Document:

Unassociated Document

    Exhibit
      4.1

     

    NEITHER
      THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
      HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES
      ACT”),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS.

     

    PURE
      BIOFUELS CORP.

     

    Secured
      Convertible Debenture

     

    
      	
              Issuance
                Date: April 19, 2007

            	
              Original
                Principal Amount: $3,000,000

            
	
              No.
                PBOF-1-1

            	 

    

    

    FOR
      VALUE RECEIVED,
      PURE
      BIOFUELS CORP., a Nevada corporation (the "Company"),
      hereby promises to pay to the order of CORNELL CAPITAL PARTNERS, L.P. or
      registered assigns (the "Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption, conversion or otherwise, the
      "Principal")
      when
      due, whether upon the Maturity Date (as defined below), on any Repayment Date
      with respect to the Repayment Amount due on such Repayment Date (each, as
      defined herein), acceleration, redemption or otherwise (in each case in
      accordance with the terms hereof) and to pay interest ("Interest")
      on any
      outstanding Principal at the applicable Interest Rate from the date set out
      above as the Issuance Date (the "Issuance
      Date")
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), any Repayment Date or the Maturity Date or acceleration, conversion,
      redemption or otherwise (in each case in accordance with the terms hereof).
      This
      Secured Convertible Debenture (including all Secured Convertible Debentures
      issued in exchange, transfer or replacement hereof, this "Debenture")
      is
      issued pursuant to the Securities Purchase Agreement. Certain capitalized terms
      used herein are defined in Section 17.

     

    (1)  GENERAL
      TERMS

     

    (a)  Payment
      of Principal.
      On
      the
      Maturity Date, the Company shall pay to the Holder the Repayment Amount in
      accordance with the terms of this Debenture. The
      "Maturity
      Date"
      shall
      be July 19, 2007, provided, however, that the Maturity Date shall be extended
      until October 19, 2007 in the event that any principal is outstanding under
      the
      Debenture as of the Maturity Date due to the Company’s inability to consummate a
      financing of at least $3 million and no Event of Default (as defined herein)
      then exists. In the event that the Maturity Date is extended in accordance
      with
      the foregoing, the Company shall, within three Business Days of the date of
      such
      extension, issue additional warrants to the Holder to purchase the same number
      of shares of the Company’s Common Stock upon the same terms and conditions as
      the warrants previously issued to the Holder pursuant to the Securities Purchase
      Agreement. Furthermore, the Maturity Date may be extended at the option of
      the
      Holder in the event that, and for so long as, an Event of Default (as defined
      below) shall have occurred and be continuing on the Maturity Date (as may be
      extended pursuant to this Section 1) or any event shall have occurred and be
      continuing on the Maturity Date (as may be extended pursuant to this Section
      1)
      that with the passage of time and the failure to cure would result in an Event
      of Default. Other than as specifically permitted by this Debenture, the Company
      may not prepay or redeem any portion of the outstanding Principal without the
      prior written consent of the Holder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate (“Interest
      Rate”)
      equal
      to twelve percent (12%), provided, however, that in the event the Maturity
      Date
      is extended in accordance with the terms of this Debenture, the interest rate
      shall increase by two percent (2%) per month through and until the extended
      Maturity Date, such that the interest rate for the first month after the
      original Maturity Date shall be equal to the annual rate fourteen percent (14%),
      the interest rate for the second month after the original Maturity Date shall
      be
      equal to the annual rate of sixteen percent (16%), and the interest rate for
      the
      third month after the original Maturity Date shall be equal to the annual rate
      of eighteen percent (18%). Any amount of Principal of this Debenture that
      remains outstanding after the extended maturity date shall continue to accrue
      interest at the annual rate of eighteen percent (18%). Interest shall be
      calculated on the basis of a 365-day year and the actual number of days elapsed,
      to the extent permitted by applicable law. Interest hereunder shall be paid
      on
      the Maturity Date (or sooner as provided herein) to the Holder or its assignee
      in whose name this Debenture is registered on the records of the Company
      regarding registration and transfers of Debentures at the option of the Company
      in cash, or, provided that the Equity Conditions are then satisfied converted
      into Common Stock at the Closing Bid Price on the Trading Day immediately prior
      to the date paid. 

     

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

     

    
      
        
        

      

      
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    (2)  EVENTS
      OF DEFAULT. 

     

    (a)  An
      “Event
      of Default”,
      wherever used herein, means any one of the following events (whatever the reason
      and whether it shall be voluntary or involuntary or effected by operation of
      law
      or pursuant to any judgment, decree or order of any court, or any order, rule
      or
      regulation of any administrative or governmental body):

     

    (i)  the
      Company's failure to pay to the Holder any amount of Principal, Interest, or
      other amounts when and as due under this Debenture (including, without
      limitation, the Company's failure to pay any redemption payments or amounts
      hereunder);

     

    (ii)  The
      Company or any subsidiary of the Company shall commence, or there shall be
      commenced against the Company or any subsidiary of the Company under any
      applicable bankruptcy or insolvency laws as now or hereafter in effect or any
      successor thereto, or the Company or any subsidiary of the Company commences
      any
      other proceeding under any reorganization, arrangement, adjustment of debt,
      relief of debtors, dissolution, insolvency or liquidation or similar law of
      any
      jurisdiction whether now or hereafter in effect relating to the Company or
      any
      subsidiary of the Company or there is commenced against the Company or any
      subsidiary of the Company any such bankruptcy, insolvency or other proceeding
      which remains undismissed for a period of 61 days; or the Company or any
      subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
      of
      relief or other order approving any such case or proceeding is entered; or
      the
      Company or any subsidiary of the Company suffers any appointment of any
      custodian, private or court appointed receiver or the like for it or any
      substantial part of its property which continues undischarged or unstayed for
      a
      period of sixty one (61) days; or the Company or any subsidiary of the Company
      makes a general assignment for the benefit of creditors; or the Company or
      any
      subsidiary of the Company shall fail to pay, or shall state that it is unable
      to
      pay, or shall be unable to pay, its debts generally as they become due; or
      the
      Company or any subsidiary of the Company shall call a meeting of its creditors
      with a view to arranging a composition, adjustment or restructuring of its
      debts; or the Company or any subsidiary of the Company shall by any act or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or any corporate or other action is taken by the Company
      or any subsidiary of the Company for the purpose of effecting any of the
      foregoing;

     

    (iii)  The
      Company or any subsidiary of the Company shall default in any of its obligations
      under any other debenture or any mortgage, credit agreement or other facility,
      indenture agreement, factoring agreement or other instrument under which there
      may be issued, or by which there may be secured or evidenced any indebtedness
      for borrowed money or money due under any long term leasing or factoring
      arrangement of the Company or any subsidiary of the Company in an amount
      exceeding $250,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable. For the avoidance of doubt, this clause (iii) does not include
      the default in payment of any account payable in accordance with the Company’s
      business;

     

    
      
        
        

      

      
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    (iv)  If
      the
      Common Stock is quoted or listed for trading on any of the following and it
      ceases to be so quoted or listed for trading and shall not again be quoted
      or
      listed for trading on any Primary Market within five (5) Trading Days of such
      delisting: (a) the American Stock Exchange, (b) New York Stock Exchange, (c)
      the
      Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC
      Bulletin Board (“OTCBB”) (each, a “Primary Market”);

     

    (v)  The
      Company or any subsidiary of the Company shall be a party to any Change of
      Control Transaction (as defined in Section 6) unless in connection with such
      Change of Control Transaction this Debenture is retired; 

     

    (vi)  the
      Company's (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within five (5) Business Days after the
      applicable Conversion Failure or (B) notice, written or oral, to any holder
      of
      the Debentures, including by way of public announcement, at any time, of its
      intention not to comply with a request for conversion of any Debentures into
      shares of Common Stock that is tendered in accordance with the provisions of
      the
      Debentures, other than pursuant to Section 4(c);

     

    (vii)  The
      Company shall fail for any reason to deliver the payment in cash pursuant to
      a
      Buy-In (as defined herein) within three (3) Business Days after such payment
      is
      due;

     

    (viii)  The
      Company shall to fully comply with all of the covenants set forth in Section
      4(p)(i) of the Securities Purchase Agreement within fourteen Business Days
      of
      the Mortgage Deadline (as defined in the Securities Purchase Agreement);

     

    (ix)  The
      Company shall fail to observe or perform any other covenant or agreement
      contained in this Debenture (except as may be covered by Section 2(a)(i) through
      2(a)(viii) hereof) or any Transaction Document (as defined in Section 16) which
      materially adversely affects the Company’s ability to repay the amounts owed
      under this Debenture and is not cured within fifteen (15) Business Days of
      the
      date the Holder provides written notice of such breach to the
      Company.

     

    (b)  During
      the time that any portion of this Debenture is outstanding, if any Event of
      Default has occurred, the full unpaid Principal amount of this Debenture,
      together with interest and other amounts owing in respect thereof, to the date
      of acceleration shall become at the Holder's election, immediately due and
      payable in cash; provided however, the Holder may request (but shall have no
      obligation to request) payment of such amounts in Common Stock of the Company.
      Furthermore, in addition to any other remedies, the Holder shall have the right
      (but not the obligation) to convert this Debenture at any time after an Event
      of
      Default at the lower of the Conversion Price or the Company Conversion Price.
      The Holder need not provide and the Company hereby waives any presentment,
      demand, protest or other notice of any kind, (other than required notice of
      conversion) and the Holder may immediately and without expiration of any grace
      period enforce any and all of its rights and remedies hereunder and all other
      remedies available to it under applicable law. Such declaration may be rescinded
      and annulled by Holder at any time prior to payment hereunder. No such
      rescission or annulment shall affect any subsequent Event of Default or impair
      any right consequent thereon. 

     

    
      
        
        

      

      
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    (3)  COMPANY
      REPAYMENT OR CONVERSION.
      

