-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KvlFvqJs0DQqokQZgRdJUVXxS6eGd570SksUhPpi5rlsFaaqDnxDE5dxypAfYfsH fUjckabf8AvCCUXZUemuOA== 0001019687-07-004352.txt : 20071218 0001019687-07-004352.hdr.sgml : 20071218 20071217193309 ACCESSION NUMBER: 0001019687-07-004352 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20071214 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071218 DATE AS OF CHANGE: 20071217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUEFIRE ETHANOL FUELS INC CENTRAL INDEX KEY: 0001370489 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 204590982 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-52361 FILM NUMBER: 071311274 BUSINESS ADDRESS: STREET 1: 31 MUSICK CITY: IRVINE STATE: CA ZIP: 92618 BUSINESS PHONE: 949-588-3767 MAIL ADDRESS: STREET 1: 31 MUSICK CITY: IRVINE STATE: CA ZIP: 92618 8-K 1 bluefire_8k-121407.txt BLUEFIRE ETHANOL FUELS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Judiciary Plaza, 100 F Street, N.E., Room 1580, Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) - DECEMBER 14, 2007 COMMISSION FILE NUMBER: 0001370489 BLUEFIRE ETHANOL FUELS, INC. (Exact name of registrant as specific in its charter) NEVADA 20-4590982 (State of Incorporation) (I.R.S. Employer I.D. No.) 31 MUSICK IRVINE, CALIFORNIA 92618 (Address of principal executive offices, including zip code) (949) 588-3767 (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Precommencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Precommencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES. (a) On December 14, 2007, BlueFire Ethanol Fuels, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with three accredited investors (the "Investors") relating to the private sale of 5,740,741 shares (the "Shares") of common stock, par value $.001 per share (the "Common Stock") of the Company (the "Private Offering"). Under the terms of the Private Offering, the Company also issued to the Investors warrants to purchase 5,740,741 shares of Common Stock (the "Warrants"). The aggregate gross proceeds raised in the Private Offering by the Company was approximately $15.5 million. Each Share was sold to the Investors at a purchase price of $2.70 per Share. The Warrants expire five (5) years from the date of issue and may be exercised at an exercise price of $2.90 per Share, subject to adjustment in certain circumstances. The Private Offering was an unregistered sale of securities conducted pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. In connection with the Private Offering, the Company has agreed to file a registration statement (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") covering the resale of the Shares, the Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") and certain other securities within forty-five (45) days following the closing of the Private Offering (the "Filing Date"). In addition, the Company is required to cause the Registration Statement to be declared effective by the SEC by the 150th day following the closing of the Private Offering or ten (10) business days following the date the Company is notified by the SEC that the Registration Statement will not be reviewed or is no longer subject to further review and comments (the "Effective Date"). If (i) the Company fails to file the Registration Statement with the SEC on or prior to the Filing Date, then for each day following the Filing Date, until but excluding the date the Registration Statement is filed, the Company shall pay the Investors with respect to any such failure an amount equal to 1.0% of the purchase price paid by each such Investor for its Shares or (ii) if the Registration Statement is not declared effective by the SEC by the Effective Date, then for each day following the Effective Date, the Company shall pay the Investors with respect to any such failure an amount equal to 0.50% of the purchase price paid by each such Investor for its Shares, or (iii) if the Registration Statement is not declared effective by the SEC on or prior to the 180th day after the closing of the Private Offering, the Company shall pay the Investors with respect to any such failure an amount equal to 1.0% of the purchase price paid by each such Investor for its Shares.. (b) On December 14, 2007, the Company issued an aggregate of 700,922 shares (the "Conversion Shares") of Common Stock to two investors for conversion of such investors' 8% senior secured convertible notes (the "Notes"), at a conversion price of $2.90, issued on August 22, 2007, as reported by the Company on Form 8-K filed August 27, 2007. The Conversion Shares were issued in full payment of $2,033,333 which represents the principal amount of the Notes together with accrued interest on the Notes. Additionally, as set forth in the Warrant Agreement issued on August 22, 2007, as reported by the Company on Form 8-K filed August 27, 2007, the Company has reduced the exercise price of such investors' existing warrants to purchase one million shares Common Stock, issued in connection with the Notes, to $2.90 per share. The foregoing description of the Stock Purchase Agreement, the Securities Purchase Agreement and the Warrants are not intended to be complete and is qualified in its entirety by the complete text of those agreements attached as exhibits to this Current Report on Form 8-K. 2 SECTION 9.01. FINANCIAL STATEMENT AND EXHIBITS. (d) Exhibits. The following Exhibit is hereby filed as part of this Current Report on Form 8-K: Exhibit Description - ------- ----------- 99.1 Stock Purchase Agreement, entered into as of December 3, 2007, by and among the Investors and the Company. 99.2 Securities Purchase Agreement, entered into as of December 14, 2007, by and between Quercus and the Company. 99.3 Form of Warrant, dated December 14, 2007 by and among the Investors and the Company. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. Date: December 17, 2007 BLUEFIRE ETHANOL FUELS, INC. By: /s/ Arnold Klann --------------------------------- Arnold Klann Chief Executive Officer, Director 4 EX-99.1 2 bluefire_8k-ex9901.txt STOCK PURCHASE AGREEMENT EXHIBIT 99.1 EXECUTION VERSION STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 3rd day of December 2007, by and among BLUEFIRE ETHANOL FUELS, INC., a Nevada corporation (the "Company") and each of the persons listed on Schedule A hereto (each an "Investor" and collectively, the "Investors"). WHEREAS, the Company, Quercus Trust, James G. Speirs and James G. Speirs SEP IRA (the "New Investors") have agreed to enter into a single private placement financing to be funded in two tranches occurring on December 3, 2007 and on or around December 10, 2007 (collectively, the "Financing"), whereby the New Investors will purchase from the Company and the Company will issue to the New Investors shares of common stock and warrants in the Company for an aggregate purchase price of $15,500,000; WHEREAS, the Company and the Investors desire to fund $1,000,000 of the Financing herein, whereby the Company will issue to each Investor and each Investor will purchase form the Company the number of shares of common stock (the "Shares") set forth opposite such Investor's name on Schedule A hereto. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Purchase and Sale of the Shares. 1.1 Sale of Shares. Subject to the terms and conditions of this Agreement, at the Closing (as hereafter defined), the Company will issue, sell and deliver to each Investor, and each Investor will purchase from the Company, the number of Shares set forth opposite such Investor's name on Schedule A hereto at a purchase price of $2.70 per share. 1.2 Issuance of Warrants. Concurrently with the sale of the Shares by the Company and the purchase of the Shares by the Investors, the Investors will receive a warrant (the "Warrant") to purchase such number of Shares of Common Stock of the Company (the "Warrant Shares") as set forth on Schedule A hereto. 1.3 Closing. The closing of the purchase and sale of the Shares (the "Closing") will take place at the offices of Seward & Kissel LLP, located at One Battery Park Plaza, New York, New York, 10004, at 10:00 am, New York time on the date hereof or on such other date or at such other place as the parties hereto shall mutually agree (the date of the Closing is hereinafter referred to as the "Closing Date"). At the Closing, the Company will deliver to each Investor a stock certificate or certificates dated the Closing Date for the number of Shares such Investor has agreed to purchase and registered in such name and in such denominations as such Investor requests, and such Investor will pay to the Company the purchase price for such Shares by certified check or wire transfer of immediately available funds. 2. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to each Investor that: 2.1 Authority/Capacity. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada and has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action on the part of the Company, and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 2.2 The Shares. The Shares, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free and clear of all liens, security interests, options, charges, pledges and encumbrances. 2.3 The Warrants. The Warrants when issued and delivered will be duly and validly issued and will be free of all liens and restrictions on transfer other than under applicable securities laws.. 2.4 The Warrant Shares. The Warrant Shares have been duly reserved for issuance by the Company in sufficient number to cover the exercise of all of the Warrants. The issuance of the Warrant Shares upon exercise of the Warrants has been duly authorized by the Company and the Warrant Shares when delivered in accordance with the Warrant, will be validly issued, fully paid and non-assessable, and free of all liens and restrictions on transfer other than under applicable securities laws. 2.5 Securities Law. In reliance on the investment representations made by the Investors, the offer, issuance, sale and delivery of the Shares and Warrants, as provided in this Agreement, are exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and all applicable state securities laws. 2.6 Reports; Financial Statements. The Company's Annual Report on Form 10-KSB for the year ended December 31, 2006 and Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (the "Reports") have been filed with the Securities and Exchange Commission (the "SEC") and the Reports complied in all material respects with the rules of the SEC applicable to such Reports on the date filed with the SEC, and to the Company's best knowledge, the Reports did not contain, on the date of filing with the SEC, any untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not materially misleading. All of the consolidated financial statements included in the Reports (the "Company Financial Statements"): (a) have been prepared from and on the basis of, and are in accordance with, the books and records of the Company and with generally accepted accounting principles ("GAAP") applied on a basis consistent with prior accounting periods; (b) fairly and accurately present in all material respects the consolidated financial condition of the Company as of the date of each such Company Financial Statement and the results of its operations for the periods therein specified; and (c) in the case of the annual financial statements, are 2 accompanied by the audit opinion of the Company's independent public accountants. Except as set forth in the Company Financial Statements, as of the date hereof, Company has no liabilities other than (x) liabilities which are reflected or reserved against in the Company Financial Statements and which remain outstanding and undischarged as of the date hereof, (y) liabilities arising in the ordinary course of business of the Company since September 30, 2007, or (z) which were not required by generally accepted accounting principles to be reflected or reserved on the Company Financial Statements. Since September 30, 2007, there has not been any event or change which has had a Material Adverse Effect (as hereinafter defined) and Company has no actual knowledge of any event or circumstance that would reasonably be expected to result in such a Material Adverse Effect. As used herein, "Material Adverse Effect" shall mean a material adverse effect on (i) the Company, (ii) its consolidated results of operations, assets, or financial condition, (iii) its ability to perform its obligations under this Agreement or (iv) the Shares or the Warrant Shares, PROVIDED HOWEVER, that a Material Adverse Effect shall not include facts, circumstances, events, changes, effects or occurrences (i) affecting the United States or global economy or capital or financial markets or the ethanol market generally which do not materially disproportionately affect the Company, (ii) resulting from changes in laws, regulations or GAAP, or in the authoritative interpretations thereof or in regulatory or interpretive guidance related thereto which do not materially disproportionately affect the Company, (iii) resulting from earthquakes or similar catastrophes, or acts of war, sabotage, terrorism, military action or any escalation or worsening thereof which do not materially disproportionately affect the Company, or (iv) resulting from this Agreement, the announcement thereof and the transactions contemplated hereby. 3. Representations and Warranties of the Investors. Each Investor hereby severally represents and warrants that: 3.1 Authority; Capacity to Purchase. If such Investor is an entity, it is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. It has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action on the part of such Investor, and constitutes a legal, valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally; and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.2 Securities Law. Each Investor is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the transactions contemplated under this Agreement. Such Investor is acquiring the Shares solely for investment purposes, with no intention of distributing or reselling any of the Shares or any interest therein. Such Investor's financial condition is such that it is able to bear all economic risks of investment in the Shares, including a complete loss of its investment. The Company has provided such Investor with adequate access to financial and other information concerning the Company as requested and such Investor has had the opportunity to ask questions of and receive answers from the Company concerning the transactions contemplated by this Agreement and to 3 obtain therefrom any additional information necessary to make an informed decision regarding an investment in the Company. Such Investor is aware that the Shares are not registered under the Securities Act and will be endorsed with transfer restriction legends, and that neither the Shares nor any interest therein may be sold, pledged, or otherwise transferred unless the Shares are registered under the Securities Act or qualify for an exemption under the Securities Act. 4. Miscellaneous. 4.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. 4.2 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. 4.3 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 4.4 Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies. This Agreement may be amended, superseded, cancelled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by all of the parties hereto or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of such party of any such right, power or privilege, or any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. 4.5 Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York without regard to choice of law principles. 4.6 Further Assurances. Each party shall, at the request of another party, at any time and from time to time following the Closing promptly execute and deliver, or cause to be executed and delivered, all such further instruments and take all such further action as each party may reasonably request to confirm or carry out the provisions and intent of this Agreement. 4.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.8 Delivery of Warrant. The Company hereby covenants to deliver to each Investor the Warrant on the earlier of (i) the funding of the remaining $14,500,000 in connection with the Financing or (ii) December 17, 2007. [-Signature Page Follows-] 4 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. THE COMPANY: BLUEFIRE ETHANOL FUELS, INC. By: /s/ Arnold R. Klann ------------------------- Name: Arnold R. Klann Title: Chairman & CEO INVESTORS QUERCUS TRUST By: ------------------------- Name: Title: /s/ James G. Speirs ----------------------------- James G. Speirs 5 IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE DATE FIRST ABOVE WRITTEN. THE COMPANY: BLUEFIRE ETHANOL FUELS, INC. By: ------------------------- Name: Title: INVESTORS QUERCUS TRUST BY: /s/ David Gelbaum ------------------------- NAME: David Gelbaum TITLE: Trustee /s/ James G. Speirs ----------------------------- James G. Speirs 6 Schedule A SCHEDULE OF INVESTORS COMMON STOCK ------------ Aggregate Name No. of Shares Purchase Price - ------------------------- -------------------------- ------------------------- Quercus Trust 185,185 $500,000 James G. Speirs 74,074 $200,000 James G. Speirs SEP IRA 111,111 $300,000 -------------------------- ------------------------- Total 370,370 $1,000,000 WARRANTS -------- Name No. of Warrants Exercise Price Exercise Term - --------------------- ------------------- ------------------ ---------------- Quercus Trust 185,185 $2.90 5 Years James G. Speirs 74,074 $2.90 5 Years James G. Speirs SEP 111,111 $2.90 5 Years IRA ------------------- ------------------ ---------------- Total 370,370 7 EX-99.2 3 bluefire_8k-ex9902.txt SECURITIES PURCHASE AGREEMENT EXHIBIT 99.2 SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made as of the 14th day of December 2007, by and among BLUEFIRE ETHANOL FUELS, INC., a Nevada corporation (the "COMPANY") and Quercus Trust, a ___________ (the "INVESTOR"). WHEREAS, the Company, the Investor, James G. Speirs, James G. Speirs SEP IRA (the "NEW INVESTORS") entered into a single private placement financing to be funded in two tranches (collectively, the "FINANCING"), whereby the New Investors agreed to purchase from the Company and the Company agreed to issue to the New Investors shares of common stock and warrants in the Company for an aggregate purchase price of $15,500,000; WHEREAS, the first tranche in the amount of $1,000,000 was funded on December 3, 2007; WHEREAS, the Company and the Investor desire to fund the second tranche on the date hereof in the amount of $14,500,000. