Exhibit 10.2
 
DISTRIBUTION AGREEMENT
 
THIS DISTRIBUTION AGREEMENT (this “Agreement”) is made as of this 20th day of
March, 2013 (the “Effective Date”) by and between CLEAR SKY ENERGY S.A. DE C.V.,
a company organized under the laws of the United Mexican States (“CSE”) and
MAGNEGAS CORPORATION, a Delaware corporation (“MagneGas”). Each of CSE and
MagneGas is referred to herein as a “Party,” and CSE and MagneGas are
collectively referred to herein as the “Parties.”
 
BACKGROUND
 
MagneGas is engaged in the business of generating gaseous fuel from liquid waste
using proprietary  Plasma Arc Flow technology.  MagneGas is the developer and
manufacturer of Gasifiers (as defined below) used for such purpose.
 
CSE is in the business of selling gaseous fuel.  CSE has established and
maintains, or intends to establish and maintain, connections with Customers (as
defined below) in the Territory (as defined below) sufficient to allow CSE to
promote the sale of Products (as defined below) to Customers in the Territory.
 
MagneGas and CSE have entered into a Gasifier Purchase Agreement of even date
herewith (the “Purchase Agreement”).   Pursuant to the Purchase Agreement, CSE
will purchase from MagneGas one or more Gasifiers which CSE will use to
manufacture and promote the sale of fuel Products under MagneGas’ Marks (as
defined below) to Customers.
 
The purpose of this Agreement is to set forth the terms and conditions upon
which CSE will distribute the Products  and the respective duties, obligations,
and responsibilities of each of the Parties, including the conditions upon which
MagneGas will allow CSE to promote and distribute Products in the
Territory.  The Parties acknowledge and agree that MagneGas would not sell any
Gasifiers to CSE without the Parties’ voluntary entry into this Agreement.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties, intending to be legally bound,
hereby agree as follows:
 
OPERATIVE TERMS AND CONDITIONS
 
1.            DEFINITIONS
 
In addition to any other term defined elsewhere in this Agreement, the following
terms shall have the respective meanings set forth below.
 
1.1           “Change of Control” shall mean the occurrence of any of the
following after the Effective Date: (a) the sale, transfer, or other disposition
of all or substantially all of the assets of a Party; or (b) the acquisition (by
merger, consolidation, transfer, purchase or otherwise) by any person or entity
of (i) beneficial ownership of securities of a Party representing more than
fifty percent (50%) of the common stock of such Party or representing more than
fifty percent (50%) of the combined voting power with respect to the election of
directors (or members of any other governing body) of such Party, (ii) the right
or ability to appoint a majority of such Party's Board of Directors (or other
governing body), or (iii) the right or ability to direct the operations or
management of such Party or any successor to such Party.
 
 
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1.2           “Commissioning Date” shall mean the commissioning date of the
First Gasifier, as defined in the Purchase Agreement.
 
1.3           “CSE Indemnified Party” shall have the meaning set forth in
Section 9.1.
 
1.4           “Customer” shall mean any Person to which sale of the Product is
offered.
 
1.5           “First Gasifier” shall mean the first Gasifier CSE shall purchase
from MagneGas pursuant to the Purchase Agreement.
 
1.6           “Force Majeure Event” shall have the meaning set forth in Section
11.1.
 
1.7           “Gasifier” shall mean a Gasifier manufactured by MagneGas based on
Plasma Arc Flow technology.
 
1.8            “Latin America” means the countries in (i) Central America, (ii)
South America and (iii) the Caribbean, excluding any U.S. territories.  For
purposes of this Agreement, the country of Mexico is not considered part of
Latin America.
 
1.9           “Limited License Agreement” shall have the meaning set forth in
Section 5.1.
 
1.10           “Losses” shall mean any and all damages, settlement amounts,
assessments, fines, dues, penalties and other costs and expenses (including,
without limitation, court costs, interest and reasonable fees of attorneys,
accountants and other experts) required to be paid to third parties with respect
to the claim, suit, or action in question by reason of any judgment, order,
decree, stipulation or injunction, or any settlement entered into in accordance
with the provisions of this Agreement, together with all documented
out-of-pocket costs and expenses incurred in complying with any judgments,
orders, decrees, stipulations. and injunctions that arise from or relate to such
claim, suit, or action.
 
1.11           “Marks” shall have the meaning given to such term in the Limited
License Agreement.
 
1.12           “Mexico” means the country of Mexico, also referred to as the
United States of Mexico.
 
1.13           “Minimum Royalty Requirements” shall have the meaning set forth
in Section 2.5.
 
1.14           “MagneGas Indemnified Party” shall have the meaning set forth in
Section 9.2.
 
1.15           “Person” or “person” shall mean any natural person, corporation,
partnership, limited liability company, proprietorship, association, trust, or
other legal entity.
 
 
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1.16           “Product” shall mean the gaseous fuels manufactured by a Gasifier
and any by-products or other output from a Gasifier purchased by CSE that may be
sold to Customers, as the same may be modified from time to time in accordance
with Section 4.5.
 
1.17           “Product Quality Standards and Specifications” shall mean the
quality standards and specifications for gaseous fuels and other products
manufactured or to be manufactured at a Gasifier, according to MagneGas’s CE
Certificate of Conformity, in respect of the Products, which MagneGas provides
to CSE in writing. The initial Product Quality Standards and Specifications are
attached as Exhibit B hereto.
 
1.18           “Promotional Materials” shall have the meaning set forth in
Section 4.2.
 
1.19           “Purchase Agreement” shall mean the Gasifier Purchase Agreement
of even date herewith by and between the Parties.
 
1.20            “Royalty” shall mean the royalty payment amount MagneGas shall
be entitled to receive as calculated pursuant to the formula set forth in
Exhibit A attached hereto.
 
1.21           “Territory” shall mean Mexico (on an exclusive basis pursuant to
Section 2.1 below), and the rest of Latin America (on a non-exclusive basis
pursuant to Section 2.2 below); provided that the exclusive Territory is subject
to change in accordance with this Agreement, for which CSE is granted the right
to distribute Products, using MagneGas’ Marks, subject to the terms of the
Limited License Agreement.
 
