distribution payable in securities or
assets of the Company (other than shares of Common Stock), then and in each such
event provision shall be made so that the Holders of Notes shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities or assets of the Company which
they would have received had their Notes been converted into Common Stock on the
date of such event and had they thereafter, during the period from the date of
such event to and including the date of conversion, retained such securities or
assets receivable by them as aforesaid during such period, subject to all other
adjustment called for during such period under this Section 3.6 with respect to
the rights of the Holders of Notes.
(e) The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification. If
after an adjustment a Holder of Notes upon conversion of such Notes may receive
shares of two or more classes of Capital Stock of the Company, the Conversion
Price will thereafter be subject to adjustment upon the occurrence of an action
taken with respect to any such class of Capital Stock with respect to the Common
Stock on terms comparable to those applicable to Common Stock described herein.
(f) Only one adjustment shall be made with respect to any event
causing an adjustment. If an adjustment is required by Section 3.6(b) and 3.6(c)
hereof, only the adjustment resulting in the greatest decrease in the Conversion
Price shall be made.
(g) For purposes of Section 3.6(b) and (c):
(i) If the Company issues any options, warrants or other
securities convertible into or exchangeable or exercisable for Common
Stock ("Convertible Securities"), then the number of shares of Common
Stock issuable upon the exercise, exchange or conversion of such
Convertible Securities, shall be deemed to be the issuance of Common
Stock;
(ii) The consideration receivable by the Company for Common
Stock deemed issued pursuant to the preceding clause (i), shall be the
total amount, if any, received by the Company as consideration for the
issuance of such Convertible Securities, plus the aggregate amount of
additional consideration
16
payable to the Company upon the exercise, exchange or conversion of
such Convertible Securities; and
(iii) Upon the expiration or termination of any Convertible
Securities, the Conversion Price, to the extent in any way affected by
or computed using such Convertible Securities, shall then be
recomputed to reflect the issuance of only the number of shares of
Common Stock (and Convertible Securities which remain in effect) that
were actually issued upon the exercise, exchange or conversion of such
Convertible Securities.
(g) No adjustment in the Conversion Price need be made unless
the adjustment would require an increase or decrease of at least $0.01 in the
Conversion Price. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment. All calculations relating to
anti-dilution adjustments shall be made to the nearest cent.
(h) No adjustment need be made for a change in the par value or no
par value of the Common Stock. No adjustment shall be made to the Conversion
Price for the issuance of any Excluded Stock.
(i) If the Company is a party to a transaction involving a sale of
substantially all of the assets of the Company or a merger or binding share
exchange which reclassifies or changes its outstanding Common Stock, the person
obligated to deliver securities, cash or other assets upon conversion of Notes
will be required to assume the obligations of the Company with respect to the
Notes. In addition, if the Company in connection with any such transaction makes
a distribution to all holders of its Common Stock of any of its assets, or debt
securities or any rights, warrants or options to purchase securities of the
Company, then, from and after the record date for determining the holders of
Common Stock entitled to receive the distribution, a Holder of Notes that
converts such Notes would, upon such conversion, be entitled to receive, in
addition to the shares of Common Stock into which such Notes are convertible,
the kind and amount of securities, cash or other assets comprising the
distribution that such holder would have received if such holder had converted
such Notes immediately prior to the record date for determining the holders of
Common Stock entitled to receive the distribution.
(j) Whenever the Conversion Price is adjusted in accordance with
this Section 3.6, the Company shall: (1) forthwith compute the Conversion Price
in accordance with this Section 3.6 and prepare and transmit to the Transfer
Agent an Officers' Certificate setting forth the Conversion Price, the method of
calculation thereof in reasonable detail, and the facts requiring such
adjustment and upon which such adjustment is based; and (2) as soon as
practicable following the occurrence of an event that requires an adjustment to
the Conversion Price pursuant to this Section 3.6 (or if the Company is not
aware of such occurrence, as soon as practicable after becoming so aware),
provide a written notice to the Holders of Notes of the occurrence of such event
and a statement setting forth in reasonable detail the method by which the
adjustment to the Conversion Price was determined and setting forth the adjusted
Conversion Price.
17
(k) After an adjustment to the Conversion Price, any subsequent
event requiring an adjustment will cause a subsequent adjustment to the
Conversion Price as so adjusted.
(l) In connection with the conversion of the Notes, no fractions of
shares of Common Stock shall be issued, but the Company shall, with respect to
any fractional interest: (i) pay cash with respect to the Market Price of such
fractional share; or (ii) round up to the next whole share of Common Stock.
(m) It is the intent of the parties hereto that, in the aggregate,
the Issue Date Common Stock, the Conversion Shares and the Warrant Shares will,
as of the Closing Date, represent 51.1% of the fully-diluted Common Stock,
assuming the exercise of all 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. From and after the Closing Date until
September 12, 2008, to the extent that the Company issues any Common Stock (or
options, warrants or other rights to acquire Common Stock), pursuant to or in
connection with (i) the Binding Letter of Intent, (ii) the Company's stock
option plan (other than the 14 million options outstanding under the stock
option plan as of the date hereof), (iii) the 2006 Private Placement Warrants or
(iv) the ▇▇▇▇▇▇▇ Agreements (other than any Common Stock, options, warrants or
other rights to acquire Common Stock issued in connection with the exercise or
conversion of any securities previously issued pursuant to the ▇▇▇▇▇▇▇
Agreements), within three Business Days of such issuance of Common Stock (or
options, warrants or other rights to acquire Common Stock), the Company shall
issue to the Purchaser, warrants to purchase a number of shares of Common Stock
equal to the number of shares of Common Stock (or options, warrants or other
rights to acquire Common Stock), issued in such issuance with an exercise price
equal to the lesser of (x) the applicable exercise price, conversion price or
stock purchase price of such issuance and (y) $1.50. Other than the exercise
price, the warrants issued pursuant to this Section 3.6(m) shall have
substantially the same terms and conditions as the Warrants attached hereto as
Exhibit C.
SECTION 3.7. Forced Conversion
. Upon the consummation of a firm commitment underwritten public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act") resulting in gross
proceeds of not less than $30.0 million and an offering price to the public of
not less than $1.80 per share, the Company may, within 5 Trading Days, deliver a
written notice to all Holders (a "Forced Conversion Notice" and the date such
notice is received by the Holders, the "Forced Conversion Notice Date") which
shall have the effect of forcing the conversion of the Notes specified therein,
it being understood that the "Conversion Date" for purposes of Section 3.5(b)
shall be deemed to occur on the third Trading Day following the Forced
Conversion Notice Date. As to each holder, a Forced Conversion Notice shall
state: (i) the Conversion Date; (ii) the aggregate principal amount of Notes the
Company wishes to convert; (iii) such Holder's pro-rata portion of such
aggregate principal amount; (iv) the place or places where certificates for such
Notes are to be surrendered for conversion; (v) that the conversion is being
made pursuant to Section 3.7 hereof; and (vi) that interest on the Notes to be
converted will cease to accrue on such conversion date.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
In order to induce the Purchaser to enter into this Agreement and to
purchase the Securities, the Company hereby represents and warrants to and
agrees with the Purchaser that on the date hereof, after giving effect to the
consummation of the transactions contemplated hereby that:
SECTION 4.1. Company Status. The Company (a) is a duly organized and
validly existing corporation in good standing under the laws of the State of
Nevada, (b) has the corporate power and authority to own its property and assets
and to transact the business in which it is engaged and presently proposes to
engage and (c) is duly qualified and is authorized to do business and is in good
standing in each jurisdiction where the ownership, leasing or operation of its
property or the conduct of its business requires such qualifications.
SECTION 4.2. Power and Authority. The Company has the corporate power
and authority to execute, deliver and perform the terms and provisions of each
of the Transaction Documents to which it is party and has taken all necessary
corporate action to authorize the execution, delivery and performance by it of
each of such Transaction Documents. The Company has duly executed and delivered
each of the Transaction Documents to which it is party, and each of such
Transaction Documents 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).
SECTION 4.3. No Violation. Neither the execution, delivery or
performance by the Company of the Transaction Documents to which it is a party,
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, 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 its
property or assets is bound or to which it may be subject, 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.
SECTION 4.4. Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except for those that have otherwise been obtained or made on or prior to the
Closing Date and which remain in full force and effect on the Closing Date), or
exemption by, any Governmental Authority is required to be obtained or made
19
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 (i) the execution,
delivery and performance of any Transaction Document or (ii) the legality,
validity, binding effect or enforceability of any Transaction Document.
SECTION 4.5. True and Complete Disclosure. All factual information
(taken as a whole) furnished by or on behalf of the Company and its Subsidiaries
in writing to Purchaser (including, without limitation, all information
contained in the Transaction Documents) for purposes of or in connection with
this Agreement, the other Transaction Documents or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of the Company and its Subsidiaries in
writing to Purchaser will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading in any material respect at such time in light of the
circumstances under which such information was provided, it being understood and
agreed that for purposes of this Section 4.5, such factual information shall not
include any budget information (including, without limitation, any Annual
Business Plan) or any pro forma financial information.