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Purchase and Sale of the Shares. 1.1 SALE OF SHARES. Subject to the terms and conditions of this Agreement, at the Closing (as hereafter defined), the Company will issue, sell and deliver to the Investor, and the Investor will purchase from the Company 5,370,370 shares of the Company's common stock (the "SHARES") at a purchase price of $2.70 per share (the "PURCHASE PRICE"). 1.2 ISSUANCE OF WARRANTS. Concurrently with the sale of the Shares by the Company and the purchase of the Shares by the Investor, the Investor will receive a warrant (the "WARRANT") to purchase 5,370,370 Shares of common stock of the Company (the "WARRANT SHARES") at a purchase price of $2.90 per share. The Warrants shall have a term of five (5) years. 1.3 CLOSING. The closing of the purchase and sale of the Shares and Warrants (the "CLOSING") will take place at the offices of Seward & Kissel LLP, located at One Battery Park Plaza, New York, New York, 10004, at 10:00 am, New York time on the date hereof or on such other date or at such other place as the parties hereto shall mutually agree (the date of the Closing is hereinafter referred to as the "CLOSING DATE"). At the Closing or promptly thereafter, the Company will deliver to the Investor a stock certificate or certificates dated the Closing Date for the number of Shares the Investor has agreed to purchase and registered in such name and in such denominations as the Investor requests and a Warrant on the terms set forth in Section 1.2 above, and the Investor will pay to the Company the Purchase Price by certified check or wire transfer of immediately available funds. SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company hereby represents, warrants and covenants to the Investor that: 2.1 CORPORATE EXISTENCE. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada and has all requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. 2.2 SUBSIDIARIES. Each Subsidiary of the Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. For the purposes of this Agreement, "SUBSIDIARY" shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other Persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other Subsidiaries. 2.3 CORPORATE POWER. The Company has the requisite legal and corporate power and authority to enter into, issue and perform this Agreement and the Warrants in accordance with the terms hereof and thereof. The execution, delivery and performance of this Agreement and the Warrants by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action. When executed and delivered by the Company, this Agreement and the Warrants shall constitute valid and binding obligations of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application 2.4 NO CONFLICTS. The execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby, do not and will not (i) violate or conflict with any provision of the Company's certificate of incorporation or bylaws, each as amended to date, or any Subsidiary's comparable charter documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries' respective properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries are bound or affected. 2.5 NO CONSENTS. Neither the Company nor any Subsidiary is required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof, except for those consents, authorizations, orders, filings and registrations previously made or obtained and those filings which are required to be made under federal or state securities laws that, pursuant to such laws, may be made after the date hereof. 2 2.6 TITLE TO PROPERTIES. Except as set forth in the Public Filings, each of the Company and the Subsidiaries has good and valid title to all of its real and personal property, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances. Any leases of the Company and each of its Subsidiaries are valid and subsisting and in full force and effect. 2.7 INSURANCE. The Company and the Subsidiaries are 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 have a Material Adverse Effect. 2.8 LEGAL PROCEEDINGS. Except as set forth in the Public Filings, (i) there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary which questions the validity of this Agreement or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto, (ii) there is no material action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against or involving the Company, any Subsidiary or any of their respective properties or assets and (iii) there are no material outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any Subsidiary or any officers or directors of the Company or Subsidiary in their capacities as such. 2.9 SECURITIES LAW. In reliance on the investment representations made by the Investor, the offer, issuance, sale and delivery of the Shares and Warrants, as provided in this Agreement, are exempt from the registration requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and all applicable state securities laws. 2.10 INTELLECTUAL PROPERTY. The Company and the Subsidiaries own or possess adequate rights or licenses to use all trademarks, service marks, and all applications and registrations therefor, trade names, patents, patent rights, copyrights, original works of authorship, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights, (collectively "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective businesses as now conducted. Except as disclosed in the Public Filings, none of the Company's Intellectual Property Rights have expired or terminated, or are expected to expire or terminate, within two years from the date of this Agreement. The Company does not have any knowledge, after reasonable inquiry, of any material infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There is no material claim, action or proceeding pending, or to the knowledge of the Company, being threatened, against the Company or its Subsidiaries regarding its Intellectual Property Rights. The Company is unaware of any material facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their material Intellectual Property Rights. 3 2.11 REPORTS; FINANCIAL STATEMENTS. The Company's Annual Report on Form 10-KSB for the year ended December 31, 2006 and Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (the "REPORTS") have been filed with the Securities and Exchange Commission (the "SEC") and the Reports complied in all material respects with the rules of the SEC applicable to such Reports on the date filed with the SEC, and to the Company's best knowledge, the Reports did not contain, on the date of filing with the SEC, any untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not materially misleading. All of the consolidated financial statements included in the Reports (the "COMPANY FINANCIAL STATEMENTS"): (a) have been prepared from and on the basis of, and are in accordance with, the books and records of the Company and with generally accepted accounting principles ("GAAP") applied on a basis consistent with prior accounting periods; (b) fairly and accurately present in all material respects the consolidated financial condition of the Company as of the date of each such Company Financial Statement and the results of its operations for the periods therein specified; and (c) in the case of the annual financial statements, are accompanied by the audit opinion of the Company's independent public accountants. Except as set forth in the Company Financial Statements, as of the date hereof, Company has no liabilities other than (x) liabilities which are reflected or reserved against in the Company Financial Statements and which remain outstanding and undischarged as of the date hereof, (y) liabilities arising in the ordinary course of business of the Company