2.            DISTRIBUTORSHIP
 
2.1           Exclusive Appointment for Mexico.  Effective upon MagneGas’
receipt of payment in full of the purchase price for the First Gasifier,
MagneGas hereby grants to CSE the exclusive right (including without limitation
as to Magnegas) to manufacture, sell and distribute the Products in Mexico for a
term of three (3) years from the Commissioning Date of the First Gasifier under
the Purchase Agreement, subject to extension of such term pursuant to Section
6.1 below and subject to the royalty requirements of Section 2.5 and termination
in accordance with Section 5.3 (the “Exclusive Term”).  During the Exclusive
Term, MagneGas shall not (a) grant any other distribution rights or license, or
appoint any independent sales representatives, to solicit, sell or distribute
Gasifiers, Products or products similar to Products to any of Customers in
Mexico, or (b) authorize, encourage or support any person to sell Products or
products similar to the Products in Mexico to (x) any Customers, or (y) any
person that MagneGas knows or should reasonably know, intends to sell or
distribute Products or products similar to the Products to any Customers in
Mexico.
 
2.2           Non-Exclusive Appointment – Latin America.  Effective upon
MagneGas’ receipt of payment in full of the purchase price for the First
Gasifier, MagneGas grants to CSE a non-exclusive right to manufacture, solicit
the sale of, sell and distribute Products to Customers in Latin America, subject
to the terms and conditions hereof.
 
 
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2.3           Exclusive Appointment for Latin America.  MagneGas hereby grants
CSE an option to acquire exclusive rights to additional territories within Latin
America, such option to be exercised effective upon MagneGas’ receipt of payment
in full of the purchase price for a Gasifier to be located within a Latin
American country (as stated by CSE in its purchase order for such Gasifier) on
terms to be negotiated by the parties separate and apart from  the current
Purchase Agreement,  and subject to the negotiation of reasonable performance
conditions for distribution in such specific Latin American country or
geographic portion thereof.   At such time MagneGas shall grant to CSE the
exclusive right (including, without limitation, as to MagneGas), to manufacture,
sell and distribute Products in the certain Latin American country (or
geographic portion thereof, as negotiated by the parties) in which the Gasifier
is to be located , subject to the terms and conditions hereof.  For purposes of
this Section, each such country for which exclusive rights are granted shall be
included in references to the “Territory”.  If CSE acquires exclusive rights as
contemplated in this Section, MagneGas shall not, thereafter, for a period of
time determined pursuant to Section 6.1 below, (a) grant any other distribution
rights or license, or appoint any independent sales representatives, to solicit,
sell or distribute Gasifiers, Products or products similar to Products to any of
the Customers in the Territory, or (b) authorize, encourage or support any
person to sell Products or products similar to the Products in the Territory to
any (x) Customers, or (y) any person that MagneGas knows or should reasonably
know, intends to sell or distribute Products or products similar to the Products
to any Customers in the Territory.   For purposes of clarity, all Gasifiers to
be used in a Latin American country other than Mexico on an exclusive basis
shall be purchased pursuant to a separate agreement with MagneGas other than the
Purchase Agreement.   Minimum Royalty and other performance requirements for
such additions to the exclusive Territory shall be negotiated by the parties for
each such Latin American country or portion thereof  added to the
Territory.  For further clarity, Gasifiers to be used in a Latin American
country other than Mexico on a non-exclusive basis shall be purchased pursuant
to the Purchase Agreement and the Minimum Royalty and other performance
requirements in this Agreement shall apply.
 
2.4           Breach of Exclusivity.  Other than for such joint sales calls as
may be described in any marketing plan mutually agreed to by the Parties, or as
otherwise agreed upon by the Parties, MagneGas shall not (directly or
indirectly) contact or call upon any Customers in the Territory or cooperate
with or support any person other than CSE, to promote the sale of, or sell
Products in the Territory to Customers.
 
2.5           Minimum Royalty Requirement.  To maintain its exclusive rights as
distributor for Customers in any country in the Territory, CSE must pay
Royalties to MagneGas that meet or exceed certain “Minimum Royalty Requirements”
per Gasifier, based on gross revenues generated from (i) sales of Product, and
(ii) any other revenue generated from employment of a Gasifier purchased by CSE
from MagneGas as a Gasifier or recycler in such country in the Territory (for
the avoidance of doubt, gross revenue excludes any other benefit generated from
the Gasifiers, such as tax credits or cost savings resulting from employment of
a Gasifier for CSE’s internal business purposes).  The Minimum Royalty
Requirements per Gasifier applicable for Mexico and other non-exclusive
countries in the Territory are set forth on Exhibit A.   Minimum Royalty
Requirements for exclusive countries in the Territory other than Mexico shall be
negotiated by the parties on a case-by-case basis.   In the event that the
Royalty paid to MagneGas during any calendar year is less than the Minimum
Royalty Requirements amount, at MagneGas' option, CSE shall become a
non-exclusive distributor in the applicable country in the Territory.  In such
case, the restrictions on MagneGas' sales and solicitation of sales of (x)
Gasifiers to other Persons, or (y) Products to Customers in the such country in
the Territory (whether directly or through sales representatives or distributors
or otherwise), shall terminate.  For clarification, CSE may fulfill the Minimum
Royalty Requirement at any time with a cash payment, notwithstanding that it has
not have achieved the required gross revenues.
 
 
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2.6           Solicitation and Sales Outside the Territory. Unless otherwise
agreed by MagneGas, CSE shall not purposefully solicit orders for sales of
Products from persons other than the Customers in the Territory. For purposes of
this Agreement, solicitations for sales of Products that are accessible to
persons outside of the Territory, but that are not specifically directed towards
such persons, shall not constitute solicitations for sales of Products outside
of the Territory. Notwithstanding the foregoing, sales may be made to Customers
maintaining their principal offices outside the Territory so long as
solicitations are not targeted to Customers outside the Territory and sales are
completed with delivery of Product within the Territory.
 
2.7           Sub-Agents. CSE shall have the authority to appoint sub-agents,
sub-distributors and other persons to assist it in marketing and selling
Products hereunder, or to otherwise perform any of CSE's obligations hereunder,
provided that CSE has adequately trained such sub-agents and provides
commercially reasonable oversight of such sub-agents.
 
2.8           Other Activities of CSE. Nothing in this Agreement shall be
construed to prohibit or limit CSE's ability to promote, offer, purchase, or
sell products other than the Products to any person in or out of the Territory.
 
2.9           Distributorship Arrangement. Each Party acknowledges and agrees
that this Agreement provides for a distributorship arrangement. MagneGas will
sell one or more Gasifiers directly to CSE pursuant to the terms of the Purchase
Agreement and CSE will operate the Gasifier or Gasifiers to manufacture Products
for sale in the Territory.  CSE will use its commercially reasonable efforts to
maximize sales and distribution of Products to Customers purchasing in the
Territory.
 
