Document:

Unassociated Document

    Exhibit
      10.1

    

    

    SECURITIES
      PURCHASE AGREEMENT

    

    THIS SECURITIES
      PURCHASE AGREEMENT
      (this
“Agreement”),
      dated
      as of April 19, 2007, by and among PURE
      BIOFUELS CORP.,
      a Nevada
      corporation (the “Company”),
      and
      the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
      collectively “Buyers”).

     

    WITNESSETH

    

    WHEREAS,
      the
      Company and the Buyer(s) are executing and delivering this Agreement in reliance
      upon an exemption from securities registration pursuant to Section 4(2) and/or
      Rule 506 of Regulation D (“Regulation
      D”)
      as
      promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
      under
      the Securities Act of 1933, as amended (the “Securities
      Act”);

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Buyer(s), as provided herein,
      and the Buyer(s) shall purchase (i) up to Three Million Dollars ($3,000,000)
      of
      secured convertible debentures in the form attached hereto as “Exhibit
      A”
(the
      “Convertible
      Debentures”),
      which
      shall be convertible into shares of the Company’s common stock, par value $0.001
      (the “Common
      Stock”)
      (as
      converted, the “Conversion
      Shares”),
      and
      (ii) warrants substantially in the form attached hereto as “Exhibit
      B”
(the
      “Warrants”),
      to
      acquire up to that number of additional shares of Common Stock set forth
      opposite such Buyer’s name in column (5) of the Schedule I (as exercised, the
“Warrant
      Shares”)
      for a
      total purchase price of up to Three Million Dollars ($3,000,000), (the
“Purchase
      Price”)
      in the
      respective amounts set forth opposite each Buyer(s) name on Schedule I (the
      “Subscription
      Amount”);
      

     

    WHEREAS,
      contemporaneously with the execution and delivery of this Agreement, the parties
      hereto are executing and delivering a Registration Rights Agreement (the
“Registration
      Rights Agreement”)
      pursuant to which the Company has agreed to provide certain registration rights
      under the Securities Act and the rules and regulations promulgated thereunder,
      and applicable state securities laws; 

     

    WHEREAS,
      the
      Convertible Debentures are secured by (i) a
      security interest in all of the assets of the Company and in all of the capital
      stock of the Company's subsidiaries owned by the Company as evidenced by the
      security agreement of even date herewith (the “Security
      Agreement”),
      (ii)
      a guaranty by all the subsidiaries of the Company as evidenced by the guaranty
      agreement of even date herewith (the “Guaranty
      Agreement”),
      which
      guaranty shall be secured by a pledge of all the assets of each subsidiary
      pursuant to the Security Agreement and a mortgage in favor of the Buyers in
      all
      of the real property of the subsidiaries (the “Mortgage”),
      and
      (iii) certain shares of common stock owned by an officer of the Company (the
      “Pledged
      Shares”)
      as
      evidenced by the pledge of even date herewith (the “Pledge
      Agreement”)
      which
      Pledged Shares shall be held in escrow by U.S. Bank National Association (the
      “Escrow
      Agent”)
      in
      accordance with the escrow agreement of even date herewith. (the Pledge
      Agreement together with the Guaranty Agreement, the Mortgage, and the Security
      Agreement are collectively referred to herein as the “Security
      Documents”);
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    WHEREAS,
      the
      Convertible Debentures, the Conversion Shares, the Warrants, and the Warrants
      Shares collectively are referred to herein as the “Securities”).
      

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and other agreements contained in this
      Agreement the Company and the Buyer(s) hereby agree as follows:

     

    1.  PURCHASE
      AND SALE OF CONVERTIBLE DEBENTURES.

     

    (a)  Purchase
      of Convertible Debentures.
      The
      purchase, sale and issuance of the Convertible Debentures and Warrants shall
      take place at one or more closings (each of which is referred to in this
      Agreement as a “Closing”).
      Subject to the satisfaction (or waiver) of the terms and conditions of this
      Agreement, each Buyer agrees, severally and not jointly, to purchase at each
      Closing and the Company agrees to sell and issue to each Buyer, severally and
      not jointly, at each Closing, Convertible Debentures in amounts corresponding
      with the Subscription Amount set forth opposite each Buyer’s name on Schedule I
      hereto and the Warrants to acquire up that number of Warrant Shares as set
      forth
      opposite such Buyer’s name in column (5) on Schedule I . 

     

    (b)  Closing
      Dates.
      The
      Closing of the purchase and sale of the Convertible Debentures and Warrants
      shall take place at 10:00 a.m. Eastern Standard Time on the first (1st) business
      day following the date hereof, subject to notification of satisfaction of the
      conditions to the Closing set forth herein and in Sections 6 and 7 below (or
      such other date as is mutually agreed to by the Company and the Buyer(s)) (the
      “Closing
      Date”).
      The
      initial Closing (the “Initial
      Closing”)
      and
      each subsequent closing shall take place at the offices of Yorkville Advisors,
      LLC, 3700 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 (or such
      other place as is mutually agreed to by the Company and the Buyer(s)).

     

    (c)  Form
      of Payment.
      Subject
      to the satisfaction of the terms and conditions of this Agreement, on each
      Closing Date, (i) the Buyers shall deliver to the Company such aggregate
      proceeds for the Convertible Debentures and Warrants to be issued and sold
      to
      such Buyer at such Closing, minus the fees to be paid directly from the proceeds
      of such Closing as set forth herein, and (ii) the Company shall deliver to
      each Buyer, Convertible Debentures and Warrants which such Buyer is purchasing
      at such Closing in amounts indicated opposite such Buyer’s name on Schedule I,
      duly executed on behalf of the Company.

     

    2.  BUYER’S
      REPRESENTATIONS AND WARRANTIES.

     

    Each
      Buyer represents and warrants, severally and not jointly, that:

     

    (a)  Investment
      Purpose.
      Each
      Buyer is acquiring the Securities for its own account, not as a nominee or
      agent, for investment only and not with a view towards, or for resale in
      connection with, the public sale or distribution thereof, and each Buyer has
      no
      present intention of selling, granting any participation in, or otherwise
      distributing the same, except pursuant to sales registered or exempted under
      the
      Securities Act; provided, however, that by making the representations herein,
      such Buyer reserves the right to dispose of the Securities at any time in
      accordance with or pursuant to an effective registration statement covering
      such
      Securities or an available exemption under the Securities Act. Such Buyer does
      not presently have any agreement or understanding, directly or indirectly,
      with
      any Person to distribute any of the Securities. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Accredited
      Investor Status.
      Each
      Buyer is an “Accredited
      Investor”
as
      that
      term is defined in Rule 501(a)(3) of Regulation D and shall submit to the
      Company such further assurances of such status as may reasonably be requested
      by
      the Company.

     

    (c)  Reliance
      on Exemptions.
      Each
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    (d)  Information.
      Each
      Buyer and its advisors (and his or, its counsel), if any, have been furnished
      with all materials relating to the business, finances and operations of the
      Company and information he deemed material to making an informed investment
      decision regarding his purchase of the Securities, which have been requested
      by
      such Buyer. Each Buyer and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company and its management. Neither such
      inquiries nor any other due diligence investigations conducted by such Buyer
      or
      its advisors, if any, or its representatives shall modify, amend or affect
      such
      Buyer’s right to rely on the Company’s representations and warranties contained
      in Section 3 below. Each Buyer understands that its investment in the Securities
      involves a high degree of risk. Each Buyer is in a position regarding the
      Company, which, based upon employment, family relationship or economic
      bargaining power, enabled and enables such Buyer to obtain information from
      the
      Company in order to evaluate the merits and risks of this investment. Each
      Buyer
      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. Each buyer can bear the economic risk of such Buyer’s investment and
      is able, without impairing such Buyer’s financial condition, to hold the
      Securities for an indefinite period of time and to suffer a complete loss of
      such Buyer’s investment.

     

    (e)  No
      Governmental Review.
      Each
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities, or the fairness or suitability of the investment
      in the Securities, nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f)  Transfer
      or Resale.
      Each
      Buyer 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)
      such Buyer 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) such Buyer 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 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 SEC 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. Each Buyer understands that, although Rule 144 is
      not
      exclusive, the Securities and Exchange Commission has expressed its opinion
      that
      persons proposing to sell restricted securities received in a private offering
      other than in a registered offering or pursuant to Rule 144 will have a
      substantial burden of proof in establishing that an exemption from registration
      is available for such offers or sales and that such persons and the brokers
      who
      participate in the transactions do so at their own risk.

     

    (g)  Legends.
      Each
      Buyer understands and agrees that the certificates evidencing the Shares or
      the
      Conversion Shares, or any other securities issued in respect of the Shares
      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 SEC). 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 Buyer that it is selling Conversion Shares or Warrant Shares 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 2(g), it will, no later than
      three (3) Trading Days following the delivery by a Buyer that is not an
      Affiliate of the company (a “Non-Affiliated Buyer”) to the Company or the
      Company’s 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 or cause to be delivered to such Non-Affiliated Buyer 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 set
      forth in this Section. Each Buyer 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. 

     

    (h)  Authorization,
      Enforcement.
      Each
      Buyer has all requisite power and authority to execute and deliver the
      Transaction Documents, to purchase the Securities hereunder and to carry out
      and
      perform its obligations under the terms of the Transaction Documents. All action
      on the part of each Buyer necessary for the authorization, execution, delivery
      and performance of the Transaction Documents, and the performance of all of
      the
      Buyer’s obligations under the Transaction Documents, has been taken or will be
      taken prior to the Closing. The Transaction Documents have been duly and validly
      authorized, executed and delivered on behalf of such Buyer and are valid and
      binding agreements of such Buyer enforceable in accordance with their terms,
      except as such enforceability may be limited by general principles of equity
      or
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      and
      other similar laws relating to, or affecting generally, the enforcement of
      applicable creditors’ rights and remedies. No
      consent, approval, authorization, order, filing, registration or qualification
      of or with any court, governmental authority or third person is required to
      be
      obtained by the Buyer in connection with the execution and delivery of the
      Transaction Documents by the Buyer or the performance of the Buyer’s obligations
      hereunder or thereunder.

     

    (i)  Receipt
      of Documents.
      Each
      Buyer and his or its counsel has received and read in their entirety: (i) this
      Agreement and each representation, warranty and covenant set forth herein and
      the Transaction Documents (as defined herein); (ii) all due diligence and other
      information necessary to verify the accuracy and completeness of such
      representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
      the fiscal year ended December 31, 2006; (iv) the Company’s Form 10-QSB for the
      fiscal quarter ended September 30, 2006 and (v) answers to all questions each
      Buyer submitted to the Company regarding an investment in the Company; and
      each
      Buyer has relied on the information contained therein and has not been furnished
      any other documents, literature, memorandum or prospectus.