since September 30, 2007, or (z) which were not required by generally accepted accounting principles to be reflected or reserved on the Company Financial Statements. Since September 30, 2007, there has not been any event or change which has had a Material Adverse Effect (as hereinafter defined) and Company has no actual knowledge of any event or circumstance that would reasonably be expected to result in such a Material Adverse Effect. As used herein, "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (i) the Company, (ii) its consolidated results of operations, assets, or financial condition, (iii) its ability to perform its obligations under this Agreement or (iv) the Shares or the Warrant Shares, PROVIDED HOWEVER, that a Material Adverse Effect shall not include facts, circumstances, events, changes, effects or occurrences (i) affecting the United States or global economy or capital or financial markets or the ethanol market generally which do not materially disproportionately affect the Company, (ii) resulting from changes in laws, regulations or GAAP, or in the authoritative interpretations thereof or in regulatory or interpretive guidance related thereto which do not materially disproportionately affect the Company, (iii) resulting from earthquakes or similar catastrophes, or acts of war, sabotage, terrorism, military action or any escalation or worsening thereof which do not materially disproportionately affect the Company, or (iv) resulting from this Agreement, the announcement thereof and the transactions contemplated hereby. 4 2.12 THE SHARES. The Shares, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free and clear of all liens, security interests, options, charges, pledges and encumbrances. 2.13 THE WARRANTS. The Warrants when issued and delivered will be duly and validly issued and will be free of all liens and restrictions on transfer other than under applicable securities laws.. 2.14 THE WARRANT SHARES. The Warrant Shares have been duly reserved for issuance by the Company in sufficient number to cover the exercise of all of the Warrants. The issuance of the Warrant Shares upon exercise of the Warrants has been duly authorized by the Company and the Warrant Shares when delivered in accordance with the Warrant, will be validly issued, fully paid and non-assessable, and free of all liens and restrictions on transfer other than under applicable securities laws. 2.15 BROKERS' OR FINDERS' FEES. Except for Ardour Capital Investment, LLC ("ARDOUR"), no broker, finder or similar agent has been employed by or on behalf of the Company, and no Person or entity with which the Company has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation, in connection with this Agreement or the transactions contemplated hereby. 2.16 NO OTHER REPRESENTATIONS. Except as and to the extent set forth in this Section 2, the Company makes no representations or warranties whatsoever to the Investor and hereby disclaims all liability and responsibility for any representation, warranty, statement, or information not included herein that was made, communicated, or furnished (orally or in writing) to the Investor or its representatives (including any opinion, information, projection, or advice that may have been or may be provided to the Investor by any director, officer, employee, agent, consultant, or representative of the Company or any of is Subsidiaries). SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE Investor. The Investor hereby represents and warrants that: 3.1 CORPORATE EXISTENCE. The Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate or other power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.. 3.2 CORPORATE POWER. The Investor has the requisite legal, corporate or other power and authority to enter into, issue and perform this Agreement in accordance with the terms hereof. The execution, delivery and performance of this Agreement by the Investor and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate or other action. When executed and delivered by the Investor, this Agreement shall constitute valid and binding obligations of the Investor enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application. 5 3.3 SECURITIES LAW. The Investor is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the transactions contemplated under this Agreement. The Investor is acquiring the Shares and Warrants solely for investment purposes, with no intention of distributing or reselling any of the Shares or Warrants or any interest therein. The Investor's financial condition is such that it is able to bear all economic risks of investment in the Shares and Warrants, including a complete loss of its investment. The Company has provided the Investor with adequate access to financial and other information concerning the Company as requested and the Investor has had the opportunity to ask questions of and receive answers from the Company concerning the transactions contemplated by this Agreement and to obtain therefrom any additional information necessary to make an informed decision regarding an investment in the Company. The Investor is aware that the Shares are not registered under the Securities Act and will be endorsed with transfer restriction legends, and that neither the Shares nor any interest therein may be sold, pledged, or otherwise transferred unless the Shares are registered under the Securities Act or qualify for an exemption under the Securities Act. 3.4 NO CONFLICTS. The execution, delivery and performance of this Agreement and the consummation by the Investor of the transactions contemplated hereby, do not and will not (i) violate or conflict with any provision of any Investor's organizational documents, each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which any Investor is a party or by which any of its respective properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Investor or by which any property or asset of the Investor are bound or affected. 3.5 BROKERS' OR FINDERS' FEES. No broker, finder or similar agent has been employed by or on behalf of the Investor, and no Person or entity with which the Investor has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation, in connection with this Agreement or the transactions contemplated hereby. 3.6 CERTAIN TRADING ACTIVITIES. The Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Investor, engaged in any transactions in the securities of the Company (including, without limitations, any short sales involving the Company's securities) since the time that such Investor was first contacted by the Company or Ardour regarding the investment in the Company contemplated by this Agreement. The Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company (including short sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed by the Company. The Investor has maintained, and covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company the Investor will maintain, the confidentiality of any disclosures made to it in connection with this transaction (including the existence and terms of this transaction). 6 3.7 LIMITED OWNERSHIP. The purchase by the Investor of the securities issuable to it at the Closing will not result in the Investor (individually or together with any other Person with whom the Investor has identified, or will have identified, itself as part of a "group" in a public filing made with the SEC involving the Company's securities) acquiring, or obtaining the right to acquire, beneficial ownership in excess of 19.999% of the outstanding shares of common stock or the voting power of the Company on a post transaction basis that assumes that the Closing shall have occurred. The Investor does not presently intend to, alone or together with others, make a public filing with the SEC to disclose that it has (or that it together with such other Persons have) acquired, or obtained the right to acquire, as a result of the Closing (when added to any other securities of the Company that it or they then own or have the right to acquire), beneficial ownership in excess of 19.999% of the outstanding shares of common stock or the voting power of the Company on a post transaction basis that assumes that the Closing shall have occurred. SECTION 4. CONDITIONS TO CLOSING. The following are conditions to Closing which shall be deemed satisfied upon delivery by the Company of the certificates representing the Shares and the Warrants and delivery by the Investor of the Purchase Price: 4.1 TERMINATION OF SECURITY INTERESTS/UCC FILINGS. Aurarian Capital Partners II, L.P. ("AURARIAN CAPITAL") and Aurarian Offshore Ltd. ("AURARIAN OFFSHORE") shall have agreed to release any security interests they have in the assets of the Company and its Subsidiaries and the Company shall have filed UCC termination statements extinguishing any security interests. 