Document:

Unassociated Document

    Exhibit
      10.5

    

     

    SECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT
      (the
“Agreement”), is
      entered into and made effective as of April 19, 2007, by and between
PURE
      BIOFUELS CORPORATION, a
      Nevada
      corporation with its principal place of business located at 9440 Little Santa
      Monica Blvd., Suite 400, Beverly Hills, CA 90210 (the “Parent”),
      and
      the each subsidiary of the Parent listed on Schedule I attached hereto (each
      a
“Subsidiary,”
and
      collectively and together with the Parent, the “Company”),
      in
      favor of the BUYER(S)
      (the
“Secured
      Party”)
      listed
      on Schedule I attached to the Securities Purchase Agreement (the “Securities
      Purchase Agreement”)
      dated
      the date hereof between the Company and the Secured Party.

     

    WHEREAS,
      The
      Parent shall issue and sell to the Secured Party, as provided in the Securities
      Purchase Agreement, and the Secured Party shall purchase, up to Three Million
      Dollars ($3,000,000) of secured convertible debentures (the “Convertible
      Debentures”),
      which
      shall be convertible into shares of the Parent’s common stock, par value $0.001,
      in the respective amounts set forth opposite each Buyer(s) name on
      Schedule I attached to the Securities Purchase Agreement;

     

    WHEREAS,
      to
      induce
      the Secured Party to enter into the transaction contemplated by the Securities
      Purchase Agreement, the Convertible Debentures, the Investor Registration Rights
      Agreement of even date herewith between the Parent and the Secured Party (the
      “Investor
      Registration Rights Agreement”),
      and
      the Irrevocable Transfer Agent Instructions among the Parent, the Secured Party,
      the Parent’s transfer agent, and David Gonzalez, Esq. (the “Transfer
      Agent Instructions”)
      (collectively referred to as the “Transaction
      Documents”),
      each
      Company hereby grants to the Secured Party a security interest in and to the
      pledged property of each Company identified on Exhibit
      A
      hereto
      (collectively referred to as the “Pledged
      Property”)
      to
      secure all of the Obligations (as defined below).

     

    NOW,
      THEREFORE, in
      consideration of the promises and the mutual covenants herein contained, and
      for
      other good and valuable consideration, the adequacy and receipt of which are
      hereby acknowledged, the parties hereto hereby agree as follows:

     

    ARTICLE
      1.

     

    DEFINITIONS
      AND INTERPRETATIONS

     

    Section
      1.1. Recitals.
      

     

    The
      above
      recitals are true and correct and are incorporated herein, in their entirety,
      by
      this reference.

     

    Section
      1.2. Interpretations.
      

     

    Nothing
      herein expressed or implied is intended or shall be construed to confer upon
      any
      person other than the Secured Party any right, remedy or claim under or by
      reason hereof.

     

    
      
        
        

      

      
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    Section
      1.3. Obligations
      Secured.

     

    The
      security interest created hereby in the Pledged Property constitutes continuing
      collateral security for all of the obligations of the Parent now existing or
      hereinafter incurred to the Buyers, whether oral or written and whether arising
      before, on or after the date hereof including, without limitation following
      obligations (collectively, the “Obligations”):

    

    (a)
      for
      so long as the Convertible Debentures are outstanding, the payment by the
      Parent, as and when due and payable (by scheduled maturity, acceleration, demand
      or otherwise), of all amounts from time to time owing by it in respect of the
      Securities Purchase Agreement, the Convertible Debentures and the other
      Transaction Documents; and

    

    (b)
      for
      so long as the Convertible Debentures are outstanding, the due performance
      and
      observance by the Parent of all of its other obligations from time to time
      existing in respect of any of the Transaction Documents, including without
      limitation, the Parent’s obligations with respect to any conversion or
      redemption rights of the Secured Party under the Convertible
      Debentures.

    

    ARTICLE
      2.

     

    PLEDGED
      PROPERTY; EVENT OF DEFAULT

     

    Section
      2.1. Pledged
      Property.

     

    (a) As
      collateral security for all of the Obligations, the Company hereby pledges
      to
      the Secured Party, and creates in the Secured Party for its benefit, a
      continuing security interest in and to all of the Pledged Property whether
      now
      owned or hereafter acquired. 

     

    (b) Without
      limiting the generality of the foregoing, as additional security for the payment
      and performance of the Obligations, each Company hereby grants to the Secured
      Party a continuing security interest in, and hereby collaterally assigns to
      the
      Secured Party, all of such Company’s right, title and interest in and to each
      Deposit Account (as defined below) and in and to any deposits or other sums
      at
      any time credited to each such Deposit Account. In connection with the
      foregoing, each Company hereby authorizes and directs each bank or other
      depository institution which maintains any Deposit Account to pay or deliver
      to
      the Secured Party upon the Secured Party’s written demand thereof made at any
      time after the occurrence of an Event of Default has occurred all balances
      in
      each Deposit Account with such depository for application to the Obligations
      then outstanding.

     

    (c) Simultaneously
      with the execution and delivery of this Agreement, the Company shall make,
      execute, acknowledge, file, record and deliver to the Secured Party any
      documents reasonably requested by the Secured Party to perfect its security
      interest in the Pledged Property. Simultaneously with the execution and delivery
      of this Agreement, the Company shall make, execute, acknowledge and deliver
      to
      the Secured Party such documents and instruments, including, without limitation,
      financing statements, certificates, affidavits and forms as may, in the Secured
      Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or
      to continue and preserve, the security interest of the Secured Party in the
      Pledged Property, and the Secured Party shall hold such documents and
      instruments as secured party, subject to the terms and conditions contained
      herein.

     

    
      
        
        

      

      
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    Section
      2.2. Event
      of Default

     

    An
      “Event
      of Default”
shall
      be deemed to have occurred under this Agreement upon an Event of Default under
      and as defined in the Convertible Debentures.

     

    Section
      2.3. Certain
      Limited Exclusions

     

    (a) Notwithstanding
      anything herein to the contrary, in no event shall the security interest granted
      under this Agreement attach to (i) any lease, license, instrument, document,
      contract, property rights or agreement to which any Company is a party, or
      any
      of its rights or interests thereunder, if and for so long as the grant of such
      security interest shall constitute or result in: (A) the abandonment,
      invalidation or unenforceability of any right, title or interest of such Company
      therein or (B) a breach or termination pursuant to the terms of, or a default
      under, any such lease, license, instrument, document, contract property rights
      or agreement (other than to the extent that any such term would be rendered
      ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC or
      the
      Uniform Commercial Code in effect in any relevant jurisdiction or any other
      Requirement of Law or principle of equity), provided,
      however,
      that such security interest shall attach immediately at such time as the
      condition causing such abandonment, invalidation or unenforceability shall
      be
      remedied and, to the extent severable, shall attach immediately to any portion
      of such lease, license, contract, property rights or agreement that does not
      result in any of the consequences specified in (A) or (B) including any proceeds
      of such lease, license, contract, property rights or agreement; or (ii) any
      property or asset to the extent that such grant of a security interest is
      prohibited by any Law or requires a consent not obtained of any governmental
      authority pursuant to such Law (other than to the extent that any such term
      would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409
      of the UCC or the Uniform Commercial Code in effect in any relevant jurisdiction
      or any other Requirement of Law or principles of equity).