     

    (j)  Due
      Formation of Corporate and Other Buyers.
      If the
      Buyer(s) is a corporation, trust, partnership or other entity that is not an
      individual person, it has been formed and validly exists and has not been
      organized for the specific purpose of purchasing the Securities and is not
      prohibited from doing so.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (k)  No
      Legal Advice From the Company.
      Each
      Buyer acknowledges, that it had the opportunity to review this Agreement and
      the
      transactions contemplated by this Agreement with his or its own legal counsel
      and investment and tax advisors. Each Buyer is relying solely on such counsel
      and advisors and not on any statements or representations of the Company or
      any
      of its representatives or agents for legal, tax or investment advice with
      respect to this investment, the transactions contemplated by this Agreement
      or
      the securities laws of any jurisdiction. 

     

    (l)  Brokers
      or Finders.
      Each
      Buyer has not engaged any brokers, finders or agents, and neither the Company
      nor any other Buyer has, nor will, incur, directly or indirectly, as a result
      of
      any action taken by each Buyer, any liability for brokerage or finders’ fees or
      agents’ commissions or any similar charges in connection with the Transaction
      Documents.

     

    (m)  Tax
      Advisors.
      Each
      Buyer has reviewed with its own tax advisors the U.S. federal, state, local
      and
      foreign tax consequences of this investment and the transactions contemplated
      by
      the Transaction Documents. With respect to such matters, Each Buyer relies
      solely on such advisors and not on any statements or representations of the
      Company or any of its agents, written or oral. Each Buyer 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 by the
      Transaction Documents.

     

    3.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

     

    Except
      as
      disclosed in the SEC Documents (as defined below) or as set forth under the
      corresponding section of the Disclosure Schedules which Disclosure Schedules
      shall be deemed a part hereof and to qualify any representation or warranty
      otherwise made herein to the extent of such disclosure, the Company hereby
      represents and warrants to the Buyers that the following representations are
      true and complete as of the date of the Initial Closing, (or as the date
      otherwise indicated):

     

    (a)  Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3(a).
      Other
      than as set forth in Schedule 3(a), the Company owns, directly or indirectly,
      all of the capital stock or other equity interests of each subsidiary free
      and
      clear of any liens, and all the issued and outstanding shares of capital stock
      of each subsidiary are validly issued and are fully paid, non-assessable and
      free of preemptive and similar rights to subscribe for or purchase
      securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Organization
      and Qualification.
      The
      Company and its subsidiaries are corporations duly organized and validly
      existing in good standing under the laws of the jurisdiction in which they
      are
      incorporated, and have the requisite corporate power to own their properties
      and
      to carry on their business as now being conducted. Each of the Company and
      its
      subsidiaries is duly qualified as a foreign corporation to do business and
      is in
      good standing in every jurisdiction in which the nature of the business
      conducted by it makes such qualification necessary, except to the extent that
      the failure to be so qualified or be in good standing would not have or
      reasonably be expected to result in (a) a material adverse effect on the results
      of operations, assets, business or condition (financial or otherwise) of the
      Company and the subsidiaries, taken as a whole, or (ii) a material adverse
      effect on the Company’s ability to perform in any material respect on a timely
      basis its obligations under any Transaction Document (either of (i) or (ii)
      a
“Material
      Adverse Effect”)
      and to
      the Company’s knowledge no proceeding has been instituted in any such
      jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
      curtail such power and authority or qualification.

     

    (c)  Authorization,
      Enforcement, Compliance with Other Instruments.
      (i) The Company has the requisite corporate power and authority to enter
      into and perform its obligations under this Agreement, the Convertible
      Debentures, the Warrants, the Security Documents, the Registration Rights
      Agreement, the Transfer Agent Instructions (if and when executed and delivered
      in accordance with Section 5 hereof), and each of the other agreements entered
      into by the parties hereto in connection with the transactions contemplated
      by
      this Agreement (collectively the “Transaction
      Documents”)
      and to
      issue the Securities in accordance with the terms hereof and thereof, (ii)
      the
      execution and delivery of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated hereby and thereby,
      including, without limitation, the issuance of the Securities, the reservation
      for issuance and the issuance of the Conversion Shares, and the reservation
      for
      issuance and the issuance of the Warrant Shares, have been duly authorized
      by
      the Company’s Board of Directors and no further consent or authorization is
      required by the Company, its Board of Directors or its stockholders, (iii)
      the
      Transaction Documents, when executed and delivered by the Company, shall
      constitute the valid and binding obligations of the Company enforceable against
      the Company in accordance with their terms, except as such enforceability may
      be
      limited by general principles of equity or applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally, the enforcement of creditors’ rights and
      remedies.

     

    (d)  Capitalization.
      Immediately prior to the Initial Closing, the authorized capital stock of the
      Company consists of 93,750,000 shares of Common Stock of which as of March
      5,
      2007 62,132,419 shares of Common Stock are issued and outstanding. All of the
      outstanding shares of capital stock of the Company are validly issued, fully
      paid and nonassessable, have been issued in compliance with all federal and
      state securities laws, and none of such outstanding shares was issued in
      violation of any preemptive rights or similar rights to subscribe for or
      purchase securities. Except as disclosed in Schedule 3(d): (i) none of the
      Company's capital stock is subject to preemptive rights or any other similar
      rights or any liens or encumbrances suffered or permitted by the Company; (ii)
      there are no outstanding options, warrants, scrip, rights to subscribe to,
      calls
      or commitments of any character whatsoever relating to, or securities or rights
      convertible into, or exercisable or exchangeable for, any capital stock of
      the
      Company or any of its subsidiaries, or contracts, commitments, understandings
      or
      arrangements by which the Company or any of its subsidiaries is or may become
      bound to issue additional capital stock of the Company or any of its
      subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities or rights
      convertible into, or exercisable or exchangeable for, any capital stock of
      the
      Company or any of its subsidiaries; (iii) there are no outstanding debt
      securities, notes, credit agreements, credit facilities or other agreements,
      documents or instruments evidencing indebtedness of the Company or any of its
      subsidiaries or by which the Company or any of its subsidiaries is or may become
      bound; (iv) there are no financing statements securing obligations in any
      material amounts, either singly or in the aggregate, filed in connection with
      the Company or any of its subsidiaries; (v) there are no outstanding securities
      or instruments of the Company or any of its subsidiaries which contain any
      redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      subsidiaries; (vi) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities; and (vii) the Company does not have any stock appreciation
      rights or "phantom stock" plans or agreements or any similar plan or agreement.
      The Company has furnished to the Buyers true, correct and complete copies of
      the
      Company's Certificate of Incorporation, as amended and as in effect on the
      date
      hereof (the “Certificate
      of Incorporation”),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
“Bylaws”),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto. No further approval or authorization of any stockholder, the
      Board of Directors of the Company or others is required for the issuance and
      sale of the Securities. Other than as set forth in Schedule 3(d), there are
      no
      stockholders agreements, voting agreements or other similar agreements with
      respect to the Company’s capital stock to which the Company is a party or, to
      the knowledge of the Company, between or among any of the Company’s
      stockholders. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (e)  Issuance
      of Securities.
      The
      issuance of the Convertible Debentures and the Warrants is duly authorized
      and
      free from all taxes, liens and charges with respect to the issue thereof. Upon
      conversion in accordance with the terms of the Convertible Debentures or
      exercise in accordance with the Warrants, as the case may be, the Conversion
      Shares and Warrant Shares, respectively, when issued will be validly issued,
      fully paid and nonassessable, free from all taxes, liens and charges with
      respect to the issue thereof. The Company has reserved from its duly authorized
      capital stock the appropriate number of shares of Common Stock as set forth
      in
      this Agreement. 

     

    (f)  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Convertible
      Debentures and the Warrants, and reservation for issuance and issuance of the
      Conversion Shares and the Warrant Shares) will not (i) result in a violation
      of
      any certificate of incorporation, certificate of formation, any certificate
      of
      designations or other constituent documents of the Company or any of its
      subsidiaries or the bylaws of the Company or any of its subsidiaries or (ii)
      conflict with, or constitute a default (or an event which with notice or lapse
      of time or both would become a default) in any respect under, or give to others
      any rights of termination, amendment, acceleration or cancellation of, any
      agreement, indenture or instrument to which the Company or any of its
      subsidiaries is a party, or (iii) result in a violation of any law, rule,
      regulation, order, judgment or decree (including foreign, federal and state
      securities laws and regulations and the rules and regulations of the National
      Association of Securities Dealers Inc.’s OTC Bulletin Board) applicable to the
      Company or any of its subsidiaries or by which any property or asset of the
      Company or any of its subsidiaries is bound or affected; except in the case
      of
      each of clauses (ii) and (iii), such as could
      not, individually or in the aggregate, have or reasonably be expected to result
      in a Material Adverse Effect.
      The
      business of the Company and its subsidiaries is not being conducted, and shall
      not be conducted in violation of any material law, ordinance, or regulation
      of
      any governmental entity. Except as specifically contemplated by this Agreement
      and as required under the Securities Act and any applicable state securities
      laws, the Company is not required to obtain any consent, authorization or order
      of, or make any filing or registration with, any court or governmental agency
      in
      order for it to execute, deliver or perform any of its obligations under or
      contemplated by this Agreement or the Registration Rights Agreement in
      accordance with the terms hereof or thereof. All consents, authorizations,
      orders, filings and registrations which the Company is required to obtain
      pursuant to the preceding sentence have been obtained or effected on or prior
      to
      the date hereof. The Company and its subsidiaries are unaware of any facts
      or
      circumstance, which might give rise to any of the foregoing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g)  SEC
      Documents; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it with the SEC under the Securities Exchange Act of
      1934, as amended (the “Exchange
      Act”)
      since
      September 15, 2006 (all of the foregoing filed prior to the date hereof or
      amended after the date hereof and all exhibits included therein and financial
      statements and schedules thereto and documents incorporated by reference
      therein, being hereinafter referred to as the “SEC
      Documents”)
      on
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Document prior to the expiration of any such extension.
      As of
      their respective dates, the SEC Documents complied in all material respects
      with
      the requirements of the Exchange Act and the rules and regulations of the SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not misleading. As of
      their respective dates, the financial statements of the Company included in
      the
      SEC Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto. Such financial statements have been prepared in accordance
      with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). 

     

    (h)  10(b)-5.
      The SEC
      Documents do not include any untrue statements of material fact, nor do they
      omit to state any material fact required to be stated therein necessary to
      make
      the statements made, in light of the circumstances under which they were made,
      not misleading.