SECTION 4.6. Use of Proceeds. (a) All proceeds from the sale of the
Securities shall be used solely for the purposes set forth on Schedule 2.01 to
the Loan Agreement.
(b) No part of the proceeds from the sale of the Securities will be
used to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock. Neither the sale of the Securities
nor the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulation T, U or X.
SECTION 4.7. Capital Stock. (a) As of the Closing Date, the
authorized Capital Stock of the Company will consist solely of 93,750,000 shares
of Common Stock, of which 63,035,769 shares are issued and outstanding (assuming
no additional exercises of existing stock options) no shares are held in
treasury and 7,628,762 (such amount does not include (i) any management options
since they will only be exercisable upon an increase in the authorized common
stock, (ii) the shares convertible upon the Cornell debt since the debt will be
paid off at closing or (iii) any shares or warrants issuable under the Binding
Letter of Intent since the transaction has not closed and the final
consideration has not yet been determined) are reserved for issuance upon the
exercise of outstanding warrants, options and other convertible or exchangeable
securities (other than the Notes and the Warrants). Schedule 4.7 of the Company
Disclosure Schedule sets forth the capitalization of the Company as of the
Closing Date. Each share of Capital Stock of the Company that will be issued and
outstanding immediately following the Closing will be duly authorized and
validly issued and fully paid and nonassessable, and the issuance thereof will
not have been subject to any preemptive rights or made in violation of any
Applicable Law.
(b) Except as set forth on Schedule 4.7 of the Company Disclosure
Schedule, as of the date of this Agreement, there are and on the Closing Date
there will be (i) no outstanding options, warrants, agreements, conversion
rights, exchange rights, preemptive rights
20
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.
(c) From and after the Amendment Date, the Conversion Shares and
the Warrant Shares will have been duly authorized and validly reserved for
issuance in contemplation of the conversion of the Notes and the exercise of the
Warrants and, when issued and delivered in accordance with the terms of the
Notes or the Warrants, will have been validly issued and will be fully paid and
nonassessable, and the issuance thereof will not have been subject to any
preemptive rights or made in violation of any Applicable Law.
(d) The holders of the Notes will, upon issuance thereof, have the
rights set forth in the Form of Note (subject to the limitations and
qualifications set forth therein).
SECTION 4.8. Private Offering. Assuming the accuracy of the
representations and warranties set forth in Section 5.2, the offer and sale of
the Securities to the Purchaser is exempt from the registration and prospectus
delivery requirements of the Securities Act. Neither the Company, nor anyone
acting on behalf of it, has offered or sold or will offer or sell any
securities, or has taken or will take any other action (including, without
limitation, any offering of any securities of the Company under circumstances
that would require, under the Securities Act, the integration of such offering
with the offering and sale of the Securities), which would subject the sale of
the Securities contemplated hereby to the registration provisions of the
Securities Act.
SECTION 4.9. Brokers and Finders. Except as set forth on Schedule 4.9
of the Company Disclosure Schedule, 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.
SECTION 4.10. Representations and Warranties in Other Documents. All
representations and warranties set forth in the other Transaction Documents and
the Loan Documents were true and correct in all material respects at the time as
of which such representations and warranties were made (or deemed made) and
shall be true and correct in all material respects as of the Closing Date as if
such representations or warranties were made on and as of such date (it being
understood and agreed that any such representation or warranty which by its
terms is made as of a specified date shall be true and correct in all material
respects as of such specified date).
21
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
SECTION 5.1. Organization; Authorization; Enforceability. Purchaser
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite power and authority to
own its properties and assets and to carry on its business as it is now being
conducted and as currently proposed to be conducted. Purchaser has the power to
execute, deliver and perform its obligations under each of the Transaction
Documents to which it is a party and has taken all action necessary to authorize
the execution, delivery and performance by it of such Transaction Documents and
to consummate the transactions contemplated hereby and thereby. No other
proceedings on the part of Purchaser are necessary for such authorization,
execution, delivery and consummation. Purchaser has duly executed and delivered
this Agreement and, at the Closing, Purchaser will have duly executed and
delivered each of the other Transaction Documents to be executed and delivered
at or prior to the Closing. This Agreement constitutes, and each of the other
Transaction Documents to which Purchaser is a party, when executed and delivered
by Purchaser, will constitute, a legal, valid and binding obligation of
Purchaser, enforceable against Purchaser 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).
SECTION 5.2. Private Placement. (a) Purchaser understands that the
offering and sale of the Securities by the Company has not been registered under
the Securities Act and state securities laws and is intended to be exempt from
registration under the Securities Act pursuant to Section 4(2) and/or
Regulation D thereof.
(b) Purchaser has sufficient knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and is capable of bearing the economic risks of
such investment and is able, without impairing Purchaser's financial condition,
to hold the Securities for an indefinite period of time and to suffer a complete
loss of Purchaser's investment.
(c) Purchaser has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.
(d) Purchaser is acquiring the Securities to be acquired hereunder
for its own account, not as a nominee or agent, for investment and not with a
view to the public resale or distribution thereof, in violation of any
securities law.
22
(e) Purchaser understands that the Securities may not be
transferred except pursuant to a registration statement under the Securities Act
or in a transaction that is exempt from registration under the Securities Act.
(f) Purchaser is an "Accredited Investor" as that term is defined
in Rule 501(a)(3) of Regulation D.
(g) Purchaser (i) has been furnished with or has had full access to
all of the information (financial or other) that it considers necessary or
appropriate to make an informed investment decision with respect to the Company
and the Securities and that it has requested from the Company, (ii) has had an
opportunity to discuss with management of the Company the intended business,
properties, condition (financial or other), operations and prospects of the
Company and to obtain information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to it or to which it had access;
it being understood that nothing set forth in this Section 5.2 shall affect the
representations, warranties or other obligations of the Company, or the rights
and remedies of Purchaser, under this Agreement in any way whatsoever.
(h) Purchaser has reviewed with its own tax advisors the
U.S. federal, state, local and foreign tax consequences of this investment and
the transactions contemplated under any of the Transaction Documents. With
respect to such matters, Purchaser relies solely on such advisors and not on any
statements or representations of the Company or any of its agents, written or
oral. Purchaser understands that it (and not the Company) shall be responsible
for its own tax liability that may arise as a result of this investment or the
transactions contemplated under any of the Transaction Documents.
SECTION 5.3. Brokers or Finders
Purchaser 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 Purchaser, any liability for brokerage or finders' fees or
agents' commissions or any similar charges under any of the Transaction
Documents.
SECTION 5.4. Transfer or Resale; Legends
(a) Purchaser understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the Securities Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) Purchaser shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration requirements, or (C)
Purchaser provides the Company with reasonable assurances (in the form of seller
and broker representation letters) that such Securities can be sold, assigned or
transferred pursuant to Rule 144, Rule 144(k), or Rule 144A promulgated under
the Securities Act, as amended (or a successor rule thereto) (collectively,
"Rule 144"), in each case following the applicable holding period set forth
therein; (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
23
not applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Commission thereunder; and (iii) neither the Company nor any
other person is under any obligation to register the Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
(b) Legends. Purchaser understands and agrees that the certificates
evidencing the Notes or the Conversion Shares, or any other securities issued in
respect of the Notes or the Conversion Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, bear the
following legend (in addition to any legend required by the Registration Rights
Agreement or under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates evidencing the Conversion Shares or Warrant Shares shall not
contain any legend (including the legend set forth above), (i) following the
sale of such Conversion Shares or Warrant Shares pursuant to a registration
statement (including the Registration Statement) covering the resale of such
security which is effective under the Securities Act, (ii) following any sale of
such Conversion Shares or Warrant Shares pursuant to Rule 144, (iii) if such
Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k), or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). The Company shall cause its counsel to issue a
legal opinion to the Company's transfer agent as soon as practicable upon notice
by the Purchaser that it is selling Securities pursuant to a Registration
Statement if required by the Company's transfer agent to effect the removal of
the legend hereunder. The Company agrees that at such time as such legend is no
longer required under this Section 5.4(b), it will, no later than three (3)
Trading Days following the delivery by a purchaser that is not an Affiliate of
the Company (a "Non-Affiliated Purchaser") to the Company or the Transfer Agent
of a certificate representing Conversion Shares or Warrant Shares, as the case
may be, issued with a restrictive legend (such third Trading Day, the "Legend
Removal Date"), deliver of cause to be delivered to such Non-Affiliated
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer
24
set forth in this Section 5.4. Purchaser acknowledges that the Company's
agreement hereunder to remove all legends from Conversion Shares or Warrant
Shares is not an affirmative statement or representation that such Conversion
Shares or Warrant Shares are freely tradable.
SECTION 5.5. No Violation; Consents. (a) The execution, delivery and
performance by Purchaser of each of the Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby do not and
will not contravene any Applicable Law. The execution, delivery and performance
by Purchaser of each of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby (i) will not violate,
result in a breach of or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under any Contract to which Purchaser is party or by which
Purchaser is bound or to which any of its assets is subject, except for any such
violations, breaches or defaults that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of Purchaser to perform its obligations under this Agreement, and (ii)
will not conflict with or violate any provision of the articles of incorporation
or bylaws or other governing documents of Purchaser.