2.10           Independent Contractors. Neither Party is, nor will be deemed to
be, an agent, legal representative, joint venturer, partner, or employee of the
other Party for any purpose.  Neither Party will be entitled to (a) enter into
any contracts in the name of or on behalf of the other Party, (b) pledge the
credit of the other Party in any way or hold itself out as having authority to
do so, or (c) make commitments-or incur any charges or expenses for or in the
name of the other-Party.  Each Party shall be solely responsible for payment of
all compensation owed to its personnel (and all tax withholding with respect
thereto), including payment, if any, of employment-related taxes and worker's
compensation insurance premiums.  The Parties are and shall be independent
contractors.
 
2.11           Operations and Expenses. Subject to the express provisions of
this Agreement, the detailed operations and activities of CSE in acting as
distributor for the Products under this Agreement are subject to the sole
control and management of CSE.
 
2.12           CSE Right of First Refusal for Brazil.  Until exclusive rights
are granted in respect of any particular country in the Territory,  MagneGas may
sell Gasifiers and distribution rights to any third Person; provided, however,
that until the third anniversary of the date of the Purchase Agreement (the
“Brazil ROFR Period”), CSE shall have a right of first refusal to acquire
exclusive distribution rights for Brazil, other than with the Mello Farias
Parties as defined below, in accordance with the terms of this Section.  During
the Brazil ROFR Period, if MagneGas receives an offer from, or makes an offer
to, a bona fide third party purchaser (other than the Mello Farias Parties) to
acquire exclusive distribution rights for the sale of Products in Brazil or any
geographic region within Brazil (the “Brazil Offer”), MagneGas will notify CSE
of the terms of such Brazil Offer in writing (the “Brazil Offer Notice”).  If
CSE notifies MagneGas, in writing, within thirty (30) calendar days after
receipt of the Brazil Offer Notice that CSE desires to exercise its right of
first refusal, and provided CSE  is not in breach of this Agreement, CSE shall
be afforded the opportunity to purchase the exclusive distribution rights on the
terms and conditions set forth in the Brazil Offer.  To the extent consideration
or other terms and conditions in the Brazil Offer cannot by their nature be
duplicated or performed by CSE, the parties will negotiate in good faith to
substitute other terms or cash consideration of equivalent value. CSE
acknowledges that MagneGas has already been working with and is currently in
negotiations with Carlos Eduardo Mello Farias and BCI Born Commerce
International, LTDA, for development of the Brazil market.  Accordingly, the
terms that MagneGas may agree on with Carlos Eduardo Mello Farias and BCI Born
Commerce International, LTDA (the “Mello Farias Parties”) shall not be subject
to the right of first refusal granted to CSE hereunder.  Further, CSE agrees not
to solicit MagneGas business for Brazil or elsewhere through any of the Mello
Farias Parties.  
 
 
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2.13           MagneGas Right of First Refusal for CSE.  If, during the term of
this Agreement, CSE or its shareholders shall receive a bona fide offer from a
third party to acquire 50% or more of the issued and outstanding shares of
capital stock of CSE or substantially all of CSE’s assets used in connection
with its metal cutting business or Products distribution business (the “CSE
Offer”), MagneGas shall have a right of first refusal to purchase such shares of
capital stock or assets, as applicable, in accordance with the terms of this
Section.  CSE will notify MagneGas of the terms of such third party offer in
writing (the “CSE Offer Notice”).  If MagneGas notifies CSE, in writing, within
thirty (30) calendar days after receipt of the CSE Offer Notice that MagneGas
desires to exercise its right of first refusal, and provided MagneGas is not in
breach of this Agreement, MagneGas shall be afforded the opportunity to purchase
such shares of capital stock of CSE or substantially all of CSE’s assets used in
connection with its metal cutting business or Products distribution business on
the terms and conditions set forth in the CSE Offer.  To the extent
consideration or other terms and conditions in the CSE Offer cannot by their
nature be duplicated or performed by MagneGas, the parties will negotiate in
good faith to substitute other terms or cash consideration of equivalent value.
 
2.14           Purchase Option on CSE.  If, during the term of this Agreement,
MagneGas or its shareholders shall receive a bona fide offer from a third party
to acquire substantially all of the issued and outstanding shares of capital
stock of MagneGas or substantially all of MagneGas’s assets, that is conditioned
upon exclusive distribution rights in the Territory (the “MagneGas Offer”),
MagneGas shall have the option to repurchase the Gasifiers and such exclusive
rights in accordance with the terms of this Section.  MagneGas will notify CSE
of the terms of the MagneGas Offer in writing (the “MagneGas Offer Notice”).  If
MagneGas notifies CSE, in writing, within thirty (30) calendar days after
receipt of the MagneGas Offer Notice that MagneGas desires to exercise its
purchase right, and provided MagneGas is not in breach of this Agreement,
MagneGas shall be afforded the opportunity to repurchase the Gasifiers and
exclusive distribution rights in accordance with the following Buy-Out
Formula.  The “Buy-Out Formula” shall be:  for each Gasifier being repurchased
and distribution rights associated therewith, the Purchase Price shall equal the
product of the greatest of pro forma 85% utilization or the actual average
monthly output, times 12, then multiplied by the remaining rated life of the
Gasifier, and then discounted for present value (NPV 10).  For purposes of this
calculation, a Gasifier’s rated life is assumed to be twenty years.
 
 
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3.             MANUFACTURE, PACKAGING, DELIVERY AND PAYMENT
 
3.1           Manufacture of Product.  CSE, at its sole cost and expense, will
manufacture Products using the Gasifier or Gasifiers purchased or that shall be
purchased from MagneGas.  The Product shall be manufactured to meet the Product
Quality Standards and Specifications.  No Products failing to meet the Product
Quality Standards and Specifications will be sold or distributed using or
otherwise in association with the Marks.  Notwithstanding any provision to the
contrary, failure of CSE to comply with this Section shall be deemed a material
breach of this Agreement, except to the extent due to a design or manufacturing
defect in the Gasifiers, or failure of a Gasifier to comply with the Gasifier
specifications.
 
3.2           Purchase Price and Terms.  CSE shall have full and complete
discretion to establish its terms and conditions of sale of Products to
Customers, including pricing.  CSE shall inform MagneGas periodically of its
pricing.
 
3.3           Packaging and Labeling.  CSE will ensure all Product packaging and
labeling will be in compliance with all packaging and labeling laws and
regulations for the marketing, sale and use of the Products in all geographic
regions within the Territory.  Without limiting the  foregoing, CSE, and not
MagneGas, will be responsible for all packaging and labeling compliance for any
amount of Product shipped in bulk and repackaged after delivery to
Customers.  CSE represents that it has adequate capacity to package and label
Products, in compliance with applicable legal requirements and with the
requirements of this Agreement and the Limited License Agreement, provided
MagneGas delivers to CSE artwork and instructions reasonably required to perform
packaging and labeling services to order.  MagneGas shall have no other
responsibilities in respect of packaging or labeling of Products.
 