     

    (a)  General.
      On each
      applicable Repayment Date, the Company shall pay to the Holder of this Debenture
      the Repayment Amount due on such date by converting such Repayment Amount into
      shares of Common Stock of the Company, provided that there is not then an Equity
      Conditions Failure, in accordance with this Section 3 (a "Company
      Conversion");
      or
      redeem such Repayment Amount (a "Company
      Redemption"),
      or by
      any combination of a Company Conversion and a Company Redemption so long as
      all
      of the outstanding applicable Repayment Amount shall be converted and/or
      redeemed by the Company on the applicable Repayment Date, subject to the
      provisions of this Section 3. On or prior to the date which is the second (2nd)
      Trading Day prior to each Repayment Date (each, a "Repayment
      Notice Due Date"),
      the
      Company shall deliver written notice (each, a "Company
      Repayment Notice"),
      to
      the Holder which Company Repayment Notice shall (i) either (A) confirm that
      the
      applicable Repayment Amount of the Debenture shall be converted in whole
      pursuant to a Company Conversion or (B) (1) state that the Company elects to
      redeem, or is required to redeem in accordance with the provisions of the
      Debenture, in whole or in part, the applicable Redemption Amount pursuant to
      a
      Company Redemption and (2) specify the portion (including Interest) which the
      Company elects or is required to redeem pursuant to a Company Redemption (such
      amount to be redeemed, the "Company
      Redemption Amount")
      and
      the portion (including Interest), if any, that the Company elects to convert
      pursuant to a Company Conversion (such amount a "Company
      Conversion Amount")
      which
      amounts when added together, must equal the applicable Repayment Amount and
      (ii)
      if the Repayment Amount is to be paid, in whole or in part, pursuant to a
      Company Conversion, certify that there is not then an Equity Conditions Failure
      as of the date of the Company Repayment Notice. Each Company Repayment Notice
      shall be irrevocable. If the Company does not timely deliver a Company Repayment
      Notice in accordance with this Section 3, then the Company shall be deemed
      to
      have delivered an irrevocable Company Repayment Notice confirming a Company
      Redemption. The Company Conversion Amount shall be converted in accordance
      with
      Section 3(b) and the Company Redemption Amount shall be paid in accordance
      with
      Section 3(c).

     

    (b)  Mechanics
      of Company Conversion.
      If the
      Company delivers a Company Repayment Notice and elects, or is deemed to have
      elected, in whole or in part, a Company Conversion in accordance with Section
      3(a), then the applicable Company Conversion Amount, if any, which remains
      outstanding as of the applicable Repayment Date shall be converted as of the
      applicable Repayment Date by converting on such Repayment Date such Company
      Conversion Amount at the Company Conversion Price; provided that the Equity
      Conditions are then satisfied (or waived in writing by the Holder) on such
      Repayment Date and that the Repayment Volume Limitation is not exceeded. If
      the
      Equity Conditions are not satisfied (or waived in writing by the Holder) on
      such
      Repayment Date or the Repayment Volume Limitation is exceeded, then at the
      option of the Holder designated in writing to the Company, the Holder may
      require the Company to do any one or more of the following: (i) the Company
      shall redeem all or any part of the unconverted Company Conversion Amount
      designated by the Holder (such designated amount is referred to as the
      "Unconverted
      Redemption Amount")
      and
      the Company shall pay to the Holder within three (3) days of such Repayment
      Date, by wire transfer of immediately available funds, an amount in cash equal
      to such Unconverted Redemption Amount, and/or (ii) the Company Conversion shall
      be null and void with respect to all or any part of the unconverted Company
      Conversion Amount designated by the Holder and the Holder shall be entitled
      to
      all the rights of a holder of this Debenture with respect to such designated
      amount of the Company Conversion Amount; provided, however, that the Conversion
      Price for such unconverted Company Conversion Amount shall thereafter be
      adjusted to equal the lesser of (A) the Company Conversion Price as in effect
      on
      the date on which the Holder voided the Company Conversion and (B) the Company
      Conversion Price as in effect on the date on which the Holder delivers a
      Conversion Notice relating thereto. If the Company fails to redeem any
      Unconverted Redemption Amount by the third (3rd)
      day
      following the applicable Repayment Date, then the Holder shall have all rights
      under this Debenture (including, without limitation, such failure constituting
      an Event of Default). Notwithstanding anything to the contrary in this Section
      3(b), but subject to Section 4(c)(i), until the Company delivers Common Stock
      representing the Company Conversion Amount to the Holder, the Company Conversion
      Amount may be converted by the Holder into Common Stock pursuant to Section
      4.
      In the event that the Holder elects to convert the Company Conversion Amount
      prior to the applicable Repayment Date as set forth in the immediately preceding
      sentence, the Company Conversion Amount so converted shall be deducted from
      the
      Repayment Amounts relating to the applicable Repayment Dates as set forth in
      the
      applicable Conversion Notice.

     

    
      
        
        

      

      
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    (c)  Mechanics
      of Company Redemption.
      If the
      Company elects a Company Redemption in accordance with Section 3(a), then the
      Company Redemption Amount, if any, which is to be paid to the Holder on the
      applicable Repayment Date shall be redeemed by the Company on such Repayment
      Date, and the Company shall pay to the Holder on such Repayment Date, by wire
      transfer of immediately available funds, in an amount in cash equal to the
      Redemption Amount. If the Company fails to redeem the Company Redemption Amount
      on the applicable Redemption Date by payment of the Repayment Amount on such
      date, then at the option of the Holder designated in writing to the Company
      (any
      such designation, "Conversion
      Notice"
      for
      purposes of this Debenture), the Holder may require the Company to convert
      all
      or any part of the Repayment Amount into shares of Common Stock of the Company
      at the Company Conversion Price. Conversions required by this Section 3(c)
      shall
      be made in accordance with the provisions of Section 4(b). Notwithstanding
      anything to the contrary in this Section 3(c), but subject to Section 4(c)(i),
      until the applicable Repayment Amount (together with any interest thereon)
      is
      paid in full, the Company Redemption Amount (together with any interest thereon)
      may be converted, in whole or in part, by the Holder into Common Stock pursuant
      to Section 4. In the event the Holder elects to convert all or any portion
      of
      the Company Redemption Amount prior to the applicable Repayment Date as set
      forth in the immediately preceding sentence, the Company Redemption Amount
      so
      converted shall be deducted from the Repayment Amounts relating to the
      applicable Repayment Dates as set forth in the applicable Conversion
      Notice.

     

    (d)  Notwithstanding
      anything to the contrary, in the event that a Repayment Date is triggered by
      a
      Financing Transaction, the Holder, in lieu of accepting the applicable Repayment
      Amount, shall have the absolute right to elect to convert the applicable
      Repayment Amount into the securities offered in connection with the Financing
      Transaction in a face amount equal to the Repayment Amount being converted.
      

     

    
      
        
        

      

      
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    (4)  CONVERSION
      OF DEBENTURE.This
      Debenture shall be convertible into shares of the Company's Common Stock, on
      the
      terms and conditions set forth in this Section 4.

     

    (a)  Conversion
      Right.
      Subject
      to the provisions of Section 4(c), at any time or times on or after the Issuance
      Date, the Holder shall be entitled to convert any portion of the outstanding
      and
      unpaid Conversion Amount (as defined below) into fully paid and nonassessable
      shares of Common Stock in accordance with Section 4(b), at the Conversion Rate
      (as defined below). The number of shares of Common Stock issuable upon
      conversion of any Conversion Amount pursuant to this Section 4(a) shall be
      determined by dividing (x) such Conversion Amount by (y) the Conversion Price
      (the "Conversion
      Rate").
      The
      Company shall not issue any fraction of a share of Common Stock upon any
      conversion. If the issuance would result in the issuance of a fraction of a
      share of Common Stock, the Company shall round such fraction of a share of
      Common Stock up to the nearest whole share. The Company shall pay any and all
      transfer, stamp and similar taxes that may be payable with respect to the
      issuance and delivery of Common Stock upon conversion of any Conversion Amount.
      

     

    (i)  "Conversion
      Amount"
      means
      the portion of the Principal and accrued Interest to be converted, redeemed
      or
      otherwise with respect to which this determination is being made.

     

    (ii)  "Conversion
      Price"
      means,
      as of any Conversion Date (as defined below) or other date of determination,
      $0.98,
      subject
      to adjustment as provided herein.

     

    (b)  Mechanics
      of Conversion.

     

    (i)  Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
      "Conversion
      Date"),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
      "Conversion
      Notice")
      to the
      Company and (B) if required by Section 4(b)(iv), surrender this Debenture to
      a
      nationally recognized overnight delivery service for delivery to the Company
      (or
      an indemnification undertaking reasonably satisfactory to the Company with
      respect to this Debenture in the case of its loss, theft or destruction). If
      this Debenture is physically surrendered for conversion and the outstanding
      Principal of this Debenture is greater than the Principal portion of the
      Conversion Amount being converted, then the Company shall as soon as practicable
      and in no event later than five (5) Business Days after receipt of this
      Debenture and at its own expense, issue and deliver to the holder a new
      Debenture representing the outstanding Principal not converted. The Person
      or
      Persons entitled to receive the shares of Common Stock issuable upon a
      conversion of this Debenture shall be treated for all purposes as the record
      holder or holders of such shares of Common Stock upon the transmission of a
      Conversion Notice. In the event of a partial conversion of this Debenture
      pursuant hereto, the principal amount converted shall be deducted from the
      Repayment Amounts relating to the Repayment Dates as set forth in the Conversion
      Notice.

     

    
      
        
        

      

      
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    (ii)  Company's
      Failure to Timely Convert.
      If
      within five (5) Trading Days after the Company's receipt of the facsimile copy
      of a Conversion Notice the Company shall fail to issue and deliver a certificate
      to the Holder or credit the Holder's balance account with DTC for the number
      of
      shares of Common Stock to which the Holder is entitled upon such holder's
      conversion of any Conversion Amount (a "Conversion
      Failure"),
      and
      if on or after such Trading Day the Holder purchases (in an open market
      transaction or otherwise) Common Stock to deliver in satisfaction of a sale
      by
      the Holder of Common Stock issuable upon such conversion that the Holder
      anticipated receiving from the Company (a "Buy-In"),
      then
      the Company shall, within five (5) Business Days after the Holder's request
      and
      in the Holder's discretion, either (i) pay cash to the Holder in an amount
      equal
      to the Holder's total purchase price (including brokerage commissions and other
      out of pocket expenses, if any) for the shares of Common Stock so purchased
      (the
"Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date.