4.2 CONVERSION OPTION. Each of Aurarian Capital and Aurarian Offshore shall have fully converted their respective Senior Secured Convertible Promissory Notes with an aggregate principle amount of $2,000,000 at a conversion price of $2.90 into common stock of the Company (the "AURARIAN FINANCING"). SECTION 5. COVENANTS. 5.1 PARTICIPATIONS. Until the second anniversary from the Closing Date, the Company covenants to grant the Investor the right to purchase its pro rata share of any shares of future offerings (other than Excluded Issuances) of equity securities (or warrants or securities convertible into equity securities) of the Company that will enable it to maintain its fully diluted percentage ownership of the Company at the offering price or the price being paid by a third party, as applicable. "EXCLUDED ISSUANCES" shall mean any equity securities (or warrants or securities convertible into equity securities) issued (i) to employees, officers, directors, contractors, consultants or advisers approved by the Board of Directors of the Company (the "BOARD"), (ii) to parties that are strategic partners investing in connection with a commercial relationship, or providing the Company with equipment leases, real property leases, loans, credit lines, guaranties or similar transactions approved by the Board, (iii) in connection with a merger or acquisition or in connection with a joint venture or other strategic or commercial relationship approved by the Board, (iv) upon the exercise of currently outstanding convertible securities, options and warrants, and (v) in connection with any public offering. 7 5.2 OPTION RESTRICTIONS. Until all of the Shares are subject to an effective registration statement, the Company shall not issue shares, warrants or options to any Affiliates such that after giving effect to such issuance, the number of shares held by such Affiliates have increased by greater than ten percent (10%) over the number of outstanding shares of the Company held by Affiliates, in each case on a fully diluted basis, as of Closing Date. SECTION 6. REGISTRATION RIGHTS. 6.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall: (a) within 45 days of the Closing Date (the "FILING DEADLINE"), prepare and file with the SEC a Registration Statement (the "INITIAL REGISTRATION STATEMENT") relating to the resale of the sum (the "REQUIRED REGISTRATION AMOUNT") of (i) the number of Shares and Warrant Shares issued to the New Investors and (ii) the number of shares of common stock and warrant shares of the Company issued to Aurarian pursuant to the Aurarian Financing (collectively, the "REGISTRABLE SECURITIES"). The Initial Registration Statement shall be on Form SB-2 (or on another appropriate form). Notwithstanding anything herein to the contrary, if the SEC prevents the Company from including the Required Registration Amount of Registrable Securities on the Initial Registration Statement due to limitations on the use of Rule 415 of the Securities Act or otherwise for the resale of the Registrable Securities by the New Investors and Aurarian (the Registrable Securities not included on such Registration Statement, the "CUTBACK SHARES"), the Initial Registration Statement shall register the resale of a number of Registrable Securities which is equal to the maximum number of shares as is permitted by the SEC. In such event, the number of Registrable Securities to be registered for the New Investors and Aurarian in the Initial Registration Statement shall be reduced PRO RATA among all New Investors and Aurarian. With respect to the Cutback Shares, the Company shall file additional registration statements (each an "ADDITIONAL REGISTRATION STATEMENT" and with the Initial Registration Statement, the "REGISTRATION STATEMENT") successively trying to register the maximum number of remaining Cutback Shares until all of the Required Registration Amount of Registrable Securities have been registered with the SEC.; (b) use its reasonable commercial efforts, subject to receipt of necessary information from the New Investors and Aurarian, to cause the SEC to declare the Initial Registration Statement effective within 150 days after the Closing Date (or ten business days after receipt of notice of no review by the SEC) (the "EFFECTIVE DEADLINE"); (c) promptly prepare and file with the SEC such amendments and supplements to any Registration Statement filed pursuant to this Section 6.1 and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective until the earliest of (i) such time as all of the Registrable Securities have been sold pursuant to the Registration Statement, (ii) two years or (iii) such time all of the Registrable Securities become eligible for resale without volume limitations pursuant to Rule 144 (including for purposes of this Agreement, any successor rule that may be adopted following the date hereof) under the Securities Act or any other rule of similar effect (the "EFFECTIVENESS PERIOD"); 8 (d) furnish to the New Investors and Aurarian with respect to the Registrable Securities registered under any Registration Statement (and to each underwriter, if any, of such Registrable Securities) such number of copies of prospectuses and such other documents as the New Investors may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Securities by the New Investors and Auraruan; (e) bear all expenses in connection with the procedures in paragraphs (a) through (f) of this Section 6.1 and the registration of the Registrable Securities pursuant to any Registration Statement, other than fees and expenses, if any, of counsel or other advisers to the New Investors and Aurarian or underwriting discounts, brokerage fees and commissions incurred by the New Investors or Aurarian, if any in connection with the offering of the shares pursuant to any Registration Statement; (f) in order to enable the New Investors to sell the Registrable Securities under Rule 144 to the Securities Act ("RULE 144"), for a period of two years from the Closing Date, use its commercially reasonable efforts to comply with the requirements of Rule 144, including without limitation, use its commercially reasonable efforts to comply with the requirements of Rule 144 with respect to public information about the Company and timely file all reports required to be filed by the Company under the Exchange Act; 6.2 DELAY IN FILING OR EFFECTIVENESS OF REGISTRATION STATEMENT. (a) If (i) the Initial Registration Statement is not filed by the Company with the SEC on or prior to the Filing Deadline, then for each day following the Filing Deadline, until but excluding the date the Initial Registration Statement is filed, the Company shall pay the New Investors with respect to any such failure, as liquidated damages and not as a penalty, an amount per 30-day period equal to 1.0% of the purchase price paid by such New Investors for its Shares pursuant to this Agreement (on a daily basis over such period) (the "FILING LIQUIDATED DAMAGES") or (ii) if the Initial Registration Statement is not declared effective by the SEC by the Effective Deadline, then for each day following the Effective Deadline, until but excluding the date that is the earlier of the date the SEC declares the Initial Registration Statement effective or the 30th day after the Effective Deadline, the Company shall pay the New Investors with respect to any such failure, as liquidated damages and not as a penalty, an amount for such period equal to 0.50% of the purchase price paid by such New Investors for its Shares pursuant to this Agreement (pro rata) (the "150 DAY LIQUIDATED DAMAGES") or (iii) if the Initial Registration Statement is not declared effective by the SEC by the 180 Day Effective Deadline, then for each day following the 180 Day Effective Deadline, until but excluding the date the SEC declares the Initial Registration Statement effective, the Company shall pay the New Investors with respect to any such failure, as liquidated damages and not as a penalty, an amount per 30-day period equal to 1.0% of the purchase price paid by such New Investors for its Shares pursuant to this Agreement (pro rata on a 30 day basis) (the "180 Day LIQUIDATED DAMAGES," and together with the Filing Liquidated Damages and the 150 Day Liquidated Damages, the "Liquidated Damages"). Notwithstanding the foregoing provisions, in no event shall the Company be obligated to pay any Liquidated Damages pursuant to this Section 6.2 (i) to more than one New Investor in respect of the same Shares or Warrants for the same period of time, (ii) with respect to any Cutback Shares, (iii) with respect to the Warrants or any Warrant Shares, (iv) in respect of any Shares that are eligible to be sold by any New Investor pursuant to Rule 144 and (v) of more than 5.0% of the Purchase Price, in the aggregate. 