     

    (i)  Absence
      of Litigation.
      There
      is no action, suit, proceeding, inquiry or investigation before or by any court,
      public board, government agency, self-regulatory organization or body pending
      against or affecting the Company, the Common Stock or any of the Company’s
      subsidiaries, wherein an unfavorable decision, ruling or finding would have
      a
      Material Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (j)  Acknowledgment
      Regarding Buyer’s Purchase of the Convertible Debentures.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of an arm’s length purchaser with respect to this Agreement and the transactions
      contemplated hereby. The Company further acknowledges that each Buyer is not
      acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby and any advice given by each Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is merely incidental to such Buyer’s purchase of the
      Securities. The Company further represents to each Buyer that the Company’s
      decision to enter into this Agreement has been based solely on the independent
      evaluation by the Company and its representatives.

     

    (k)  No
      General Solicitation.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D under the Securities Act) in connection
      with
      the offer or sale of the Securities.

     

    (l)  No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any security
      or
      solicited any offers to buy any security, under circumstances that would require
      registration of the Securities under the Securities Act or cause this offering
      of the Securities to be integrated with prior offerings by the Company for
      purposes of the Securities Act.

     

    (m)  Employee
      Relations.
      Neither
      the Company nor any of its subsidiaries is involved in any labor dispute or,
      to
      the knowledge of the Company or any of its subsidiaries, is any such dispute
      threatened. None of the Company’s or its subsidiaries’ employees is a member of
      a union.

     

    (n)  Intellectual
      Property Rights.
      To the
      Company’s knowledge, the Company and its subsidiaries own or possess adequate
      rights or licenses to use all trademarks, trade names, service marks, service
      mark registrations, service names, patents, patent rights, copyrights,
      inventions, licenses, approvals, governmental authorizations, trade secrets
      and
      rights necessary to conduct their respective businesses as now conducted. The
      Company and its subsidiaries do not have any knowledge of any infringement
      by
      the Company or its subsidiaries of trademark, trade name rights, patents, patent
      rights, copyrights, inventions, licenses, service names, service marks, service
      mark registrations, trade secret or other similar rights of others, and, to
      the
      knowledge of the Company there is no claim, action or proceeding being made
      or
      brought against, or to the Company’s knowledge, being threatened against, the
      Company or its subsidiaries regarding trademark, trade name, patents, patent
      rights, invention, copyright, license, service names, service marks, service
      mark registrations, trade secret or other infringement; and the Company and
      its
      subsidiaries are unaware of any facts or circumstances which might give rise
      to
      any of the foregoing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (o)  Environmental
      Laws.
      Except
      as could not reasonably by expected to have a Material Adverse Effect, to the
      best of the Company’s knowledge the Company and its subsidiaries are in
      compliance with any and all applicable foreign, federal, state and local laws
      and regulations relating to the protection of human health and safety, the
      environment or hazardous or toxic substances or wastes, pollutants or
      contaminants (“Environmental
      Laws”).
      The
      Company has received all permits, licenses or other approvals required of them
      under applicable Environmental Laws to conduct their respective businesses,
      the
      lack of which would have a Material Adverse Effect and are in compliance with
      all terms and conditions of any such permit, license or approval.

     

    (p)  Title.
      All
      real property and facilities held under lease by the Company and its
      subsidiaries are held by them under valid, subsisting and enforceable leases
      with such exceptions as are not material and do not interfere with the use
      made
      and proposed to be made of such property and buildings by the Company and its
      subsidiaries.

     

    (q)  Insurance.
      The
      Company and each of its subsidiaries is insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its subsidiaries are engaged. Neither the Company
      nor
      any such subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not materially and
      adversely affect the condition, financial or otherwise, or the earnings,
      business or operations of the Company and its subsidiaries, taken as a
      whole.

     

    (r)  Regulatory
      Permits.
      The
      Company and its subsidiaries possess all material certificates, authorizations
      and permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses, and neither the
      Company nor any such subsidiary has received any notice of proceedings relating
      to the revocation or modification of any such certificate, authorization or
      permit.

     

    (s)  Internal
      Accounting Controls.
      The
      Company and each of its subsidiaries maintains a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management’s general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset accountability, and (iii) the recorded amounts for assets are
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences.

     

    (t)  No
      Material Adverse Breaches, etc.
      Neither
      the Company nor any of its subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company’s officers has or is expected in the future
      to have a Material Adverse Effect. Neither the Company nor any of its
      subsidiaries is in breach of any contract or agreement which breach, in the
      judgment of the Company’s officers, has or is expected to have a Material
      Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (u)  Tax
      Status.
      The
      Company and each of its subsidiaries has made and filed all federal and state
      income and all other material tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject and (unless and only to the extent
      that
      the Company and each of its subsidiaries has set aside on its books provisions
      reasonably adequate for the payment of all unpaid and unreported taxes) has
      paid
      all taxes and other governmental assessments and charges that are material
      in
      amount, shown or determined to be due on such returns, reports and declarations,
      except those being contested in good faith and has set aside on its books
      provision reasonably adequate for the payment of all taxes for periods
      subsequent to the periods to which such returns, reports or declarations apply.
      There are no unpaid taxes in any material amount claimed to be due by the taxing
      authority of any jurisdiction, and the officers of the Company know of no basis
      for any such claim.

     

    (v)  Certain
      Transactions.
      Except
      for arm’s length transactions pursuant to which the Company makes payments in
      the ordinary course of business upon terms no less favorable than the Company
      could obtain from third parties and other than the grant of stock options
      disclosed in the SEC Documents, none of the officers, directors, or employees
      of
      the Company is presently a party to any transaction with the Company (other
      than
      for services as employees, officers and directors, reimbursement for reasonable
      expenses incurred on behalf of the Company and for other standard employee
      benefits made generally available to all employees), including any contract,
      agreement or other arrangement providing for the furnishing of services to
      or
      by, providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or such employee or, to
      the
      knowledge of the Company, any corporation, partnership, trust or other entity
      in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner.

     

    (w)  Fees
      and Rights of First Refusal.
      The
      Company is not obligated to offer the securities offered hereunder on a right
      of
      first refusal basis or otherwise to any third parties including, but not limited
      to, current or former shareholders of the Company, underwriters, brokers, agents
      or other third parties.

     

    (x)  Investment
      Company.
      The
      Company is not, and is not an affiliate of, and immediately after receipt of
      payment for the Securities, will not be or be an affiliate of, an “investment
      company” within the meaning of the Investment Company Act of 1940, as amended.
      The Company shall conduct its business in a manner so that it will not become
      subject to the Investment Company Act.

     

    (y)  Registration
      Rights.
      Other
      than each of the Buyers, no Person has any right to cause the Company to effect
      the registration under the Securities Act of any securities of the Company.
      There are no outstanding registration statements not yet declared effective
      and
      there are no outstanding comment letters from the SEC or any other regulatory
      agency.

     

    (z)  Private
      Placement.
      Assuming the accuracy of the Buyers’ representations and warranties set forth in
      Section 2, no registration under the Securities Act is required for the offer
      and sale of the Securities by the Company to the Buyers as contemplated hereby.
      The issuance and sale of the Securities hereunder does not contravene the rules
      and regulations of the Primary Market (as defined below).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (aa)  Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
      Exchange Act, and the Company has taken no action designed to terminate, or
      which to its knowledge is likely to have the effect of, terminating the
      registration of the Common Stock under the Exchange Act nor has the Company
      received any notification that the SEC is contemplating terminating such
      registration. The Company has not, in the twelve (12) months preceding the
      date
      hereof, received notice from any Primary Market on which the Common Stock is
      or
      has been listed or quoted to the effect that the Company is not in compliance
      with the listing or maintenance requirements of such Primary Market.

     

    (bb)  Manipulation
      of Price. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of the
      Securities, or (iii) paid or agreed to pay to any Person any compensation for
      soliciting another to purchase any other securities of the Company, other than,
      in the case of clauses (ii) and (iii), compensation paid to the Company’s
      placement agent in connection with the placement of the Securities.

     

    (cc)  Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Convertible Debentures and the Warrant Shares
      issuable upon exercise of the Warrants will increase in certain circumstances.
      The Company further acknowledges that its obligation to issue Conversion Shares
      upon conversion of the Convertible Debentures in accordance with this Agreement
      and the Convertible Debentures and its obligation to issue the Warrant Shares
      upon exercise of the Warrants in accordance with this Agreement and the
      Warrants, in each case, is absolute and unconditional regardless of the dilutive
      effect that such issuance may have on the ownership interests of other
      stockholders of the Company.

     

    (dd)  Brokerage.
      The
      Company represents that no broker, agent, finder or other party has been
      retained by it in connection with the transactions contemplated hereby and
      that
      no fee or commission has been agreed by the Company to be paid for or on account
      of the transactions contemplated hereby. 

     

    (ee)  Placement
      Agent.
      The
      Company has retained Canaccord Adams, Inc. and Merriman, Curhan Ford & Co.
      to assist the Company to raise at least $3,000,000 in subsequent financing,
      the
      proceeds of which can be used by the Company to repay the Convertible Debentures
      issued hereunder. 

     

    4.  COVENANTS.

     

    (a)  Best
      Efforts.
      Each
      party shall use its best efforts to timely satisfy each of the conditions to
      be
      satisfied by it as provided in Sections 6 and 7 of this Agreement.

     

    (b)  Form
      D.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary to qualify the Securities,
      or obtain an exemption for the Securities for sale to the Buyers at the Closing
      pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
      states of the United States, and shall provide evidence of any such action
      so
      taken to the Buyers on or prior to the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)  Reporting
      Status.
      Until
      the earlier of (i) the date as of which the Buyer(s) may sell all of the
      Securities without restriction pursuant to Rule 144(k) promulgated under the
      Securities Act (or successor thereto), or (ii) the date on which (A) the Buyers
      shall have sold all the Securities and (B) none of the Convertible Debentures
      or
      Warrants are outstanding (the “Registration
      Period”),
      the
      Company shall file in a timely manner all reports required to be filed with
      the
      SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
      and
      the Company shall not terminate its status as an issuer required to file reports
      under the Exchange Act even if the Exchange Act or the rules and regulations
      thereunder would otherwise permit such termination.

     

    (d)  Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Convertible Debentures as
      follows: (i) $1,500,000 for construction and development of a bio-diesel plant
      in Peru, (ii) $1,000,000 for the purchase of centrifuges, and (iii) $500,000
      for
      expenses relating to the offering and for general corporate and working capital
      purposes.