3.4           Shipping and Delivery Terms.  CSE will be responsible for and will
prepare all documentation necessary for distribution of Products in and to the
Territory.  All Product will be packed and shipped in a commercially reasonable
manner, consistent with industry standards, and in compliance with applicable
law.
 
3.5           Manner of Payment: Currency. All payments of any kind to MagneGas,
including but not limited to payments of Royalties to MagneGas, shall be
calculated and paid in U.S. Dollars. All payments shall be paid by wire transfer
of immediately available funds to an account at SunTrust Bank as specified by
MagneGas to CSE.
 
4.             ADDITIONAL OBLIGATIONS OF THE PARTIES
 
4.1           Stewardship Group.
 
(i)           Establishment and Composition.  CSE and MagneGas shall establish a
steering committee (the “Stewardship Group”) to act as the primary means of
discussions between the Parties with respect to the management of the
independent distributorship relationship established under this Agreement. The
Stewardship Group shall consist of [two (2)] individual representatives
appointed by CSE and [two (2)] individual representatives appointed by MagneGas.
The initial representatives of CSE and MagneGas are named on Exhibit C.  Each
party shall notify the other party in writing of any change in its appointed
members. The members of the Stewardship Group (or an individual member thereof
designated by the applicable Party) shall be empowered to commit resources of
the Party whom they represent to the extent required or permitted hereunder;
provided, however, that each party reserves the right to submit any allocation
of resources or other action to its management for review and approval.
 
 
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(ii)           Meetings. The Stewardship Group shall meet at least monthly (or
more frequently as the Parties may agree).  Such meetings may be held in person
or via teleconference or video conference as the Parties may agree, provided
that if no agreement is reached to meet in person, the meeting(s) will be held
telephonically. If the meetings are held in person, the venue of such meetings
shall be in Florida unless MagneGas otherwise agrees, and shall be attended by
at least one representative of each Party.  Each Party shall bear its expenses,
including travel and living expenses, in connection with its participation in
any meeting under this Section.
 
4.2           Promotional Materials.  MagneGas shall provide CSE with reasonable
quantities of MagneGas' promotional materials and sales literature for the
Products, including revised or updated copies hereof as prepared by MagneGas
from time to time, (collectively, the “Promotional Materials”) for use by CSE,
if CSE so chooses, in promoting sales of Products to Customers in the Territory.
CSE may reproduce, publicly display, and modify Promotional Materials; provided,
however, that CSE may not alter such materials and literature or remove or
obscure any proprietary notices or markings of MagneGas appearing herein,
without MagneGas' prior written approval.  All such materials, literature and
samples shall be provided to CSE at no additional charge.  Any use of the Marks
by CSE in connection with the promotion of the Products and the Promotional
Materials shall be in conformity with the terms of the Limited License
Agreement.
 
4.3           Customer Service and Support. Unless otherwise specified herein or
agreed by the Parties in writing, CSE shall be solely responsible for responding
to all inquiries, complaints, and other communications with or from persons who
purchase or are contemplating the purchase of Products in the Territory through
or based on orders solicited or being solicited by CSE hereunder. MagneGas shall
use commercially reasonable efforts to promptly respond to inquiries by CSE in
addressing such inquiries, complaints, and other communications and will
cooperate with CSE to resolve any problems or issues that may have arisen.
Should CSE require MagneGas’ assistance in connection with performing
such  activities, MagneGas shall provide, at CSE’s cost, such assistance as CSE
may reasonably request.
 
4.4           Compliance with Law; Licenses and Approvals.  Each Party shall
comply in all material respects with all laws, rules, regulations, and other
governmental requirements applicable to its performance under this Agreement,
and shall obtain and maintain all material governmental permits, licenses, and
consents required in connection therewith.
 
 
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5.            TERM AND TERMINATION
 
5.1           Term.
 
(i)           The term of any non-exclusive distribution rights in respect of
Latin America will continue until (A) MagneGas, upon sixty (60) days’ prior
written notice to CSE, enters into an exclusive distributorship relationship
with a Person other than CSE in such Territory, or (B) this Agreement is
terminated for cause as provided in Section 5.2 below.  Notwithstanding the
foregoing, CSE’s non-exclusive distribution rights in Mexico are perpetual and
may be terminated by MagneGas only pursuant to the provisions of Section 5.1
(Termination Without Cause) or Section 5.2 (Termination With Cause).
 
(ii)           The term of exclusive distribution rights for any Territory (the
“Term of Exclusivity”) shall be for a period of three (3) years of the
Commissioning Date of the First Gasifier), provided, however, that the Term of
Exclusivity shall be extended for an additional three (3) years for each
additional Gasifier purchased by CSE from MagneGas within five (5) years after
the Commissioning Date of the First Gasifier, up to six (6) Gasifiers in
total.  For example, if the Commissioning Date of the First Gasifier is
determined to be January 2, 2013, and the Second Gasifier is acquired June 10,
2013, the Term of Exclusivity will expire January 2, 2019.  If a third Gasifier
is purchased is purchased within the prescribed 5-year period from the
Commissioning Date of the First Gasifier, the Term of Exclusivity will extended
to January 2,2022.  And if a fourth Gasifier is purchased within the prescribed
5-year period from the Commissioning Date of the First Gasifier, the Term of
Exclusivity will extend to January 2, 2025.  These Terms of Exclusivity may be
terminated by MagneGas, at MagneGas’ sole option, if CSE does not purchase the
Second Gasifier prior to the third anniversary of the Commissioning Date of the
First Gasifier.
 
5.2           Termination Without Cause.  Notwithstanding the provisions in
Section 5.1 above, this Agreement may be terminated without cause by either
Party, if a court of competent jurisdiction or governmental authority,
regulatory, or administrative agency or commission shall have enacted any law,
statute, rule, or regulation, or issued any final and non-appealable order or
decree that permanently restrains, enjoins, or otherwise prohibits either Party
from substantially performing under this Agreement; provided, however, that if
such restraint, injunction, or prohibition affects only a portion of the
Territory that is not substantial to the Territory as a whole, such termination
shall be limited to such portion of the Territory; and provided further that if
such restraint, injunction or prohibition affects a portion of the Products that
is not substantial to the range of Products as a whole, such termination shall
be limited to such Product(s) only.
 