(b) no consent, authorization or order of, or filing or
registration with, any Governmental Authority or other Person is required to be
obtained or made by Purchaser for the execution, delivery and performance of any
of the Transaction Documents to which it is a party or the consummation of any
of the transactions contemplated hereby, except where the failure to obtain such
consents, authorizations or orders, or make such filings or registrations, would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Purchaser to perform its obligations under this
Agreement.
SECTION 5.6. Short Position. Neither Purchaser nor any of its
Affiliates have an open short position in the Common Stock of the Company.
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.1. Access to Books and Records. So long as Purchaser holds
any Securities, Conversion Shares or Warrant Shares, the Company shall afford to
Purchaser and Purchaser's representatives (including without limitation, its
accountants and counsel) full access during normal business hours to all its
properties, books, Contracts, commitments and records (including, but not
limited to, tax returns) and permit the Purchaser and its representatives to
discuss with management and the Company's accountants the business and affairs
of the Company and the Subsidiaries.
SECTION 6.2. Use of Proceeds. The Company shall use the proceeds from
the issuance of Securities for the specific purposes set forth in the Loan
Agreement.
SECTION 6.3. Periodic Information. For so long as the Notes or any
Conversion Shares are outstanding the Company shall file all reports, if any,
required to be filed by the
25
Company under Section 13 or 15(d) of the Exchange Act and, if no longer required
to file such reports, shall provide the holders of the Securities, the
Conversion Shares, the Warrant Shares and prospective purchasers of such
securities with the information specified in Rule 144A(d) under the Securities
Act.
SECTION 6.4. Directors and Officers Insurance; Indemnification. For
so long as Purchaser holds any Notes, the Company shall maintain directors' and
officers' insurance with policy limits and deductibles at least as favorable to
the beneficiaries of such insurance as are currently maintained and otherwise on
terms reasonably comparable to the coverage maintained by the Company on the
date hereof, such insurance to be maintained with either (i) a Lloyds of London
syndicate reasonably acceptable to Purchaser or (ii) an insurer with an A.M.
Best financial strength rating of "A" or better. For purposes of this Section
6.4, it is understood that the directors' and officers' insurance maintained by
the Company on the date hereof is acceptable to Purchaser and that the
indemnification provisions of the Company bylaws are acceptable to Purchaser.
For so long as Purchaser holds any Notes, the Company shall indemnify the
Company's directors and officers to the fullest extent permitted under the NGCL
and shall enter into all such agreements and use its best efforts to obtain any
necessary amendments to its articles of incorporation or bylaws to give effect
to this Section 6.4.
SECTION 6.5. Conversion Shares. The Company agrees to use its best
efforts to cause the Articles of Incorporation to be amended as soon as
practicable to increase the authorized common stock to a number sufficient to
support the issuance of the Common Stock underlying the Notes and the Warrants
(the effective date of such amendment, the "Amendment Date"). Thereafter, the
Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock, for the purpose of
effecting the conversion of Notes, the full number of shares of common of the
Company then issuable upon the conversion into Common Stock of all of the
outstanding principal (including PIK Interest) and accrued interest that are
outstanding from time to time under the provisions of the Note Documents. The
Company covenants that all of the Conversion Shares that may be issued upon the
conversion of Notes will, upon issuance, be fully paid and nonassessable, and
the Company will pay all taxes (including transfer and stamp), liens and charges
with respect to the issue thereof.
SECTION 6.6. Stockholders Meeting. The Company shall hold the
stockholders meeting contemplated by the Voting Agreement by no later than
November 30, 2007; provided, however, that in the event that the Commission
reviews the preliminary proxy statement filed in connection with such
stockholders meeting, such stockholders meeting shall be held no later than
January 31, 2008.
SECTION 6.7. Plainfield Director. (a) From and after the Closing
Date, Purchaser or its Affiliates (or any transferee of more than 50% of the
Notes held by Purchaser) shall have the right to designate one Director (the
"Plainfield Director"). As promptly as practicable after the Closing Date, the
Board of Directors shall increase the number of Directors to permit the addition
of the Plainfield Director and elect the person so designated to the Board of
Directors. In connection with any annual or special meeting of stockholders of
the Company where Directors are to be elected, the person designated by to be
the Plainfield Director shall be nominated by the Board of Directors or any
nominating committee thereof.
26
(b) Purchaser or its Affiliates shall have the right to designate any
replacement for a Plainfield Director designated for nomination or nominated in
accordance with this Section 6.7 upon the death, resignation, retirement,
disqualification or removal from office for other cause of such Director. The
Board of Directors of the Company shall elect each person so designated.
(c) The Company shall use its best efforts to solicit from the
stockholders of the Company eligible to vote for the election of Directors
proxies in favor of the nominee selected in accordance with this Section 6.7.
(d) If at any time Purchaser has the right to nominate a director
pursuant to this Section 6.7 but fails to exercise this right, then Purchaser or
its Affiliates shall have the right to appoint one (1) representative (the
"Observer"). The Observer shall have the right to attend meetings of the Board
of Directors in a nonvoting observer capacity, to receive notice of such
meetings and to receive the information provided by the Company to the Board of
Directors.
(e) Purchaser will have a right to effectuate their rights pursuant to
this Section 6.7 so long as any Notes remain outstanding or Purchaser holds at
least 5% of the Company's outstanding Common Shares.
(f) A quorum of the Board of Directors shall require the presence of
the Plainfield Director.
(g) The Company will not increase the number of Directors above six.
SECTION 6.8. Information Covenants. Holdings will furnish to each
Holder:
(a) Monthly Reports. Within 30 days after the end of each fiscal
month of the Company (other than the last fiscal month of any fiscal
quarter of the Company ), the balance sheet of the Company as at the end of
such fiscal month and the related statements of income and statement of
cash flows for such fiscal month and for the elapsed portion of the fiscal
year ended with the last day of such fiscal month, and setting forth (x)
comparable budgeted income statement figures for such fiscal month as set
forth in the respective Annual Business Plan delivered pursuant to Section
6.17 and (y) beginning with the fiscal month of the Company ending
September 30, 2007 comparative figures for all such financial information
for the corresponding fiscal month in the prior fiscal year. All of the
foregoing financial statements shall be certified by an Authorized
Representative of the Company that they fairly present in all material
respects in accordance with GAAP the financial condition of the Company and
its Subsidiaries as of the dates indicated and the consolidated results of
their operations for the periods indicated, subject to normal year-end
audit adjustments and the absence of footnotes.
(b) Quarterly Financial Statements. Within 45 days after the
close of the first three quarterly accounting periods in each fiscal year
of the Company, (i) the balance sheet of the Company as at the end of such
quarterly accounting period and the related statements of income and
statement of cash flows for such quarterly accounting period
27
and for the elapsed portion of the fiscal year ended with the last day of
such quarterly accounting period, and setting forth (x) comparable budgeted
income statement figures for such quarterly accounting period as set forth
in the respective Annual Business Plan delivered pursuant to Section 6.17
and (y) beginning with the quarterly accounting period ending September 30,
2007 comparative figures for all such financial information for the
corresponding quarterly accounting period in the prior fiscal year, and
(ii) management's discussion and analysis of the important operational and
financial developments during such quarterly accounting period. All of the
foregoing financial statements shall be certified by an Authorized
Representative of the Company that they fairly present in all material
respects in accordance with GAAP the financial condition of the Company and
its Subsidiaries as of the dates indicated and the results of their
operations for the periods indicated, subject to normal year-end audit
adjustments and the absence of footnotes. Notwithstanding the foregoing,
the filing with the Commission of a quarterly report on Form 10-Q or Form
10-QSB within the time frame allotted by the Commission for such filing,
including any extension pursuant to Rule 12b-25, shall be deemed to fulfill
the obligations under this Section 6.8(b).
(c) Annual Financial Statements. Within 120 days after the close
of each fiscal year of the Company, (i) the balance sheet of the Company as
at the end of such fiscal year and the related statements of income and
retained earnings and statement of cash flows for such fiscal year setting
forth, commencing with the fiscal year of the Company ending December 31,
2007, comparative figures for the preceding fiscal year and certified by
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Worth ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, LLP or other independent certified
public accountants of recognized national standing reasonably acceptable to
Purchaser, accompanied by an opinion of such accounting firm (which opinion
shall be without a "going concern" or like qualification or exception and
without any qualification or exception as to scope of audit) stating that
in the course of its regular audit of the financial statements of the
Company, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm obtained no knowledge of any
Default or an Event of Default relating to financial or accounting matters
which has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or an Event of Default has occurred and is
continuing, a statement as to the nature thereof, and (ii) management's
discussion and analysis of the important operational and financial
developments during such fiscal year. Notwithstanding the foregoing, the
filing with the SEC of an annual report on Form 10-K or Form 10-KSB within
the time frame allotted by the SEC for such filing, including any extension
pursuant to Rule 12b-25, shall be deemed to fulfill the obligations under
this Section 6.8(c).