     

    (iii)  Book-Entry.
      Notwithstanding anything to the contrary set forth herein, upon conversion
      of
      any portion of this Debenture in accordance with the terms hereof, the Holder
      shall not be required to physically surrender this Debenture to the Company
      unless (A) the full Conversion Amount represented by this Debenture is being
      converted or (B) the Holder has provided the Company with prior written notice
      (which notice may be included in a Conversion Notice) requesting reissuance
      of
      this Debenture upon physical surrender of this Debenture. The Holder and the
      Company shall maintain records showing the Principal and Interest converted
      and
      the dates of such conversions or shall use such other method, reasonably
      satisfactory to the Holder and the Company, so as not to require physical
      surrender of this Debenture upon conversion.

     

    (c)  Limitations
      on Conversions.

     

    (i)  Beneficial
      Ownership.
      The
      Company shall not effect any conversions of this Debenture and the Holder shall
      not have the right to convert any portion of this Debenture or receive shares
      of
      Common Stock as payment of interest hereunder to the extent that after giving
      effect to such conversion or receipt of such interest payment, the Holder,
      together with any affiliate thereof, would beneficially own (as determined
      in
      accordance with Section 13(d) of the Exchange Act and the rules promulgated
      thereunder) in excess of 4.99% of the number of shares of Common Stock
      outstanding immediately after giving effect to such conversion or receipt of
      shares as payment of interest. Since the Holder will not be obligated to report
      to the Company the number of shares of Common Stock it may hold at the time
      of a
      conversion hereunder, unless the conversion at issue would result in the
      issuance of shares of Common Stock in excess of 4.99% of the then outstanding
      shares of Common Stock without regard to any other shares which may be
      beneficially owned by the Holder or an affiliate thereof, the Holder shall
      have
      the authority and obligation to determine whether the restriction contained
      in
      this Section will limit any particular conversion hereunder and to the extent
      that the Holder determines that the limitation contained in this Section
      applies, the determination of which portion of the principal amount of this
      Debenture is convertible shall be the responsibility and obligation of the
      Holder. If the Holder has delivered a Conversion Notice for a principal amount
      of this Debenture that, without regard to any other shares that the Holder
      or
      its affiliates may beneficially own, would result in the issuance in excess
      of
      the permitted amount hereunder, the Company shall notify the Holder of this
      fact
      and shall honor the conversion for the maximum principal amount permitted to
      be
      converted on such Conversion Date in accordance with Section 4(a) and, any
      principal amount tendered for conversion in excess of the permitted amount
      hereunder shall remain outstanding under this Debenture. The provisions of
      this
      Section may be waived by a Holder (but only as to itself and not to any other
      Holder) upon not less than 65 days prior notice to the Company. Other Holders
      shall be unaffected by any such waiver.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (d)  Other
      Provisions.

     

    (i)  The
      Company shall at all times reserve and keep available out of its authorized
      Common Stock the full number of shares of Common Stock issuable upon conversion
      of all outstanding amounts under this Debenture; and within three (3) Business
      Days following the receipt by the Company of a Holder's notice that such minimum
      number of Underlying Shares is not so reserved, the Company shall promptly
      reserve a sufficient number of shares of Common Stock to comply with such
      requirement.

     

    (ii)  All
      calculations under this Section 4 shall be rounded to the nearest $0.0001 or
      whole share.

     

    (iii)  The
      Company covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of this Debenture and payment of interest on this
      Debenture, each as herein provided, free from preemptive rights or any other
      actual contingent purchase rights of persons other than the Holder, not less
      than such number of shares of the Common Stock as shall (subject to any
      additional requirements of the Company as to reservation of such shares set
      forth in this Debenture or in the Transaction Documents) be issuable (taking
      into account the adjustments and restrictions set forth herein) upon the
      conversion of the outstanding principal amount of this Debenture and payment
      of
      interest hereunder. The Company covenants that all shares of Common Stock that
      shall be so issuable shall, upon issue, be duly and validly authorized, issued
      and fully paid, nonassessable and, if the Underlying Shares Registration
      Statement has been declared effective under the Securities Act, registered
      for
      public sale in accordance with such Underlying Shares Registration
      Statement.

     

    (iv)  Nothing
      herein shall limit a Holder's right to pursue actual damages or declare an
      Event
      of Default pursuant to Section 2 herein for the Company 's failure to deliver
      certificates representing shares of Common Stock upon conversion within the
      period specified herein and such Holder shall have the right to pursue all
      remedies available to it at law or in equity including, without limitation,
      a
      decree of specific performance and/or injunctive relief, in each case without
      the need to post a bond or provide other security. The exercise of any such
      rights shall not prohibit the Holder from seeking to enforce damages pursuant
      to
      any other Section hereof or under applicable law. 

     

    (5)  Adjustments
      to Conversion Price

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (a)  Adjustment
      of Conversion Price upon Issuance of Common Stock.
      If the
      Company, at any time while this Debenture is outstanding, issues or sells,
      or in
      accordance with this Section 5(a) is deemed to have issued or sold, any shares
      of Common Stock, excluding shares of Common Stock deemed to have been issued
      or
      sold by the Company in connection with any Excluded Securities, for a
      consideration per share (the “New
      Issuance Price”)
      less
      than a price equal to the Conversion Price in effect immediately prior to such
      issue or sale (such price the "Applicable
      Price")
      (the
      foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance the Conversion Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. For purposes
      of
      determining the adjusted Conversion Price under this Section 5(a), the following
      shall be applicable:

     

    (i)  Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share of Common Stock is issuable upon the exercise of any such
      Option or upon conversion or exchange or exercise of any Convertible Securities
      issuable upon exercise of such Option is less than the Applicable Price, then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the granting or sale of such
      Option for such price per share. For purposes of this Section, the "lowest
      price
      per share for which one share of Common Stock is issuable upon the exercise
      of
      any such Option or upon conversion or exchange or exercise of any Convertible
      Securities issuable upon exercise of such Option" shall be equal to the sum
      of
      the lowest amounts of consideration (if any) received or receivable by the
      Company with respect to any one share of Common Stock upon granting or sale
      of
      the Option, upon exercise of the Option and upon conversion or exchange or
      exercise of any Convertible Security issuable upon exercise of such Option.
      No
      further adjustment of the Conversion Price shall be made upon the actual
      issuance of such share of Common Stock or of such Convertible Securities upon
      the exercise of such Options or upon the actual issuance of such Common Stock
      upon conversion or exchange or exercise of such Convertible
      Securities.

     

    (ii)  Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon such
      conversion or exchange or exercise thereof is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the issuance or sale of
      such
      Convertible Securities for such price per share. For the purposes of this
      Section, the "lowest price per share for which one share of Common Stock is
      issuable upon such conversion or exchange or exercise" shall be equal to the
      sum
      of the lowest amounts of consideration (if any) received or receivable by the
      Company with respect to any one share of Common Stock upon the issuance or
      sale
      of the Convertible Security and upon the conversion or exchange or exercise
      of
      such Convertible Security. No further adjustment of the Conversion Price shall
      be made upon the actual issuance of such share of Common Stock upon conversion
      or exchange or exercise of such Convertible Securities, and if any such issue
      or
      sale of such Convertible Securities is made upon exercise of any Options for
      which adjustment of the Conversion Price had been or are to be made pursuant
      to
      other provisions of this Section, no further adjustment of the Conversion Price
      shall be made by reason of such issue or sale.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (iii)  Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exchange or exercise of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exchangeable or exercisable for Common Stock changes at any time, the
      Conversion Price in effect at the time of such change shall be adjusted to
      the
      Conversion Price which would have been in effect at such time had such Options
      or Convertible Securities provided for such changed purchase price, additional
      consideration or changed conversion rate, as the case may be, at the time
      initially granted, issued or sold. For purposes of this Section, if the terms
      of
      any Option or Convertible Security that was outstanding as of the Issuance
      Date
      are changed in the manner described in the immediately preceding sentence,
      then
      such Option or Convertible Security and the Common Stock deemed issuable upon
      exercise, conversion or exchange thereof shall be deemed to have been issued
      as
      of the date of such change. No adjustment shall be made if such adjustment
      would
      result in an increase of the Conversion Price then in effect.

     

    (iv)  Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for the difference of (x) the aggregate
      fair
      market value of such Options and other securities issued or sold in such
      integrated transaction, less (y) the fair market value of the securities other
      than such Option, issued or sold in such transaction and the other securities
      issued or sold in such integrated transaction will be deemed to have been issued
      or sold for the balance of the consideration received by the Company. If any
      Common Stock, Options or Convertible Securities are issued or sold or deemed
      to
      have been issued or sold for cash, the consideration received therefor will
      be
      deemed to be the gross amount raised by the Company; provided, however, that
      such gross amount is not greater than 110% of the net amount received by the
      Company therefor. If any Common Stock, Options or Convertible Securities are
      issued or sold for a consideration other than cash, the amount of the
      consideration other than cash received by the Company will be the fair value
      of
      such consideration, except where such consideration consists of securities,
      in
      which case the amount of consideration received by the Company will be the
      Closing Bid Price of such securities on the date of receipt. If any Common
      Stock, Options or Convertible Securities are issued to the owners of the
      non-surviving entity in connection with any merger in which the Company is
      the
      surviving entity, the amount of consideration therefor will be deemed to be
      the
      fair value of such portion of the net assets and business of the non-surviving
      entity as is attributable to such Common Stock, Options or Convertible
      Securities, as the case may be. The fair value of any consideration other than
      cash or securities will be determined jointly by the Company and the Holder.
      If
      such parties are unable to reach agreement within ten (10) days after the
      occurrence of an event requiring valuation (the "Valuation
      Event"),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth (10th)
      day
      following the Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Holder. The determination of such appraiser
      shall be deemed binding upon all parties absent manifest error and the fees
      and
      expenses of such appraiser shall be borne by the Company.