     

    (e)  Reservation
      of Shares.
      On the
      date hereof, the Company shall reserve for issuance to the Buyers 4,000,000
      shares for issuance upon conversions of the Convertible Dentures and 704,082
      shares for issuance upon exercise of the Warrants (collectively, the
“Share
      Reserve”).
      The
      Company represents that it has sufficient authorized and unissued shares of
      Common Stock available to create the Share Reserve after considering all other
      commitments that may require the issuance of Common Stock. The Company shall
      take all action reasonably necessary to at all times have authorized, and
      reserved for the purpose of issuance, such number of shares of Common Stock
      as
      shall be necessary to effect the full conversion of the Convertible Debentures
      and the full exercise of the Warrants. If at any time the Share Reserve is
      insufficient to effect the full conversion of the Convertible Debentures or
      the
      full exercise of the Warrants, the Company shall increase the Share Reserve
      accordingly. If the Company does not have sufficient authorized and unissued
      shares of Common Stock available to increase the Share Reserve, the Company
      shall call and hold a special meeting of the shareholders within thirty (30)
      days of such occurrence, for the purpose of increasing the number of shares
      authorized. The Company’s management shall recommend to the shareholders to vote
      in favor of increasing the number of shares of Common Stock authorized.

     

    (f)  Listings
      or Quotation.
      The
      Company’s Common Stock shall be listed or quoted for trading on any of (a) the
      American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global
      Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board
      (“OTCBB”)
      (each,
      a “Primary
      Market”).
      The
      Company shall promptly secure the listing of all of the Registrable Securities
      (as defined in the Registration Rights Agreement) upon each national securities
      exchange and automated quotation system, if any, upon which the Common Stock
      is
      then listed (subject to official notice of issuance) and shall maintain such
      listing of all Registrable Securities from time to time issuable under the
      terms
      of the Transaction Documents. 

     

    (g)  Fees
      and Expenses.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i)  Each
      of
      the Company and the Buyer(s) shall pay all costs and expenses incurred by such
      party in connection with the negotiation, investigation, preparation, execution
      and delivery of the Transaction Documents. The Company shall pay Yorkville
      Advisors, LLC a fee equal to five percent (5%) of the Purchase Price which
      shall
      be paid pro rata directly from the gross proceeds of the Closing. 

     

    (ii)  The
      Company shall pay a structuring and due diligence fee to Yorkville Advisors,
      LLC
      of Twenty Five Thousand Dollars ($25,000) which shall be paid directly from
      the
      proceeds of the Closing. 

     

    (h)  Corporate
      Existence.
      So long
      as any of the Convertible Debentures remain outstanding, the Company shall
      not
      directly or indirectly consummate any merger, reorganization, restructuring,
      reverse stock split consolidation, sale of all or substantially all of the
      Company’s assets or any similar transaction or related transactions (each such
      transaction, an “Organizational
      Change”)
      unless, prior to the consummation an Organizational Change, the Company obtains
      the written consent of each Buyer. In any such case, the Company will make
      appropriate provision with respect to such holders’ rights and interests to
      insure that the provisions of this Section 4(h) will thereafter be applicable
      to
      the Convertible Debentures.

     

    (i)  Transactions
      With Affiliates.
      So long
      as any Convertible Debentures are outstanding, the Company shall not, and shall
      cause each of its subsidiaries not to, enter into, amend, modify or supplement,
      or permit any subsidiary to enter into, amend, modify or supplement any
      agreement, transaction, commitment, or arrangement with any of its or any
      subsidiary’s officers, directors, person who were officers or directors at any
      time during the previous two (2) years, stockholders who beneficially own five
      percent (5%) or more of the Common Stock, or Affiliates (as defined below)
      or
      with any individual related by blood, marriage, or adoption to any such
      individual or with any entity in which any such entity or individual owns a
      five
      percent (5%) or more beneficial interest (each a “Related
      Party”),
      except for (a) customary employment arrangements and benefit programs on
      reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
      agreement, transaction, commitment, or arrangement on an arms-length basis
      on
      terms no less favorable than terms which would have been obtainable from a
      person other than such Related Party, (d) any agreement, transaction,
      commitment, or arrangement which is approved by a majority of the disinterested
      directors of the Company; for purposes hereof, any director who is also an
      officer of the Company or any subsidiary of the Company shall not be a
      disinterested director with respect to any such agreement, transaction,
      commitment, or arrangement or (e) any transaction or agreement that is not
      required to be disclosed pursuant to Item 404 of Regulation SB. “Affiliate”
for
      purposes hereof means, with respect to any person or entity, another person
      or
      entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
      interest in that person or entity, (ii) has ten percent (10%) or more common
      ownership with that person or entity, (iii) controls that person or entity,
      or
      (iv) shares common control with that person or entity. “Control”
or
      “controls”
for
      purposes hereof means that a person or entity has the power, direct or indirect,
      to conduct or govern the policies of another person or entity.

     

    (j)  RESERVED

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (k)  Short
      Sales.
      Neither
      the Buyer(s) nor any of its affiliates have an open short position in the Common
      Stock of the Company, and the Buyer(s) agrees that it shall not, and that it
      will cause its affiliates not to, engage in any short sales of or hedging
      transactions with respect to the Common Stock as long as any Convertible
      Debentures shall remain outstanding. 

     

    (l)  Lock
      Up Agreements.
      On the
      date hereof, the Company shall obtain from each officer and director a lock
      up
      agreement in the form attached hereto as Exhibit
      C.

     

    (m)  Additional
      Registration Statements.
      Until
      the effective date of the initial Registration Statement, the Company will
      not
      file a registration statement under the Securities Act relating to securities
      that are not the Securities. 

     

    (n)  Review
      of Public Disclosures.
      All SEC
      filings (including, without limitation, all filings required under the Exchange
      Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other
      public disclosures made by the Company, including, without limitation, all
      press
      releases, investor relations materials, and scripts of analysts meetings and
      calls, shall be reviewed and approved for release by the Company’s attorneys
      and, if containing financial information, the Company’s independent certified
      public accountants.

     

    (o)  Disclosure
      of Transaction.
      Within
      four Business Days following the date of this Agreement, the Company shall
      file
      a Current Report on Form 8-K describing the terms of the transactions
      contemplated by the Transaction Documents in the form required by the Exchange
      Act and attaching the material Transaction Documents (including, without
      limitation, this Agreement, the form of the Convertible Debenture, the form
      of
      Warrant and the form of the Registration Rights Agreement) as exhibits to such
      filing.

     

    (p)  Post
      Closing Obligations.
      

     

    (i)  The
      Company hereby covenants that the following obligations shall be fully satisfied
      within the time periods set forth below:

     

    (1)  The
      Pledged Shares as well as fully executed stock powers of attorney, signature
      guaranteed as required by the transfer agent of the Company shall be deposited
      with the Escrow Agent on or before 5:00 p.m. New York City time on Friday,
      April
      27, 2007 (the “Pledge
      Deadline”).

     

    (2)  The
      Company shall (a) file, or cause to be filed, all necessary forms and documents
      as may be required to perfect in Peru the Buyer’s security interest in all the
      assets of the subsidiaries of the Company and provided proof of such filing
      to
      the Buyer, and (b) cause its subsidiaries to grant to the Buyer a mortgage
      in
      all of the real property of each of the Company’s subsidiaries and file all
      necessary forms and documents as may be required to perfect such mortgages
      in
      Peru, each on or before 5:00 p.m. New York City time on Friday, April 27, 2007
      (the “Mortgage
      Deadline”).
      For
      the avoidance of doubt, the Company shall be deemed to satisfy its obligations
      under this Section 4(p)(i)(2) by filing a mortgage in the Registry of Real
      Estate Property of Lima and a Personal Property Warranty in the Personal
      Property Registry of Contracts (together, the “Peruvian
      Security Documents”).
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii)  In
      the
      event that the Company does not fully comply with the covenants set forth in
      Section 4(p)(i)(1) hereof by the Pledge Deadline, then the Company shall pay
      to
      the Buyer a one time payment of $100,000 as liquidated damages and not as a
      penalty. Furthermore, in the event that the Company does not fully comply with
      all the covenants set forth in Section 4(p)(i)(2) hereof by the Mortgage
      Deadline, the Company shall pay to the Buyer $5,000 for each Business Day until
      full compliance with all such covenants is satisfied as liquidated damages
      and
      not as a penalty. All payments made pursuant to this Section 4(p)(ii) shall
      be
      made within three (3) Business Days of the date first due and shall be made
      in
      cash or in Common Stock valued at the Closing Bid Price on the Trading Day
      immediately prior to the date due (at the sole discretion of the Company).
      All
      payments pursuant to this Section 4(p) shall be capped at $1,000,000. It shall
      be a material breach hereunder and an event of default under the Convertible
      Debentures if the Company fails to fully comply with all of the covenants set
      forth in Section 4(p)(i) within fourteen Business Days of the Mortgage Deadline,
      which breach shall entitle the Buyer to all rights and remedies of default
      including the right to accelerate the repayment of the Convertible
      Debentures.

     

    5.  TRANSFER
      AGENT INSTRUCTIONS.
      If
      the
      Convertible Debentures remain outstanding as of July 19, 2007 then the Company
      shall (i) use commercially reasonable efforts to appoint a new transfer agent
      reasonably acceptable to the Buyer, and (ii) enter
      into transfer agent instructions materially in the form of Exhibit D (the
“Transfer
      Agent Instructions”)
      with
      the new transfer agent
      as soon
      as reasonably practicable but in no event later than August 19,
      2007.

     

    6.  CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.

     

    The
      obligation of the Company hereunder to issue and sell the Convertible Debentures
      to the Buyer(s) at the Closing is subject to the satisfaction, at or before
      the
      Closing Dates, of each of the following conditions, provided that these
      conditions are for the Company’s sole benefit and may be waived by the Company
      at any time in its sole discretion:

     

    (a)  Each
      Buyer shall have executed the Transaction Documents and delivered them to the
      Company.

     

    (b)  The
      Buyer(s) shall have delivered to the Company the Purchase Price for the
      Convertible Debentures and Warrants in the respective amounts as set forth
      next
      to each Buyer as set forth on Schedule I attached hereto, minus any fees to
      be
      paid directly from the proceeds the Closing as set forth herein, by wire
      transfer of immediately available U.S. funds pursuant to the wire instructions
      provided by the Company.

     

    (c)  The
      representations and warranties of the Buyer(s) shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Dates as though
      made at that time (except for representations and warranties that speak as
      of a
      specific date), and the Buyer(s) shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Buyer(s)
      at or
      prior to the Closing Dates. 

     

    7.  CONDITIONS
      TO THE BUYER’S OBLIGATION TO PURCHASE.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a)  The
      obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
      at
      the Closing is subject to the satisfaction, at or before the Closing Date,
      of
      each of the following conditions:

     

    (i)  The
      Company shall have executed the Transaction Documents and delivered the same
      to
      the Buyers.