    

    (b) It
      is understood that the security interests created hereby shall not prevent
      the
      Company from using the Pledged Property in the ordinary course of business
      for
      purposes not inconsistent with this Agreement and the other Transaction
      Documents.

    

     

    ARTICLE
      3.

     

    ATTORNEY-IN-FACT;
      PERFORMANCE

     

    Section
      3.1. Secured
      Party Appointed Attorney-In-Fact.

     

    Upon
      the
      occurrence and during the continuance of an Event of Default: (a) the Company
      hereby appoints the Secured Party as its attorney-in-fact, with full authority
      in the place and stead of the Company and in the name of the Company or
      otherwise, from time to time in the Secured Party’s discretion to take any
      action and to execute any instrument which the Secured Party may reasonably
      deem
      necessary to accomplish the purposes of this Agreement, including, without
      limitation, to receive and collect all instruments made payable to the Company
      representing any payments in respect of the Pledged Property or any part thereof
      and to give full discharge for the same; (b) the Secured Party may demand,
      collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize
      on the Pledged Property as and when the Secured Party may determine, and (c)
      to
      facilitate collection, the Secured Party may notify account debtors and obligors
      on any Pledged Property to make payments directly to the Secured
      Party.

     

    
      
        
        

      

      
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    Section
      3.2. Secured
      Party May Perform.

     

    If
      the
      Company fails to perform any agreement contained herein, the Secured Party,
      at
      its option, may itself perform, or cause performance of, such agreement, and
      the
      expenses of the Secured Party incurred in connection therewith shall be included
      in the Obligations secured hereby and payable by the Company under
      Section 8.3.

     

    ARTICLE
      4.

     

    REPRESENTATIONS
      AND WARRANTIES

     

    Section
      4.1. Authorization;
      Enforceability.

     

    Each
      of
      the parties hereto represents and warrants that it has taken all action
      necessary to authorize the execution, delivery and performance of this Agreement
      and the transactions contemplated hereby; and upon execution and delivery,
      this
      Agreement shall constitute a valid and binding obligation of the respective
      party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
      and similar laws affecting creditors’ rights or by the principles governing the
      availability of equitable remedies.

     

    Section
      4.2. Ownership
      of Pledged Property.

     

    The
      Company represents and warrants that it is the legal and beneficial owner of
      the
      Pledged Property free and clear of any lien, security interest, option or other
      charge or encumbrance (each, a “Lien”) except for the security interest created
      by this Agreement and other Permitted Liens. For purposes of this Agreement,
      “Permitted Liens” means: (1) the security interest created by this Agreement,
      (2) existing Liens disclosed by the Company to the Secured Party; (3) inchoate
      Liens for taxes, assessments or governmental charges or levies not yet due,
      as
      to which the grace period, if any, related thereto has not yet expired, or
      being
      contested in good faith and by appropriate proceedings for which adequate
      reserves have been established in accordance with GAAP; (4) Liens of carriers,
      materialmen, warehousemen, mechanics and landlords and other similar Liens
      which
      secure amounts which are not yet overdue by more than 60 days or which are
      being
      contested in good faith by appropriate proceedings; (5) licenses, sublicenses,
      leases or subleases granted to other Persons not materially interfering with
      the
      conduct of the business of the Company; (6) Liens securing capitalized lease
      obligations and purchase money indebtedness incurred solely for the purpose
      of
      financing an acquisition or lease; (7) easements, rights-of-way, restrictions,
      encroachments, municipal zoning ordinances and other similar charges or
      encumbrances, and minor title deficiencies, in each case not securing debt
      and
      not materially interfering with the conduct of the business of the Company
      and
      not materially detracting from the value of the property subject thereto; (8)
      Liens arising out of the existence of judgments or awards which judgments or
      awards do not constitute an Event of Default; (9) Liens incurred in the ordinary
      course of business in connection with workers compensation claims, unemployment
      insurance, pension liabilities and social security benefits and Liens securing
      the performance of bids, tenders, leases and contracts in the ordinary course
      of
      business, statutory obligations, surety bonds, performance bonds and other
      obligations of a like nature (other than appeal bonds) incurred in the ordinary
      course of business (exclusive of obligations in respect of the payment for
      borrowed money); (10) Liens in favor of a banking institution arising by
      operation of law encumbering deposits (including the right of set-off) and
      contractual set-off rights held by such banking institution and which are within
      the general parameters customary in the banking industry and only burdening
      deposit accounts or other funds maintained with a creditor depository
      institution; (11) usual and customary set-off rights in leases and other
      contracts; and (12) escrows in connection with acquisitions and
      dispositions.

     

    
      
        
        

      

      
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    ARTICLE
      5.

     

    DEFAULT;
      REMEDIES; SUBSTITUTE COLLATERAL

     

    Section
      5.1 Method
      of Realizing Upon the Pledged Property: Other Remedies.

     

    If
      any
      Event of Default shall have occurred and be continuing:

     

    (a) The
      Secured Party may exercise in respect of the Pledged Property, in addition
      to
      any other rights and remedies provided for herein or otherwise available to
      it,
      all of the rights and remedies of a secured party upon default under the Uniform
      Commercial Code (whether or not the Uniform Commercial Code applies to the
      affected Pledged Property), and also may (i) take absolute control of the
      Pledged Property, including, without limitation, transfer into the Secured
      Party's name or into the name of its nominee or nominees (to the extent the
      Secured Party has not theretofore done so) and thereafter receive, for the
      benefit of the Secured Party, all payments made thereon, give all consents,
      waivers and ratifications in respect thereof and otherwise act with respect
      thereto as though it were the outright owner thereof, (ii) require the
      Company to assemble all or part of the Pledged Property as directed by the
      Secured Party and make it available to the Secured Party at a place or places
      to
      be designated by the Secured Party that is reasonably convenient to both
      parties, and the Secured Party may enter into and occupy any premises owned
      or
      leased by the Company where the Pledged Property or any part thereof is located
      or assembled for a reasonable period in order to effectuate the Secured Party's
      rights and remedies hereunder or under law, without obligation to the Company
      in
      respect of such occupation, and (iii) without notice except as specified
      below and without any obligation to prepare or process the Pledged Property
      for
      sale, (A) sell the Pledged Property or any part thereof in one or more
      parcels at public or private sale, at any of the Secured Party's offices or
      elsewhere, for cash, on credit or for future delivery, and at such price or
      prices and upon such other terms as the Secured Party may deem commercially
      reasonable and/or (B) lease, license or dispose of the Pledged Property or
      any part thereof upon such terms as the Secured Party may deem commercially
      reasonable. The Company agrees that, to the extent notice of sale or any other
      disposition of the Pledged Property shall be required by law, at least ten
      (10)
      days' notice to the Company of the time and place of any public sale or the
      time
      after which any private sale or other disposition of the Pledged Property is
      to
      be made shall constitute reasonable notification. The Secured Party shall not
      be
      obligated to make any sale or other disposition of any Pledged Property
      regardless of notice of sale having been given. The Secured Party may adjourn
      any public or private sale from time to time by announcement at the time and
      place fixed therefor, and such sale may, without further notice, be made at
      the
      time and place to which it was so adjourned. The Company hereby waives any
      claims against the Secured Party arising by reason of the fact that the price
      at
      which the Pledged Property may have been sold at a private sale was less than
      the price which might have been obtained at a public sale or was less than
      the
      aggregate amount of the Obligations, even if the Secured Party accepts the
      first
      offer received and does not offer such Pledged Property to more than one
      offeree, and waives all rights that the Company may have to require that all
      or
      any part of such Pledged Property be marshaled upon any sale (public or private)
      thereof. The Company hereby acknowledges that (i) any such sale of the
      Pledged Property by the Secured Party may be made without warranty,
      (ii) the Secured Party may specifically disclaim any warranties of title,
      possession, quiet enjoyment or the like, and (iii) such actions set forth
      in clauses (i) and (ii) above shall not adversely affect the commercial
      reasonableness of any such sale of Pledged Property. 