9 (g) Notwithstanding anything herein to the contrary, the Company in its sole discretion may pay any Liquidated Damages in either (i) cash or (ii) additional shares of common stock. Such additional shares shall be valued by the average VWAP five (5) trading days prior to when such Liquidated Damages shall be paid. SECTION 7. DEFINITIONS. 7.1 DEFINED TERMS USED IN THIS AGREEMENT. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below: "AFFILIATE" means, with respect to any Person (i) a director, officer or shareholder of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or spouse, parent, sibling or descendant of any director or executive officer of such Person), and (iii) any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. "150 DAY LIQUIDATED DAMAGES" has the meaning set forth in Section 6.2. "180 DAY EFFECTIVE DEADLINE" shall mean the day that is 180 days after the Closing Date. "180 DAY LIQUIDATED DAMAGES" has the meaning set forth in Section 6.2. "ADDITIONAL REGISTRATION STATEMENT" has the meaning set forth in Section 6.1(a). "AGREEMENT" has the meaning set forth in the preamble. "AURARIAN" means Aurarian Capital and Aurarian Offshore. "AURARIAN CAPITAL" has the meaning set forth in Section 4.1. "AURARIAN FINANCING" has the meaning set forth in Section 4.2. "AURARIAN OFFSHORE" has the meaning set forth in Section 4.1. "BOARD" has the meaning set forth in Section 5.1. "CLOSING" has the meaning set forth in Section 1.3. "CLOSING DATE" has the meaning set forth in Section 1.3. 10 "COMPANY" has the meaning set forth in the preamble. "COMPANY FINANCIAL STATEMENTS" has the meaning set forth in Section 2.11. "CUTBACK SHARES" has the meaning set forth in Section 6.1(a). "EFFECTIVE DEADLINE" has the meaning set forth in Section 6.1(b). "EFFECTIVENESS PERIOD" has the meaning set forth in Section 6.1(c). "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. "EXCLUDED ISSUANCES" has the meaning set forth in Section 5.1. "FILING DEADLINE" has the meaning set forth in Section 6.1(a). "FILING LIQUIDATED DAMAGES" has the meaning set forth in Section 6.2. "FINANCING" has the meaning set forth in the first recital. "GAAP" has the meaning set forth in Section 2.11. "INITIAL REGISTRATION AMOUNT" has the meaning set forth in Section 6.1(a). "INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section 2.10. "INVESTOR" has the meaning set forth in the preamble. "LIQUIDATED DAMAGES" has the meaning set forth in Section 6.2. "MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 2.11. "NEW INVESTORS" has the meaning set forth in the first recital. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or any other company or entity or a government or agency or political subdivision thereof. "PUBLIC FILING" means all forms, Reports, schedules, statements, exhibits and other documents or information filed with the SEC pursuant to the Exchange Act or the Securities Act. "PURCHASE PRICE" has the meaning set forth in Section 1.1. "REGISTRABLE SECURITIES" has the meaning set forth in Section 6.1(a). "REGISTRATION STATEMENT" has the meaning set forth in Section 6.1(a). "REPORTS" has the meaning set forth in Section 2.11. 11 "REQUIRED REGISTRATION AMOUNT" has the meaning set forth in Section 6.1(a). "RULE 144" has the meaning set forth in Section 6.1(f). "SEC" has the meaning set forth in Section 2.11. "SECURITIES ACT" has the meaning set forth in Section 2.9. "SENIOR SECURED CONVERTIBLE PROMISSORY NOTES" means the Senior Secured Convertible Promissory Notes, dated August 21, 2007, issued by the Company to each of Aurarian Capital and Aurarian Offshore. "SHARES" has the meaning set forth in the third recital. "SUBSIDIARY" has the meaning set forth in Section 2.2. "WARRANTS" has the meaning set forth in Section 1.2. "WARRANT SHARES" has the meaning set forth in Section 1.2. SECTION 8. MISCELLANEOUS. 8.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. 8.2 ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. 8.3 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 8.4 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION OF REMEDIES. This Agreement may be amended, superseded, cancelled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by all of the parties hereto or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of such party of any such right, power or privilege, or any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. 8.5 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of New York without regard to choice of law principles. 12 8.6 FURTHER ASSURANCES. Each party shall, at the request of another party, at any time and from time to time following the Closing promptly execute and deliver, or cause to be executed and delivered, all such further instruments and take all such further action as each party may reasonably request to confirm or carry out the provisions and intent of this Agreement. 8.7 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. THE COMPANY: BLUEFIRE ETHANOL FUELS, INC. By: _______________________________ Name: Title: INVESTOR QUERCUS TRUST By: _______________________________ Name: Title: 14 EX-99.3 4 bluefire_8k-ex9903.txt FORM OF WARRANT EXHIBIT 99.3 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE COMPANY, IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. December 14, 2007 No. _____ BLUEFIRE ETHANOL FUELS, INC. (Organized under the laws of the State of Nevada) WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK FOR VALUE RECEIVED, BLUEFIRE ETHANOL FUELS, INC., a corporation organized under the laws of the State of Nevada (the "Company"), hereby certifies that ______________, its successors and assigns (the "Holder"), is the owner of this warrant (the "Warrant") which initially entitles the Holder, subject to the provisions hereof, to purchase from the Company at any time and from time to time on and after the date hereof (the "Original Issue Date") until 5:00 p.m. California local time on the Expiration Date (as defined in Section 3 herein), up to __________ duly authorized, validly issued, fully paid and non-assessable shares of Common Stock (as defined below) at the Exercise Price (as defined in Section 2 herein) per share of Common Stock on the terms and conditions hereinafter set forth. This warrant is issued in connection with a securities purchase agreement between Holder and the Company dated December 7, 2007 (the "Purchase Agreement"). The term "Common Stock" means the Common Stock, par value $0.001 per share, of the Company as constituted on the Original Issue Date. The number of shares of Common Stock to be received upon the exercise of this Warrant shall be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter referred to as "Warrant Shares." The term "Company" means and includes the corporation named above as well as any successor corporation. The term "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by law to close. The Holder agrees with the Company that this Warrant is issued, and all the rights hereunder shall be held subject to, all of the conditions, limitations and provisions set forth herein. 1. NUMBER OF WARRANT SHARES. This Warrant Entitles the Holder to purchase up to _____________ duly authorized, validly issued, fully paid and nonassessable shares of the Company's Common Stock, as such amount may be adjusted under Section 9 hereof. 1 2. EXERCISE PRICE. The Exercise Price shall be $2.90 per share subject to adjustment pursuant to Section 9 hereof (originally and as adjusted, the "Exercise Price"). 3. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part, at any time, or from time to time during the period commencing on the Original Issue Date and expiring on December 7, 2012, or if such date is not a Business Day, then on the next succeeding day which shall be a Business Day (the "Expiration Date"). 