(d) Management Letters. Promptly after receipt thereof by the
Company or any of its Subsidiaries, a copy of any "management letter"
received from its certified public accountants and management's response
thereto.
(e) Certificates. At the time of the delivery of the financial
statements provided for in Sections 6.8 (b) and (c), a compliance
certificate from an Authorized Representative of the Company in the form of
Exhibit G certifying on its behalf that, to such Person's knowledge after
due inquiry, no Default or Event of Default has occurred
28
and is continuing or, if any Default or Event of Default has occurred and
is continuing, specifying the nature and extent thereof.
(f) Notice of Default, Litigation and Material Adverse Effect.
Promptly, and in any event within three Business Days after any Authorized
Representative of the Company or any of its Subsidiaries obtains knowledge
thereof, notice of (i) the occurrence of any event which constitutes a
Default or an Event of Default, (ii) any litigation or governmental
investigation or proceeding pending against the Company or any of its
Subsidiaries (A) which, either individually or in the aggregate, has had,
or could reasonably be expected to have, a Material Adverse Effect or (B)
with respect to any Transaction Document, or (iii) any other event, change
or circumstance that has had, or could reasonably be expected to have, a
Material Adverse Effect.
(g) Environmental Matters. Promptly after the Company or any of its
Subsidiaries obtains knowledge thereof, notice of one or more of the
following environmental matters to the extent that such environmental
matters, either individually or when aggregated with all other such
environmental matters, could reasonably be expected to have a Material
Adverse Effect:
(i) any pending or threatened Environmental Claim against
any of the Company or its Subsidiaries or any Real Property owned,
leased or operated by it;
(ii) any condition or occurrence on or arising from any Real
Property owned, leased or operated by the Company or any of its
Subsidiaries that (A) results in noncompliance by it with any
applicable Environmental Law or (B) could reasonably be expected to
form the basis of an Environmental Claim against it or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned,
leased or operated by the Company or any of its Subsidiaries that
could reasonably be expected to cause such Real Property to be subject
to any restrictions on the ownership, lease, occupancy, use or
transferability by it of such Real Property under any Environmental
Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Property owned, leased or operated by the Company or any of its
Subsidiaries as required by any Environmental Law or any governmental
or other administrative agency; provided that in any event the Company
and its Subsidiaries shall deliver to Purchaser all notices received
by it from any government or governmental agency under, or pursuant
to, any Environmental Law (including, without limitation, CERCLA)
which identifies it as a potentially responsible party for remediation
costs or which otherwise notify such Borrower or any Guarantor of
potential liability under any Environmental Law (including, without
limitation, CERCLA).
29
All such notices shall describe in reasonable detail the nature
of the claim, investigation, condition, occurrence or removal or
remedial action and the Company's response thereto.
(h) Other Information. From time to time, such other
information or documents (financial or otherwise) with respect to
the Company and its Subsidiaries as the Purchaser may reasonably
request.
SECTION 6.9. Information Covenants. Each of the Company and its
Subsidiaries will keep proper books of record and accounts in which full, true
and correct entries in conformity with GAAP, with respect to the Company and its
Domestic Subsidiaries, or International GAAP, with respect to Foreign
Subsidiaries, as applicable, and all requirements of law shall be made of all
dealings and transactions in relation to its business and activities
SECTION 6.10. Maintenance of Property; Insurance. The Company will,
and will cause its Subsidiaries to, (i) keep all property necessary to its
business in good working order and condition, ordinary wear and tear excepted
and subject to the occurrence of casualty events, (ii) maintain with financially
sound and reputable insurance companies insurance on all such property and
against all such risks as is consistent and in accordance with industry practice
for companies similarly situated owning similar properties and engaged in
similar businesses as it, and (iii) furnish to Purchaser, upon its request
therefor, full information as to the insurance carried. Such insurance shall
include physical damage insurance on all real and personal property (whether now
owned or hereafter acquired) on an all risk basis and business interruption
insurance.
SECTION 6.11. Maintenance of Property; Insurance. The Company will,
and will cause its Subsidiaries to, do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and its material
rights, franchises, licenses, permits, copyrights, trademarks and patents;
provided, however, that nothing in this Section 6.11 shall prevent sales of
assets and other transactions by the Company or its Subsidiaries in accordance
with Section 7.2.
SECTION 6.12. Compliance with Statutes, etc.. The Company will, and
will cause its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all Governmental
Authorities in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls).
SECTION 6.13. Compliance with Environmental Laws. (a) The Company
will, and will cause its Subsidiaries to, comply with all Environmental Laws and
permits applicable to, or required by, the ownership, lease or use of its Real
Property now or hereafter owned, leased or operated by it, and will promptly pay
or cause to be paid all costs and expenses incurred in connection with such
compliance, and will keep or cause to be kept all such Real Property free and
clear of any Encumbrances imposed pursuant to such Environmental Laws. The
Company will not, and will not permit any of its Subsidiaries to, generate, use,
treat, store, Release or dispose of, or permit the generation, use, treatment,
storage, Release or disposal of Hazardous Materials on any Real Property now or
hereafter owned, leased or operated by it or
30
transport or permit the transportation of Hazardous Materials to or from any
such Real Property, except for Hazardous Materials generated, used, treated,
stored, Released or disposed of at any such Real Properties in compliance in all
material respects with all applicable Environmental Laws and as required in
connection with the normal operation, use and maintenance of its business or
operations.
(b) (i) After the receipt by Purchaser of any notice of the type
described in Section 6.8(g), (ii) at any time that the Company is not in
compliance with Section 6.13(a) or (iii) in the event that the Holders have
exercised any of the remedies pursuant to Article X, the Company will provide,
at the sole expense of the Company and at the request of Purchaser, an
environmental site assessment report concerning any Real Property owned, leased
or operated by any of the Company or its Subsidiaries, prepared by an
environmental consulting firm reasonably approved by Purchaser, indicating the
presence or absence of Hazardous Materials and the potential cost of any removal
or remedial action in connection with such Hazardous Materials on such Real
Property. If the Company fails to provide the same within 30 days after such
request was made, Purchaser may order the same, the cost of which shall be borne
by the Company, and the Company shall grant and hereby grant to Purchaser and
the Holders and their respective agents access to such Real Property and
specifically grant Purchaser and the Holders an irrevocable non-exclusive
license, subject to the rights of tenants, to undertake such an assessment at
any reasonable time upon reasonable notice to the Company, all at the sole
expense of the Company.
SECTION 6.14. End of Fiscal Years; Fiscal Quarters. (a) The Company
will cause (a) its fiscal year to end on December 31 of each calendar year and
(b) its fiscal quarters to end on dates consistent with a fiscal year end as
provided in preceding clause (a).
SECTION 6.15. Performance of Obligations. The Company will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement, loan agreement or credit
agreement and each other agreement, contract or instrument by which it is bound.
SECTION 6.16. Payment of Taxes. The Company will, and will cause each
of its Subsidiaries to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become an Encumbrance or
charge upon any of its properties not otherwise permitted under Section 7.1(a);
provided that none of the Company and its Subsidiaries shall be required to pay
any such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP, with respect to the Company and its
Domestic Subsidiaries, or International GAAP, with respect to Foreign
Subsidiaries, as applicable.
SECTION 6.17. Annual Business Plan. No later than thirty (30) days
prior to the end of the then current calendar year, the Company shall prepare
(or cause to be prepared) an annual business plan for the Company and its
Subsidiaries for 2008 or the next calendar year, as applicable, which plan must
be approved in writing by Purchaser, which approval shall not be unreasonably
withheld. A plan approved by Purchaser is referred to herein as the "Annual
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Business Plan." No changes or departures from any item in an Annual Business
Plan approved by Purchaser, shall be made without the prior written approval of
Purchaser, which approval shall not to be unreasonably withheld. Each Annual
Business Plan shall include such information as Purchaser may reasonably
request. All actual costs incurred by Purchaser in reviewing and approving any
Annual Business Plan shall be reimbursed by the Company promptly following
demand.
SECTION 6.18. ERISA. None of the Company or its Subsidiaries or any
ERISA Affiliate thereof will maintain or contribute to (or have an obligation to
contribute to) a Plan except as may be required by Peruvian Law.