     

    
      
        
        

      

      
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    (b) Any
      cash
      held by the Secured Party as Pledged Property and all cash proceeds received
      by
      the Secured Party in respect of any sale of or collection from, or other
      realization upon, all or any part of the Pledged Property shall be applied
      (after payment of any amounts payable to the Secured Party pursuant to Section
      8.3 hereof) by the Secured Party against, all or any part of the Obligations
      in
      such order as the Secured Party shall elect, consistent with the provisions
      of
      the Securities Purchase Agreement. Any surplus of such cash or cash proceeds
      held by the Secured Party and remaining after the indefeasible payment in full
      in cash of all of the Obligations shall be paid over to whomsoever shall be
      lawfully entitled to receive the same or as a court of competent jurisdiction
      shall direct.

     

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

     

    (d) The
      Company hereby acknowledges that if the Secured Party complies with any
      applicable state, provincial, or federal law requirements in connection with
      a
      disposition of the Pledged Property, such compliance will not adversely affect
      the commercial reasonableness of any sale or other disposition of the Pledged
      Property.

     

    (e) The
      Secured Party shall not be required to marshal any present or future collateral
      security (including, but not limited to, this Agreement and the Pledged
      Property) for, or other assurances of payment of, the Obligations or any of
      them
      or to resort to such collateral security or other assurances of payment in
      any
      particular order, and all of the Secured Party's rights hereunder and in respect
      of such collateral security and other assurances of payment shall be cumulative
      and in addition to all other rights, however existing or arising. To the extent
      that the Company lawfully may, the Company hereby agrees that it will not invoke
      any law relating to the marshaling of collateral which might cause delay in
      or
      impede the enforcement of the Secured Party's rights under this Agreement or
      under any other instrument creating or evidencing any of the Obligations or
      under which any of the Obligations is outstanding or by which any of the
      Obligations is secured or payment thereof is otherwise assured, and, to the
      extent that it lawfully may, the Company hereby irrevocably waives the benefits
      of all such laws.

     

    
      
        
        

      

      
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    Section
      5.2 Duties
      Regarding Pledged Property.

     

    The
      Secured Party shall have no duty as to the collection or protection of the
      Pledged Property or any income thereon or as to the preservation of any rights
      pertaining thereto, beyond the safe custody and reasonable care of any of the
      Pledged Property actually in the Secured Party’s possession.

     

    ARTICLE
      6.

     

    AFFIRMATIVE
      COVENANTS

     

    The
      Company covenants and agrees that, from the date hereof and until the
      Obligations have been fully paid and satisfied or the Convertible Debentures
      have been fully converted, unless the Secured Party shall consent otherwise
      in
      writing (as provided in Section 8.4 hereof):

     

    Section
      6.1. Existence,
      Properties, Etc.

     

    (a) The
      Company shall do, or cause to be done, all things, or proceed with due diligence
      with any actions or courses of action, that may be reasonably necessary
      (i) to maintain Company’s due organization, valid existence and good
      standing under the laws of its state of incorporation, and (ii) to preserve
      and keep in full force and effect all qualifications, licenses and registrations
      in those jurisdictions in which the failure to do so could have a Material
      Adverse Effect (as defined below); and (b) the Company shall not do, or
      cause to be done, any act impairing the Company’s corporate power or authority
      (i) to carry on the Company’s business as now conducted, and (ii) to
      execute or deliver this Agreement or any other document delivered in connection
      herewith, including, without limitation, any UCC-1 Financing Statements required
      by the Secured Party (which other loan instruments collectively shall be
      referred to as the “Loan
      Instruments”) to
      which it is or will be a party, or perform any of its obligations hereunder
      or
      thereunder. For purpose of this Agreement, the term “Material
      Adverse Effect”
shall
      mean any material and adverse affect as determined by Secured Party in its
      reasonable discretion, whether individually or in the aggregate, upon
      (a) the Company’s assets, business, operations, properties or condition,
      financial or otherwise; (b) the Company’s ability to make payment as and
      when due of all or any part of the Obligations; or (c) the Pledged
      Property.

     

    Section
      6.2. Financial
      Statements and Reports.

     

    The
      Company shall furnish to the Secured Party within a reasonable time such
      financial data as the Secured Party may reasonably request.

     

    Section
      6.3. Accounts
      and Reports.

     

    The
      Company shall maintain a standard system of accounting in accordance with
      generally accepted accounting principles consistently applied (“GAAP”) and
      provide, at its sole expense, to the Secured Party the following:

     

    (a) as
      soon
      as available, a copy of any notice or other communication alleging any
      nonpayment or other material breach or default, or any foreclosure or other
      action respecting any material portion of its assets and properties, received
      respecting any of the indebtedness of the Company in excess of $500,000 (other
      than the Obligations), or any demand or other request for payment under any
      guaranty, assumption, purchase agreement or similar agreement or arrangement
      respecting the indebtedness or obligations of others in excess of $500,000;
      and

     

    
      
        
        

      

      
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    (b) within
      fifteen (15) days after the making of each submission or filing, a copy of
      any report, financial statement, notice or other document, whether periodic
      or
      otherwise, submitted to the shareholders of the Company, or submitted to or
      filed by the Company with any governmental authority involving or affecting
      (i)
      the Company that could reasonably be expected to have a Material Adverse Effect;
      (ii) the Obligations; (iii) any part of the Pledged Property; or
      (iv) any of the transactions contemplated in this Agreement or the Loan
      Instruments (except, in each case, to the extent any such submission, filing,
      report, financial statement, notice or other document is posted on EDGAR
      Online).

     

    Section
      6.4. Maintenance
      of Books and Records; Inspection.