5.3           Termination for Cause.  Notwithstanding the provisions in Section
5.1 above, this Agreement may be terminated for cause:
 
(i)           By either Party if the other Party (a) institutes any insolvency,
receivership, or bankruptcy proceedings, or any other proceedings for the
settlement of its debts, (b) has any such proceedings instituted against it,
which proceedings are not dismissed or otherwise resolved in its favor within
one hundred and twenty (120) days thereafter, (c) makes a general assignment for
the benefit of its creditors, or (d) is dissolved or permanently ceases to
conduct business in the ordinary course;
 
 
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(ii)           By either Party if the other Party breaches or fails to comply
with any material term, condition, or obligation required to be performed or
complied with by such other Party, and such breach or failure is not cured
within forty-five (45) days following written notice thereof by the terminating
Party; provided, however, that if such breach or failure affects only a portion
of the Territory or range of Products that is not substantial to the Territory
or range of Products as a whole, such termination shall be limited to such
portion of the Territory or range of Products, as applicable; or
 
(iii)           By CSE upon thirty (30) days' prior written notice if CSE
determines in its reasonable business discretion that the performance or
observance of this Agreement by either Party is having, or has had, a material
adverse effect on the relationship between CSE or any of its affiliates, on the
one hand, and any of their Customers, on the other hand.
 
5.4           Books and Records; Audit.  Commencing on the Effective Date of
this Agreement and for a period of three (3) years after termination of this
Agreement, CSE agrees to make and keep full and accurate books and records in
sufficient detail, and in the English language, to enable Royalties payable
hereunder to be determined.  On no less than thirty (30) days' prior written
notice to CSE, but no more frequently than once per calendar year, MagneGas or a
third party certified public accountant designated by MagneGas shall have access
at CSE’s offices during normal business hours to the books and records of CSE
pertaining to (A) CSE's sales of Products to Customers or (B) the manufacture of
Products, solely to the extent necessary to verify the calculation of the
Royalties due, if any, under this Agreement or compliance with Product Quality
Standard and Specifications.   Prompt adjustment and payment shall be made by
CSE or MagneGas to compensate for any underpayments or overpayments disclosed by
such audit.  The cost of each audit shall be borne by MagneGas; provided,
however, that if any audit discloses that CSE has underpaid Royalties by three
percent (3%) or more during the period audited, CSE shall bear the reasonable
cost of the applicable audit.  Similarly, if any audit discloses that CSE has
distributed Product under the Marks that does not meet the Product Quality
Standards and Specifications, CSE shall bear the reasonable cost of the
applicable audit.
 
5.5                  Rights and Obligations on Expiration or Termination.
 
(i)           If and when this Agreement is terminated for any reason or no
reason, MagneGas shall be entitled to receive from CSE, and CSE shall pay to
MagneGas in accordance with the terms and conditions of this Agreement, any and
all Royalties earned but not received prior to the effective date of such
termination;
 
(ii)           If MagneGas terminates this Agreement for CSE’s failure to
perform or any other “for cause” reason under Section 5.3, at MagneGas’s sole
option it may, but shall not be required to,  purchase any Gasifiers owned by
CSE on a straight line depreciation basis, according to the remaining useful
life of the Gasifiers CSE may have at such time; and
 
(iii)           In the event CSE terminates this Agreement for MagneGas’s
failure to perform its obligations under Section 2.1, Magnegas shall repurchase
the Gasifiers on a straight-line depreciation basis, according to the remaining
useful life of the Gasifiers CSE may have at such time.
 
 
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(iv)           Upon termination of this Agreement, CSE will immediately cease
using the Marks provided that CSE will be authorized to deliver Products
packaged and labeled using the Marks on orders received prior to termination of
this Agreement.
 
5.6           Survival. The following Sections and Articles, as well as any
payment obligations of MagneGas, shall survive the expiration or termination of
this Agreement: Sections  5.5, 7, 8 and 9.
 
6.            REPRESENTATIONS AND WARRANTIES; DISCLAIMER OF ADDITIONAL
WARRANTIES
 
6.1           By Both Parties.  Each Party represents and warrants to the other
Party that (a) it has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, (b) it is not a party to any
agreement or understanding, and knows of no law or regulation, that would
prohibit it from entering into and performing its obligations under this
Agreement, or that would conflict with this Agreement, and (c) when executed and
delivered by it, this Agreement will constitute a legal, valid and binding
obligation of it, enforceable against it in accordance with the terms hereof.
 
6.2           Additional Warranties of MagneGas.   MagneGas additionally
represents and warrants to CSE that (a) it owns and claims proprietary rights to
the technology that is the basis for the Gasifier and that certain of those
rights are protected by patents filed with the U.S. Patent and Trademark Office
(the “USPTO”), are covered by patents pending with the USPTO, or are otherwise
MagneGas’s trade secrets and that, based on such ownership, MagneGas has
sufficient rights to license to CSE the right to distribute Products in the
Territory; and  (b) provided that CSE acknowledges that no patent application
for the Gasifier technology is currently pending before the Mexican Patent and
Trademark Office and that MagneGas has not undertaken a search of the records of
the Mexican Patent and Trademark Office, to the best  knowledge of MagneGas such
Products will not infringe or misappropriate any enforceable patent, copyright,
trade secret, or other intellectual property or proprietary rights of any third
party.
 
6.3           Additional Warranties of CSE.  CSE additionally represents and
warrants to MagneGas that (a) it has  access to sufficient quantities of raw
materials and ingredients to produce and provide such quantities of Products as
may be necessary to fill in a timely manner all purchase orders for Products
that may be received by CSE for sales to Customers in the Territory, based upon
projections of sales developed by CSE; (b) the Products shall be manufactured,
labeled, and packaged in accordance with all applicable laws for sales of
Products in the Territory, (c) the Products, prior to distribution, will be
tested and certified, or shall be tested, under the Instituto Mexicano de
Petrόleo and all other required governmental bodies offering applicable testing
and certification, (d) the Products are and shall be compliant with all
applicable federal and state laws and regulation, including, but not limited to,
environmental laws and regulations, for sale and use of the Products within the
Territory, subject to any special handling and disposal requirements or
processes that MagneGas shall have described to CSE in writing in advance of any
related orders being accepted, (e) such Products will, at the time of shipment,
conform with the Product Quality Standards and Specifications, and (f) neither
CSE nor any of its representatives will intentionally make any oral or written
representations which vary materially from the Product Quality Standards and
Specifications.
 
 
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6.4           Disclaimer of Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH
HEREIN, NEITHER. PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER, AND
ALL SUCH OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
ARE HEREBY DISCLAIMED.
 