     

    (ii)  The
      Common Stock shall be authorized for quotation or trading on the Primary Market,
      trading in the Common Stock shall not have been suspended for any reason, and
      all the Conversion Shares issuable upon the conversion of the Convertible
      Debentures shall be approved for listing or trading on the Primary Market.
      

     

    (iii)  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except to the extent that any of such representations and
      warranties is already qualified as to materiality in Section 3 above, in which
      case, such representations and warranties shall be true and correct without
      further qualification) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date) and the Company shall have performed, satisfied and
      complied in all material respects with the covenants, agreements and conditions
      required by this Agreement to be performed, satisfied or complied with by the
      Company at or prior to the Closing Date.

     

    (iv)  The
      Company shall have executed and delivered to the Buyer(s) the Convertible
      Debentures and Warrants in the respective amounts set forth opposite each
      Buyer’s name on Schedule I attached hereto.

     

    (v)  The
      Buyers shall have received an opinion of counsel from counsel to the Company
      in
      a form satisfactory to the Buyers.

     

    (vi)  The
      Company shall have provided to the Buyers a true copy of a certificate of good
      standing evidencing the formation and good standing of the Company from the
      secretary of state (or comparable office) from the jurisdiction in which the
      Company is incorporated, as of a date within 10 days of the Closing
      Date.

     

    (vii)  The
      Company shall have delivered to the Buyers a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions consistent with Section 3(c) as adopted by the Company's Board
      of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
      of
      Incorporation and (iii) the Bylaws, each as in effect at the
      Closing.

     

    (viii)  The
      Company shall have filed, or authorized the Buyer to file, a form UCC-1 or
      such
      other forms as may be required to perfect in the United States the Buyer’s
      security interest in the Pledged Property as detailed in the Security Agreement
      and provided proof of such filing to the Buyer(s).

     

    (ix)  The
      Company shall have created the Share Reserve. 

     

    8.  INDEMNIFICATION.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a)  In
      consideration of the Buyer’s execution and delivery of this Agreement and
      acquiring the Convertible Debentures and the Conversion Shares hereunder, and
      in
      addition to all of the Company’s other obligations under this Agreement, the
      Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
      each
      other holder of the Convertible Debentures and the Conversion Shares, and all
      of
      their officers, directors, employees and agents (including, without
      limitation, those retained in connection with the transactions contemplated
      by
      this Agreement) (collectively, the “Buyer
      Indemnitees”)
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Buyer Indemnitee is a party to the action
      for
      which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
      Liabilities”),
      incurred by the Buyer Indemnitees or any of them as a result of, or arising
      out
      of, or relating to (a) any misrepresentation or breach of any representation
      or
      warranty made by the Company in this Agreement, the Convertible Debentures
      or
      the other Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby, or (b) any breach of any covenant, agreement
      or
      obligation of the Company contained in this Agreement, or the other Transaction
      Documents or any other certificate, instrument or document contemplated hereby
      or thereby. To the extent that the foregoing undertaking by the Company may
      be
      unenforceable for any reason, the Company shall make the maximum contribution
      to
      the payment and satisfaction of each of the Indemnified Liabilities, which
      is
      permissible under applicable law.

     

    (b)  In
      consideration of the Company’s execution and delivery of this Agreement, and in
      addition to all of the Buyer’s other obligations under this Agreement, the Buyer
      shall defend, protect, indemnify and hold harmless the Company and all of its
      officers, directors, employees and agents (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the “Company
      Indemnitees”)
      from
      and against any and all Indemnified Liabilities incurred by the Indemnitees
      or
      any of them as a result of, or arising out of, or relating to (a) any
      misrepresentation or breach of any representation or warranty made by the
      Buyer(s) in this Agreement, instrument or document contemplated hereby or
      thereby executed by the Buyer or (b) any breach of any covenant, agreement
      or
      obligation of the Buyer(s) contained in this Agreement, the Transaction
      Documents or any other certificate, instrument or document contemplated hereby
      or thereby executed by the Buyer. To the extent that the foregoing undertaking
      by each Buyer may be unenforceable for any reason, each Buyer shall make the
      maximum contribution to the payment and satisfaction of each of the Indemnified
      Liabilities, which is permissible under applicable law.

     

    9.  GOVERNING
      LAW: MISCELLANEOUS.

     

    (a)  Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New Jersey without regard to the principles of conflict of laws.
      The parties further agree that any action between them shall be heard in Hudson
      County, New Jersey, and expressly consent to the jurisdiction and venue of
      the
      Superior Court of New Jersey, sitting in Hudson County and the United States
      District Court for the District of New Jersey sitting in Newark, New Jersey
      for
      the adjudication of any civil action asserted pursuant to this Paragraph.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party.
      A
      facsimile, telecopy or other reproduction of this Agreement may be executed
      by
      one or more parties hereto and delivered by such party by facsimile or any
      similar electronic transmission device pursuant to which the signature of or
      on
      behalf of such party can be seen. Such execution and delivery shall be
      considered valid, binding and effective for all purposes. At the request of
      any
      party hereto, all parties hereto agree to execute and deliver an original of
      this Agreement as well as any facsimile, telecopy or other reproduction
      hereof.

     

    (c)  Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d)  Severability.
      If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    (e)  Entire
      Agreement, Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between the
      Buyer(s), the Company, their affiliates and persons acting on their behalf
      with
      respect to the matters discussed herein, and this Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor any Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters. No provision
      of
      this Agreement may be waived or amended other than by an instrument in writing
      signed by the party to be charged with enforcement.

     

    (f)  Notices.
      Any
      notices, consents, waivers, or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      confirmation of receipt, when sent by facsimile; (iii) three (3) days after
      being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
      day
      after deposit with a nationally recognized overnight delivery service, in each
      case properly addressed to the party to receive the same. The addresses and
      facsimile numbers for such communications shall be:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to the Company, to:

            	
              Pure
                Biofuels Corp.

            
	 	
              Av.
                Canaval y Moreyra 380 of 402

            
	 	
              San
                Isidro, Lima 

            
	 	
              Peru

            
	 	
              Attention: Luis
                Goyzueta

            
	 	
              Telephone: +511-221-7365

            
	 	
              Facsimile: +511-221-7347

            
	 	 
	
              With
                copy to:

            	
              ARC
                Investment Partners, LLC

            
	 	
              9440
                Little Santa Monica Blvd., Suite 400

            
	 	
              Beverly
                Hills, CA 90210

            
	 	
              Attention:
                 Steven
                Magami

            
	 	
              Telephone: 310-402-5901

            
	 	
              Facsimile: 310-402-5947

            
	 	 
	
              And:

            	
              DLA
                Piper US LLP

            
	 	
              1251
                Avenue of the Americas

            
	 	
              New
                York, NY 10020-1104

            
	 	
              Attn:
                Daniel I. Goldberg, Esq.

            
	 	
              Telephone:
                212-335-4966

            
	 	
              Facsimile:
                212-884-8466

            

    

     

    If
      to the
      Buyer(s), to its address and facsimile number on Schedule I, with copies to
      the
      Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
      days’ prior written notice to the other party of any change in address or
      facsimile number.

     

    (g)  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns. Neither the Company nor any Buyer
      shall
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of the other party hereto.

     

    (h)  No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    (i)  Survival.
      Unless
      this Agreement is terminated under Section 9(l), the representations and
      warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
      agreements and covenants set forth in Sections 4, 5 and 9, and the
      indemnification provisions set forth in Section 8, shall survive the Closing
      for
      a period of two (2) years following the date on which the Convertible Debentures
      are converted in full. The Buyer(s) shall be responsible only for its own
      representations, warranties, agreements and covenants hereunder.

     

    (j)  Publicity.
      The
      Company and the Buyer(s) shall have the right to approve, before issuance any
      press release or any other public statement with respect to the transactions
      contemplated hereby made by any party; provided, however, that the Company
      shall
      be entitled, without the prior approval of the Buyer(s), to issue any press
      release or other public disclosure with respect to such transactions required
      under applicable securities or other laws or regulations (the Company shall
      use
      its best efforts to consult the Buyer(s) in connection with any such press
      release or other public disclosure prior to its release and Buyer(s) shall
      be
      provided with a copy thereof upon release thereof).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (k)  Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (l)  Termination.
      In the
      event that the Closing shall not have occurred with respect to the Buyers on
      or
      before five (5) business days from the date hereof due to the Company’s or the
      Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
      (and the non-breaching party’s failure to waive such unsatisfied condition(s)),
      the non-breaching party shall have the option to terminate this Agreement with
      respect to such breaching party at the close of business on such date without
      liability of any party to any other party; provided, however, that if this
      Agreement is terminated by the Company pursuant to this Section 9(l), the
      Company shall remain obligated to reimburse the Buyer in the amount of $100,000,
      payable in Common Stock at a per share price equal to the closing market price
      of such Common Stock on the date of termination.

     

    (m)  No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    

    [REMAINDER
      PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 
 	 
 	
              COMPANY:
                
                PURE
                  BIOFUELS CORP.

              

            
	 	 	 
	 	 	By:
              /s/ Luis Goyzueta
	 	
              
                

              

              Name: Luis
                Goyzueta

            
	 	
              Title: CEO

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 
 	 
 	
                
                  
                    BUYERS:
                      
                      CORNELL
                        CAPITAL PARTNERS, LP 

                    

                  

                

              
	 	 	 
	 	 	
                By:
                   Yorkville
                  Advisors, LLC 

              
	 	 	
                Its: General
                  Partner

              
	 	 	 
	 	 	
                By: /s/
                  Gerald Eicke

              
	 	
                
                  

                

                Name: Gerald
                  Eicke

              
	 	
                Its: Managing
                  PartnerUnassociated Document

    Exhibit
      10.2

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    THIS
      REGISTRATION RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of April 19, 2007, by and among PURE
      BIOFUELS CORP.,
      a Nevada
      corporation (the “Company”),
      and
      the undersigned Buyers listed on Schedule I attached hereto (each, a
“Buyer”
and
      collectively, the “Buyers”).

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the “Securities
      Purchase Agreement”),
      the
      Company has agreed, upon the terms and subject to the conditions of the
      Securities Purchase Agreement, to issue and sell to the Buyers (i) secured
      convertible debentures (the “Convertible
      Debentures”)
      which
      shall be convertible into shares of the Company’s common stock, par value $0.001
      per share (the “Common
      Stock,”
as
      converted, the “Conversion
      Shares”)
      in
      accordance with the terms of the Convertible Debentures, and (ii) warrants
      (the
“Warrants”),
      which
      will be exercisable to purchase shares of Common Stock (as exercised,
      collectively, the “Warrant
      Shares”).
      Capitalized terms not defined herein shall have the meaning ascribed to them
      in
      the Securities Purchase Agreement.