     

    The
      Company shall maintain its books, accounts and records in accordance with GAAP,
      and permit the Secured Party, its officers and employees and any professionals
      designated by the Secured Party in writing, at any time during normal business
      hours and upon reasonable notice to visit and inspect any of its properties
      (including but not limited to the collateral security described in the
      Transaction Documents and/or the Loan Instruments), corporate books and
      financial records, and to discuss its accounts, affairs and finances with any
      employee, officer or director thereof (it being agreed that, unless an Event
      of
      Default shall have occurred and be continuing, there shall be no more than
      two
      (2) such visits and inspections in any Fiscal Year).

     

    Section
      6.5. Maintenance
      and Insurance.

     

    (a) The
      Company shall maintain or cause to be maintained, at its own expense, all of
      its
      material assets and properties in good working order and condition, ordinary
      wear and tear excepted, making all necessary repairs thereto and renewals and
      replacements thereof.

     

    (b) The
      Company shall maintain or cause to be maintained, at its own expense, insurance
      in form, substance and amounts (including deductibles), which the Company deems
      reasonably necessary to the Company’s business, (i) adequate to insure all
      assets and properties of the Company of a character usually insured by persons
      engaged in the same or similar business against loss or damage resulting from
      fire or other risks included in an extended coverage policy; (ii) against
      public liability and other tort claims that may be incurred by the Company;
      (iii) as may be required by the Transaction Documents and/or applicable law
      and (iv) as may be reasonably requested by Secured Party, all with financially
      sound and reputable insurers.

     

    Section
      6.6. Contracts
      and Other Collateral.

     

    The
      Company shall perform all of its obligations under or with respect to each
      instrument, receivable, contract and other intangible included in the Pledged
      Property to which the Company is now or hereafter will be party on a timely
      basis and in the manner therein required, including, without limitation, this
      Agreement, except to the extent the failure to so perform such obligations
      would
      not reasonably be expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
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    Section
      6.7. Defense
      of Collateral, Etc.

     

    The
      Company shall defend and enforce its right, title and interest in and to any
      part of: (a) the Pledged Property; and (b) if not included within the
      Pledged Property, those assets and properties whose loss would reasonably be
      expected to have a Material Adverse Effect, each against all manner of claims
      and demands on a timely basis to the full extent permitted by applicable law
      (other than any such claims and demands by holders of Permitted
      Liens).

     

    Section
      6.8. Taxes
      and Assessments.

     

    The
      Company shall (a) file all material tax returns and appropriate schedules
      thereto that are required to be filed under applicable law, prior to the date
      of
      delinquency (taking into account any extensions of the original due date),
      (b) pay and discharge all material taxes, assessments and governmental
      charges or levies imposed upon the Company, upon its income and profits or
      upon
      any properties belonging to it, prior to the date on which penalties attach
      thereto, and (c) pay all material taxes, assessments and governmental
      charges or levies that, if unpaid, might become a lien or charge upon any of
      its
      properties; provided,
      however,
      that
      the Company in good faith may contest any such tax, assessment, governmental
      charge or levy described in the foregoing clauses (b) and (c) so long as
      appropriate reserves are maintained with respect thereto if and to the extent
      required by GAAP. 

     

    Section
      6.9. Compliance
      with Law and Other Agreements.
      

     

    The
      Company shall maintain its business operations and property owned or used in
      connection therewith in compliance with (a) all applicable federal, state
      and local laws, regulations and ordinances governing such business operations
      and the use and ownership of such property, and (b) all agreements,
      licenses, franchises, indentures and mortgages to which the Company is a party
      or by which the Company or any of its properties is bound, except where the
      failure to so comply would not reasonably be expected to have a Material Adverse
      Effect.

     

    Section
      6.10. Notice
      of Default.
      

     

    The
      Company shall give written notice to the Secured Party of the occurrence of
      any
      Event of Default.

     

    Section
      6.11. Notice
      of Litigation.

     

    The
      Company shall give notice, in writing, to the Secured Party of (a) any
      actions, suits or proceedings wherein the amount at issue is in excess of
      $250,000, instituted by any persons against the Company, or affecting any of
      the
      assets of the Company, and (b) any dispute, not resolved within fifteen
      (15) days of the commencement thereof, between the Company on the one hand
      and
      any governmental or regulatory body on the other hand, which might reasonably
      be
      expected to have a Material Adverse Effect on the business operations or
      financial condition of the Company.

     

    Section
      6.13. Future
      Subsidiaries.

     

    If
      the
      Company shall hereafter create or acquire any subsidiary, simultaneously with
      the creation or acquisition of such subsidiary, the Company shall cause such
      subsidiary to grant to the Secured Party a security interest of the same tenor
      as created under this Agreement. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Section
      6.14. Establishment
      of Deposit Account, Dominion Account
      Agreements. 
      

     

    Within
      ten (10) days of the date hereof, each Company, the Secured Party, and each
      applicable bank or other depository institution shall enter into a deposit
      account agreement (“Deposit
      Account Agreement”)
      in the
      form of Exhibit B with respect to each of the Company’s savings, passbook, money
      market or other depository accounts, and all certificates of deposit, maintained
      by each Company with any bank, savings and loan association, credit union or
      other depository institution (each, a “Deposit
      Account”)
      maintained or used by each Company providing dominion and control over such
      accounts to the Secured Party such that upon notice by the Secured Party to
      such
      bank or other depository institution of the occurrence of an Event of Default
      all actions under such account shall be taken solely at the Secured Party’s
      direction. Each Company’s current Deposit Accounts are set forth on Schedule
      6.14 attached hereto. 

     

    Each
      Company shall cause all cash, all collections and proceeds from accounts
      receivable, all receipts from credit card payments, and all proceeds from the
      sale of any Pledged Property to be deposited into a Deposit Account in the
      ordinary course of business and consistent with past practices.

     

    While
      any
      Convertible Debentures remain outstanding, the Company shall have valid and
      effective Deposit Account Agreements in place at all times with respect to
      all
      of its Deposit Accounts. No Deposit Account shall be established, used or
      maintained by the Company unless it first enters into a Deposit Account
      Agreement. 

     

    With
      respect to each Deposit Account, from an after the occurrence of an Event of
      Default, the Secured Party shall have the right, at any time and from time
      to
      time, to exercise its rights under such Deposit Account Agreement, including,
      for the avoidance of any doubt, the exclusive right to give instructions to
      the
      financial institution at which such Deposit Account is maintained as to the
      disposition of funds or other property on deposit therein or credited thereto.
      The Secured Party hereby covenants and agrees that it will not send any such
      notice to a financial institution at which any such Deposit Account is
      maintained directing the disposition of funds or other property therein unless
      and until the occurrence of an Event of Default. 

     

    ARTICLE
      7.

     

    NEGATIVE
      COVENANTS

     

    The
      Company covenants and agrees that, from the date hereof until the Obligations
      have been fully paid and satisfied, the Company shall not, unless the Secured
      Party shall consent otherwise in writing:

     

    Section
      7.1. Liens
      and Encumbrances.