     

    (v)  Record
      Date.
      If the
      Company takes a record of the holders of Common Stock for the purpose of
      entitling them (A) to receive a dividend or other distribution payable in Common
      Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
      Common Stock, Options or Convertible Securities, then such record date will
      be
      deemed to be the date of the issue or sale of the Common Stock deemed to have
      been issued or sold upon the declaration of such dividend or the making of
      such
      other distribution or the date of the granting of such right of subscription
      or
      purchase, as the case may be.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (b)  Adjustment
      of Conversion Price upon Subdivision or Combination of Common
      Stock.
      If the
      Company, at any time while this Debenture is outstanding, shall (a) pay a
      stock dividend or otherwise make a distribution or distributions on shares
      of
      its Common Stock or any other equity or equity equivalent securities payable
      in
      shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
      a
      larger number of shares, (c) combine (including by way of reverse stock split)
      outstanding shares of Common Stock into a smaller number of shares, or (d)
      issue
      by reclassification of shares of the Common Stock any shares of capital stock
      of
      the Company, then the Conversion Price shall be multiplied by a fraction of
      which the numerator shall be the number of shares of Common Stock (excluding
      treasury shares, if any) outstanding before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding after
      such
      event. Any adjustment made pursuant to this Section shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      re-classification.

     

    (c)  Purchase
      Rights.
      If at
      any time the Company grants, issues or sells any Options, Convertible Securities
      or rights to purchase stock, warrants, securities or other property pro rata
      to
      the record holders of any class of Common Stock (the "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Debenture (without taking into account any
      limitations or restrictions on the convertibility of this Debenture) immediately
      before the date on which a record is taken for the grant, issuance or sale
      of
      such Purchase Rights, or, if no such record is taken, the date as of which
      the
      record holders of Common Stock are to be determined for the grant, issue or
      sale
      of such Purchase Rights.

     

    (d)  Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 4 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Conversion Price so as to protect the rights
      of
      the Holder under this Debenture; provided that no such adjustment will increase
      the Conversion Price as otherwise determined pursuant to this Section
      5.

     

    (e)  Other
      Corporate Events.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Debenture, at
      the
      Holder's option, (i) in addition to the shares of Common Stock receivable upon
      such conversion, such securities or other assets to which the Holder would
      have
      been entitled with respect to such shares of Common Stock had such shares of
      Common Stock been held by the Holder upon the consummation of such Corporate
      Event (without taking into account any limitations or restrictions on the
      convertibility of this Debenture) or (ii) in lieu of the shares of Common Stock
      otherwise receivable upon such conversion, such securities or other assets
      received by the holders of shares of Common Stock in connection with the
      consummation of such Corporate Event in such amounts as the Holder would have
      been entitled to receive had this Debenture initially been issued with
      conversion rights for the form of such consideration (as opposed to shares
      of
      Common Stock) at a conversion rate for such consideration commensurate with
      the
      Conversion Rate. Provision made pursuant to the preceding sentence shall be
      in a
      form and substance satisfactory to the Required Holders. The provisions of
      this
      Section shall apply similarly and equally to successive Corporate Events and
      shall be applied without regard to any limitations on the conversion or
      redemption of this Debenture.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (f)  Whenever
      the Conversion Price is adjusted pursuant to Section 5 hereof, the Company
      shall
      promptly mail to the Holder a notice setting forth the Conversion Price after
      such adjustment and setting forth a brief statement of the facts requiring
      such
      adjustment.

     

    (g)  In
      case
      of any (1) merger or consolidation of the Company or any subsidiary of the
      Company with or into another Person, or (2) sale by the Company or any
      subsidiary of the Company of more than one-half of the assets of the Company
      in
      one or a series of related transactions, a Holder shall have the right to (A)
      exercise any rights under Section 2(b), (B) convert the aggregate amount of
      this
      Debenture then outstanding into the shares of stock and other securities, cash
      and property receivable upon or deemed to be held by holders of Common Stock
      following such merger, consolidation or sale, and such Holder shall be entitled
      upon such event or series of related events to receive such amount of
      securities, cash and property as the shares of Common Stock into which such
      aggregate principal amount of this Debenture could have been converted
      immediately prior to such merger, consolidation or sales would have been
      entitled, or (C) in the case of a merger or consolidation, require the surviving
      entity to issue to the Holder a convertible Debenture with a principal amount
      equal to the aggregate principal amount of this Debenture then held by such
      Holder, plus all accrued and unpaid interest and other amounts owing thereon,
      which such newly issued convertible Debenture shall have terms identical
      (including with respect to conversion) to the terms of this Debenture, and
      shall
      be entitled to all of the rights and privileges of the Holder of this Debenture
      set forth herein and the agreements pursuant to which this Debentures were
      issued. In the case of clause (C), the conversion price applicable for the
      newly
      issued shares of convertible preferred stock or convertible Debentures shall
      be
      based upon the amount of securities, cash and property that each share of Common
      Stock would receive in such transaction and the Conversion Price in effect
      immediately prior to the effectiveness or closing date for such transaction.
      The
      terms of any such merger, sale or consolidation shall include such terms so
      as
      to continue to give the Holder the right to receive the securities, cash and
      property set forth in this Section upon any conversion or redemption following
      such event. This provision shall similarly apply to successive such
      events.

     

    (6)  REISSUANCE
      OF THIS DEBENTURE.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (a)  Transfer.
      If this
      Debenture is to be transferred, the Holder shall surrender this Debenture to
      the
      Company, whereupon the Company will, subject to the satisfaction of the transfer
      provisions of the Securities Purchase Agreement, forthwith issue and deliver
      upon the order of the Holder a new Debenture (in accordance with Section 5(d)),
      registered in the name of the registered transferee or assignee, representing
      the outstanding Principal being transferred by the Holder and, if less then
      the
      entire outstanding Principal is being transferred, a new Debenture (in
      accordance with Section 5(d)) to the Holder representing the outstanding
      Principal not being transferred. The Holder and any assignee, by acceptance
      of
      this Debenture, acknowledge and agree that, by reason of the provisions of
      Section 4(b)(iii) following conversion or redemption of any portion of this
      Debenture, the outstanding Principal represented by this Debenture may be less
      than the Principal stated on the face of this Debenture.

     

    (b)  Lost,
      Stolen or Mutilated Debenture.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Debenture, and, in the case
      of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Debenture, the Company shall execute and deliver to the
      Holder a new Debenture (in accordance with Section 5(d)) representing the
      outstanding Principal.

     

    (c)  Debenture
      Exchangeable for Different Denominations.
      This
      Debenture is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Debenture or Debentures (in
      accordance with Section 5(d)) representing in the aggregate the outstanding
      Principal of this Debenture, and each such new Debenture will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d)  Issuance
      of New Debentures.
      Whenever the Company is required to issue a new Debenture pursuant to the terms
      of this Debenture, such new Debenture (i) shall be of like tenor with this
      Debenture, (ii) shall represent, as indicated on the face of such new Debenture,
      the Principal remaining outstanding (or in the case of a new Debenture being
      issued pursuant to Section 5(a) or Section 5(c), the Principal designated by
      the
      Holder which, when added to the principal represented by the other new
      Debentures issued in connection with such issuance, does not exceed the
      Principal remaining outstanding under this Debenture immediately prior to such
      issuance of new Debentures), (iii) shall have an issuance date, as indicated
      on
      the face of such new Debenture, which is the same as the Issuance Date of this
      Debenture, (iv) shall have the same rights and conditions as this Debenture,
      and
      (v) shall represent accrued and unpaid Interest from the Issuance
      Date.

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    
      	
              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
                a copy to:

            	
              ARC
                Investment Partners, LLC

            
	 	
              9440
                Little Santa Monica Blvd., Suite 400

            
	 	
              Beverly
                Hills, CA 90210

            
	 	
              Attention:
                 Steven
                Magami

            
	 	
              Telephone: 310-402-5901

            
	 	
              Facsimile: 310-402-5947

            
	 	 
	
              And:
                

            	
              DLA
                Piper US LLP

            
	 	
              1251
                Avenue of the Americas

            
	 	
              New
                York, NY 10020-1104

            
	 	
              Attn:
                Daniel I. Goldberg, Esq.

            
	 	
              Telephone:
                212-335-4966

            
	 	
              Facsimile:
                212-884-8466

            

    

    

    
      	
              If
                to the Holder:

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street, Suite 3700

            
	 	
              Jersey
                City, NJ 07303

            
	 	
              Attention: Mark
                Angelo

            
	 	
              Telephone: (201)
                985-8300

            
	 	 
	
              With
                a copy to:

            	
              Troy
                Rillo, Esq. 

            
	 	
              101
                Hudson Street - Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Telephone: (201)
                985-8300

            
	 	
              Facsimile: (201)
                985-8266

            
	 	 

    

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) Business Days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (8)  Except
      as
      expressly provided herein, no provision of this Debenture shall alter or impair
      the obligations of the Company, which are absolute and unconditional, to pay
      the
      principal of, interest and other charges (if any) on, this Debenture at the
      time, place, and rate, and in the coin or currency, herein prescribed. This
      Debenture is a direct obligation of the Company. As long as this Debenture
      is
      outstanding, the Company shall not and shall cause their subsidiaries not to,
      without the consent of the Holder, (i) amend its certificate of incorporation,
      bylaws or other charter documents so as to adversely affect any rights of the
      Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise
      acquire shares of its Common Stock or other equity securities other than as
      to
      the Underlying Shares to the extent permitted or required under the Transaction
      Documents; or (iii) enter into any agreement with respect to any of the
      foregoing. 

     

    (9)  This
      Debenture shall not entitle the Holder to any of the rights of a stockholder
      of
      the Company, including without limitation, the right to vote, to receive
      dividends and other distributions, or to receive any notice of, or to attend,
      meetings of stockholders or any other proceedings of the Company, unless and
      to
      the extent converted into shares of Common Stock in accordance with the terms
      hereof.