ARTICLE VII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that on and after the Closing
Date and until the Notes (in each case, together with interest thereon) and all
other obligations under the Transaction Documents (other than any indemnities
described in Section 13.1 that are not then due and payable) are paid in full,
the Company will not, and will not permit any of its Subsidiaries to:
SECTION 7.1. Encumbrances. Create, incur, assume or suffer to exist
any Encumbrance upon or with respect to any of its property or assets (real or
personal, tangible or intangible), whether now owned or hereafter acquired, or
sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable with recourse to it), or assign any right to receive
income or permit the filing of any financing statement under the UCC or any
other similar notice of Encumbrance under any similar recording or notice
statute; provided that the provisions of this Section 7.1 shall not prevent the
creation, incurrence, assumption or existence of the following (Encumbrances
described below are herein referred to as "Permitted Encumbrances"):
(a) inchoate Encumbrances for taxes, assessments or governmental
charges or levies not yet due or Encumbrances for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP, with respect to the Company and its Domestic
Subsidiaries, or International GAAP, with respect to Foreign Subsidiaries,
as applicable;
(b) Encumbrances in respect of its property or assets imposed by
law, which were incurred in the ordinary course of business and do not
secure Indebtedness for borrowed money, such as carriers', warehousemen's,
materialmen's and mechanics' Encumbrances and other similar Encumbrances
arising in the ordinary course of business, and (i) which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business or (ii)
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
property or assets subject to any such Encumbrance;
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(c) Encumbrances created by or pursuant to this Agreement and the
Loan Documents;
(d) easements, rights-of-way, restrictions, encroachments and other
similar charges or encumbrances, and minor title deficiencies, in each case
not securing Indebtedness and not materially interfering with the conduct
of its business; and
(e) Encumbrances arising out of the existence of judgments or
awards in respect of which it shall in good faith be prosecuting an appeal
or proceedings for review and in respect of which there shall have been
secured a subsisting stay of execution pending such appeal or proceedings;
provided that the aggregate amount of all cash and the Fair Market Value of
all other property subject to such Encumbrances does not exceed $100,000 at
any time outstanding.
SECTION 7.2. Consolidation, Merger, Purchase or Sale of Assets, etc.
Wind up, liquidate or dissolve its affairs or enter into any partnership, joint
venture, or transaction of merger or consolidation, convey, sell or otherwise
dispose of all or any part of their property or assets, or enter into any
sale-leaseback transactions, or purchase or otherwise acquire (in one or a
series of related transactions) any part of the property or assets of any Person
(or agree to do any of the foregoing at any future time), except that:
(i) Capital Expenditures by it shall be permitted to the extent not
in violation of Section 7.7;
(ii) the Company and its Subsidiaries may enter into or complete the
transaction contemplated by the Binding Letter of Intent by means of a
merger of Interpacific Oil S.A.C, into Pure Biofuels del Peru S.A.C., in
accordance with the Peruvian General Corporations Act (Ley General de
Sociedades);
(iii) Investments may be made to the extent permitted by Section 7.5;
and
(iv) it may liquidate or otherwise dispose of Cash Equivalents in
the ordinary course of business, in each case for cash at Fair Market
Value.
SECTION 7.3. Dividends. Authorize, declare or pay any Dividends with
respect to it, except Dividends payable to the Company or its Subsidiaries.
SECTION 7.4. Indebtedness. Contract, create, incur, assume or suffer
to exist any Indebtedness, except:
(a) The Notes and Indebtedness incurred pursuant to the Loan
Documents;
(b) Indebtedness incurred pursuant to the Working Capital
Facility in an aggregate principal amount at any time outstanding not to
exceed $5,000,000;
(c) Indebtedness in the ordinary course of its business (including,
without limitation, Indebtedness such as bonds, guarantees and letters of
credit, which may be
33
deemed to exist in connection with agreements providing for
indemnification, purchase price adjustments and similar obligations in
connection with the disposition of assets in accordance with the
requirements of this Agreement, so long as any such obligations are those
of the Person making the respective acquisition or sale, and are not
guaranteed by any other Person); and
(d) Existing Indebtedness.
SECTION 7.5. Advances, Investments and Loan. Directly or indirectly,
lend money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other Equity Interest in, or make
any capital contribution to, any other Person, or purchase or own a futures
contract or otherwise become liable for the purchase or sale of currency or
other commodities at a future date in the nature of a futures contract (each of
the foregoing an "Investment" and, collectively, "Investments"), except that the
following shall be permitted:
(a) it may acquire and hold accounts receivable owing to it, if
created or acquired in the ordinary course of its business and payable or
dischargeable in accordance with its customary trade terms;
(b) it may acquire and hold cash and Cash Equivalents;
(c) Contingent Obligations permitted by Section 7.4, to the extent
constituting Investments; and
(d) the Company may make Investments in its Subsidiaries.
SECTION 7.6. Transactions with Affiliates. Enter into any transaction
or series of related transactions with any Affiliate, other than in the ordinary
course of business and on terms and conditions substantially as favorable to it
as would reasonably be obtained by it at that time in a comparable arm's-length
transaction with a Person other than an Affiliate, except that the following in
any event shall be permitted:
(a) Dividends may be paid by it to the extent provided in
Section 7.3; and
(b) Loans may be made and other transactions may be entered into by
it to the extent permitted by Sections 7.2, 7.4 and 7.5.
SECTION 7.7. Capital Expenditures. Make any Capital Expenditures
except (a) Capital Expenditures set forth in the applicable Annual Business Plan
and (b) Capital Expenditures made with the amount of Net Insurance Proceeds
received by it from any Recovery Event so long as such Net Insurance Proceeds
are used to replace or restore any properties or assets in respect of which such
Net Insurance Proceeds were paid.
SECTION 7.8. Modifications of Certificate of Incorporation, By-Laws
and Certain Other Agreements; Limitations on Voluntary Payments, etc. (a)
Amend, modify or
34
change its certificate or articles of incorporation (including, without
limitation, by the filing or modification of any certificate or articles of
designation), certificate of formation, limited liability company agreement or
by-laws (or the equivalent organizational documents), as applicable, or any
agreement entered into by it with respect to their Capital Stock (including any
stockholders agreement), or enter into any new agreement with respect to their
Capital Stock, unless such amendment, modification, change or other action
contemplated by this clause (a) could not reasonably be expected to be adverse
to the interests of Purchaser and the terms of any such amendment, modification,
change or other action will not violate any of the other provisions of this
Agreement or any other Transaction Document; or
(b) amend, modify or change any provision of any Management
Agreement unless such amendment, modification or change could not reasonably be
expected to be adverse to the interests of Purchaser (although no amendment,
modification or change may be made to any monetary term thereof); or
(c) amend, modify or change any provision of any material agreement
set forth on Schedule 8.23 to the Loan Agreement unless such amendment,
modification or change could not reasonably be expected to be adverse to the
interests of Plainfield (although no amendment, modification or change may be
made to any monetary term thereof).
SECTION 7.9. Limitation on Issuance of Capital Stock. (a) Issue any
Capital Stock or securities convertible into Capital Stock (other than issuances
of Excluded Stock) or (b) create, or make any amendments to, any equity
incentive plan of the Company or any of its Subsidiaries other than to the 2006
Stock Option and Award Plan as amended and restated as the Pure Biofuels Corp.
Stock Incentive Plan as described in the definitive proxy statement filed with
the Commission on July 2, 2007.
SECTION 7.10. Business; etc.. Engage, directly or indirectly, in any
business other than the businesses engaged in by it as of the Closing Date and
reasonable extensions thereof and businesses ancillary or complimentary thereto.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.1. Conditions to the Company's Obligations. The
issuance of the Securities by the Company shall be subject to the satisfaction,
at or prior to the Closing, of the following conditions:
(a) The representations and warranties of Purchaser contained in
this Agreement which are qualified by any "materiality", "material adverse
effect" or any similar qualifier shall be true and correct in all respects
and the representations and warranties of Purchaser which are not so
qualified shall be true and correct in all material respect, in each case
on and as of the Closing Date.
(b) Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this
35
Agreement to be performed and complied with by Purchaser at or prior to the
Closing Date.
(c) No provision of any Applicable Law, injunction, order or decree
of any Governmental Authority shall be in effect which has the effect of
making the transactions contemplated hereby illegal or shall otherwise
restrain or prohibit the consummation of the transactions contemplated
hereby.
SECTION 8.2. Conditions to Purchaser's Obligations. The obligations
of Purchaser to purchase the Securities contemplated by this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of the following
conditions:
(a) On the Closing Date and also after giving effect to the sale of
the Notes on such date (a) there shall exist no Default or Event of Default and
(b) all representations and warranties contained herein and in the other
Transaction Documents shall be true and correct in all material respects with
the same effect as though such representations and warranties had been made on
the Closing Date (it being understood and agreed that any representation or
warranty which by its terms is made as of a specified date shall be required to
be true and correct in all material respects only as of such specified date).
(b) Purchaser shall have received a certificate, dated the Closing
Date and signed on behalf of the Company by an Authorized Representative,
certifying on behalf of the Company that all of the conditions in Sections
8.2(a), (f), (g) and (h) have been satisfied on such date.
(c) Purchaser shall have received (from each of DLA Piper US LLP
and ▇▇▇▇▇ and ▇▇▇▇ LLP, special counsel to the Company, an opinion addressed to
Purchaser and dated the Closing Date covering such matters incident to the
transactions contemplated herein as the Purchaser may reasonably request.
(d) Purchaser shall have received a certificate from the Company,
dated the Closing Date, signed by an Authorized Representative, and attested to
by another Authorized Representative, in the form of Exhibit F with appropriate
insertions, together with copies of the articles of incorporation and by-laws of
the Company and the resolutions of the Company referred to in such certificate,
and each of the foregoing shall be in form and substance reasonably acceptable
to Purchaser.