     

    Directly
      or indirectly make, create, incur, assume or permit to exist any Lien in, to
      or
      against any part of the Pledged Property other than Permitted
      Liens.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Section
      7.2. Restriction
      on Redemption and Cash Dividends

     

    Directly
      or indirectly, redeem, repurchase or declare or pay any cash dividend or
      distribution on its capital stock without the prior express written consent
      of
      the Secured Party.

     

    Section
      7.3. Incurrence
      of Indebtedness.

     

    Directly
      or indirectly, incur or guarantee, assume or suffer to exist any indebtedness,
      other than the indebtedness evidenced by the Convertible Debentures and other
      Permitted Indebtedness. “Permitted
      Indebtedness”
means:
      (i) indebtedness evidenced by Convertible Debentures; (ii) indebtedness
      described on the Disclosure Schedule to the Securities Purchase Agreement;
      (iii)
      indebtedness incurred solely for the purpose of financing the acquisition or
      lease of any equipment by the Company, including capital lease obligations
      with
      no recourse other than to such equipment; (iv) indebtedness (A) the repayment
      of
      which has been subordinated to the payment of the Convertible Debentures on
      terms and conditions acceptable to the Secured Party, including with regard
      to
      interest payments and repayment of principal, (B) which does not mature or
      otherwise require or permit redemption or repayment prior to or on the
      91st
      day
      after the maturity date of any Convertible Debentures then outstanding; and
      (C)
      which is not secured by any assets of the Company; (v) indebtedness solely
      between the Company and/or one of its domestic subsidiaries, on the one hand,
      and the Company and/or one of its domestic subsidiaries, on the other which
      indebtedness is not secured by any assets of the Company or any of its
      subsidiaries, provided that (x) in each case a majority of the equity of any
      such domestic subsidiary is directly or indirectly owned by the Company, such
      domestic subsidiary is controlled by the Company and such domestic subsidiary
      has executed a security agreement in the form of this Agreement and (y) any
      such
      loan shall be evidenced by an intercompany note that is pledged by the Company
      or its subsidiary, as applicable, as collateral pursuant to this Agreement;
      (vi)
      reimbursement obligations in respect of letters of credit issued for the account
      of the Company or any of its subsidiaries for the purpose of securing
      performance obligations of the Company or its subsidiaries incurred in the
      ordinary course of business so long as the aggregate face amount of all such
      letters of credit does not exceed $500,000 at any one time; and (vii) renewals,
      extensions and refinancing of any indebtedness described in clauses (i) or
      (iii)
      of this subsection.

     

    Section
      7.4. Places
      of Business.

     

    Change
      the location of its chief place of business, chief executive office or any
      place
      of business disclosed to the Secured Party, unless such change in location
      is to
      a different location within the United States and the Company provides notice
      to
      the Secured Party of new location within 10 days’ of such change in
      location.

     

    ARTICLE
      8.

     

    MISCELLANEOUS

     

    Section
      8.1. Notices.

     

    All
      notices or other communications required or permitted to be given pursuant
      to
      this Agreement shall be in writing and shall be considered as duly given on:
      (a) the date of delivery, if delivered in person or by nationally
      recognized overnight delivery service or (b) five (5) days after
      mailing if mailed from within the continental United States by certified mail,
      return receipt requested to the party entitled to receive the same:

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      
        	
                If
                  to the Secured Party:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street-Suite 3700 

              
	 	
                Jersey
                  City, New Jersey 07302 

              
	 	
                Attention:

              	
                Mark
                  Angelo

              
	 	 	
                Portfolio
                  Manager

              
	 	
                Telephone:

              	
                (201)
                  986-8300

              
	 	
                Facsimile:

              	
                (201)
                  985-8266

              
	 	 
	
                With
                  a copy to:

              	
                Troy
                  Rillo, Esq.

              
	 	
                101
                  Hudson Street, Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone:

              	
                (201)
                  985-8300

              
	 	
                Facsimile:

              	
                (201)
                  985-8266

              
	 	 
	 	 
	 	 
	
                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

              

      
 

    Any
      party
      may change its address by giving notice to the other party stating its new
      address. Commencing on the tenth (10th) day
      after the giving of such notice, such newly designated address shall be such
      party’s address for the purpose of all notices or other communications required
      or permitted to be given pursuant to this Agreement.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
      8.2. Severability.

     

    If
      any
      provision of this Agreement shall be held invalid or unenforceable, such
      invalidity or unenforceability shall attach only to such provision and shall
      not
      in any manner affect or render invalid or unenforceable any other severable
      provision of this Agreement, and this Agreement shall be carried out as if
      any
      such invalid or unenforceable provision were not contained herein.

     

    Section
      8.3. Expenses.

     

    In
      the
      event of an Event of Default, the Company will pay to the Secured Party the
      amount of any and all reasonable out-of-pocket expenses, including the
      reasonable fees and expenses of its counsel, which the Secured Party may incur
      in connection with: (i) the custody or preservation of, or the sale,
      collection from, or other realization upon, any of the Pledged Property;
      (ii) the exercise or enforcement of any of the rights of the Secured Party
      hereunder or (iii) the failure by the Company to perform or observe any of
      the provisions hereof.

     

    Section
      8.4. Waivers,
      Amendments, Etc.

     

    The
      Secured Party’s delay or failure at any time or times hereafter to require
      strict performance by Company of any undertakings, agreements or covenants
      shall
      not waive, affect, or diminish any right of the Secured Party under this
      Agreement to demand strict compliance and performance herewith. Any waiver
      by
      the Secured Party of any Event of Default shall not waive or affect any other
      Event of Default, whether such Event of Default is prior or subsequent thereto
      and whether of the same or a different type. None of the undertakings,
      agreements and covenants of the Company contained in this Agreement, and no
      Event of Default, shall be deemed to have been waived by the Secured Party,
      nor
      may this Agreement be amended, changed or modified, unless such waiver,
      amendment, change or modification is evidenced by an instrument in writing
      specifying such waiver, amendment, change or modification and signed by the
      Secured Party in the case of any such waiver, and signed by the Secured Party
      and the Company in the case of any such amendment, change or
      modification.

     

    Section
      8.5. Continuing
      Security Interest; Partial Release.

     

    (a)
      This
      Agreement shall create a continuing security interest in the Pledged Property
      and shall: (i) remain in full force and effect until payment or conversion
      in full of the Convertible Debentures; (ii) be binding upon the Company and
      its successors and assigns; and (iii) inure to the benefit of the Secured
      Party and its successors and assigns. Upon the payment or satisfaction in full
      or conversion in full of the Convertible Debentures, this Agreement and the
      security interest created hereby shall terminate, and, in connection therewith,
      the Company shall be entitled to the return, at its expense, of such of the
      Pledged Property as shall not have been sold in accordance with Section 5.2
      hereof or otherwise applied pursuant to the terms hereof and the Secured Party
      shall deliver to the Company such documents as the Company shall reasonably
      request to evidence such termination.