     

    (10)  No
      indebtedness of the Company is senior to this Debenture in right of payment,
      whether with respect to interest, damages or upon liquidation or dissolution
      or
      otherwise. Without the Holder’s consent, the Company will not and will not
      permit any of their subsidiaries to, directly or indirectly, enter into, create,
      incur, assume or suffer to exist any indebtedness of any kind, on or with
      respect to any of its property or assets now owned or hereafter acquired or
      any
      interest therein or any income or profits there from that is senior in any
      respect to the obligations of the Company under this Debenture.

     

    (11)  This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New Jersey, without giving effect to conflicts of laws thereof. Each
      of
      the parties consents to the jurisdiction of the Superior Courts of the State
      of
      New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
      for the District of New Jersey sitting in Newark, New Jersey in connection
      with
      any dispute arising under this Debenture and hereby waives, to the maximum
      extent permitted by law, any objection, including any objection based on forum
      non conveniens to the bringing of any such proceeding in such jurisdictions.
      

     

    (12)  If
      the
      Company fails to strictly comply with the terms of this Debenture, then the
      Company shall reimburse the Holder promptly for all fees, costs and expenses,
      including, without limitation, attorneys’ fees and expenses incurred by the
      Holder in any action in connection with this Debenture, including, without
      limitation, those incurred: (i) during any workout, attempted workout, and/or
      in
      connection with the rendering of legal advice as to the Holder’s rights,
      remedies and obligations, (ii) collecting any sums which become due to the
      Holder, (iii) defending or prosecuting any proceeding or any counterclaim to
      any
      proceeding or appeal; or (iv) the protection, preservation or enforcement of
      any
      rights or remedies of the Holder.

     

    (13)  Any
      waiver by the Holder of a breach of any provision of this Debenture shall not
      operate as or be construed to be a waiver of any other breach of such provision
      or of any breach of any other provision of this Debenture. The failure of the
      Holder to insist upon strict adherence to any term of this Debenture on one
      or
      more occasions shall not be considered a waiver or deprive that party of the
      right thereafter to insist upon strict adherence to that term or any other
      term
      of this Debenture. Any waiver must be in writing.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (14)  If
      any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture shall remain in effect, and if any provision is inapplicable
      to
      any person or circumstance, it shall nevertheless remain applicable to all
      other
      persons and circumstances. If it shall be found that any interest or other
      amount deemed interest due hereunder shall violate applicable laws governing
      usury, the applicable rate of interest due hereunder shall automatically be
      lowered to equal the maximum permitted rate of interest. The Company covenants
      (to the extent that it may lawfully do so) that it shall not at any time insist
      upon, plead, or in any manner whatsoever claim or take the benefit or advantage
      of, any stay, extension or usury law or other law which would prohibit or
      forgive the Company from paying all or any portion of the principal of or
      interest on this Debenture as contemplated herein, wherever enacted, now or
      at
      any time hereafter in force, or which may affect the covenants or the
      performance of this indenture, and the Company (to the extent it may lawfully
      do
      so) hereby expressly waives all benefits or advantage of any such law, and
      covenants that it will not, by resort to any such law, hinder, delay or impeded
      the execution of any power herein granted to the Holder, but will suffer and
      permit the execution of every such as though no such law has been
      enacted.

     

    (15)  Whenever
      any payment or other obligation hereunder shall be due on a day other than
      a
      Business Day, such payment shall be made on the next succeeding Business
      Day.

     

    (16)  THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    (17)  CERTAIN
      DEFINITIONS For
      purposes of this Debenture, the following terms shall have the following
      meanings:

     

    (a)  “Approved
      Stock Plan”
means
      a
      stock option plan that has been or will be approved by the Board of Directors
      of
      the Company, pursuant to which the Company’s securities may be issued only to
      any employee, officer, director or consultant for services provided to the
      Company.

     

    (b)  "Bloomberg"
      means
      Bloomberg Financial Markets.

     

    (c)  “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States or a day on which banking institutions are
      authorized or required by law or other government action to close.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (d)  “Change
      of Control Transaction”
means
      the occurrence of (a) an acquisition after the date hereof by an individual
      or
      legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
      Exchange Act) of effective control (whether through legal or beneficial
      ownership of capital stock of the Company, by contract or otherwise) of in
      excess of fifty percent (50%) of the voting securities of the Company (except
      that the acquisition of voting securities by the Holder or any other current
      holder of convertible securities of the Company shall not constitute a Change
      of
      Control Transaction for purposes hereof), (b) a replacement at one time or
      over
      time of more than one-half of the members of the board of directors of the
      Company which is not approved by a majority of those individuals who are members
      of the board of directors on the date hereof (or by those individuals who are
      serving as members of the board of directors on any date whose nomination to
      the
      board of directors was approved by a majority of the members of the board of
      directors who are members on the date hereof), (c) the merger, consolidation
      or
      sale of fifty percent (50%) or more of the assets of the Company or any
      subsidiary of the Company in one or a series of related transactions with or
      into another entity, or (d) the execution by the Company of an agreement to
      which the Company is a party or by which it is bound, providing for any of
      the
      events set forth above in (a), (b) or (c).

     

    (e)  “Closing
      Bid Price”
means
      the price per share in the last reported trade of the Common Stock on a Primary
      Market or on the exchange which the Common Stock is then listed as quoted by
      Bloomberg.

     

    (f)  “Convertible
      Securities”
means
      any
      stock
      or securities (other than Options) directly or indirectly convertible into
      or
      exercisable or exchangeable for Common Stock.

     

    (g)  “Commission”
means
      the Securities and Exchange Commission.

     

    (h)  “Common
      Stock”
means
      the common stock, par value $.001, of the Company and stock of any other class
      into which such shares may hereafter be changed or reclassified.

     

    (i)  "Company
      Conversion Price"
      means,
      the lower of (i) the applicable Conversion Price and (ii) that price which
      shall
      be computed as ninety five percent (95%) of the lowest Volume Weighted Average
      Price of the Common Stock during the sixty (60) consecutive Trading Days
      immediately preceding the applicable Repayment Date. All such determinations
      to
      be appropriately adjusted for any stock split, stock dividend, stock combination
      or other similar transaction.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (j)  "Equity
      Conditions"
      means
      that each of the following conditions is satisfied: (i) on each day during
      the
      period beginning three (3) business days prior to the applicable date of
      determination and ending on and including the applicable date of determination
      (the "Equity Conditions Measuring Period"), either (x) the Underlying Shares
      Registration Statement filed pursuant to the Registration Rights Agreement
      shall
      be effective and available for the resale of all applicable shares of Common
      Stock to be issued in connection with the event requiring determination or
      (y)
      all applicable shares of Common Stock to be issued in connection with the event
      requiring determination shall be eligible for sale without restriction and
      without the need for registration under any applicable federal or state
      securities laws; (ii) on each day during the Equity Conditions Measuring Period,
      the Common Stock is designated for quotation on the Principal Market and shall
      not have been suspended from trading on such exchange or market nor shall
      delisting or suspension by such exchange or market been threatened or pending
      either (A) in writing by such exchange or market or (B) by falling below the
      then effective minimum listing maintenance requirements of such exchange or
      market; (iii) during the Equity Conditions Measuring Period, the Company shall
      have delivered Conversion Shares upon conversion of the Debentures to the Holder
      on a timely basis as set forth in Section 4(b)(ii) hereof; (iv) any applicable
      shares of Common Stock to be issued in connection with the event requiring
      determination may be issued in full without violating Section 4(c) hereof and
      the rules or regulations of the Primary Market; (v) during the Equity Conditions
      Measuring Period, there shall not have occurred either (A) an Event of Default
      or (B) an event that with the passage of time or giving of notice would
      constitute an Event of Default; and (vii) the Company shall have no knowledge
      of
      any fact that would cause (x) the Registration Statements required pursuant
      to
      the Registration Rights Agreement not to be effective and available for the
      resale of all applicable shares of Common Stock to be issued in connection
      with
      the event requiring determination or (y) any applicable shares of Common Stock
      to be issued in connection with the event requiring determination not to be
      eligible for sale without restriction and without the need for registration
      under any applicable federal or state securities laws.

     

    (k)  "Equity
      Conditions Failure"
      means
      that on any applicable date the Equity Conditions have not been satisfied (or
      waived in writing by the Holder).

     

    (l)  “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    (m)  “Excluded
      Securities”
means,
      (a) shares issued or deemed to have been issued by the Company pursuant to
      an
      Approved Stock Plan (b) shares of Common Stock issued or deemed to be issued
      by
      the Company upon the conversion, exchange or exercise of any right, option,
      obligation or security outstanding on the date prior to date of the Securities
      Purchase Agreement, provided that the terms of such right, option, obligation
      or
      security are not amended or otherwise modified on or after the date of the
      Securities Purchase Agreement, and provided that the conversion price, exchange
      price, exercise price or other purchase price is not reduced, adjusted or
      otherwise modified and the number of shares of Common Stock issued or issuable
      is not increased (whether by operation of, or in accordance with, the relevant
      governing documents or otherwise) on or after the date of the Securities
      Purchase Agreement, (c) shares issued in connection with any acquisition by
      the
      Company, whether through an acquisition of stock or a merger of any business,
      assets or technologies, leasing arrangement or any other transaction the primary
      purpose of which is not to raise equity capital, and (d) the shares of
      Common Stock issued or deemed to be issued by the Company upon conversion of
      this Debenture.

     

    (n)  “Financing
      Transaction”
means
      any fund raising transaction consummated by the Company after the Original
      Issue
      Date including any public or private debt or equity transactions and any
      transaction arranged by any placement agent including Canaccord Adams, Inc.
      

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (o)  “Options”
      means
      any
      rights, warrants or options to subscribe for or purchase shares of Common Stock
      or Convertible Securities.

     

    (p)  “Original
      Issue Date”
means
      the date of the first issuance of this Debenture regardless of the number of
      transfers and regardless of the number of instruments, which may be issued
      to
      evidence such Debenture.

