Exhibit 10.8

 
FORM OF REGISTRATION RIGHTS AGREEMENT
 
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), made as of the __ day of
_________, 2006, by and between H2Diesel, Inc., a Delaware corporation, (“H2”)
and each of the persons and entities listed on Exhibit A attached hereto (the
“Holders”). For purposes of this Agreement, H2, together with Pubco (as defined
in those certain subscription agreements of even date herewith (the
“Subscription Agreements”), each between H2 and a Holder signatory thereto), are
referred to as the “Company”. Capitalized terms used but not defined herein
shall have the respective meanings set forth in the Subscription Agreements.
This Agreement shall be automatically effective upon the effectiveness of the
Merger (the “Effective Date”).
 
W I T N E S S E T H
 
WHEREAS, the Company has agreed to provide the registration rights set forth in
this Agreement.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
 
AGREEMENT
 
1.  Definitions.   As used in this Agreement, the following capitalized terms
have the following respective meanings:
 
“Business Day” means a day other than a Saturday or Sunday or any day on which
banking institutions in Miami, Florida and New York City, New York are
authorized or obligated by law or executive order to close.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
similar federal statute then in effect, and a reference to a particular section
thereof is deemed to include a reference to the comparable section, if any, of
any such similar federal statute.
 
“Majority of Holders” means Holders holding more than 50% in aggregate principal
amount of the Registrable Securities outstanding at the time of any
determination in question.
 
“Person” means any individual, corporation, partnership, limited partnership,
limited liability company, syndicate, trust, association or other entity.
 
“Prospectus” means the prospectus included in any Shelf Registration Statement,
as amended or supplemented by any Prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Shelf Registration Statement and all other amendments and supplements to
the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
 
“Registrable Securities” means any shares of Pubco Common Stock acquired by each
Holder pursuant to a Subscription Agreement and the Merger, issuable to a Holder
upon the exercise of any Warrants and Options or held by any other Holder on the
Effective Date, any shares of Pubco Common Stock which may be issued or
distributed in respect thereof by way of stock dividend or stock split or other
distribution, recapitalization or reclassification and any shares of Pubco
Common Stock described in Section 2(c) of this Agreement. Any particular
Registrable Securities that are issued will cease to be Registrable Securities
when (i) a registration statement with respect to the sale by the Holder
 

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of such securities becomes effective under the Securities Act and such
securities have been disposed of in accordance with such registration statement,
(ii) such securities have been distributed to the public pursuant to Rule 144
(or any successor provision) under the Securities Act, (iii) all of the
Registrable Securities then owned by such Holder could be sold pursuant to Rule
144(k), or (iv) such securities have ceased to be outstanding. For the avoidance
of doubt, the Company is under no obligation to register the resale of any
Warrants and Options.
 
“Registration Expenses” means any and all expenses incident to performance of or
compliance with this Agreement, including, without limitation, (i) all SEC and
stock exchange or National Association of Securities Dealers, Inc. (the “NASD”)
registration and filing fees (including, if applicable, the fees and expenses of
any “qualified independent underwriter,” as such term is defined in NASD conduct
rule 2720, and of its counsel), (ii) all fees and expenses of complying with
securities or blue sky laws (including fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees
and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange, (v) the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits and/or “cold comfort” letters required by or
incident to such performance and compliance, and (vi) the reasonable fees and
disbursements of counsel selected pursuant to Section 5(b) hereof.
 
“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute then in effect, and a reference to a particular section thereof
will be deemed to include a reference to the comparable section, if any, of any
such similar federal statute.
 
“SEC” means the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act or the Exchange Act.
 
“Selling Expenses” means underwriting or brokerage discounts and commissions and
transfer taxes, if any, applicable to the sale of Registrable Securities.
 
“Underwritten Offering” means an offering pursuant to the Shelf Registration
Statement in which Registrable Securities are sold to an underwriter for
reoffering to the public.
 
2.  Shelf Registration.
 
(a)  The Company shall:
 
(i)  not later than 30 days after the Effective Date (the “Shelf Filing
Deadline”), cause to be filed a registration statement on an appropriate form
pursuant to Rule 415 (or any successor rule) under the Securities Act (together
with any amendments thereto, and including any documents incorporated by
reference therein if permitted by such form, the “Shelf Registration
Statement”), which Shelf Registration Statement shall provide for resales of all
Registrable Securities held by Holders that have provided the information
required pursuant to the terms of Section 2(b) hereof;
 
(ii)  use its commercially reasonable efforts to cause the Shelf Registration
Statement to be declared effective by the SEC as promptly as is practicable
after the date it is first filed with the SEC, but in no event later than 180
days after the Effective Date (the “Effectiveness Target Date”); and
 
(iii)  use its commercially reasonable efforts to keep the Shelf Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Section 4
 

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hereof to the extent necessary to ensure that: (A) it is available for resales
by the Holders of Registrable Securities entitled to the benefit of this
Agreement and (B) conforms with the requirements of this Agreement and the
Securities Act, in each case, for a period (the “Effectiveness Period”) that
will terminate upon the earlier of (x) the first anniversary of the Effective
Date and (y) when all Registrable Securities cease to be Registrable Securities
in accordance with this Agreement.
 