     

    (b) Effective
      upon the closing of a disposition of any Pledged Property, provided the Secured
      Party consents in writing prior to such disposition or such disposition is
      made
      in the ordinary course of business, the security interest granted hereunder
      in
      the Pledged Property so disposed of shall terminate and the Secured Party shall
      deliver such documents as the Company shall reasonably request to evidence
      such
      termination; provided, however, the security interest granted hereunder in
      all
      remaining Pledged Property shall remain in full force and effect.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Section
      8.6. Independent
      Representation.

     

    Each
      party hereto acknowledges and agrees that it has received or has had the
      opportunity to receive independent legal counsel of its own choice and that
      it
      has been sufficiently apprised of its rights and responsibilities with regard
      to
      the substance of this Agreement.

     

    Section
      8.7. Applicable
      Law: Jurisdiction.

     

    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.

     

    Section
      8.8. Waiver
      of Jury Trial.

     

    AS
      A
      FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
      MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES
      ANY
      RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
      AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

     

    Section
      8.9. Entire
      Agreement.

     

    This
      Agreement constitutes the entire agreement among the parties and supersedes
      any
      prior agreement or understanding among them with respect to the subject matter
      hereof.

     

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement as of the date first above
      written.

     

    

      
        	 	
                COMPANY:

              	 
	 	
                PURE
                  BIOFUELS CORPORATION

              	 
	 	 	 
	 	
                By:
                  

              	
                /s/
                  Luis Goyzueta

              	 
	 	
                Name:

              	
                Luis
                  Goyzueta 

              	 
	 	
                Title:

              	
                CEO

              	 
	 	 	 

      

    

     

    

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement as of the date first above
      written.

     

    
      

        
          	 	
                  COMPANY:

                	 
	 	
                  
                    PALMA
                      INDUSTRIAL SAC

                  

                	 
	 	 	 
	 	
                  By:
                    

                	
                  /s/
                    Luis Goyzueta

                	 
	 	
                  Name:

                	
                  Luis
                    Goyzueta 

                	 
	 	
                  Title:

                	
                  CEO

                	 
	 	 	 

        

      

      
 

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

     

     

    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement as of the date first above
      written.

     

    
      

        
          	 	
                  COMPANY:

                	 
	 	
                  
                    
                      PURE
                        BIOFUELS DEL PERU SAC

                    

                  

                	 
	 	 	 
	 	
                  By:
                    

                	
                  /s/
                    Luis Goyzueta

                	 
	 	
                  Name:

                	
                  Luis
                    Goyzueta 

                	 
	 	
                  Title:

                	
                  CEO

                	 
	 	 	 

        

      

       

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement as of the date first above
      written.

     

    
      
        

          
            	 	
                    
                      SECURED
                        PARTY:

                    

                  	 
	 	
                    
                      
                        
                          CORNELL
                            CAPITAL PARTNERS, L.P.

                        

                      

                    

                  	 
	 	 	 
	 	
                    By: Yorkville
                      Advisors, LLC

                  	 
	 	
                    Its: Investment
                      Advisor

                  	 
	 	 	 
	 	
                    By:
                      

                  	
                    /s/
                      Gerald Eicke

                  	 
	 	
                    Name:

                  	
                    Gerald
                      Eicke

                  	 
	 	
                    Its:

                  	
                    Managing
                      Partner

                  	 
	 	 	 

          

        

         

         

        
          
            
            

          

          
            18Unassociated Document

    
      Pure
        Biofuels
        Corp.

      9440
        Little Santa Monica Blvd., Suite 401

      Beverly
        Hills, CA 90210
Exhibit
      10.6

     

    May
      11,
      2007

     

    Interpacific
      Oil SAC

    Calle
      Juno Mz. C Lt. 6B

    La
      Campina, Chorrillos

    Lima
      04,
      Perú

    

    Luis
      Goyzueta

    Av.
      La
      Merced 810

    Surco,
      Lima 33

    Perú

    

    Alberto
      Pinto

    Calle
      Bolívar 472-304

    Lima
      18,
      Perú

    

    Patrick
      Orlando

    Antonio
      Pezet 1506,

    San
      Isidro, Lima 27

    Perú

    

    Attention:
      Luis Goyzueta

    Alberto
      Pinto

    

    Dear
      Messrs. Goyzueta and Pinto:

     

    This
      binding letter sets forth the intention of Pure Biofuels Corp., a Nevada
      corporation (the “Buyer”), to acquire from Interpacific Oil SAC, a Peruvian
      corporation (the “Seller”), all of the Seller’s properties, assets, contracts,
      business, goodwill and rights as a going concern, of every kind, nature,
      character and description, tangible and intangible, wherever located and whether
      or not carried or reflected on the books and records of the Seller, including,
      without limitation, (i) all customer lists, vendor lists, distribution
      information, records and files, licenses and all promotional and advertising
      information, (iii) all patents, copyrights, trademarks, trade names and other
      intellectual property rights, (iv) all contracts, understandings, arrangements,
      purchase orders and agreements with suppliers, manufacturers, customers and
      other third parties, (v) all furniture, fixtures, equipment, vehicles and
      leasehold improvements and (vi) all cash received by the Seller for goods or
      services which will be provided by the Buyer after the Closing (as defined
      below) (collectively, the “Assets”). Notwithstanding the foregoing, the Assets
      shall not include (a) all accounts receivable of the Seller resulting from
      sales
      made prior to the Closing (as defined below), (b) all raw materials, work-in
      process, and finished goods constituting the Seller’s inventory and samples of
      the Seller’s products and (c) all cash and cash equivalents set forth on the
      Seller’s balance sheet or located in the Seller’s bank account(s), except as set
      forth in clause (vi) above. The Buyer may, in its sole discretion, elect to
      purchase all of the capital stock of the Seller in lieu of purchasing the
      Assets, whether by merger, purchase or other structure, in which case references
      to the Assets shall be deemed to refer to the capital stock of the Seller.
      If
      the Acquisition is structured as a merger, the Buyer shall proceed to purchase
      from the Seller’s shareholders (Luis Goyzueta Angobaldo, Peruvian citizen,
      identified with DNI No. 10609920; Alberto Pinto Rocha, Peruvian citizen,
      identified with DNI No. 08249574; and Patrick Orlando Panizo, Peruvian citizen,
      identified with Peruvian Passport No. 0552726) all of the shares they receive
      from Pure Biofuels Peru S.A.C. (hereinafter referred to as the “Buyer’s
      Subsidiary”) as a result of the merger process; in such case, the Seller’s
      Shareholders will be referred to as the “Seller” instead of Interpacific Oil
      SAC.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Based
      upon the information Buyer has received to date and present market conditions,
      the proposed acquisition of the Assets (the “Acquisition”) would be
      substantially on the following terms:

     