(e) On the Closing Date, all corporate and legal proceedings and
all instruments and agreements in connection with the transactions contemplated
by this Agreement and the other Transaction Documents shall be reasonably
satisfactory in form and substance to Purchaser, and Purchaser shall have
received all information and copies of all documents and papers, including
records of corporate proceedings, governmental approvals, good standing
certificates and bring-down telegrams or facsimiles, if any, which Purchaser
reasonably may have requested in connection therewith, such documents and papers
where appropriate to be certified by proper corporate officials or Governmental
Authorities.
(f) Nothing shall have occurred since June 30, 2007 (and Purchaser
shall have not have become aware of any facts or conditions not previously
known) which Purchaser shall
36
determine has had, or could reasonably be expected to have, (i) a Material
Adverse Effect or (ii) a material adverse effect on the Transactions.
(g) All necessary governmental and third party approvals and/or
consents in connection with the Transactions shall have been obtained and remain
in effect, and all applicable waiting periods with respect thereto shall have
expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transactions. On the Closing Date, there shall not exist any
judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the Transactions.
(h) Except as set forth in Schedule 5.07 to the Loan Agreement, on
the Closing Date, there shall be no actions, suits or proceedings pending or
threatened (a) with respect to the Transactions, this Agreement or any other
Transaction Document, or (b) which Purchaser shall determine has had, or could
reasonably be expected to have, a Material Adverse Effect.
(i) The Company shall have executed and delivered the Loan
Agreement and all conditions precedent to the effectiveness of the Loan
Agreement and the initial borrowings thereunder shall have been satisfied and
the initial borrowings shall have been made.
(j) The Company and the stockholders party thereto shall have
executed and delivered the Stockholders Agreement and the Voting Agreement.
(k) The Company shall have executed and delivered the Registration
Rights Agreement.
(l) The bylaws of the Company shall have been amended in form and
substance satisfactory to the Purchaser.
(m) Purchaser shall have received certificates representing the
Issue Date Common Stock, the Notes and the Warrants purchased by Purchaser.
(n) Purchaser shall have received such other documents and evidence
as are customary for transactions of this type or as Purchaser may reasonably
request in order to evidence the satisfaction of the other conditions set forth
above.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Events of Default.
One or more of the following events shall constitute an "Event of
Default"
37
(a) The Company shall default in the payment when due of any
principal of any Note, or (b) default, and such default shall continue
unremedied for three or more Business Days, in the payment when due of any
interest on any Note; or
(b) Any representation, warranty or statement made or deemed made
by the Company herein or in any other Transaction Document or in any certificate
delivered to Purchaser or any Holder pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
(c) The Company shall (a) default in the due performance or
observance by it of any term, covenant or agreement contained in Sections 6.2
and 6.8(g)(i) or Article X or (b) default in the due performance or observance
by it of any other term, covenant or agreement contained in this Agreement
(other than those set forth in Sections 9.1(a) and (b)) and such default shall
continue unremedied for a period of 30 days; or
(d) (i) The Company or any of its Subsidiaries shall (A) default in
any payment of any Indebtedness (other than the Notes) beyond the period of
grace, if any, provided in an instrument or agreement under which such
Indebtedness was created or (B) default in the observance or performance of any
agreement or condition relating to any Indebtedness (other than the Notes) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause (determined without regard to whether any notice is required),
any such Indebtedness to become due prior to its stated maturity, or (ii) any
Indebtedness (other than the Notes) of the Company or any its Subsidiaries shall
be declared to be (or shall become) due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment, prior to the stated
maturity thereof, provided that it shall not be a Default or an Event of Default
under this Section 9.1(d) unless the aggregate principal amount of all
Indebtedness as described in preceding clauses (i) and (ii) is at least
$100,000; or
(e) The Company or any of its Subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against the Company
or any of its Subsidiaries, and the petition is not controverted within 10 days,
or is not dismissed within 60 days after the filing thereof; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Company or any of its Subsidiaries, to
operate all or any substantial portion of the business of the Company or any of
its Subsidiaries, or the Company or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
of its Subsidiaries, or there is commenced against the Company or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days after the filing thereof, or the Company or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any of its
Subsidiaries makes a general assignment for the benefit of creditors; or any
action is taken by the Company or any of
38
its Subsidiaries for the purpose of effecting any of the foregoing; or any
Subsidiary of the Company organized under the laws of Peru (a "Peruvian
Subsidiary") shall commence a voluntary insolvency, liquidation, dissolution or
reorganization proceeding under the bankruptcy laws of Peru (Ley General
Concursal) or the General Corporations Act of Peru (Ley General de Sociedades)
as now hereafter in effect; or a proceeding or case shall be commenced against
any Peruvian Subsidiary, without application or consent, seeking (i) its
reorganization, liquidation, dissolution, arrangement or warranty, (ii) the
appointment of a receiver, custodian, trustee, examiner, liquidator or the like
of it or of all or any substantial part of its property or (iii) similar relief
in respect of it under any law relating to bankruptcy, insolvency,
reorganization, winding up, or composition or adjustment of debts, and such
proceeding shall continue undismissed, or in order, judgment or decree approving
or ordering any of the foregoing shall be entered and continued unstayed and in
effect, for a period of 60 or more days, or a declaration of bankruptcy or
suspension of payment shall be entered against any Peruvian Subsidiary under the
bankruptcy laws of Peru (Ley General Concursal) or the General Corporations Act
of Peru (Ley General de Sociedades) as now or hereafter in effect; or
(f) Any of the Transaction Documents shall cease to be in full
force and effect, or shall cease to give Purchaser and the Holders the rights,
powers and privileges purported to be created thereby, or the Company shall
default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to any such Transaction
Document and such default shall continue beyond the period of grace, if any,
specifically applicable thereto pursuant to the terms of such Transaction
Document; or
(g) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate for such Person a
liability (to the extent not paid or not covered by a reputable and solvent
insurance company) and such judgments and decrees either shall be final and
non-appealable or shall not be vacated, discharged or stayed or bonded pending
appeal for any period of 30 consecutive days, and the aggregate amount of all
such judgments equals or exceeds $100,000; or
(h) The Amendment Date shall not have occurred on or prior to
November 30, 2007; provided, however, that such date shall be extended until
January 31, 2008 in the event that the Commission reviews the preliminary proxy
statement filed in connection with the stockholders meeting contemplated by the
Voting Agreement.
ARTICLE X
REMEDIES ON DEFAULT, ETC.
SECTION 10.1. Acceleration. (a) If an Event of Default with respect to
the Company or any Subsidiary described in Section 9.1(e) has occurred, all the
Notes then outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any Holder or Holders of more than 50% in principal amount of the Notes at
the time outstanding may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
39
(c) If any Event of Default described in Section 9.1(a) has
occurred and is continuing, any Holder or Holders of Notes at the time
outstanding affected by such Events of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes
held by it or them to be immediately due and payable.
(d) Upon any Notes becoming due and payable under this Section,
whether automatically or by declaration, such Notes will forthwith mature
and the entire unpaid principal amount of such Notes, plus (i) all accrued
and unpaid interest thereon, and (ii) all fees, expense reimbursements
obligations and other obligations of the Company accrued hereunder and
under the Notes and the other Note Documents, shall all be immediately due
and payable, in each and every case without presentment, demand, protest or
further notice, all of which are hereby waived.
(e) Subject to applicable law, all proceeds received from the
Company after maturity of the Notes, whether by acceleration or otherwise,
shall be applied:
(i) first, pro rata to payment or reimbursement of fees
expenses and indemnities payable to the Purchaser;
(ii) second, pro rata to payment of principal amount
outstanding on the Notes;
(iii) third, pro rata to any other obligations outstanding
under the Note Documents; and
(iv) fourth, any excess, after all obligations under the
Note Documents shall have been indefeasibly paid in
full in cash, shall be paid to the Company or as
otherwise required by law.
SECTION 10.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 10.1, the Holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such Holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
SECTION 10.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 10.1, the
Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, by written notice to the Company, may rescind and annul
any such declaration and its consequences if (a) the Company has paid all
overdue interest on the Notes, all principal of any Notes that is due and
payable and is unpaid other than by reason of such declaration, and all
interest on such overdue principal and (to the extent permitted by
applicable law) overdue interest in respect of the Notes, (b) all Events of
Default and Defaults, other than non-payment of amounts that have become
due solely by reason of such declaration, have been cured or
40
have been waived pursuant to Section 11.1, and (c) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to
the Notes. No rescission and annulment under this Section 10.3 will extend
to or affect any subsequent Event of Default or Default or impair any right
consequent thereon.
SECTION 10.4. No Waivers or Election of Remedies, Expenses, etc. No
course of dealing and no delay on the part of any Holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such Holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any Holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by
statute or otherwise. The Company will pay to the Purchaser on demand such
further amount as shall be sufficient to cover all reasonable costs and
expenses of the Holders incurred in any enforcement or collection under
this Section 10, including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
ARTICLE XI
AMENDMENT AND WAIVER.