4. NOTICE OF EXERCISE. (a) The purchase rights represented by this Warrant may be exercised by presentation and surrender of this Warrant to the Company at its principal office, at the office of its stock transfer agent or at any other warrant agent designated by the Company (the "Warrant Agent") if any, with the Warrant Exercise Form, a form of which is attached hereto as EXHIBIT A, duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form and instruments of transfer, if appropriate, duly executed by the Holder or its duly authorized attorney. (b) On or after December 14, 2008, if the fair market value of one share of the Company's Common Stock is greater than the Exercise Price (at the date of calculation as set forth below) and (i) any portion of the Warrant Shares issuable upon exercise of this Warrant are not covered by an effective registration statement under the Securities Act, and (ii) the sale of any portion of Warrant Shares are subject to any volume limitations under Rule 144, then in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company or the Warrant Agent together with an executed Cashless Exercise Form in the Form attached hereto as EXHIBIT B in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula: X = Y(A-B) ------ A Where X = the number of shares of Common Stock to be issued to the Holder Y = the number of shares of Common Stock issuable under the Warrant or, if only a portion of the Warrant Certificate is being exercised, the portion of the Warrant Certificate being exercised (at the date of such calculation) A = the fair market value of one share of the Company's Common Stock (at the date of such calculation) B = Exercise Price (as adjusted to the date of such calculation) For purposes of the above calculation, the fair market value of one share of Common Stock shall be determined by taking the average of the closing prices of the sales of any shares of Common Stock on all securities exchanges on which the Common Stock is listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the OTC Bulletin Board as of 4:00 p.m., New York time, or, if on any day any Common Stock is not quoted on the OTC Bulletin Board, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the fair market value is being determined and the 20 consecutive Business Days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the OTC Bulletin Board or the over-the-counter market, the fair market value of one share of Common Stock shall be the amount determined in good faith by the Company's Board of Directors. Notwithstanding anything contained herein, any "cashless exercise" of Warrant shall be limited to only those Warrant Shares covered under Sections 4(b)(i) and (ii). 2 (c) Payment of the aggregate Exercise Price shall be made at the Holder's election (i) by wire transfer in cash or by certified check or cashier's check, payable to the order of the Company in accordance with the provisions of Section 4(a), (ii) by "cashless exercise" in accordance with the provisions of Section 4(b), or (iii) by a combination of the foregoing methods of exercise selected by the Holder. If this Warrant should be exercised in part only, the Company shall, within ten (10) Business Days of the surrender of this Warrant, execute and deliver a new warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares issuable hereunder. (d) Upon receipt by the Company of this Warrant, together with the Warrant Exercise Form and/or the Cashless Exercise Form, as the case may be, and the Exercise Price at its office, or by the Warrant Agent at its office, in each case in the proper form for exercise, the Holder shall immediately be deemed to be the Holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on exercise of this Warrant, but in no event shall the Company be responsible or liable for income taxes or transfer taxes upon the issuance or transfer of the Warrant or the Warrant Shares. 5. RESERVATION OF SHARES. The Company will at all times reserve for issuance and delivery upon exercise of this Warrant all shares of Common Stock or other shares of capital stock of the Company (and other securities) from time to time receivable upon exercise of this Warrant. All such shares (and other securities) shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and non-assessable and free of all encumbrances. 6. FRACTIONAL SHARES. No fractional shares or script representing fractional shares shall be issued upon the exercise of the Warrant, but the Company shall pay within ten (10) Business Days the Holder in cash an amount equal to the fair market value of such fractional share of Common Stock in lieu of each fraction of a share otherwise called for upon any exercise of the Warrant, as determined in good faith by the Board of Directors of the Company (the "Board"). 3 7. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its Warrant Agent, if any, for other warrants of different denominations, entitling the Holder to purchase in the aggregate the same number of shares of Common Stock issusable hereunder. Upon surrender of this Warrant to the Company or at the office of its Warrant Agent, if any, with an appropriate form of assignment duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other warrants that carry the same rights (including registration rights) upon presentation hereof at the office of the Company or at the office of its Warrant Agent, if any, together with a written notice specifying the names and denominations in which new warrants are to be issued and signed by the Holder hereof. 8. RIGHTS OF THE HOLDER. Prior to exercise of the Warrant, the Holder, in its capacity hereunder, shall not, by virtue hereof, be entitled to any rights as a shareholder of the Company, either at law or in equity, and the rights of the Holder, in its capacity hereunder, are limited to those expressed in this Warrant. 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of Warrant Shares issuable upon the exercise of this Warrant Certificate and the Exercise Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: 9.1 MERGER. If at any time there shall be a merger or consolidation of the Company with or into another corporation when the Company is not the surviving corporation, then, as part of such merger or consolidation, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of rights herein granted, during the period specified herein and upon payment of the aggregate Exercise Price, if any, the number of shares of stock or other securities or property of the successor corporation resulting from such merger or consolidation, to which a holder of the stock deliverable upon exercise of the rights granted in this Warrant would have been entitled in such merger or consolidation if such rights had been exercised immediately before such merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the merger or consolidation. The Company will not effect any such merger or consolidation unless, prior to the consummation thereof, the successor corporation shall assume, by written instrument reasonably satisfactory in form and substance to the Holder, the obligations of the Company under this Warrant. 9.2 RECLASSIFICATION, ETC. If the Company at any time shall, by combination or reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such combination, reclassification or other change. 4 9.3 STOCK DIVIDENDS, SPLITS, SUBDIVISIONS OR COMBINATION OF SHARES. If the Company at any time shall pay a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, split or subdivide its Common Stock, the Exercise Price shall be proportionately decreased and the number of Warrant Shares issuable pursuant to this Warrant shall be proportionately increased. If the Company at any time shall combine or reverse split its Common Stock, the Exercise Price shall be proportionately increased and the number of Warrant Shares issuable pursuant to this Warrant shall be proportionately decreased. 9.4 ANTI-DILUTION PROTECTION. This Warrant is subject to "full-ratchet" anti-dilution protection in relation to the issuance by the Company (other than Excluded Issuances) of any additional shares of stock, options, warrants or any securities exchangeable into any of the foregoing, (the "ADDITIONAL SHARES"). If the Company issues any Additional Shares in exchange for consideration in an amount per Additional Share less than the Exercise Price in effect immediately prior to such issuance or sale of such Additional Share, then the Exercise Price shall be adjusted to equal the consideration paid per Additional Share. "EXCLUDED ISSUANCES" shall mean any equity securities (or options, warrants or securities convertible into equity securities) issued (i) to employees, officers, directors, contractors, consultants or advisers approved by the Board, (ii) to parties that are strategic partners investing in connection with a commercial relationship, or providing the Company with equipment leases, real property leases, loans, credit lines, guaranties or similar transactions approved by the Board, (iii) in connection with a merger or acquisition or in connection with a joint venture or other strategic or commercial relationship approved by the Board, (iv) upon the exercise of currently outstanding convertible securities, options and warrants, and (v) in connection with any public offering. 9.5 OTHER CHANGES. If any other event occurs as to which the other provisions of this Section 9 are not strictly applicable or if strictly applicable, would not fairly protect the rights of the Holder in accordance with such provisions, then the Company shall make an adjustment in the number of and class of shares available under this Warrant, the Exercise Price or the application of such provisions, so as to protect such rights as aforesaid. The adjustment shall be such as will give the Holder upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as the Holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. 