7.            LIMITATIONS OF LIABILITY
 
7.1           Limitation on Certain Damages. EXCEPT TO THE EXTENT ARISING OUT OF
A THIRD PARTY CLAIM AS SET FORTH IN SECTION 8 BELOW, IN NO EVENT SHALL A PARTY
BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, PUNITIVE, OR.
CONSEQUENTIAL DAMAGES OF ANY KIND (INCLUDING, WITHOUT LIMITATION, LOST PROFITS,
BUSINESS, OR GOODWILL) IN CONNECTION WITH THE PRODUCTS OR ANY OTHER MATTER
COVERED BY THIS AGREEMENT, REGARDLESS OF WHETHER SUCH LIABILITY IS BASED ON
BREACH OF CONTRACT, TORT, STRICT LIABILITY, BREACH OF WARRANTY, OR ANY OTHER
THEORY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THE FOREGOING LIMITATION OF LIABILITY REFLECTS A DELIBERATE AND BARGAINED FOR
ALLOCATION OP RISKS BETWEEN CSE AND MAGNEGAS AND IS INTENDED TO BE INDEPENDENT
OF ANY EXCLUSIVE REMEDIES AVAILABLE UNDER THIS AGREEMENT, INCLUDING ANY FAILURE
OF SUCH REMEDIES TO ACHIEVE THEIR ESSENTIAL PURPOSE.
 
EXCEPT TO THE EXTENT ARISING OUT OF A PARTY’S (I) VIOLATION OF LAW, OR (II)
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR A THIRD PARTY CLAIM AS SET FORTH IN
SECTION 8 BELOW, EACH PARTY’S TOTAL LIABILITY FOR ANY AND ALL LOSSES AND DAMAGES
ARISING OUT OF ANY CAUSE WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT,
NEGLIGENCE, STRICT LIABILITY, OTHER TORT OR OTHERWISE) SHALL IN NO EVENT EXCEED
THE MINIMUM ROYALTY AMOUNT.
 
7.2           Essential Part of the Bargain. The Parties acknowledge that the
limitations of liability set forth in this Article 7 are an essential element of
this Agreement between the Parties, and that the Parties would not have entered
into this Agreement but for such limitations of liability.
 
8.             INDEMNIFICATION
 
8.1           Indemnification by MagneGas.  MagneGas shall defend and/or settle
any and all third party claims, suits, and actions asserted against CSE, its
affiliates, or their respective its employees, officers, directors, agents,
successors, and assigns (each, a “CSE Indemnified Party”), to the extent such
claims, suits or actions arise from or are based on (i) any breach by MagneGas
of any of its representations, or warranties set forth in Article 6 or (ii) an
actual or alleged claim of infringement or misappropriation of a patent,
copyright, trademark or trade secret of any third party.  All settlements under
this Section 8.1 shall be subject to CSE's prior written approval.  CSE (and the
applicable CSE Indemnified Parties) shall at all times have the option, at its
own expense, to participate in the defense or settlement of the claim, suit, or
action (including, without limitation, through counsel of its own
selection).  In addition, MagneGas shall indemnify and hold harmless the CSE
Indemnified Parties from and against any and all Losses suffered or incurred by
any of them in connection with any such claims, suits, or actions.
 
 
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8.2           Indemnification by CSE.  CSE shall defend and/or settle any and
all third party claims, suits, and actions asserted against MagneGas, its
affiliates, or their respective its employees, officers, directors, agents,
successors, and assigns (each, a “MagneGas Indemnified Party”), to the extent
such claims, suits or actions arise from or are based on (a) any breach by CSE
of any of its representations or warranties set forth in Article 6, or (b) CSE’s
tortious acts or omissions in connection with any sale, distribution, use, or
disposal of the Products, including, without limitation, to or by the Customers,
their customers, or any other person (including, without limitation, products
liability claims), except to the extent caused by or arising out of the acts or
omissions of MagneGas or any MagneGas Indemnified Party.  All settlements under
this Section 8.2 shall be subject to MagneGas' prior written approval.  MagneGas
(and the applicable MagneGas Indemnified Parties) shall at all times have the
option, at its own expense, to participate in the defense or settlement of the
claim, suit, or action (including, without limitation, through counsel of its
own selection).  In addition, CSE shall indemnify and hold harmless the MagneGas
Indemnified Parties from and against any and all Losses suffered or incurred by
any of them in connection with any such claims, suits, or actions.
 
8.3           Publicity – Adverse Conditions. To the extent practicable, and
unless otherwise required by applicable law, subpoena or court order, the
Parties will notify or otherwise consult with one another prior to making any
public announcement concerning any materially adverse event or condition in
connection with a Gasifier, Products or the distribution business contemplated
by this Agreement.
 
9.            GENERAL PROVISIONS
 
9.1           Force Majeure. Neither Party shall be considered in default of its
performance of any obligation hereunder to the extent that performance of such
obligation is prevented or delayed by any act of God or other cause beyond such
Party's reasonable control, including, without limitation, any act, failure to
act, or delay in acting on the part of any governmental authority; governmental
priorities; strikes or other labor difficulties; accidents or disruptions such
as fire, explosion, terrorism, flood, epidemics, unanticipated breakdown,
failure, or delay of third party essential machinery or telecommunications
services, or civil disturbance (each, a “Force Majeure Event”). If any Force
Majeure Event does arise, occur, or result, the Party subject thereto shall use
commercially reasonable efforts to minimize the consequences of such Force
Majeure Event and to overcome such Force Majeure Event as soon as reasonably
possible. A Party desiring to rely upon any Force Majeure Event as an excuse for
failure, default, or delay in performance shall provide the other Party with a
written description of the facts giving rise to said event when it arises and
statement claiming Force Majeure giving rise to suspension of the Parties’
obligation hereunder during the pendency of such conditions of Force Majeure.
 
 
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9.2           Assignment; Binding Effect. Except as expressly permitted
hereunder, neither Party may, assign, delegate, or otherwise transfer this
Agreement, or any of its rights or obligations hereunder without the prior
written consent of the other Party, and any such assignment, delegation, or
transfer shall be null and void. Notwithstanding the foregoing, each Party may,
without consent, assign or transfer this Agreement in its entirety to any
Affiliate, or entity into or with which such Party merges or consolidates, or to
whom the Party transfers all or substantially all of its business or assets to
which this Agreement relates; provided, however, that this sentence shall not
apply to assignments or transfers of this Agreement by or to the following
competitors of MagneGas or CSE: Air Gas, Praxair and Air Liquide. Subject to the
foregoing, all of the terms and conditions of this Agreement shall be binding
upon and shall inure to the benefit of the Parties and their respective
successors and assigns.
 
9.3           No Rights In Third Parties. Except as expressly stated herein,
nothing in this Agreement will confer any rights upon any person other than the
Parties and their respective successors and assigns.
 