SECTION 11.1. Requirements. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be
waived (either retroactively or prospectively), with (and only with) the
written consent of the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of Article II, III, IV, V,
VIII and Section 13.13 hereof, or any defined term (as it is used therein),
will be effective as to Purchaser unless consented to by Purchaser in
writing, and (b) no such amendment or waiver may, without the written
consent of Holder of each Note at the time outstanding affected thereby,
(i) subject to the provisions of Article X relating to acceleration or
rescission, change the amount or time of any prepayment or payment of
principal of, or reduce the rate or change the time of payment or method of
computation of interest on the Notes, (ii) change the percentage of the
principal amount of the Notes the Holders of which are required to consent
to any such amendment or waiver or (iii) amend any of Article III, X or XI
Section 9.1(a).
SECTION 11.2. Solicitation of Holders of Notes. (a) Solicitation. The
Company will provide each Holder of the Notes (irrespective of the amount
of Notes then owned by it) with sufficient information, sufficiently far in
advance of the date a decision is required, to enable such Holder to make
an informed and considered decision with respect to any proposed amendment,
waiver or consent in respect of any of the provisions hereof or of the
Notes. The Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of this
Section 11 to each Holder of outstanding Notes promptly following the date
on which it is executed and delivered by, or receives the consent or
approval of, the requisite Holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any Holder
of Notes as consideration for or as an
41
inducement to the entering into by any Holder of Notes or any waiver or
amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on
the same terms, ratably to each Holder of Notes then outstanding even if
such Holder did not consent to such waiver or amendment.
SECTION 11.3. Binding Effect, etc. Any amendment or waiver consented
to as provided in this Section 11 applies equally to Holders of Notes and
is binding upon them and upon each future Holder of any Note and upon the
Company without regard to whether such Note has been marked to indicate
such amendment or waiver. No such amendment or waiver will extend to or
affect any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent thereon. No
course of dealing between the Company, on the one hand, and the Holder of
any Note, on the other, nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any Holder of
such Note.
SECTION 11.4. Notes held by Company, etc. Solely for the purpose of
determining whether the Holders of the requisite percentage of the
aggregate principal amount of Notes then outstanding approved or consented
to any amendment, waiver or consent to be given under this Agreement or the
Notes, or have directed the taking of any action provided herein or in the
Notes to be taken upon the direction of the Holders of a specified
percentage of the aggregate principal amount of Notes then outstanding,
Notes directly or indirectly owned by the Company or any of the Company's
Affiliates shall be deemed not to be outstanding.
ARTICLE XII
REGISTRATION; EXCHANGE; SUBSTITUTION AND PAYMENT OF NOTES.
SECTION 12.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each Holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and Holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any Holder of a Note upon request therefor,
a complete and correct copy of the names and addresses of all registered Holders
of Notes.
SECTION 12.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered Holder of such Note or his attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
Holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such Holder may
42
request and shall be substantially in the form of Exhibit A. Each such new Note
shall be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $100,000, provided that if necessary to enable the registration of
transfer by a Holder of its entire holding of Notes, one Note may be in a
denomination of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 5.2
SECTION 12.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the Holder of such Note is, or
is a nominee for, the Purchaser or another Holder of a Note with a minimum net
worth of at least $10,000,000, such Person's own unsecured agreement of
indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
within ten (10) Business Days thereafter, the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Indemnification. The Company hereby agrees to: (i) after
the occurrence of an Event of Default, pay all reasonable out-of-pocket costs
and expenses of Purchaser in connection with the enforcement of this Agreement
and the other Transaction Documents and the documents and instruments referred
to herein and therein or in connection with any refinancing or restructuring of
the Notes in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings (including, in each case without limitation, the
reasonable fees and disbursements of counsel and consultants for Purchaser);
(ii) pay and hold Purchaser harmless from and against any and all present and
future stamp, excise and other similar documentary taxes with respect to the
foregoing matters and save the Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to Purchaser) to pay such taxes; and (iii) indemnify
Purchaser, and its officers, directors, employees, representatives, agents,
affiliates, trustees and investment advisors from and hold each of them harmless
against any and all liabilities, obligations (including removal or remedial
actions), losses, damages, penalties, claims, actions, judgments, suits, costs,
expenses and disbursements (including reasonable attorneys' and consultants'
fees and disbursements) incurred by, imposed on or assessed against any of them
as a result of, or arising out of, or in any way related to, or by reason of,
(x) any investigation,
43
litigation or other proceeding (whether or not Purchaser is a party thereto and
whether or not such investigation, litigation or other proceeding is brought by
or on behalf of the Company) related to the entering into and/or performance of
this Agreement or any other Transaction Document or the use of the proceeds of
from the sale of the Notes or the consummation of the Transactions or the
exercise of any of their rights or remedies provided herein or in the other
Transaction Documents, (y) the actual or alleged presence of Hazardous Materials
in the air, surface water or groundwater or on the surface or subsurface of any
Real Property at any time owned, leased or operated by the Company or any of its
Subsidiaries, the generation, storage, transportation, handling or disposal of
Hazardous Materials by the Company or any of its Subsidiaries at any location,
whether or not owned, leased or operated by the Company or any of its
Subsidiaries, the non-compliance by the Company or any of its Subsidiaries with
any Environmental Law (including applicable permits thereunder) applicable to
any Real Property, or any Environmental Claim asserted against the Company or
any of its Subsidiaries, or any Real Property at any time owned, leased or
operated by the Company or any of its Subsidiaries or (z) claims asserted or
alleged by any broker, consultant or other advisor of any Credit Party,
including, in each case, without limitation, the reasonable fees and
disbursements of counsel and other consultants incurred in connection with any
such investigation, litigation or other proceeding (but excluding any losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified (as
determined by a court of competent jurisdiction in a final and non-appealable
decision)). To the extent that the undertaking to indemnify, pay or hold
harmless Purchaser set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Company shall make the
maximum contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
SECTION 13.2. Notices. All notices, demands, requests, consents,
approvals or other communications (collectively, "Notices") required or
permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or to such
other address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the next business day
following delivery of such notice to a reputable air courier service. Notices
shall be delivered as follows:
If to the Company: Pure Biofuels Corp.
▇▇. ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇▇-▇▇▇-▇▇▇▇
44
with a copy to: ARC Investment Partners, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
And: DLA Piper US LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
if to Purchaser: Plainfield Peru I LLC
Plainfield Peru II LLC
c/o Plainfield Asset Management LLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: White & Case LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
SECTION 13.3. Governing Law; Submission to Jurisdictionl Venue; Waiver
of Jury Trial. (a) THIS AGREEMENT AND THE OTHER NOTE DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES). ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT, THE
COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
PERSONAL JURISDICTION OVER IT, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT
BROUGHT IN
45
ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION
OVER IT. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
IT AT ITS ADDRESS SET FORTH SECTION 13.2, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO
SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREE NOT TO PLEAD OR
CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER NOTE
DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE PURCHASER OR THE HOLDER OF ANY NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
(b) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
NOTE DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER NOTE DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 13.4. Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.
SECTION 13.5. Exhibits and Schedules. Each of the exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
SECTION 13.6. Expenses. The Company shall reimburse the Purchaser for
all reasonable disbursements and out-of-pocket expenses incurred by the
Purchaser in connection with the transactions contemplated hereby, including,
without limitation, the fees and disbursements of White & Case LLP, counsel to
the Purchaser, Estudio Echecopar, Peruvian counsel to the Purchaser, and ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Nevada counsel to the Purchaser. On the Closing Date,
Purchaser shall provide the Company with documentation reasonably satisfactory
to the Company for such disbursements and out-of-pocket expenses.
46
SECTION 13.7. Press Releases and Public Announcements. All public
announcements or disclosures relating to this Agreement and the transactions
contemplated hereby shall be made only if mutually agreed upon by the Company
and Purchaser, except to the extent such disclosure is, in the opinion of
counsel, required by or advisable under Applicable Law, provided that (a) any
such required disclosure shall only be made, to the extent consistent with
Applicable Law and (b) no such announcement or disclosure (except as required by
Applicable Law) shall identify Purchaser without Purchaser's prior consent.
SECTION 13.8. Assignment; No Third Party Beneficiaries. This Agreement
and the rights, duties and obligations hereunder may not be assigned or
delegated by the Company without the prior written consent of Purchaser, and may
not be assigned or delegated by Purchaser without the Company's prior written
consent except that Purchaser may assign any or all of its rights and
obligations under this Agreement to any Purchaser Affiliate, provided Purchaser
notifies the Company in writing, and Purchaser may transfer the Notes as
provided in Article XII. Any attempted assignment or delegation of rights,
duties or obligations hereunder other than as contemplated in the preceding
sentence shall be void and of no effect. This Agreement and the provisions
hereof shall be binding upon and shall inure to the benefit of each of the
parties and their respective successors and permitted assigns. This Agreement is
not intended to confer any rights or benefits on any Persons other than the
parties hereto and their permitted successors and assigns (including any
subsequent Holder of a Note), except as expressly set forth in Section 13.1 or
this Section 13.8.