9.6 NOTICE OF ADJUSTMENTS; NOTICES. Whenever the Exercise Price or number of shares hereunder shall be adjusted, the Company shall issue a certificate signed by its President, Chief Executive Officer or Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of shares hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the Holder. The Company shall give written notice to the Holder at least 20 days prior to the date on which the Company closes its books or takes a record for determining rights to receive any dividends or distributions. 5 9.7 NOTICES OF CORPORATE EVENTS. If the Company (i) shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of cash, securities or other property in respect of its Common Stock, including without limitation granting any rights or warrants to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities, or to receive any other right; (ii) authorizes or approves any (a) capital reorganization of the Company, (b) any reclassification of the capital stock of the Company, (c) any consolidation or merger of the Company with or into another corporation, (d) any sale of all or substantially all of its assets in one or a series of related transactions or (e) any tender offer or exchange offer pursuant to which holders of the Common Stock are permitted to tender or exchange their shares for other securities, cash or property or (iii) authorizes the voluntary dissolution, liquidation or winding up of the Company, then the Company shall mail or cause to be mailed to each Holder a notice describing the material terms and conditions of such transaction at least 20 calendar days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; PROVIDED, HOWEVER, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 10. TRANSFER TO COMPLY WITH THE SECURITIES ACT. The Warrant and any Warrant Shares may not be sold, transferred, pledged, hypothecated or otherwise disposed of unless registered under the Securities Act or pursuant to an available exemption from such registration, provided that the transferor delivers to the Company an opinion of counsel reasonably satisfactory to the Company confirming the availability of such exemption. 11. LEGEND. Unless the Warrant Shares have been registered under the Securities Act, upon exercise of the Warrant and the issuance of any of the Warrant Shares, all certificates representing such securities shall bear on the face thereof substantially the following legend: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), may not be sold, offered for sale, assigned, transferred or otherwise disposed of, unless registered pursuant to the provisions of the Act or unless an opinion of counsel reasonably acceptable to the Company is obtained stating that such disposition is in compliance with an available exemption from such registration." 12. WARRANT AGENT. The Company shall initially serve as Warrant Agent under this Warrant. Upon 10 days' prior written notice to the Holder, the Company may appoint a new Warrant Agent. Any corporation into which the Company or any new Warrant Agent may be merged or any corporation resulting from any consolidation to which the Company or any new Warrant Agent shall be a party or any corporation to which the Company or any new Warrant Agent transfers substantially all of its corporate trust or shareholders services business shall be a successor Warrant Agent under this Warrant without any further act. Any such successor Warrant Agent shall promptly cause notice of its succession as Warrant Agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Company's books. 6 13. NOTICES. All notices required hereunder shall be in writing and shall be deemed given when sent by facsimile, delivered personally or within two days after mailing when mailed by certified or registered mail, return receipt requested, to the Company at its principal office, or to the Holder at the address set forth on the record books of the Company, or at such other address of which the Company or the Holder has been advised by notice hereunder. 14. GENERAL PROVISIONS. (a) SUCCESSORS AND ASSIGNORS. All the covenants and provisions of this Warrant shall bind and inure to the benefit of the respective executors, administrators, successors and assigns of the Holder and the Company. (b) AMENDMENT. This Warrant may only be modified or amended by a writing signed by the Company and the Holder. (c) APPLICABLE LAW. THE WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, PERFORMANCE, AND ENFORCEMENT WITHOUT GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF. (d) ENTIRE AGREEMENT. Except as provided herein, this Warrant, including exhibits, contains the entire agreement of the parties, and supersedes all existing negotiations, representations or agreements and other oral, written, or other communications between them concerning the subject matter of this Warrant. (e) SEVERABILITY. If any provision of this Warrant is unenforceable, invalid, or violates applicable law, such provision shall be deemed stricken and shall not affect the enforceability of any other provisions of this Warrant. (f) CAPTIONS. The captions in this Warrant are inserted only as a matter of convenience and for reference and shall not be deemed to define, limit, enlarge, or describe the scope of this Warrant or the relationship of the parties, and shall not affect this Warrant or the construction of any provisions herein. (g) LOST WARRANT. The Company covenants to the Holder that upon receipt by the Company of documentation reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new warrant certificate of like tenor and date in lieu of this Warrant. Any such new warrant certificate executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone. (h) FURTHER ASSURANCES. The Company shall not, by amendment of its articles of incorporation (or other organizational documents) or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any governmental authority or any other person, and otherwise fulfilling, or causing the fulfillment of, the various obligations made herein, as may be reasonably required or desirable to carry out or to perform the provisions of this Warrant and to consummate and make effective as promptly as possible the transactions contemplated by this Warrant. 7 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf, in its corporate name, by its duly authorized officer, all as of the day and year first above written. BLUEFIRE ETHANOL FUELS, INC., a corporation organized under the laws of the State of the Nevada By: _______________________________________ Name: Title 8 EXHIBIT A WARRANT EXERCISE FORM (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To BlueFire Ethanol Fuels, Inc.: In accordance with the Warrant enclosed with this Warrant Exercise Form, the undersigned hereby irrevocably elects to purchase________ shares of Common Stock, $0.001 par value per share ("Common Stock"), of BlueFire Ethanol Fuels Inc. and, encloses herewith $__________ in cash, certified or official bank check or checks or wire transfer, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Warrant Exercise Form relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of: PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER _______________________________________ ________________________________________________________________________________ (Please print name and address) If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock that the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a new warrant evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to: ________________________________________________________________________________ (Please print name and address) Dated: _____________________________ ______________________________________ (Print name of holder) By: __________________________________ Name: ________________________________ Title: _______________________________ (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) 9 EXHIBIT B CASHLESS EXERCISE FORM The undersigned hereby elects, pursuant to the exercise provisions of Section 4(b) of the Warrant, to exchange the Warrant for such number of Warrant Shares as set forth on the calculation attached hereto. Please issue a certificate or certificates for such Warrant Shares in the name of: Name: _________________________________________________________________ (Please Print Name, Address and SSN or EIN of Shareholder above) Address: ________________________________________________________________ ________________________________________________________________ SSN or EIN: _____________________________________________________________ Signature: ______________________________________________________________ 10 -----END PRIVACY-ENHANCED MESSAGE-----