[logo.jpg]
Colombia Clean Power & Fuels, inc

 
December 3, 2010
 
Steelhead Partners, LLC
333 – 108th Avenue NE
Suite 2010
Bellevue, WA  98004
Attn:   J.D. Kritser
 
Dear J.D.:
 
This letter (the “Letter”) supplements the Subscription Agreement dated December
3, 2010 (the “Agreement”) by and between Colombia Clean Power & Fuels, Inc. (the
“Issuer”) and Steelhead Navigator Master, L.P. (“Steelhead”), subject to the
terms and conditions set forth herein.  Capitalized terms herein shall have the
same meaning as the Agreement.
 
1.      Right of First Refusal.  The Issuer hereby grants to Steelhead, together
with its affiliates and other funds or entities under common management, the
right of first refusal to purchase up to (i) 50% of any offering of New
Securities (defined herein) comprising Preferred Securities or Debt Securities
(each as defined herein) and (ii) 25% of any offering of New Securities
consisting of Common Stock (defined herein), subject to the limitations, terms
and conditions set forth herein.
 
a.      Subject to the limitations set forth in Section 1.b., “New Securities”
shall mean any Preferred Securities, Debt Securities or Common Stock (each as
defined herein) issued by the Issuer after the date of the Agreement.
 
(i)         “Preferred Securities” shall mean any preferred stock of the Issuer,
and rights, convertible securities, options or warrants to purchase such
preferred stock;
 
(ii)        “Debt Securities” shall mean any convertible or non-convertible
indebtedness of the Issuer, whether accompanied by warrants or otherwise, and
rights, convertible securities, options or warrants to purchase such
indebtedness; and
 
(iii)        “Common Stock” shall mean any shares of common stock of the Issuer,
and rights, convertible securities, options or warrants to purchase such Common
Stock.
 
b.      The term “New Securities” shall not include:
 
(i)         the Notes and the Investor Warrants;
 
(ii)        the Common Stock or the Preferred Stock (as such term is defined in
the Notes) issuable upon conversion of the Notes or exercise of the Investor
Warrants, as applicable;
 
(iii)       securities issued or issuable to officers, employees, directors,
consultants, placement agents, and other service providers of the Issuer (or any
subsidiary) pursuant to stock grants, option plans, purchase plans, agreements
or other employee stock incentive programs or arrangements approved by the Board
of Directors of the Issuer;

 
 

--------------------------------------------------------------------------------

 
 
(iv)         securities issued pursuant to the conversion or exercise of any
convertible or exercisable securities outstanding as of the date of this
Agreement;
 
(v)         securities offered pursuant to a bona fide, firmly underwritten
public offering pursuant to a registration statement filed under the Securities
Act;
 
(vi)        securities issued or issuable pursuant to the acquisition of another
corporation by the Issuer by merger, purchase of substantially all of the assets
or other reorganization or to a joint venture agreement, provided, that such
issuances are approved by the Board of Directors of the Issuer;
 
(vii)         securities issued or issuable to banks, equipment lessors or other
financial lending institutions pursuant to a commercial leasing or debt
financing transaction approved by the Board of Directors of the Issuer; and
 
(viii)         any right, option or warrant to acquire any security convertible
into the securities excluded from the definition of New Securities pursuant to
subsections (i) through (vii) above.
 
c.      If the Issuer proposes to issue New Securities, it shall give the
Subscriber written notice of its intention, describing the type of New
Securities, their price and the general terms upon which the Issuer proposes to
issue the New Securities.  The Subscriber shall have fifteen (15) days after any
such notice is mailed or delivered to agree to purchase up to the applicable
percentage of such New Securities for the price and upon the terms specified in
the notice by giving written notice to the Issuer and stating therein the
quantity of New Securities to be purchased.
 
d.      If the Subscriber fails to exercise fully the right of first refusal
within such fifteen (15) day period (the “Election Period”), the Issuer shall
have one hundred and twenty (120) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within one hundred and twenty (120) days from the date of
such agreement) to sell that portion of the New Securities with respect to which
the Subscriber’s right of first refusal option set forth herein was not
exercised, at a price and upon terms no more favorable to the purchasers thereof
than specified in the Issuer’s notice delivered pursuant to this Letter.  If the
Issuer has not sold within such one hundred and twenty (120) day period
following the Election Period, or such one hundred and twenty (120) day period
following the date of such agreement, the Issuer shall not thereafter issue or
sell any New Securities without again offering such securities to the Subscriber
as provided in this Letter.
 
e.      The Right of First Refusal granted herein shall expire on the earlier
of: (i) the final closing of an offering of New Securities with minimum gross
proceeds of ten million dollars ($10,000,000), or (ii) the second anniversary of
the date of the Agreement.

 
 

--------------------------------------------------------------------------------

 
 
Page 3 of 3
 
If the foregoing is in accordance with your understanding, please sign two
copies and return one to me, whereupon this letter shall constitute a binding
agreement between the Issuer and Steelhead.
 

 
Sincerely yours,
     
COLOMBIA CLEAN POWER & FUELS, INC.
     
By:
/s/ Edward P. Mooney
 
Name: Edward P. Mooney
 
Title:   Chief Executive Officer

Confirmed and agreed to this 3rd day of December, 2010

STEELHEAD NAVIGATOR MASTER, L.P.

By Its General Partner:
STEELHEAD OFFSHORE PARTNERS, LLC

By Its Sole Member:
STEELHEAD PARTNERS, LLC

By:
/s/ J. Michael Johnson
 
Name: J. Michael Johnson
 
Title:   Managing Member, Steelhead Partners, LLC
 

 
 

--------------------------------------------------------------------------------