     

    (q)  “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

     

    (r)  "Repayment
      Amount"
      means
      with respect to any Repayment Date, the outstanding Principal on this Debenture,
      plus 120% of the outstanding Principal, plus accrued and unpaid Interest,
      provided however, if a Repayment Date is triggered because of the consummation
      of a Financing Transaction resulting in net proceeds less than the Repayment
      Amount, then the Repayment Amount for that Repayment Date shall be reduced
      to
      equal the net proceeds of such Financing Transaction. 

     

    (s)  "Repayment
      Date"
      means
      the first Trading Day immediately following any of the following events: (a)
      the
      Maturity Date, or any extended Maturity Date as provided in Section 1(a) hereof,
      (b) the consummation of any Financing Transaction, or (c) any other date that
      is
      mutually agreed upon by the Holder and the Company. 

     

    (t)  "Repayment
      Volume Limitation"
      means
      15% of the aggregate dollar trading volume (as reported on Bloomberg) of the
      Common Stock on the Principal Market over the forty (40) consecutive Trading
      Day
      period ending on the Trading Day immediately preceding the applicable Repayment
      Notice Date.

     

    (u)  “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    (v)  “Securities
      Purchase Agreement”
means
      the Securities Purchase Agreement dated April 19, 2007 by and among the Company
      and the Buyers listed on Schedule I attached thereto. 

     

    (w)  “Trading
      Day”
means
      a
      day on which the shares of Common Stock are quoted on the OTCBB or quoted or
      traded on such Primary Market on which the shares of Common Stock are then
      quoted or listed; provided, that in the event that the shares of Common Stock
      are not listed or quoted, then Trading Day shall mean a Business
      Day.

     

    (x)  “Transaction
      Documents”
means
      the Securities Purchase Agreement or any other agreement delivered in connection
      with the Securities Purchase Agreement, including, without limitation, the
      Security Documents, the Irrevocable Transfer Agent Instructions, and the
      Registration Rights Agreement.

     

    (y)  “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of this Debenture or as
      payment of interest in accordance with the terms hereof.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (z)  “Underlying
      Shares Registration Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement, covering among other things the resale of the Underlying
      Shares and naming the Holder as a “selling stockholder” thereunder.

     

    (aa)  "Volume
      Weighted Average Price"
      means,
      for any security as of any date, the daily dollar volume-weighted average price
      for such security on the Primary Market as reported by Bloomberg through its
      “Historical Prices - Px Table with Average Daily Volume” functions, or, if no
      dollar volume-weighted average price is reported for such security by Bloomberg,
      the average of the highest closing bid price and the lowest closing ask price
      of
      any of the market makers for such security as reported in the "pink sheets"
      by
      Pink Sheets LLC. 

     

    (bb)  "Warrants"
      has the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Secured Convertible Debenture to be duly executed by
      a
      duly authorized officer as of the date set forth above.

     

    
      
        	 	 	 
	 
 	 
 	
                COMPANY:
                  
                  PURE
                    BIOFUELS CORP.

                

              
	 	 	 
	 	 	By:
                /s/ Luis Goyzueta
	 	
                
                  

                

                Name: Luis
                  Goyzueta

              
	 	
                Title: CEOUnassociated Document

    

      Exhibit
        4.2

      

      NEITHER
        THIS CONVERTIBLE NOTE NOR THE SECURITIES INTO WHICH THIS CONVERTIBLE NOTE
        IS
        CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
        OR
        THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN
        RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
        1933,
        AS AMENDED (THE “SECURITIES
        ACT”),
        AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
        EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
        SECURITIES LAWS.

      

      PURE
        BIOFUELS CORP.

      

      CONVERTIBLE
        PROMISSORY NOTE

       

      
        	
                Issuance
                  Date: April 19, 2007

              	
                Original
                  Principal Amount: $60,000

              
	
                No.
                  PBOF-1-2

              	 

      

      

      FOR
        VALUE RECEIVED,
        PURE
        BIOFUELS CORP., a Nevada corporation (the "Company"),
        hereby promises to pay to the order of WHARTON CAPITAL PARTNERS, Ltd. or
        registered assigns (the "Holder")
        the
        amount set out above as the Original Principal Amount (as reduced pursuant
        to
        the terms hereof pursuant to redemption, conversion or otherwise, the
        "Principal")
        when
        due, whether upon the Maturity Date (as defined below), on any Repayment
        Date
        with respect to the Repayment Amount due on such Repayment Date (each, as
        defined herein), acceleration, redemption or otherwise (in each case in
        accordance with the terms hereof) and to pay interest ("Interest")
        on any
        outstanding Principal at the applicable Interest Rate from the date set out
        above as the Issuance Date (the "Issuance
        Date")
        until
        the same becomes due and payable, whether upon an Interest Date (as defined
        below), any Repayment Date or the Maturity Date or acceleration, conversion,
        redemption or otherwise (in each case in accordance with the terms hereof).
        This
        Convertible Promissory Note (including all Convertible Promissory Notes issued
        in exchange, transfer or replacement hereof, this "Convertible
        Note")
        is
        issued pursuant to that letter agreement by and among the Company, the Holder
        and Wharton Capital Partners, Ltd., dated as of April 18, 2007. Certain
        capitalized terms used herein are defined in Section 16.

      

      (1) GENERAL
        TERMS

      

      (a) Payment
        of Principal.
        On
        the
        Maturity Date, the Company shall pay to the Holder the Repayment Amount in
        accordance with the terms of this Convertible Note. The
        "Maturity
        Date"
        shall
        be June 18, 2007, provided,
        however,
        that
        the Maturity Date shall be accelerated and the Note and all accrued interest
        thereon shall become immediately due and payable, upon the Company’s closing of
        a Financing Transaction (an “Acceleration
        Event”)
        prior
        to the original Maturity Date. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) Interest.
        Interest shall accrue on the outstanding principal balance hereof at an annual
        rate (“Interest
        Rate”)
        equal
        to ten percent (10%). Interest shall be calculated on the basis of a 365-day
        year and the actual number of days elapsed, to the extent permitted by
        applicable law. Interest hereunder shall be paid on the Maturity Date (or
        sooner
        as provided herein) to the Holder or its assignee in whose name this Convertible
        Note is registered on the records of the Company regarding registration and
        transfers of Convertible Notes in cash.

      

      (2) EVENTS
        OF DEFAULT. 

      

      (a) An
        “Event
        of Default”,
        wherever used herein, means any one of the following events (whatever the
        reason
        and whether it shall be voluntary or involuntary or effected by operation
        of law
        or pursuant to any judgment, decree or order of any court, or any order,
        rule or
        regulation of any administrative or governmental body):

      

      (i) The
        Company's failure to pay to the Holder any amount of Principal, Interest,
        or
        other amounts when and as due under this Convertible Note;

      

      (ii) The
        Company or any subsidiary of the Company shall default in any of its obligations
        under any other debenture or any mortgage, credit agreement or other facility,
        indenture agreement, factoring agreement or other instrument under which
        there
        may be issued, or by which there may be secured or evidenced any indebtedness
        for borrowed money or money due under any long term leasing or factoring
        arrangement of the Company or any subsidiary of the Company in an amount
        exceeding $250,000, whether such indebtedness now exists or shall hereafter
        be
        created and such default shall result in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable. For the avoidance of doubt, this clause (ii) does not include
        the default in payment of any account payable in accordance with the Company’s
        business;

      

      (iii) If
        the
        Common Stock is quoted or listed for trading on any of the following and
        it
        ceases to be so quoted or listed for trading and shall not again be quoted
        or
        listed for trading on any Primary Market within five (5) Trading Days of
        such
        delisting: (a) the American Stock Exchange, (b) New York Stock Exchange,
        (c) the
        Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC
        Bulletin Board (“OTCBB”) (each, a “Primary Market”);

      

      (iv) The
        Company or any subsidiary of the Company shall be a party to any Change of
        Control Transaction unless in connection with such Change of Control Transaction
        this Convertible Note is retired.

      

      (b) During
        the time that any portion of this Convertible Note is outstanding, if any
        Event
        of Default has occurred, the Repayment Amount, to the date of acceleration
        shall
        become at the Holder's election, immediately due and payable in cash. The
        Holder
        need not provide and the Company hereby waives any presentment, demand, protest
        or other notice of any kind, (other than required notice of conversion) and
        the
        Holder may immediately and without expiration of any grace period enforce
        any
        and all of its rights and remedies hereunder and all other remedies available
        to
        it under applicable law. Such declaration may be rescinded and annulled by
        Holder at any time prior to payment hereunder. No such rescission or annulment
        shall affect any subsequent Event of Default or impair any right consequent
        thereon. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (3) Payment.
        

      

      (a) General.
        Subject
        to the provisions of Section 4 hereof relating to the conversion of this
        Convertible Note, on each applicable Repayment Date the Company shall pay
        to the
        Holder of this Convertible Note by wire transfer of immediately available
        funds,
        the Repayment Amount due on such date in lawful money of the United States
        of
        America.

      

      (b) Acceleration.
        The
        Repayment Amount shall be immediately due and payable in full without notice,
        demand, presentment, protest or other formalities of any kind (1) upon the
        consummation of an Acceleration Event or (2) upon an Event of
        Default.

      

      (4) CONVERSION. This
        Convertible Note shall be convertible into shares of the Company's Common
        Stock,
        on the terms and conditions set forth in this Section 4.

      

      (a) Automatic
        Conversion.
        Upon
        June 18, 2007 (the “Conversion
        Date”),
        provided that no Acceleration Event has occurred and that the Company has
        not
        fully paid to the Holder the full Repayment Amount, the entire outstanding
        and
        unpaid Repayment Amount shall be converted into fully paid and nonassessable
        shares of Common Stock at the Conversion Rate (as defined below). The number
        of
        shares of Common Stock issuable upon conversion of the Repayment Amount pursuant
        to this Section 4(a) shall be determined by dividing (x) the Repayment Amount
        by
        (y) the Conversion Price (the "Conversion
        Rate").
        The
        Company shall not issue any fraction of a share of Common Stock upon any
        conversion. If the issuance would result in the issuance of a fraction of
        a
        share of Common Stock, the Company shall round such fraction of a share of
        Common Stock up to the nearest whole share. The Company shall pay any and
        all
        transfer, stamp and similar taxes that may be payable with respect to the
        issuance and delivery of Common Stock upon conversion of the Repayment Amount.
        