SECTION 13.9. Severability. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 13.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. Delivery
of an executed counterpart hereof by facsimile or electronic transmission shall
be as effective as delivery of any original executed counterpart hereof.
SECTION 13.11. Further Assurances. Each party hereto, upon the request
of any other party hereto, shall do all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may be
necessary or desirable to carry out the transactions contemplated hereby,
including, in the case of the Company, such acts, instruments and documents as
may be necessary or desirable to convey and transfer to Purchaser the Notes to
be purchased by it hereunder.
SECTION 13.12. No Waiver; Remedies Cumulative. No failure or delay on
the part of the Purchaser or any Holder in exercising any right, power or
privilege hereunder or under any other Note Document and no course of dealing
between the Company and the Purchaser or any Holder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Note Document preclude any other
47
or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights, powers and remedies herein or in
any other Note Document expressly provided are cumulative and not exclusive of
any rights, powers or remedies which the Purchaser or any Holder would otherwise
have. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Purchaser or any
Holder to any other or further action in any circumstances without notice or
demand.
SECTION 13.13. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement may be inadequate, and that as
between the Company and Purchaser any party by whom this Agreement is
enforceable shall be entitled to specific performance in addition to any other
appropriate relief or remedy. Such party may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement as between the Company and Purchaser, or prevent any violation hereof,
and, to the extent permitted by applicable as between the Company and Purchaser
law, each party waives any objection to the imposition of such relief.
SECTION 13.14. Confidentiality. The Purchaser and each of the Holders
agrees that, without the prior consent of the Company, it will use its best
efforts not to disclose any information with respect to the Company that is
furnished pursuant to this Agreement, any other Note Document or any documents
contemplated by or referred to herein or therein and which is designated by the
Company to the Holders in writing as confidential or as to which it is otherwise
reasonably clear such information is not public, except that any Holder may
disclose any such information (a) to its employees, Affiliates, auditors and
counsel, advisors or to another Holder, (b) as has become generally available to
the public other than by a breach of this Section 13.14, (c) as may be required
or appropriate in any report, statement or testimony submitted to any municipal,
state or federal regulatory body having or claiming to have jurisdiction over
such Holder or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or the Office of the Comptroller of the Currency, the NAIC, the SVO
or similar organizations (whether in the United States or elsewhere) or their
successors, (d) as may be required or appropriate in response to any summons or
subpoena or any law, order, regulation or ruling applicable to such Holder, (e)
to any prospective Holder in connection with any contemplated transfer pursuant
to Article XII; provided that such prospective Holder shall have been made aware
of this Section 13.14 and shall have agreed to be bound by its provisions as if
it were a party to this Agreement, (f) to Gold Sheets and other similar bank
trade publications; such information to consist of deal terms and other
information regarding the this Agreement customarily found in such publications,
(g) in connection with any suit, action or proceeding for the purpose of
defending itself, reducing its liability, or protecting or exercising any of its
claims, rights, remedies or interests under or in connection with the Note
Documents, (h) to a Person that is an investor or prospective investor in the
Holder or any Affiliate thereto, that, in each case, agrees that its access to
information regarding the Company and the Notes is solely for purposes of
evaluating an investment in such entity, (i) to a Person that is an investor or
prospective investor in a Securitization (as defined below) that agrees that its
access to information regarding the Company and the Notes is solely for purposes
of evaluating an investment in such Securitization, (j) to a Person that is a
trustee, collateral manager, servicer, noteholder or secured party in a
Securitization in connection with the administration, servicing and reporting on
the assets
48
serving as collateral for such Securitization, or (k) to a nationally recognized
rating agency that requires access to information regarding the Company, the
Notes and the Note Documents in connection with ratings issued with respect to a
Securitization. For purposes of this Section, "Securitization" means a public or
private offering by a Holder or any of its Affiliates or their respective
successors and assigns, of securities which represent an interest in, or which
are collateralized, in whole or in part, by the Notes or the Note Documents.
[SIGNATURE PAGES TO FOLLOW]
49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PURE BIOFUELS CORP.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
Signature Page to Purchase Agreement
Plainfield Peru I LLC
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President
Plainfield Peru II LLC
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President
Signature Page to Purchase Agreement
EXHIBIT A
FORM OF 10%/12% SENIOR CONVERTIBLE PIK ELECTION NOTE
$[__________] New York, New York
[ ], 20__
FOR VALUE RECEIVED, PURE BIOFUELS CORP., a corporation incorporated
under the laws of the state of Nevada (the "Company"), hereby promises to pay to
______________________ or its registered assigns (the "Holder"), in lawful money
of the United States of America in immediately available funds, at the office of
the Holder located at __________________________ on [ ], 2012
the principal sum of _____________________________ ($[__________]).
The Company promises to pay to the Holder interest on the principal
amount of this Note at a rate per annum set forth below from the date of
issuance until maturity. The Company will pay interest on this Note
semi-annually in arrears on _________ and __________ of each year, commencing on
_____________, or if any such day is not a Business Day, on the next succeeding
Business Day (each, an "Interest Payment Date"). Interest on this Note will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including ______________. The Company will pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, and interest on
overdue installments of interest, to the extent lawful, from time to time on
demand at a rate per annum that is 2% in excess of the rate otherwise payable.
If an Event of Default has occurred and is continuing, interest on this Note
shall accrue at a rate per annum that is 2% in excess of the rate otherwise
applicable. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
The Company may, at its option, elect to pay interest on this Note (i)
entirely in cash ("Cash Interest") or (ii) entirely by issuing additional Notes
("PIK Interest") . The first payment of interest on this Note shall be in PIK
Interest. Thereafter, the Company must elect the form of interest payment with
respect to each interest period by delivering a notice to the Holder prior to
the beginning of each interest period. In the absence of such an election for
any interest period, interest on this Note will be payable in the form of the
interest payment for the prior interest period.
Cash Interest on this Note will accrue at the rate of 10% per annum.
PIK Interest on this Note will accrue at the rate of 12% per annum and be
payable by issuing additional Notes ("PIK Notes") in an aggregate principal
amount equal to the amount of PIK Interest for the applicable interest period
(rounded up to the nearest whole dollar) and the Company will issue and deliver
such PIK Notes to the Holder of this Note. Any PIK Notes will be dated as of the
applicable interest payment date and will bear interest from and after such
date. All PIK Notes issued pursuant to a PIK Payment will mature on September [
], 2012 and will be governed by, and subject to the terms, provisions and
conditions of, the Purchase Agreement referred to below and shall have the same
rights and benefits as the Notes issued on the Issue Date.
Exh. A
The Company hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
1. Purchase Agreement
This Note is one of a series of Senior Convertible PIK Election Notes
issued pursuant to a Securities Purchase Agreement, dated as of September 12,
2007 (as from time to time amended, the "Purchase Agreement"), between the
Company and the purchaser named therein and is entitled to the benefits thereof.
Each holder of this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 13.14 of the
Purchase Agreement and (ii) to have made the representation set forth in Section
5.2 of the Purchase Agreement.
2. Optional Redemption
This Note is not subject to optional prepayment or redemption.
3. Registration and Transfer
This Note is a registered Note and, as provided in the Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
4. Conversion
The Holder may convert this Note into fully paid and nonassessable
shares of Common Stock of the Company at any time after the Amendment Date (as
defined in the Purchase Agreement) and on or prior to September [ ], 2012. The
initial conversion price is $0.60 per share, subject to adjustment as provided
in the Purchase Agreement. To determine the number of shares issuable upon
conversion of this Note, divide the principal amount and accrued but unpaid
interest to be converted by the conversion price in effect on the conversion
date. In connection with the conversion of Notes, no fractions of shares of
Common Stock shall be issued, but the Company shall, with respect to any
fractional interest: (i) pay cash with respect to the Market Price of such
fractional share; or (ii) round up to the next whole share of Common Stock.
5. Events of Default
If an Event of Default, as defined in the Purchase Agreement, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price and with the effect provided
in the Purchase Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
PURE BIOFUELS CORP.
By:
-------------------
Name:
Title:
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
Your Signature:
--------------------------------------------------------------------------------
(Sign exactly as your name appears on the Note)
Date: ______________________________
CONVERSION NOTICE
To convert this Note into Common Stock of the Company, check the box: [ ]
To convert only part of this Security, state the principal amount to be
converted: $____________________.
If you want the stock certificate made out in another person's name, fill in the
form below:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
Your Signature:
--------------------------------------------------------------------------------
(Sign exactly as your name appears on the Note)
Date: ______________________________
EXHIBIT B
[FORM OF REGISTRATION RIGHTS AGREEMENT]
Exh. B
EXHIBIT C
[FORM OF WARRANT]
Exh. C
EXHIBIT D
[FORM OF OPINION OF DLA PIPER, SPECIAL COUNSEL TO THE COMPANY]
Exh. D
EXHIBIT E
[FORM OF OPINION OF NEVADA COUNSEL TO THE COMPANY]
Exh. E
EXHIBIT F
[FORM OF CLOSING CERTIFICATE]