    1.  The
      purchase price for the Assets will be (i) Six Million Three Hundred Thousand
      Dollars ($6,300,000), payable with (A) Seven Hundred Thousand Dollars
      ($700,000) in
      cash,
      certified or bank check or wire transfer of immediately available funds and
      (B)
      a number of shares of the Common Stock of the Buyer equal to $5,600,000 (subject
      to reduction as described below) divided by the per share purchase price of
      the
      Buyer’s Common Stock used in the first equity or debt financing following the
      execution of this letter (the “Financing”) or if no such Financing occurs within
      90 days after the closing of the Acquisition (the “Closing”), then the lowest
      closing market price of the Buyer’s Common Stock between the execution of the
      Agreement and 90 days after the Closing and (ii) a five year warrant to purchase
      2,925,000 shares of the Common Stock of the Buyer, at an exercise price equal
      to
      the closing bid price of the Buyer’s Common Stock on the trading day immediately
      preceding the date of the Closing. Seller shall receive customary piggy-back
      registration rights for their shares of Common Stock and shares of Common Stock
      underlying the warrant. None of the purchase price shall be payable as of the
      date of the Closing, but the Buyer shall be required to pay the $700,000 cash
      consideration and $1,300,000 of the stock consideration for the Acquisition
      90
      days after the Closing. The remainder of the stock consideration and the warrant
      consideration shall be contingent upon a review by Moore Stephens Wurth Frazer
      and Torbet, LLP or agreed upon accounting firm (the cost of which shall be
      borne
      by the Buyer) of the operations of the Assets for the 90-day period beginning
      on
      the closing date of the Acquisition confirming that the revenue in accordance
      with U.S. GAAP for such 90-day period exceeded $3,900,000. If the revenue is
      less than $3,900,000, then the additional stock consideration and warrant
      consideration shall each be proportionately reduced on a percentage basis
      rounded off to the nearest whole percentage for each $1.00 in which the revenue
      is less than $3,900,000. By way of example, if the revenue is $1,950,000, then
      one half of the additional stock consideration and one half of the warrant
      consideration shall be paid. Seller shall use its best efforts to cause Moore
      Stephens Wurth Frazer and Torbet, LLP or agreed upon accounting firm to review
      the results of operations of the Assets for the 90-day period beginning on
      the
      closing date of the Acquisition as soon as practicable but in no event later
      than 120 days after the Closing. If the revenue is less than $3,900,000, then
      the Seller shall have the option of measuring the revenue for an additional
      90-day period (i.e., from the period beginning 91 days after the Closing and
      ending on the 180th day after the Closing) and can elect to be paid the
      additional stock consideration and warrant consideration based solely on the
      second 90-day period in the same manner set forth above for the first 90-day
      period. If the Acquisition is structured as a merger, then the Seller shall
      be
      merged into the Buyer’s Subsidiary and the shareholders of the Seller shall also
      become shareholders of the Buyer’s Subsidiary. At such time, the Buyer shall
      repurchase all of the shares received
      by the Seller’s shareholders from
      the
      Buyer’s Subsidiary
      as a
      result from the merger process with the Seller
      in
      exchange for the consideration above. After the execution of the Agreement
      (as
      hereinafter defined), the Buyer shall provide the Seller with $250,000 to expand
      the capacity of the Seller’s plant. If the merger between the Seller and the
      Buyer’s Subsidiary does not close, then the Seller will pay the Buyer such
      $250,000, without interest or any kind of penalties, within a term that will
      be
      discussed by both parties. In the case the Acquisition is structured as a
      merger, the Closing may also not occur until such time as the merger between
      the
      Buyer’s Subsidiary and the Seller is duly registered in the Peruvian Public
      Registry. It shall be understood that the Acquisition is structured as a merger
      whenever the governing bodies of the Buyer’s Subsidiary and the Seller agree to
      begin the merger process by which the Buyer’s Subsidiary absorbs the
      Seller.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.  Except
      as
      expressly provided in the Agreement (as hereinafter defined), Buyer shall not
      assume any liabilities of the Seller. The parties agree to comply with all
      Peruvian laws applicable to the Assets and/or the merger process, including
      the
      registration of this process in the Peruvian Public Registry, as a condition
      to
      the Closing.

     

    3.  Until
      the
      Closing, the Seller will operate its business as presently operated, preserve
      its business operations intact and use its commercially reasonable efforts
      to
      preserve the assets of the Seller and the goodwill of suppliers, manufacturers,
      customers and other third parties having business relations with the
      Seller.

     

    4.  Prior
      to
      the Closing, the Seller will afford Buyer and its representatives reasonable
      opportunity for free and full access to the properties, books, records, other
      data and personnel related to the Seller for the purpose of completing all
      reasonably necessary “due diligence” investigations and shall otherwise
      cooperate in good faith with Buyer, and its representatives in connection
      therewith, including, without limitation, interviewing the Seller’s employees
      and, subject to the Seller’s consent in each instance (which consent shall not
      be unreasonably withheld), customers. Buyer will likewise cooperate and afford
      the Seller and its representatives reasonable opportunity to complete all
      reasonably necessary “due diligence” investigations of Buyer.

     

    5.  Each
      of
      the Seller and Buyer agrees to pay its own costs and expenses in connection
      with
      any aspect of the Acquisition, including the preparation and negotiation of
      this
      letter of intent, it being understood that neither of the parties shall be
      responsible for the other's costs and expenses.

     

    6.  Each
      of
      the parties agrees that no finder's fee or brokerage commission shall, by reason
      of its actions, be payable by the other party in connection with the
      Acquisition, and neither party knows of any such fees or commissions that are
      or
      may become payable in connection with the Acquisition. Each of the parties
      agrees to indemnify the other in the event of a breach of the agreement set
      forth in this paragraph 6.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    7.  We
      will
      proceed promptly to negotiate a binding, definitive purchase agreement (the
      “Agreement”) providing for the Acquisition in form and substance reasonably
      satisfactory to Buyer, the Seller and their respective counsel. The Agreement
      will contain (a) customary representations and warranties by the Seller and
      its
      shareholders with respect to the Seller, the Seller’s business, the Assets and
      such other representations and warranties as may be necessary or proper as
      a
      result of Buyer’s review of the Seller and its business, (b) customary
      representations and warranties by Buyer with respect to such things as due
      formation of Buyer and power and authority of Buyer to purchase the Assets,
      (c)
      covenants, (d) indemnities by the Seller and its shareholders, (e) closing
      conditions and (f) undertakings. The Agreement will further provide for each
      party's receipt of such instruments of transfer and assumption, legal opinions
      and other documents and agreements as such party may reasonably request in
      connection with the Acquisition. 

     

    8.  In
      addition to customary conditions, the obligations of Buyer to consummate the
      Acquisition shall be contingent upon (a) the satisfactory completion of Buyer’s
“due diligence” examination of the Seller, its business and the Assets, (b) the
      execution and delivery of the Agreement by the Seller, (c) the agreement of
      the
      Seller to lease to the Buyer the property containing the Assets for $1,200
      per
      month, (d) the receipt of all necessary consents and approvals of governmental
      bodies and other third parties to the Acquisition, (e) the absence of any
      material adverse change in the Seller’s business or prospects related thereto,
      (f) an appraisal of the Assets by a nationally recognized valuation or
      accounting firm with a branch office in Peru resulting in a report (the cost
      of
      which shall be borne by the Buyer) that demonstrates that the liquidation value
      of the Assets is equal to at least $2.7 million and the cost basis of the Assets
      is equal to at least $1.5 million and (g) Seller shall have its financial
      statements for 2005, 2006 and the requisite interim period in 2007 audited
      or
      reviewed in accordance with U.S. GAAP.