      

      (i) "Conversion
        Price"
        means
        the Closing Bid Price of the Company’s Common Stock on
        the
        Conversion Date.

      

      (b) Mechanics
        of Conversion.
        Upon
        conversion of this Convertible Note pursuant to this Section 4, Holder will
        deliver the original Convertible Note to the Company for cancellation, and
        will
        execute a standard form of purchase agreement and/or other agreements and
        instruments as are necessary to document the issuance of the Common Stock
        upon
        the conversion of this Convertible Note. The Company covenants that all Common
        Stock issued upon conversion of this Convertible Note will, upon such issuance,
        be fully paid and non-assessable and free from all taxes, liens and charges
        caused or created by the Company. 

      

      (c) Other
        Provisions.

      

      (i) All
        calculations under this Section 4 shall be rounded to the nearest $0.0001
        or
        whole share.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (ii) If
        at any
        time after the date hereof the Company shall file a registration statement,
        the
        Company shall include the shares of Common Stock issuable to the holder pursuant
        to the terms of this Convertible Note and shall maintain, so long as any
        other
        shares of Common Stock shall be so listed, such listing of all such shares
        from
        time to time issuable upon the conversion of this Convertible Note; and the
        Company shall so list on each national securities exchange or automated
        quotation system, as the case may be, and shall maintain such listing of,
        any
        other shares of capital stock of the Company issuable upon the conversion
        of
        this Convertible Note if and so long as any shares of the same class shall
        be
        listed on such national securities exchange or automated quotation
        system.

      

      (iii) The
        Company covenants that it will at all times reserve and keep available out
        of
        its authorized and unissued shares of Common Stock solely for the purpose
        of
        issuance upon conversion of this Convertible Note and payment of interest
        on
        this Convertible Note, each as herein provided, free from preemptive rights
        or
        any other actual contingent purchase rights of persons other than the Holder,
        not less than such number of shares of the Common Stock as shall be issuable
        (taking into account the adjustments and restrictions set forth herein) upon
        the
        conversion of the outstanding principal amount of this Convertible Note and
        payment of interest hereunder. The Company covenants that all shares of Common
        Stock that shall be so issuable shall, upon issue, be duly and validly
        authorized, issued and fully paid, nonassessable.

      

      (5) Adjustments
        to Conversion Price

       

      (a) Adjustment
        of Conversion Price upon Subdivision or Combination of Common
        Stock.
        If the
        Company, at any time while this Convertible Note is outstanding, shall
        (a) pay a stock dividend or otherwise make a distribution or distributions
        on shares of its Common Stock or any other equity or equity equivalent
        securities payable in shares of Common Stock, (b) subdivide outstanding shares
        of Common Stock into a larger number of shares, (c) combine (including by
        way of
        reverse stock split) outstanding shares of Common Stock into a smaller number
        of
        shares, or (d) issue by reclassification of shares of the Common Stock any
        shares of capital stock of the Company, then the Conversion Price shall be
        multiplied by a fraction of which the numerator shall be the number of shares
        of
        Common Stock (excluding treasury shares, if any) outstanding before such
        event
        and of which the denominator shall be the number of shares of Common Stock
        outstanding after such event. Any adjustment made pursuant to this Section
        shall
        become effective immediately after the record date for the determination
        of
        stockholders entitled to receive such dividend or distribution and shall
        become
        effective immediately after the effective date in the case of a subdivision,
        combination or re-classification.

      

      (b) Purchase
        Rights.
        If at
        any time the Company grants, issues or sells any Options, Convertible Securities
        or rights to purchase stock, warrants, securities or other property pro rata
        to
        the record holders of any class of Common Stock (the "Purchase
        Rights"),
        then
        the Holder will be entitled to acquire, upon the terms applicable to such
        Purchase Rights, the aggregate Purchase Rights which the Holder could have
        acquired if the Holder had held the number of shares of Common Stock acquirable
        upon complete conversion of this Convertible Note (without taking into account
        any limitations or restrictions on the convertibility of this Convertible
        Note)
        immediately before the date on which a record is taken for the grant, issuance
        or sale of such Purchase Rights, or, if no such record is taken, the date
        as of
        which the record holders of Common Stock are to be determined for the grant,
        issue or sale of such Purchase Rights.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (c) Other
        Corporate Events.
        In
        addition to and not in substitution for any other rights hereunder, prior
        to the
        consummation of any transaction pursuant to which holders of shares of Common
        Stock are entitled to receive securities or other assets with respect to
        or in
        exchange for shares of Common Stock (a "Corporate
        Event"),
        the
        Company shall make appropriate provision to insure that the Holder will
        thereafter have the right to receive upon a conversion of this Convertible
        Note,
        at the Holder's option, (i) in addition to the shares of Common Stock receivable
        upon such conversion, such securities or other assets to which the Holder
        would
        have been entitled with respect to such shares of Common Stock had such shares
        of Common Stock been held by the Holder upon the consummation of such Corporate
        Event (without taking into account any limitations or restrictions on the
        convertibility of this Convertible Note) or (ii) in lieu of the shares of
        Common
        Stock otherwise receivable upon such conversion, such securities or other
        assets
        received by the holders of shares of Common Stock in connection with the
        consummation of such Corporate Event in such amounts as the Holder would
        have
        been entitled to receive had this Convertible Note initially been issued
        with
        conversion rights for the form of such consideration (as opposed to shares
        of
        Common Stock) at a conversion rate for such consideration commensurate with
        the
        Conversion Rate. Provision made pursuant to the preceding sentence shall
        be in a
        form and substance satisfactory to the Holders. The provisions of this Section
        shall apply similarly and equally to successive Corporate Events and shall
        be
        applied without regard to any limitations on the conversion or redemption
        of
        this Convertible Note.

      

      (d) Whenever
        the Conversion Price is adjusted pursuant to Section 5 hereof, the Company
        shall
        promptly mail to the Holder a notice setting forth the Conversion Price after
        such adjustment and setting forth a brief statement of the facts requiring
        such
        adjustment.

      

      (e) In
        case
        of any (1) merger or consolidation of the Company or any subsidiary of the
        Company with or into another Person, or (2) sale by the Company or any
        subsidiary of the Company of more than one-half of the assets of the Company
        in
        one or a series of related transactions, a Holder shall have the right to
        (A)
        convert the aggregate amount of this Convertible Note then outstanding into
        the
        shares of stock and other securities, cash and property receivable upon or
        deemed to be held by holders of Common Stock following such merger,
        consolidation or sale, and such Holder shall be entitled upon such event
        or
        series of related events to receive such amount of securities, cash and property
        as the shares of Common Stock into which such aggregate principal amount
        of this
        Convertible Note could have been converted immediately prior to such merger,
        consolidation or sales would have been entitled, or (B) in the case of a
        merger
        or consolidation, require the surviving entity to issue to the Holder a
        Convertible Note with a principal amount equal to the aggregate principal
        amount
        of this Convertible Note then held by such Holder, plus all accrued and unpaid
        interest and other amounts owing thereon, which such newly issued Convertible
        Note shall have terms identical (including with respect to conversion) to
        the
        terms of this Convertible Note, and shall be entitled to all of the rights
        and
        privileges of the Holder of this Convertible Note set forth herein and the
        agreements pursuant to which this Convertible Notes were issued. In the case
        of
        clause (B), the conversion price applicable for the newly issued shares of
        convertible preferred stock or Convertible Notes shall be based upon the
        amount
        of securities, cash and property that each share of Common Stock would receive
        in such transaction and the Conversion Price in effect immediately prior
        to the
        effectiveness or closing date for such transaction. The terms of any such
        merger, sale or consolidation shall include such terms so as to continue
        to give
        the Holder the right to receive the securities, cash and property set forth
        in
        this Section upon any conversion or redemption following such event. This
        provision shall similarly apply to successive such events.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (6) REISSUANCE
        OF THIS CONVERTIBLE NOTE.

      

      (a) Lost,
        Stolen or Mutilated Convertible Note.
        Upon
        receipt by the Company of evidence reasonably satisfactory to the Company
        of the
        loss, theft, destruction or mutilation of this Convertible Note, and, in
        the
        case of loss, theft or destruction, of any indemnification undertaking by
        the
        Holder to the Company in customary form and, in the case of mutilation, upon
        surrender and cancellation of this Convertible Note, the Company shall execute
        and deliver to the Holder a new Convertible Note (in accordance with Section
        5(d)) representing the outstanding Principal.

      

      (b) Issuance
        of New Convertible Notes.
        Whenever the Company is required to issue a new Convertible Note pursuant
        to the
        terms of this Convertible Note, such new Convertible Note (i) shall be of
        like
        tenor with this Convertible Note, (ii) shall represent, as indicated on the
        face
        of such new Convertible Note, the Principal remaining outstanding, (iii)
        shall
        have an issuance date, as indicated on the face of such new Convertible Note,
        which is the same as the Issuance Date of this Convertible Note, (iv) shall
        have
        the same rights and conditions as this Convertible Note, and (v) shall represent
        accrued and unpaid Interest from the Issuance Date.

      

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

      

      

      
        	
                If
                  to the Company, to:

              	
                Pure
                  Biofuels Corp.

              
	 	
                Av.
                  Canaval y Moreyra 380 of 402

              
	 	
                San
                  Isidro, Lima 

              
	 	
                Peru

              
	 	
                Attention: Luis
                  Goyzueta

              
	 	
                Telephone: +511-221-7365

              
	 	
                Facsimile: +511-221-7347

              
	 	 
	
                With
                  a 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

              

      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      
        	
                And:
                  

              	
                DLA
                  Piper US LLP

              
	 	
                1251
                  Avenue of the Americas

              
	 	
                New
                  York, NY 10020-1104

              
	 	
                Attn:
                  Daniel I. Goldberg, Esq.