9.4           Choice of Law: Jurisdiction. This Agreement and its subject matter
shall be governed by and interpreted in accordance with the laws of the State of
Florida, without reference to any principles governing conflicts of law that
might cause the laws of any other jurisdiction to apply.  The appropriate
federal and state courts in Hillsborough County in the State of Florida or in
the State of Texas shall have exclusive jurisdiction in connection with the
interpretation and construction of this Agreement and any dispute, default, or
breach arising hereunder. The Parties agree that the provisions of the United
Nations Convention on Contracts for the International Sale of Goods shall not
apply to this Agreement.
 
9.5           Notices. All notices required under this Agreement shall be deemed
effective upon receipt and shall be (a) delivered personally, (b) sent via
overnight delivery using a nationally recognized courier service (e.g., UPS or
FedEx), to the Party to be notified, at the address(es) for such Party set forth
below, or at such address(es) of which such Party has provided notice in
accordance with the provisions hereof, as follows:
 

  To MagneGas:  150 Rainville Rd
Tarpon Springs, FL 34689
Attn:  Ermanno Santilli, CEO
        with a copy to:    
Shutts & Bowen LLP
4301 W. Boy Scout Blvd., Suite 300
Tampa, FL  33607
Attn: Olga M. Pina, Esq.
       
To CSE:
in U.S.: 
1001 4th Avenue #2325
Seattle, WA 98154
Attn:  Mitchell Adams
        in Mexico:   Boulevard Independcia 3438, Piso 4
El Fresno
Torreon, Coahuila Mexico
Attn:  Jorge Torres
     

 

                                 
 
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  with a copy to: Davis Wright Tremaine LLP
1201 Third Avenue, Suite 2200
Seattle, WA 98101
Attn:  Louisa Barash, Esq.

 
9.6           Entire Agreement; Amendments. This Agreement, including any
Exhibits and Schedules hereto, sets forth the entire agreement and understanding
of the Parties with respect to its subject matter and other documents referenced
herein. All prior and contemporaneous agreements and understandings between the
Parties, whether oral or written, are hereby superseded in their entirety by
this Agreement. This Agreement may be amended, modified, or supplemented only by
a written instrument duly executed by each of the Parties.
 
9.7           No Waivers. The failure of either Party to assert a right
hereunder or to insist upon compliance with any term or condition herein will
not constitute a waiver of that right or excuse any subsequent nonperformance of
any such term or condition, or of any other term or condition, by the other
Party.
 
9.8           Severability. If any provision of this Agreement is held invalid,
illegal, or unenforceable, such provision shall be modified to reflect the
fullest legal and enforceable expression of the intent of the Parties or, if not
possible, severed, and the remainder of this Agreement will not be affected
thereby. Notwithstanding the foregoing, the limitations of liability in Article
8 and the indemnification provisions in Article 9 are considered by the Parties
to be integral to this Agreement and may not be modified or severed from this
Agreement.
 
9.9           Interpretation. The Section, Article, and Exhibit headings
contained in this Agreement are for reference purposes only, and shall not
control or affect the construction of this Agreement or the Interpretation
thereof in any respect. Unless otherwise expressly indicated, all references to
Sections, Articles, and Exhibits are to the Sections, Articles, Exhibits and
Schedules of this Agreement.
 
9.10           Background.  The Background information shall be incorporated in
and made a part of the operative terms and conditions of this Agreement.
 
9.11           Counterparts.  This Agreement may be executed in two or more
counterpart's, each of which shall be binding as of the Effective Date, and all
of which shall constitute one and the same instrument. Each such copy shall be
deemed an original, and it shall not be necessary in making proof of his
Agreement to produce or account for more than one such counterpart.  Facsimile
or electronically scanned copies will be given the same force and effect as
original documents.
 
9.12           Confidentiality.The terms of the confidentiality provision in the
Purchase Agreement shall also apply to this Agreement.
 
 
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IN WITNESS WHEREOF, the Parties, by their duly appointed officers, have entered
into this Agreement on the Effective Date.
 

CLEAR SKY ENERGY, S.A. DE C.V.  
MAGNEGAS CORPORATION
              By:  /s/  Manual Juan Marco
 
By:   /s/ Ermanno Santilli      Name: Manual Juan Marco     Name:   Ermanno
Santilli   Title:  Chief Executive Officer   Title:  Chief Executive Officer   
Date:  March 19, 2013      Date: March 20, 2013               
CLEAR SKY ENERGY, S.A. DE C.V.
                    By:  /s/  Jorge Torres         Name:      Jorge Torres      
  Title: President         Date: March 19, 2013        

 
 
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EXHIBIT A
Minimum Royalty Requirements for Mexico and Non-Exclusive Countires in Latin
America

 
Percent Royalty*
Minimum Royalty
(per Gasifier)**
     
First Gasifier
5%
$30,000
Second through Sixth Gasifiers
10%
$45,000

*Royalty is based on gross revenues as described in the Agreement.
 
**Minimum Royalty is calculated annually on a calendar year basis per Gasifier
purchased, with proration for partial calendar years.
 
 
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EXHIBIT B
Product Quality Standards and Specifications (See attached)

ONE 300 KW PLASMA-ARC-FLOWTM TOTAL REFINERY MEETING CE CERTIFICATION
(hereinafter referred to as the “Total Refinery”) according to the following
specifications (see www.MagneGas.com for details):

MODES FOR USE
TOTAL MODE:  For the gasification of various liquid such as ethylene glycol,
crude oil,  cooking oil waste, olive oil waste, antifreeze waste, palm oil
waste, certain oil based liquid waste, via its recirculation through the arc
until all liquid molecules are eliminated by the arc and converted into usable
MagneGas fuel, heat and a small percentage of carbon residue.

MAIN COMPONENTS

POWER:  One 300kw Power Unit

OPERATING PRESSURE: Up to 30 psi (2 bars)

OPERATING TEMPERATURE: Maximum of 400ºF (204ºc)

CONTROLS:  Various control panels for completely automatic operation as follows:

CONTROL PANEL FOR THE ARC: Manufactured by TEIS Corporation in Italy with
automatic initiation, control and optimization of the arc, as well as automatic
shut off for any malfunction, including excess pressure, excess temperature or
lack of flow, with visual and sonic alarms in case of shut off.

ELECTRIC PANELS: For the connection of the Refinery to an outside source of
electricity (such as the grid or a generator) with all necessary breakers and
disconnects all meeting requirements for outdoor use.

CONTROL PANEL FOR LIQUID LEVEL: Maintains the level of the liquid automatically.

CONTROL PANEL FOR MAGNEGAS STATION: For completely automatic processing of
MagneGas.

ONE VERTICAL PLASMA-ARC-FLOW STATION:  2’ (60 cm) diameter 5’ (1.5 m) tall
with  Hydraulic Lift for electrode replacement.

COAL ELECTRODES: Cylindrical electrodes with 6”, 7” and 8” O.D.
 