     

    9.  Any
      information disclosed by Buyer or Seller, or their respective representatives,
      which has not been publicly disclosed, shall be kept strictly confidential
      by
      the other. In the event that the Agreement is not signed on or before the
      Termination Date (as hereinafter defined), all documents delivered by Buyer
      or
      Seller, or their respective representatives, to the other and any copies of
      such
      documents or derivative forms of the information contained in such documents
      shall be immediately returned or destroyed. Buyer and Seller shall each use
      their best efforts to cause their respective representatives to abide by the
      provisions of this paragraph 9.

     

    10.  No
      public
      announcement of the proposed transaction shall be made by Buyer or Seller
      without the other party’s consent except where required by applicable
      law.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    11.  In
      recognition and consideration of the fact that Buyer will invest substantial
      time and effort in its investigation of Seller and in the preparation and
      negotiation of the Agreement and in other matters relating to the Acquisition
      and as a result forego or delay the conduct of other activities and
      opportunities, Seller will not, and will not permit its shareholders or
      representatives or any other third party to, (i) directly or indirectly solicit,
      encourage or facilitate the submission of proposals or offers from any person
      other than Buyer relating to any merger or acquisition of the capital stock
      or
      the Assets of, or other similar transaction involving, Seller (an “Acquisition
      Proposal”) or (ii) participate in any discussions or negotiations regarding, or
      furnish any information to any person other than Buyer and its representatives
      in connection with, any Acquisition Proposal by any person other than Buyer.
      Seller shall immediately cease and cause to be terminated any existing
      discussions or negotiations with any parties conducted heretofore with respect
      to the foregoing.

     

    12.  In
      the
      event that the parties fail to execute and deliver the Agreement on or before
      September 30, 2007 (the “Termination Date”), then this letter of intent shall
      terminate without liability on the part of either party (except as hereinafter
      provided or as provided in the Agreement) and without further action by the
      parties. Notwithstanding the foregoing, the Termination Date shall be extended
      in the event that Buyer is unable to complete its due diligence investigation
      because of the unavailability of Seller or of personnel of Seller reasonably
      requested by Buyer or the inability of Seller to deliver or cause to be
      delivered in a timely manner documentation reasonably requested by Buyer or
      its
      representatives.

     

    13.  The
      parties agree that if the Buyer fails to have its planned biodiesel plant
      operational within one year after the closing of the Acquisition, then the
      parties will unwind the Acquisition and the Buyer will return the Assets to
      the
      Seller and the Seller will return all of the consideration received from the
      Buyer other than (a) the cash consideration of $700,000 and (b) an amount equal
      to the gross profit of the Assets for the 12 month period commencing on the
      Closing Date, less an assumed $350,000 of overhead (the “Return Consideration”),
      but only to the extent the Return Consideration exceeds $700,000. Any amount
      of
      Return Consideration greater than $700,000 shall be payable in that number
      of
      shares of Common Stock of the Buyer with an aggregate value equal to the
      remaining Return Consideration due to the Seller pursuant to this paragraph.
      Moore Stephens Wurth Frazer and Torbet, LLP or agreed upon accounting firm
      shall
      review the gross profit amount and the shares of the Company’s Common Stock
      shall be valued at the then current market price. However, the parties agree
      that in case the Acquisition is structured as a merger, the Closing shall be
      suspended until the merger process is registered in the Peruvian Public
      Registry.

     

    The
      parties agree that in this scenario, returning of the assets will be done by
      means of any type of transfer that is suitable to transfer to the Seller the
      Assets or the shares of the Seller, as the case may be, including the
      performance of a corporate spin - off, the execution of a sales agreement or
      other structure to be agreed by both parties.

     

    This
      letter shall be binding on the parties and constitutes the entire agreement
      between the parties and supersedes all prior oral or written agreement,
      understandings, representations and warranties and courses of conduct and
      dealing between the parties on the subject matter hereof, and may only be
      amended by a writing signed by each of the parties.

     

    This
      letter shall be governed by and interpreted in accordance with the laws of
      Peru.
      The Seller agrees that the Buyer, in its sole discretion, may acquire the Assets
      or the stock of the Seller directly or through one or more subsidiaries. This
      letter may be executed in one or more counterparts, all of which taken together
      shall be one agreement and facsimile or email signatures shall be deemed
      original signatures for all purposes.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    We
      trust
      the foregoing is acceptable and look forward to moving ahead rapidly to ensure
      the timely completion of the Acquisition. If the foregoing correctly expresses
      our understanding, please so indicate by signing and dating the enclosed copy
      of
      this letter at the bottom and returning it to our counsel, DLA Piper US LLP,
      Attn.: Daniel I. Goldberg, Esq. at 1251 Avenue of the Americas, New York, New
      York 10020, Fax No. 212-884-8466, email: Daniel.i.goldberg@dlapiper.com.
      In the
      event that a signed copy of this letter of intent is not in our counsel’s hand
      on or before 5:00 p.m. (New York time) on May
      11, 2007
      our
      offer to acquire the Assets shall be withdrawn and this letter of intent shall
      have no further force or effect.

     

    [Remainder
      of page intentionally left blank.]

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	 	 	Very truly yours,
	 	 	 
	 	Pure Biofuels Corp.
	 
 	 
 	 
 
	 	By:  	/s/
              Steven Magami
	 	
              
                

              

              Steven
                Magami

            
	 	
              President

            

    

     

    ACCEPTED
      AND AGREED TO:

     

    Interpacific
      Oil SAC

     

    
      	 	 	 	 
	By:
              /s/ Luis Goyzueta	 	 	 
	
              
                

              

              Luis
                Goyzueta

            	 	 	
            
	
              Managing
                Director

            	 	 	 

    

     

    
      
        	 	 	 	 
	By: 
                /s/ Alberto Pinto	 	 	 
	
                
                  
Alberto
                  Pinto

              	 	 	
              
	
                Managing
                  Director

              	 	 	 

      

       

      
        	 	 	 	 
	
                /s/
                  Luis Goyzueta

              	 	 	 
	
                
Luis
                Goyzueta, shareholder of Interpacific Oil SAC	 	 	
              

        	
                /s/
                  Alberto Pinto

              	 	 	 
	
                
Alberto
                Pinto, shareholder of Interpacific Oil SAC	 	 	
              

      

    

    
      	
              /s/
                Patrick Orlando

            	 	 	 
	
              
Patrick
              Orlando, shareholder of Interpacific Oil
              SAC	 	 	
            
	 	 	 	 
	Dated: May
              11, 2007	 	 	 

    

    

    [Signature
      page to Pure Biofuels Corp. / Interpacific Oil SAC binding Letter of
      Intent.]

     

    
      
        
        

      

      
        7

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