              
	 	
                Telephone:
                  212-335-4966

              
	 	
                Facsimile:
                  212-884-8466

              

      

      

      
        	
                If
                  to the Holder:

              	
                Wharton
                  Capital Partners, Ltd.

              
	 	
                444
                  Madison Avenue

              
	 	
                New
                  York, NY 10022, 40th Fl.

              
	 	
                Attention: Barry
                  R. Minsky

              
	 	
                Telephone: 212-765-6777

              
	 	 

      

      

      or
        at
        such other address and/or facsimile number and/or to the attention of such
        other
        person as the recipient party has specified by written notice given to each
        other party three (3) Business Days prior to the effectiveness of such change.
        Written confirmation of receipt (i) given by the recipient of such notice,
        consent, waiver or other communication, (ii) mechanically or electronically
        generated by the sender's facsimile machine containing the time, date, recipient
        facsimile number and an image of the first page of such transmission or (iii)
        provided by a nationally recognized overnight delivery service, shall be
        rebuttable evidence of personal service, receipt by facsimile or receipt
        from a
        nationally recognized overnight delivery service in accordance with clause
        (i),
        (ii) or (iii) above, respectively.

      

      (8) Except
        as
        expressly provided herein, no provision of this Convertible Note shall alter
        or
        impair the obligations of the Company, which are absolute and unconditional,
        to
        pay the principal of, interest and other charges (if any) on, this Convertible
        Note at the time, place, and rate, and in the coin or currency, herein
        prescribed. This Convertible Note is a direct obligation of the Company.
        As long
        as this Convertible Note is outstanding, the Company shall not and shall
        cause
        their subsidiaries not to, without the consent of the Holder, (i) amend its
        certificate of incorporation, bylaws or other charter documents so as to
        adversely affect any rights of the Holder; (ii) repay, repurchase or offer
        to
        repay, repurchase or otherwise acquire shares of its Common Stock or other
        equity securities other than as to the Underlying Shares to the extent permitted
        or required under this Convertible Note; or (iii) enter into any agreement
        with
        respect to any of the foregoing. 

      

      (9) This
        Convertible Note shall not entitle the Holder to any of the rights of a
        stockholder of the Company, including without limitation, the right to vote,
        to
        receive dividends and other distributions, or to receive any notice of, or
        to
        attend, meetings of stockholders or any other proceedings of the Company,
        unless
        and to the extent converted into shares of Common Stock in accordance with
        the
        terms hereof.

      

      (10) Other
        than that certain Secured Convertible Debenture issued to Cornell Capital
        Partners, L.P. on April 19, 2007, no indebtedness of the Company is senior
        to
        this Convertible Note in right of payment, whether with respect to interest,
        damages or upon liquidation or dissolution or otherwise. Without the Holder’s
        consent, the Company will not, and will not permit any of their subsidiaries
        to,
        directly or indirectly, enter into, create, incur, assume or suffer to exist
        any
        indebtedness of any kind, on or with respect to any of its property or assets
        now owned or hereafter acquired or any interest therein or any income or
        profits
        there from that is senior in any respect to the obligations of the Company
        under
        this Convertible Note.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (11) This
        Warrant shall be governed by and construed in accordance with the internal
        laws
        of Nevada (without reference to the conflicts of law provisions thereof);
        provided,
        however,
        that in
        the event the Company after the date hereof reincorporates (whether by means
        of
        merger or otherwise) under the laws of a different U.S. state, this Warrant
        shall thereafter be governed by the laws of such other U.S. state.

      

      (12) Any
        waiver by the Holder of a breach of any provision of this Convertible Note
        shall
        not operate as or be construed to be a waiver of any other breach of such
        provision or of any breach of any other provision of this Convertible Note.
        The
        failure of the Holder to insist upon strict adherence to any term of this
        Convertible Note on one or more occasions shall not be considered a waiver
        or
        deprive that party of the right thereafter to insist upon strict adherence
        to
        that term or any other term of this Convertible Note. Any waiver must be
        in
        writing.

      

      (13) If
        any
        provision of this Convertible Note is invalid, illegal or unenforceable,
        the
        balance of this Convertible Note shall remain in effect, and if any provision
        is
        inapplicable to any person or circumstance, it shall nevertheless remain
        applicable to all other persons and circumstances. If it shall be found that
        any
        interest or other amount deemed interest due hereunder shall violate applicable
        laws governing usury, the applicable rate of interest due hereunder shall
        automatically be lowered to equal the maximum permitted rate of interest.
        The
        Company covenants (to the extent that it may lawfully do so) that it shall
        not
        at any time insist upon, plead, or in any manner whatsoever claim or take
        the
        benefit or advantage of, any stay, extension or usury law or other law which
        would prohibit or forgive the Company from paying all or any portion of the
        principal of or interest on this Convertible Note as contemplated herein,
        wherever enacted, now or at any time hereafter in force, or which may affect
        the
        covenants or the performance of this indenture, and the Company (to the extent
        it may lawfully do so) hereby expressly waives all benefits or advantage
        of any
        such law, and covenants that it will not, by resort to any such law, hinder,
        delay or impeded the execution of any power herein granted to the Holder,
        but
        will suffer and permit the execution of every such as though no such law
        has
        been enacted.

      

      (14) Whenever
        any payment or other obligation hereunder shall be due on a day other than
        a
        Business Day, such payment shall be made on the next succeeding Business
        Day.

      

      (15) THE
        PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
        OF
        THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
        OR
        ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
        DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
        VERBAL
        OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
        FOR
        THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (16) CERTAIN
        DEFINITIONS  For
        purposes of this Convertible Note, the following terms shall have the following
        meanings:

      

      (a) "Bloomberg"
        means
        Bloomberg Financial Markets.

      

      (b) “Business
        Day”
means
        any day except Saturday, Sunday and any day which shall be a federal legal
        holiday in the United States or a day on which banking institutions are
        authorized or required by law or other government action to close.

      

      (c) “Change
        of Control Transaction”
means
        the occurrence of (a) an acquisition after the date hereof by an individual
        or
        legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
        Exchange Act) of effective control (whether through legal or beneficial
        ownership of capital stock of the Company, by contract or otherwise) of in
        excess of fifty percent (50%) of the voting securities of the Company (except
        that the acquisition of voting securities by the Holder or any other current
        holder of convertible securities of the Company shall not constitute a Change
        of
        Control Transaction for purposes hereof), (b) a replacement at one time or
        over
        time of more than one-half of the members of the board of directors of the
        Company which is not approved by a majority of those individuals who are
        members
        of the board of directors on the date hereof (or by those individuals who
        are
        serving as members of the board of directors on any date whose nomination
        to the
        board of directors was approved by a majority of the members of the board
        of
        directors who are members on the date hereof), (c) the merger, consolidation
        or
        sale of fifty percent (50%) or more of the assets of the Company or any
        subsidiary of the Company in one or a series of related transactions with
        or
        into another entity, or (d) the execution by the Company of an agreement
        to
        which the Company is a party or by which it is bound, providing for any of
        the
        events set forth above in (a), (b) or (c).

      

      (d) “Closing
        Bid Price”
means
        the price per share in the last reported trade of the Common Stock on a Primary
        Market or on the exchange which the Common Stock is then listed as quoted
        by
        Bloomberg.

      

      (e) “Convertible
        Securities”
means
        any
        stock
        or securities (other than Options) directly or indirectly convertible into
        or
        exercisable or exchangeable for Common Stock.

      

      (f) “Common
        Stock”
means
        the common stock, par value $.001, of the Company and stock of any other
        class
        into which such shares may hereafter be changed or reclassified.

      

      (g) “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

      

      (h) “Financing
        Transaction”
means
        any fund raising transaction consummated by the Company after the Original
        Issue
        Date including any public or private debt or equity transactions and any
        transaction arranged by any placement agent. 

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

         

      

      (i) “Options”
        means
        any
        rights, warrants or options to subscribe for or purchase shares of Common
        Stock
        or Convertible Securities.

      

      (j) “Original
        Issue Date”
means
        the date of the first issuance of this Convertible Note regardless of the
        number
        of transfers and regardless of the number of instruments, which may be issued
        to
        evidence such Convertible Note.

      

      (k) “Person”
means
        a
        corporation, an association, a partnership, organization, a business, an
        individual, a government or political subdivision thereof or a governmental
        agency.

      

      (l) "Repayment
        Amount"
        means
        with respect to any Repayment Date, the outstanding Principal on this
        Convertible Note, plus accrued and unpaid Interest. 

      

      (m) "Repayment
        Date"
        means
        the first Trading Day immediately following any of the following events:
        (a) the
        Maturity Date, or any accelerated Maturity Date as provided in Section 1(a)
        hereof, or (b) any other date that is mutually agreed upon by the Holder
        and the
        Company. 

      

      (n) “Securities
        Act”
means
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated thereunder.

      

      (o) “Trading
        Day”
means
        a
        day on which the shares of Common Stock are quoted on the OTCBB or quoted
        or
        traded on such Primary Market on which the shares of Common Stock are then
        quoted or listed; provided, that in the event that the shares of Common Stock
        are not listed or quoted, then Trading Day shall mean a Business
        Day.

      

      (p) “Underlying
        Shares”
means
        the shares of Common Stock issuable upon conversion of this Convertible Note
        or
        as payment of interest in accordance with the terms hereof.

      

      [Signature
        Page Follows]

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF,
        the
        Company has caused this Convertible Note to be duly executed by a duly
        authorized officer as of the date set forth above.

      

      

      
        	 	
                COMPANY:

              
	 	
                PURE
                  BIOFUELS CORP.

              
	 	 
	 	
                By:
                  /s/ Luis Goyzueta        

              
	 	
                Name:
                  Luis
                  Goyzueta

              
	 	
                Title:  
                  CEO

              
	 	 

      

      

      
        
          
          

        

        
          11

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