 
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ELECTRODE REPLACEMENT:  All operating components are contained in the top flange
that can be removed via electrical operated linear actuator for easy replacement
of electrodes.

REFILL STATION: Comprising a strainer and a pump for completely automatic refill
of liquid feedstock.

MAGNEGAS STATION: Comprising two 100 gallon (378 liter) tanks, gas filter,
de-humidifier for the removal of any water vapor, desecant to remove traces of
water vapor in Magnegas, backpressure regulator, a 30 HP compressor up to 5,000
psi (330 bars). Plus additional equipment for the condensation of water vapor
and their removal down to 5 PPM in Magnegas.

COOLING SYSTEM: Four external heat exchangers (shell and tube) connected to a
chiller operated cooling system via antifreeze coolant and a pump that can be
disconnected so that the heat from the heat exchanger can be used for conversion
to electricity or other uses.

INDUSTRIAL TRANSFORMER: For use with local power supply.

ASSEMBLY

All the preceding components will meet CE Certification.  Additionally the above
components will be assembled in such a way to meet CE requirements as follows:

PAF Platform containing the PAF module, pumps and heat exchanger, hydrolic lift
and related components

Magnegas Platform containing desiccant, expansion tank, back pressure regulator,
Magnegas filter, Magnegas compression tank, compressor and additional desiccant.

Control Platform containing main control panels, transformer and various panels
with circuit breakers for attachment to the grid.

Cooling Platform containing chillers operated with antifreeze and related pumps.

All the above platforms will have a maximum width of 8 feet (2.44 Meters) so
that it can be transported on a low boy trailer.  However, for operation in
location they must be placed at certain relative distances of each other
requested by CE certification according to a floor plan provided by
Manufacturer.

ACCESSORIES

The above specified Refinery is delivered:

1) In fully operational and automatic condition;
 
 
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2) With Operating Manual;
3) With List of suppliers and their addresses/phones for service;

4) With Spare electrodes for one month operation;

5) Training of up to three Buyer technicians for three weeks upon completion of
the construction and for final testing prior to delivery.

NOTE: A variety of additional equipment is available on request, such as

1)           BiFuel Car running on MagneGas
2)           Electric Generator running on MagneGas
3)           Metal Cutting Demonstration Kit
4)           5 Way Exhaust Analyzer

PERFORMANCE

PERFORMANCE IN THE TOTAL MODE

The Refinery will be recommended by the manufacturer for optimal efficiency
according to the following two different specifications.

1)           For Use to Produce Maximum Fuel Quantity:
 
To maximize fuel production it is necessary to use oil or hydrocarbon based
waste. This Refinery is being delivered to process new ethylene glycol. The
manufacturer also recommends the use of an oil based low density liquid
feedstock such as ethylene glycol mixed with other oil based waste, as per
manufacturer’s suggestion.  The Refinery operating at full power, full pressure
and full temperature may produce up to 3,000 cubic feet per hour of Magnegas
fuel.  Jointly the liquid recycled in this case is 1/1000 of the Magnegas
produced corresponding to 10 gallons per hour in the absence of evaporation of
water content.

DISCLAIMER

The production of Magnegas varies greatly with even minimal changes in the
liquid feedstock.  As an example when operating in water without any organic
contaminants the production of Magnegas is expected to be less than half the
maximum production indicated above.

It should be stressed that the Refinery cannot process on a continuous basis
heavy oils, such motor oil waste, or crude oil or other oils, unless mixed with
water because of the creation of fullerenes that require a special design of the
PAF module for the continuous removal of excess carbon.
 
 
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IMPORTANT NOTE:

This refinery is designed for use at high pressure and high
temperature.  However, for safety the manufacturer recommends using it with a
maximum pressure of 30 psi.  The Buyer may at their discretion obtain local
government certification and insurance for high pressure use.

ELECTRODES:

The Refinery as above specified shall be delivered with Electrodes sufficient
for a one month use. All additional electrodes have to be purchased by Buyer
and/or user of the Refinery. During the construction of the Refinery,
Manufacturer shall assist Buyer in the selection of its preferred supplier of
electrodes.

Any manufacturing of the electrodes must receive the written approval by
Manufacturer, not only in dimensions and tolerances, but also in material
specifications. The use of electrodes not authorized by Manufacturer implies the
automatic termination of all warranties because of expected malfunction  as well
as potential serious damage to the MagneGas Technology.

SPARE PARTS:

Spare parts for anticipated two years of use will be included such as filters,
seals and other minor components.

SERVICE KIT:

A Service Kit containing the following items will be provided with each
Refinery:
 
RTB 1/4 OD SOFT REF TUBE (50' ROLL)
 
Standard Brass Compression Tube Fitting Sleeve for 1/4" Tube OD
 
Filter Cartridge for Water & Organic Acids, Polypro, 10 Micron, 30" H
 
Polyester Felt Filter Bag 50 Micron, 8" Diameter X 32" Height
 
Coltri compressor Molecular sieve filters (x2)
 
Coltri compressor Intake filter
 
24” gasket
 
Phenolic holder
seals                                                                                                    
 
Electrodes for one Month
Use                                                                         

 
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APPROVED LIQUID WASTE

The refinery should be solely used with liquid waste approved by the company in
writing.  Any use of liquid waste not approved by the company will imply the
termination of the warranty. The gasification of engine oil waste and other oil
very rich in carbon requires the continuous removal of the excess carbon
produced during the process that can be done via high speed centrifuge
specifically designed for that purpose and included in the Plasma Arc Flow loop.

INSTALLATION

Buyer is responsible for all setups needed to install the Refinery by using
Buyer’s technicians trained at the Manufacturers plant.

PRODUCT WARRANTIES

Manufacturer hereby warrants that the Refinery will be delivered as identified
in the Purchase Agreement of even date herewith and will have the performance
specified therein and in this Exhibit B.

Manufacturer furthermore warrants the proper operation of the Automatic Control,
the Automatic Refill, and the Automatic gas Station as herein stated for the
duration of one year from the date of delivery, said warranty covering the
payment by Manufacturer of all parts for their replacement.

All additional components of the Refinery carry a warranty from their own
manufacturers. For instance, the Miller AC-DC Converters carry a written
warranty from their manufacturer, the US Miller Corporation, and the same
applies for pumps and all other standard parts not manufactured by Manufacturer.
All such warranty details will be passed from Manufacturer to Buyer on or before
delivery.EXHIBIT C
Representative Designated for Stewardship Group

For CSE:                                1. Mitch Adams
                                               2. Jorge Torres
 
For MagneGas:                     1. Ermanno Santilli
                                               2. Luisa Ingargiola
 
 
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