     

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations thereunder, or any similar
      successor statute (collectively, the “Securities
      Act”),
      and
      applicable state securities laws.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Buyers hereby agree as
      follows:

     

    1.  DEFINITIONS.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    (a)  “Effectiveness
      Deadline”
means,
      with respect to the initial Registration Statement (the “Initial
      Registration Statement”)
      required to be filed hereunder, the 120th calendar day following the date filed
      and, with respect to any Subsequent Registration Statements which may be
      required pursuant to Section 3(c), the 90th calendar day following the date
      filed; provided, however, in the event the Company is notified by the U.S.
      Securities and Exchange Commission (“SEC”)
      that
      one of the above Registration Statements will not be reviewed or is no longer
      subject to further review and comments, the Effectiveness Date as to such
      Registration Statement shall be the fifth Trading Day following the date on
      which the Company is so notified if such date precedes the dates required above.
      

     

    (b)  “Filing
      Deadline”
means,
      with respect to the initial Registration Statement required hereunder, the
      45th
      calendar day following the date the Company receives a Filing Notice, and with
      respect to any Subsequent Registration Statements which may be required pursuant
      to Section 3(c), the 25th day following the date on which the Company first
      knows, or reasonably should have known that it is obligated to file such
      Subsequent Registration Statement. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)  “Filing
      Notice”
means
      a
      written notice from the Buyer to the Company (which may not be sent prior to
      the
      Maturity Date, as defined in the Convertible Debentures) to file a Registration
      Statement and stating the number of shares to include on such Registration
      Statement.

     

    (d)  “Initial
      Required Registration Amount”
means
      100% of the number of shares of Common Stock issued or to be issued upon
      conversion of the Convertible Debentures or exercise of the Warrants and any
      shares of Common Stock issued pursuant to Section 4(p) of the Securities
      Purchase Agreement.

     

    (e)  “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency.

     

    (f)  “Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

     

    (g)  “Registrable
      Securities”
means
      all of (i) the Conversion Shares issuable upon conversion of the Convertible
      Debentures, (ii) the Warrant Shares issued or issuable upon exercise of the
      Warrants, (iii) any additional shares issuable in connection with any
      anti-dilution provisions in the Warrants or the Convertible Debentures (without
      giving effect to any limitations on exercise set forth in the Warrants or
      Convertible Debentures) and (iv) any shares of Common Stock issued or issuable
      with respect to the Conversion Shares, the Convertible Debentures, the Warrant
      Shares, or the Warrants as a result of any stock split, dividend or other
      distribution, recapitalization or similar event or otherwise, without regard
      to
      any limitations on the conversion of the Convertible Debentures or exercise
      of
      the Warrants.

     

    (h)  “Registration
      Statement”
means
      the registration statements required to be filed hereunder and any additional
      registration statements contemplated by Section 3(c), including (in each case)
      the Prospectus, amendments and supplements to such registration statement or
      Prospectus, including pre- and post-effective amendments, all exhibits thereto,
      and all material incorporated by reference or deemed to be incorporated by
      reference in such registration statement.

     

    (i)  “Rule
      415”
means
      Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule
      may
      be amended from time to time, or any similar rule or regulation hereafter
      adopted by the SEC having substantially the same purpose and effect as such
      Rule.

     

    2.  REGISTRATION.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (a)  On
      or
      prior to each Filing Deadline, the Company shall prepare and file with the
      SEC a
      Registration Statement on Form S-1 or SB-2 (or, if the Company is then eligible,
      on Form S-3) covering the resale of all of the Registrable Securities. The
      Registration Statement prepared pursuant hereto shall register for resale at
      least the number of shares of Common Stock equal to the Required Registration
      Amount as of date the Registration Statement is initially filed with the SEC.
      The Registration Statement shall contain the “Selling
      Stockholders”
and
      “Plan
      of Distribution”
      sections in substantially the form attached hereto as Exhibit
      A
      and
      contain all the required disclosures set forth on Exhibit
      B.
      The
      Company shall use its best efforts to have the Registration Statement declared
      effective by the SEC no later than the Effectiveness Deadline. The Company
      shall
      cause the Registration Statement to remain effective until all of the
      Registrable Securities have been sold or may be sold without volume restrictions
      pursuant to Rule 144(k), as determined by the counsel to the Company pursuant
      to
      a written opinion letter to such effect, addressed and acceptable to the
      Company’s transfer agent and the affected Holders (“Registration
      Period”).
      Prior
      to the filing of the Registration Statement with the SEC, the Company shall
      furnish a draft of the Registration Statement to the Buyers for their review
      and
      comment. The Buyers shall furnish comments on the Registration Statement to
      the
      Company within twenty-four (24) hours of the receipt thereof from the
      Company.

     

    Notwithstanding
      the foregoing, if the SEC prevents the Company from including any or all of
      the
      Registrable Securities on the Initial Registration Statement due to limitations
      on the use of Rule 415 for the resale of the Registrable Securities by the
      Holders, the Company shall seek to register on the Initial Registration
      Statement the maximum number of Registrable Securities as is permitted by the
      SEC, and, subject to this Section 2(a), the Company shall continue to use
      commercially reasonable efforts to register all remaining Registrable Securities
      as set forth in Section 3(c). In such event, the number of shares of Common
      Stock to be registered for each Holder in the Initial Registration Statement
      shall be reduced pro rata
      among
      all Holders and the Company shall register as many shares of Common Stock
      issuable upon conversion of the Convertible Debentures as it is permitted to
      register prior to including any shares of Common Stock issuable upon exercise
      of
      the Warrants. If
      the SEC, by written or oral comment or otherwise, limits the Company’s ability
      to file, or prohibits the filing of, a Registration Statement with respect
      to
      any or all the Registrable Securities which were not included in the Initial
      Registration Statement, it shall not be a breach or default by the Company
      under
      this Agreement and shall not be deemed a failure by the Company to use “best
      efforts” as set forth above or elsewhere in this
      Agreement.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (b)  Failure
      to File or Obtain Effectiveness of the Registration Statement.
      If: (i)
      a Registration Statement is not filed on or prior to its Filing Date (if the
      Company files a Registration Statement without affording the Holders the
      opportunity to review and comment on the same as required by Section 3(a),
      the
      Company shall not be deemed to have satisfied this clause (i)), or (ii) the
      Company fails to file with the SEC a request for acceleration in accordance
      with
      Rule 461 promulgated under the Securities Act, within five Trading Days of
      the
      date that the Company is notified (orally or in writing, whichever is earlier)
      by the SEC that a Registration Statement will not be “reviewed,” or not subject
      to further review, or (iii) a Registration Statement filed or required to be
      filed hereunder is not declared effective by the SEC by its Effectiveness
      Deadline, or (iv) after the effectiveness, a Registration Statement ceases
      for
      any reason to remain continuously effective as to all Registrable Securities
      for
      which it is required to be effective, or the Holders are otherwise not permitted
      to utilize the Prospectus therein to resell such Registrable Securities for
      more
      than 45 consecutive calendar days or more than an aggregate of 60 calendar
      days
      during any 12-month period (which need not be consecutive calendar days) (any
      such failure or breach being referred to as an “Event”),
      then
      in addition to any other rights the holders of the Convertible Debentures may
      have hereunder or under applicable law, on each such Event date and on each
      monthly anniversary of each such Event date (if the applicable Event shall
      not
      have been cured by such date) until the applicable Event is cured, the Company
      shall pay to each holder of Convertible Debentures an amount in cash, as partial
      liquidated damages (“Liquidated
      Damages”)
      and
      not as a penalty, equal to 1.0% of the aggregate purchase price paid by such
      holder pursuant to the Securities Purchase Agreement for any Convertible
      Debentures then held by such holder. The parties agree that (1) the Company
      shall not be liable for Liquidated Damages under this Agreement with respect
      to
      any Warrants or Warrant Shares and (2) the maximum aggregate Liquidated Damages
      payable to a holder of Convertible Debentures under this Agreement shall be
      twenty-four percent (12%) of the aggregate Purchase Price paid by such holder
      pursuant to the Securities Purchase Agreement. The partial Liquidated Damages
      pursuant to the terms hereof shall apply on a daily pro-rata basis for any
      portion of a month prior to the cure of an Event.

     

    (c)  Liquidated
      Damages.
      The
      Company and the Buyer hereto acknowledge and agree that the sums payable under
      subsection 2(b) above shall constitute liquidated damages and not penalties
      and
      are in addition to all other rights of the Buyer, including the right to call
      a
      default. The parties further acknowledge that (i) the amount of loss or damages
      likely to be incurred is incapable or is difficult to precisely estimate, (ii)
      the amounts specified in such subsections bear a reasonable relationship to,
      and
      are not plainly or grossly disproportionate to, the probable loss likely to
      be
      incurred in connection with any failure by the Company to obtain or maintain
      the
      effectiveness of a Registration Statement, (iii) one of the reasons for the
      Company and the Buyer reaching an agreement as to such amounts was the
      uncertainty and cost of litigation regarding the question of actual damages,
      and
      (iv) the Company and the Buyer are sophisticated business parties and have
      been
      represented by sophisticated and able legal counsel and negotiated this
      Agreement at arm’s length. 

     

    3.  RELATED
      OBLIGATIONS.

     

    (a)  The
      Company shall, not less than three (3) Trading Days prior to the filing of
      each
      Registration Statement and not less than one (1) Trading Day prior to the filing
      of any related amendments and supplements to all Registration Statements (except
      for annual reports on Form 10-K or Form 10-KSB), furnish to each Buyer copies
      of
      all such documents proposed to be filed, which documents (other than those
      incorporated or deemed to be incorporated by reference) will be subject to
      the
      reasonable and prompt review of such Buyers. 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (b)  The
      Company shall (i) prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      Prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the Securities Act, as
      may
      be necessary to keep such Registration Statement effective at all times during
      the Registration Period, and prepare and file with the SEC such additional
      Registration Statements in order to register for resale under the Securities
      Act
      all of the Registrable Securities; (ii) cause the related Prospectus to be
      amended or supplemented by any required Prospectus supplement (subject to the
      terms of this Agreement), and as so supplemented or amended to be filed pursuant
      to Rule 424; (iii) respond as promptly as reasonably possible to any comments
      received from the SEC with respect to a Registration Statement or any amendment
      thereto and as promptly as reasonably possible provide the Buyers true and
      complete copies of all correspondence from and to the SEC relating to a
      Registration Statement (provided that the Company may excise any information
      contained therein which would constitute material non-public information as
      to
      any Buyer which has not executed a confidentiality agreement with the Company);
      and (iv) comply with the provisions of the Securities Act with respect to the
      disposition of all Registrable Securities of the Company covered by such
      Registration Statement until such time as all of such Registrable Securities
      shall have been disposed of in accordance with the intended methods of
      disposition by the seller or sellers thereof as set forth in such Registration
      Statement. In the case of amendments and supplements to a Registration Statement
      which are required to be filed pursuant to this Agreement (including pursuant
      to
      this Section 3(b)) by reason of the Company’s filing a report on Form 10-KSB,
      Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange
      Act of 1934, as amended (the “Exchange
      Act”),
      the
      Company shall incorporate such report by reference into the Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC within 3 days in the case of supplements and within 30 days in the case
      of
      amendments from which the Exchange Act report is filed which created the
      requirement for the Company to amend or supplement the Registration Statement.
      

     

    (c)  To
      the
      extent that the Buyer holds any Registrable Securities that are prohibited
      from
      being included on a the initial Registration Statement or any other Registration
      Statement (the “Non-Registered
      Shares”)
      under
      Rule 415, as interpreted by the SEC, then the Company shall become obligated
      to
      file an additional Registration Statement (each, a “Subsequent
      Registration Statement”)
      on the
      first day after such Subsequent Registration Statement may be filed without
      objection by the SEC under Rule 415 (and such Registration Statement shall
      be
      filed within the timeframe set forth in Section 1(b))covering the resale by
      the
      Buyers of the maximum number of such Non-Registered Shares allowed under Rule
      415 as interpreted by the SEC.

     

    (d)  The
      Company shall furnish to each Buyer whose Registrable Securities are included
      in
      any Registration Statement, upon their request and without charge, (i) at least
      one (1) copy of such Registration Statement as declared effective by the SEC
      and
      any amendment(s) thereto, including financial statements but excluding
      schedules, all documents incorporated therein by reference and all exhibits
      (unless requested in writing to the Company by such Buyer), (ii) as many copies
      of the final prospectus included in such Registration Statement and all
      amendments and supplements thereto as such Buyer may reasonably request and
      (iii) such other documents as such Buyer may reasonably request from time to
      time in order to facilitate the disposition of the Registrable Securities owned
      by such Buyer.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (e)  The
      Company shall use its best efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under such other securities
      or
“blue sky” laws of such jurisdictions in the United States as any Buyer
      reasonably requests, (ii) prepare and file in those jurisdictions, such
      amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be necessary to maintain such registrations and qualifications
      in
      effect at all times during the Registration Period, and (iv) take all other
      actions reasonably necessary or advisable to qualify the Registrable Securities
      for sale in such jurisdictions; provided, however, that the Company shall not
      be
      required in connection therewith or as a condition thereto to (w) make any
      change to its articles of incorporation or by-laws, (x) qualify to do business
      in any jurisdiction where it would not otherwise be required to qualify but
      for
      this Section 3(d), (y) subject itself to general taxation in any such
      jurisdiction, or (z) file a general consent to service of process in any such
      jurisdiction. The Company shall promptly notify each Buyer who holds Registrable
      Securities of the receipt by the Company of any notification with respect to
      the
      suspension of the registration or qualification of any of the Registrable
      Securities for sale under the securities or “blue sky” laws of any jurisdiction
      in the United States or its receipt of actual notice of the initiation or threat
      of any proceeding for such purpose.

     

    (f)  As
      promptly as practicable after becoming aware of such event or development,
      the
      Company shall notify each Buyer in writing of the happening of any event as
      a
      result of which the Prospectus included in a Registration Statement, as then
      in
      effect, includes an untrue statement of a material fact or omission to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading (provided that in no event shall such notice contain any material,
      nonpublic information), and promptly prepare a supplement or amendment to such
      Registration Statement to correct such untrue statement or omission. The Company
      shall also promptly notify each Buyer in writing (i) when a Prospectus or any
      Prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to each Buyer by
      facsimile on the same day of such effectiveness), (ii) of any request by the
      SEC
      for amendments or supplements to a Registration Statement or related prospectus
      or related information, and (iii) of the Company’s reasonable determination
      that a post-effective amendment to a Registration Statement would be
      appropriate.

     

    (g)  The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction within the United States of America and, if such an order or
      suspension is issued, to obtain the withdrawal of such order or suspension
      at
      the earliest possible moment and to notify each Buyer who holds Registrable
      Securities being sold of the issuance of such order and the resolution thereof
      or its receipt of actual notice of the initiation or threat of any proceeding
      for such purpose.

     

    (h)  If,
      after
      the execution of this Agreement, a Buyer believes, after consultation with
      its
      legal counsel, that it could reasonably be deemed to be an underwriter of
      Registrable Securities, at the request of any Buyer, the Company shall furnish
      to such Buyer, on the date of the effectiveness of the Registration Statement
      and thereafter from time to time on such dates as a Buyer may reasonably request
      (i) a letter, dated such date, from the Company’s independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      and (ii) an opinion, dated as of such date, of counsel representing the Company
      for purposes of such Registration Statement, in form, scope and substance as
      is
      customarily given in an underwritten public offering, addressed to the
      Buyers.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (i)  If,
      after
      the execution of this Agreement, a Buyer believes, after consultation with
      its
      legal counsel, that it could reasonably be deemed to be an underwriter of
      Registrable Securities, at the request of any Buyer, the Company shall make
      available for inspection by (i) any Buyer and (ii) one (1) firm of
      accountants or other agents retained by the Buyers (collectively, the
“Inspectors”)
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree,
      and
      each Buyer hereby agrees, to hold in strict confidence and shall not make any
      disclosure (except to a Buyer) or use any Record or other information which
      the
      Company determines in good faith to be confidential, and of which determination
      the Inspectors are so notified, unless (a) the disclosure of such Records is
      necessary to avoid or correct a misstatement or omission in any Registration
      Statement or is otherwise required under the Securities Act, (b) the release
      of
      such Records is ordered pursuant to a final, non-appealable subpoena or order
      from a court or government body of competent jurisdiction, or (c) the
      information in such Records has been made generally available to the public
      other than by disclosure in violation of this or any other agreement of which
      the Inspector and the Buyer has knowledge. Each Buyer agrees that it shall,
      upon
      learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential.

     

    (j)  The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Buyer provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning a Buyer is sought in or by a court or governmental
      body of competent jurisdiction or through other means, give prompt written
      notice to such Buyer and allow such Buyer, at the Buyer’s expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

     

    (k)  The
      Company shall use its best efforts either to cause all the Registrable
      Securities covered by a Registration Statement (i) to be listed on each
      securities exchange on which securities of the same class or series issued
      by
      the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange or (ii) the
      inclusion for quotation on the National Association of Securities Dealers,
      Inc.
      OTC Bulletin Board for such Registrable Securities. The Company shall pay all
      fees and expenses in connection with satisfying its obligation under this
      Section 3(k).

     

    (l)  The
      Company shall cooperate with each Buyer who holds Registrable Securities being
      offered and, to the extent applicable, to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Buyers may reasonably request and registered in such names as the
      Buyers may request.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (m)  The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

     

    (n)  The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with the provisions
      of
      Rule 158 under the Securities Act) covering a twelve (12) month period beginning
      not later than the first day of the Company’s fiscal quarter next following the
      effective date of the Registration Statement. 

     

    (o)  The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

     

    (p)  Within
      two (2) business days after a Registration Statement which covers Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities (with copies to the Buyer whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      C.

     

    (q)  The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by each Buyer of Registrable Securities pursuant to
      a
      Registration Statement.

     

    4.  OBLIGATIONS
      OF THE BUYERS.

     

    (a)  Each
      Buyer agrees that, upon receipt of any notice from the Company of the happening
      of any event of the kind described in Section 3(f) such Buyer will immediately
      discontinue disposition of Registrable Securities pursuant to any Registration
      Statement covering such Registrable Securities until such Buyer’s receipt of the
      copies of the supplemented or amended prospectus contemplated by Section 3(f)
      or
      receipt of notice that no supplement or amendment is required. Notwithstanding
      anything to the contrary, the Company shall cause its transfer agent to deliver
      unlegended certificates for shares of Common Stock to a transferee of a Buyer
      in
      accordance with the terms of the Securities Purchase Agreement in connection
      with any sale of Registrable Securities with respect to which a Buyer has
      entered into a contract for sale prior to the Buyer’s receipt of a notice from
      the Company of the happening of any event of the kind described in Section
      3(f)
      and for which the Buyer has not yet settled.

     

    (b)  Each
      Buyer covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it or an exemption therefrom
      in connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5.  EXPENSES
      OF REGISTRATION.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    All
      expenses incurred in connection with registrations, filings or qualifications
      pursuant to Sections 2 and 3, including, without limitation, all registration,
      listing and qualifications fees, printers fees and reasonable legal and
      accounting fees shall be paid by the Company. 

     

    6.  INDEMNIFICATION.

     

    With
      respect to Registrable Securities which are included in a Registration Statement
      under this Agreement:

     

    (a)  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Buyer, the directors, officers, partners,
      employees, agents, representatives of, and each Person, if any, who controls
      any
      Buyer within the meaning of the Securities Act or the Exchange Act (each, an
      “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
      expenses, joint or several (collectively, “Claims”)
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“Indemnified
      Damages”),
      to
      which any of them may become subject, under the Securities Act, the Exchange
      Act
      or otherwise, insofar as such Claims (or actions or proceedings, whether
      commenced or threatened, in respect thereof) arise out of or are based upon:
      (i)
      any untrue statement or alleged untrue statement of a material fact in a
      Registration Statement or any post-effective amendment thereto, or the omission
      or alleged omission to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading; or (ii) any untrue
      statement or alleged untrue statement of a material fact contained in any final
      prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading (the matters in the foregoing clauses (i) and (ii) being,
      collectively, “Violations”).
      The
      Company shall reimburse the Buyers and each such controlling person promptly
      as
      such expenses are incurred and are due and payable, for any reasonable legal
      fees or disbursements or other reasonable expenses incurred by them in
      connection with investigating or defending any such Claim. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified
      Person arising out of or based upon a Violation which occurs in reliance upon
      and in conformity with information furnished in writing to the Company by such
      Indemnified Person expressly for use in connection with the preparation of
      the
      Registration Statement or any such amendment thereof or supplement thereto;
      (y)
      shall not be available to the extent such Claim is based on a failure of the
      Buyer to deliver or to cause to be delivered the prospectus made available
      by
      the Company, if such prospectus was timely made available by the Company
      pursuant to Section 3(c); and (z) shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of the Company, which consent shall not be unreasonably withheld. Such
      indemnity shall remain in full force and effect regardless of any investigation
      made by or on behalf of the Indemnified Person and shall survive the transfer
      of
      the Registrable Securities by the Buyers pursuant to Section 9
      hereof.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (b)  In
      connection with a Registration Statement, each Buyer agrees to severally and
      not
      jointly indemnify, hold harmless and defend, to the same extent and in the
      same
      manner as is set forth in Section 6(a), the Company, each of its directors,
      each
      of its officers, employees, representatives, or agents and each Person, if
      any,
      who controls the Company within the meaning of the Securities Act or the
      Exchange Act (each an “Indemnified
      Party”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the Securities Act, the Exchange Act or otherwise, insofar as
      such Claim or Indemnified Damages arise out of or is based upon any Violation,
      in each case to the extent, and only to the extent, that such Violation occurs
      in reliance upon and in conformity with written information furnished to the
      Company by such Buyer expressly for use in connection with such Registration
      Statement; and, subject to Section 6(d), such Buyer will reimburse any legal
      or
      other expenses reasonably incurred by them in connection with investigating
      or
      defending any such Claim; provided, however, that the indemnity agreement
      contained in this Section 6(b) and the agreement with respect to contribution
      contained in Section 7 shall not apply to amounts paid in settlement of any
      Claim if such settlement is effected without the prior written consent of such
      Buyer, which consent shall not be unreasonably withheld; provided, further,
      however, that the Buyer shall be liable under this Section 6(b) for only that
      amount of a Claim or Indemnified Damages as does not exceed the net proceeds
      to
      such Buyer as a result of the sale of Registrable Securities pursuant to such
      Registration Statement. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of such Indemnified Party
      and shall survive the transfer of the Registrable Securities by the Buyers
      pursuant to Section 9. Notwithstanding anything to the contrary contained
      herein, the indemnification agreement contained in this Section 6(b) with
      respect to any prospectus shall not inure to the benefit of any Indemnified
      Party if the untrue statement or omission of material fact contained in the
      prospectus was corrected and such new prospectus was delivered to each Buyer
      prior to such Buyer’s use of the prospectus to which the Claim
      relates.

     

    (c)  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one (1) counsel for such Indemnified Person or Indemnified Party
      to be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      fully apprised at all times as to the status of the defense or any settlement
      negotiations with respect thereto. No indemnifying party shall be liable for
      any
      settlement of any action, claim or proceeding effected without its prior written
      consent; provided, however, that the indemnifying party shall not unreasonably
      withhold, delay or condition its consent. No indemnifying party shall, without
      the prior written consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (d)  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others, and (ii) any liabilities the
      indemnifying party may be subject to pursuant to the law.

     

    7.  CONTRIBUTION.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no seller of
      Registrable Securities guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any seller of Registrable Securities who was not guilty of
      fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
      Securities shall be limited in amount to the net amount of proceeds received
      by
      such seller from the sale of such Registrable Securities.

     

    8.  REPORTS
      UNDER THE EXCHANGE ACT.

     

    With
      a
      view to making available to the Buyers the benefits of Rule 144 promulgated
      under the Securities Act or any similar rule or regulation of the SEC that
      may
      at any time permit the Buyers to sell securities of the Company to the public
      without registration (“Rule
      144”)
      the
      Company agrees to:

     

    (a)  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    (b)  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the Securities Act and the Exchange Act so long as the Company
      remains subject to such requirements (it being understood that nothing herein
      shall limit the Company’s obligations under Section 4(c) of the Securities
      Purchase Agreement) and the filing of such reports and other documents as are
      required by the applicable provisions of Rule 144; and

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (c)  furnish
      to each Buyer so long as such Buyer owns Registrable Securities, promptly upon
      request, (i) a written statement by the Company that it has complied with the
      reporting requirements of Rule 144, the Securities Act and the Exchange Act,
      (ii) a copy of the most recent annual or quarterly report of the Company and
      such other reports and documents so filed by the Company, and (iii) such other
      information as may be reasonably requested to permit the Buyers to sell such
      securities pursuant to Rule 144 without registration.

     

    9.  AMENDMENT
      OF REGISTRATION RIGHTS.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and Buyers who
      then
      hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
      or
      waiver effected in accordance with this Section 9 shall be binding upon
      each Buyer and the Company. No such amendment shall be effective to the extent
      that it applies to fewer than all of the holders of the Registrable Securities.
      No consideration shall be offered or paid to any Person to amend or consent
      to a
      waiver or modification of any provision of any of this Agreement unless the
      same
      consideration also is offered to all of the parties to this
      Agreement.

     

    10.  MISCELLANEOUS.

     

    (a)  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities or owns the right to
      receive the Registrable Securities. If the Company receives conflicting
      instructions, notices or elections from two (2) or more Persons with respect
      to
      the same Registrable Securities, the Company shall act upon the basis of
      instructions, notice or election received from the registered owner of such
      Registrable Securities.

     

    (b)  No
      Piggyback on Registrations.
      Except
      as set forth on Schedule
      10(b)
      attached
      hereto, neither the Company nor any of its security holders (other than the
      Buyers in such capacity pursuant hereto) may include securities of the Company
      in the initial Registration Statement other than the Registrable Securities.
      The
      Company shall not file any other registration statements until the Initial
      Registration Statement required hereunder is declared effective by the SEC,
      provided that this Section 10(b) shall not prohibit the Company from filing
      amendments to registration statements already filed. 

     

    (c)  Piggy-Back
      Registrations.
      If at
      any time during the Registration Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the SEC a registration statement relating
      to
      an offering for its own account or the account of others under the Securities
      Act of any of its equity securities, other than on Form S-4 or Form S-8 (each
      as
      promulgated under the Securities Act) or their then equivalents relating to
      equity securities to be issued solely in connection with any acquisition of
      any
      entity or business or equity securities issuable in connection with the stock
      option or other employee benefit plans, then the Company shall send to each
      Buyer a written notice of such determination and, if within fifteen (15) days
      after the date of such notice, any such Buyer shall so request in writing,
      the
      Company shall include in such registration statement all or any part of such
      Registrable Securities such Buyer requests to be registered; provided,
      however,
      that,
      the Company shall not be required to register any Registrable Securities
      pursuant to this Section 10(c) that are eligible for resale pursuant to Rule
      144(k) promulgated under the Securities Act or that are the subject of a then
      effective Registration Statement.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (d)  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) business day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

     

    
      	
              If
                to the Company, to:

            	
              Pure
                Biofuels Corp.

            
	 	 	
              Av.
                Canaval y Moreyra 380 of 402

            
	 	 	
              San
                Isidro, Lima 

            
	 	 	
              Peru

            
	 	 	
              Attention: Luis
                Goyzueta

            
	 	 	
              Telephone: +511-221-7365

            
	 	 	 
	
              With
                Copy to:

            	 	
              ARC
                Investment Partners, LLC

            
	 	 	
              9440
                Little Santa Monica Blvd., Suite 400

            
	 	 	
              Beverly
                Hills, CA 90210

            
	 	 	
              Attention:
                 Steven
                Magami

            
	 	 	
              Telephone: 310-402-5901

            
	 	 	
              Facsimile: 310-402-5947

            
	 	 	 
	
              And:

            	 	
              DLA
                Piper US LLP

            
	 	 	
              1251
                Avenue of the Americas

            
	 	 	
              New
                York, NY 10020-1104

            
	 	 	
              Attn:
                Daniel I. Goldberg, Esq.

            
	 	 	
              Telephone:
                212-335-4966

            
	 	 	
              Facsimile:
                212-884-8466

            

    

     

    If
      to an
      Buyer, to its address and facsimile number on the Schedule of Buyers attached
      hereto, with copies to such Buyer’s representatives as set forth on the Schedule
      of Buyers or to such other address and/or facsimile number and/or to the
      attention of such other person as the recipient party has specified by written
      notice given to each other party five (5) days prior to the effectiveness of
      such change. Written confirmation of receipt (A) given by the recipient of
      such
      notice, consent, waiver or other communication, (B) mechanically or
      electronically generated by the sender’s facsimile machine containing the time,
      date, recipient facsimile number and an image of the first page of such
      transmission or (C) provided by a courier or overnight courier service shall
      be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (e)  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    (f)  The
      laws
      of the State of New Jersey shall govern all issues concerning the relative
      rights of the Company and the Buyers as its stockholders. All other questions
      concerning the construction, validity, enforcement and interpretation of this
      Agreement shall be governed by the internal laws of the State of New Jersey,
      without giving effect to any choice of law or conflict of law provision or
      rule
      (whether of the State of New Jersey or any other jurisdiction) that would cause
      the application of the laws of any jurisdiction other than the State of New
      Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
      of the Superior Courts of the State of New Jersey, sitting in Hudson County,
      New
      Jersey and federal courts for the District of New Jersey sitting Newark, New
      Jersey, for the adjudication of any dispute hereunder or in connection herewith
      or with any transaction contemplated hereby or discussed herein, and hereby
      irrevocably waives, and agrees not to assert in any suit, action or proceeding,
      any claim that it is not personally subject to the jurisdiction of any such
      court, that such suit, action or proceeding is brought in an inconvenient forum
      or that the venue of such suit, action or proceeding is improper. Each party
      hereby irrevocably waives personal service of process and consents to process
      being served in any such suit, action or proceeding by mailing a copy thereof
      to
      such party at the address for such notices to it under this Agreement and agrees
      that such service shall constitute good and sufficient service of process and
      notice thereof. Nothing contained herein shall be deemed to limit in any way
      any
      right to serve process in any manner permitted by law. If any provision of
      this
      Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
      or unenforceability shall not affect the validity or enforceability of the
      remainder of this Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other jurisdiction.
      EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
      TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY. 

     

    (g)  This
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.

     

    (h)  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (i)  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (j)  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (k)  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party.

     

    (l)  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

     

    
      	 	 	 
	 
 	 
 	
              COMPANY:

              PURE
                BIOFUELS CORP.

            
	 	 	 
	 	 	By: /s/
              Luis Goyzueta
	 	
              
                

              

              Name: Luis
                Goyzueta

            
	 	
              Title: CEO

            

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

     

    
      	 	 	 
	 
 	 
 	
              BUYER:

              CORNELL
                CAPITAL PARTNERS, L.P.

            
	 	 	 
	 	 	
              By: Yorkville
                Advisors, LLC

            
	 	 	
              Its: Investment
                Manager

            
	 	 	 
	 	 	By:
              /s/ Gerald Eicke
	 	
              
                

              

              Name:
                Gerald Eicke

            
	 	
              Its: Managing
                Partner

            

    

     

    
      
         

      

      
        17

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