(b)  To have its Registrable Securities included in the Shelf Registration
Statement pursuant to this Agreement, each Holder shall complete the Selling
Shareholder Notice and Questionnaire, the form of which is contained in
Exhibit B to this Agreement (the “Questionnaire”). The Company shall mail the
Questionnaire to each Holder not less than 10 Business Days (but not more than
60 Business Days) prior to the time the Company intends in good faith to have
the Shelf Registration Statement declared effective by the SEC. Holders are
required to complete and deliver the Questionnaire to the Company prior to or on
the 20th Business Day after the date of a written request therefor by the
Company (which request shall include a copy of the Questionnaire) (such
deadline, the “Questionnaire Deadline”). Holders that do not complete and
deliver the Questionnaire will not be named as selling shareholders in the
Prospectus. Prior to such time, each Holder may complete the Questionnaire and
deliver it to the Company prior to such request and, as a result, shall be
entitled to have its Registrable Securities included in the initial Shelf
Registration Statement filed with the SEC. In addition, upon receipt of written
request for additional information from the Company, each Holder who intends to
be named as a selling shareholder in the Shelf Registration Statement shall
furnish to the Company in writing, within 20 Business Days after such Holder’s
receipt of such request, such additional information regarding such Holder and
the proposed distribution by such Holder of its Registrable Securities, in
connection with the Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein and in any application to be filed with or under
state securities law, as the Company may reasonably request. Each Holder as to
which the Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make information previously furnished to the Company by such Holder not
materially misleading.
 
(c) The Company shall be entitled to include in the Shelf Registration Statement
other shares of Pubco Common Stock (i) to be sold for its own account or (ii)
which the Company is obligated to register for resale by others, and such shares
shall be Registrable Securities for all purposes hereof.
 
3.  Additional Shares.
 
(a)  The Company and the Subscribers agree that the Subscribers will suffer
damages if the Company fails to fulfill its obligations under Section 2 hereof
and that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if:
 
(i)  except as provided in Section 4(b)(i) hereof, the Shelf Registration
Statement is not filed with the SEC prior to or on the Shelf Filing Deadline;
 
(ii)  except as provided in Section 4(b)(i) hereof, the Shelf Registration
Statement has not been declared effective by the SEC prior to or on the
Effectiveness Target Date;
 
(iii)  except as provided in Section 4(b)(i) hereof, the Shelf Registration
Statement is filed and declared effective but, during the Effectiveness Period,
shall thereafter cease to be effective or fail to be usable for its intended
purpose without such disability being cured within ten Business Days by an
effective post-effective amendment to the Shelf Registration Statement, a
supplement to the Prospectus or a report filed with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failure;
or
 
 

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(iv)  (A) prior to or on the 45th or 60th day, as may be permitted under Section
4(b), of any Suspension Period (as such term is defined herein), such suspension
has not been terminated or (B) Suspension Periods exceed an aggregate of 120
days in any 360-day period, (each such event referred to in foregoing
clauses (i) through (iv), a “Registration Default”), the Company hereby agrees
to issue to each Subscriber additional shares of Pubco Common Stock (“Penalty
Shares”) in an amount equal to 1.0% of the number of Registrable Securities held
by such Subscriber on the Effective Date (the “Subject Shares”) for each full 30
day period (each, a “Penalty Period”) that elapses during the period beginning
on and including the day following the Registration Default and ending on but
excluding the day on which the Registration Default has been cured; provided,
however, that in no event shall the number of Penalty Shares exceed an aggregate
of 6.0% of the number of Subject Shares, and, provided further, a Subscriber
will not be entitled to Penalty Shares unless it has provided all information
requested by the Questionnaire prior to the deadline specified therein.
 
(b)  Any Penalty Shares issuable in respect of Subject Shares pursuant to
clause (a) of this Section 3 will be issued not later than 20 days after the end
of the Penalty Period in respect of which such Penalty Shares are issuable to
each Subscriber in whose name such Subject Shares are registered on the books of
the Company or its transfer agent.
 
(c)  Except as set forth in Section 9 hereto, the Penalty Shares to be issued
pursuant to this Section 3 shall be the exclusive remedy available to
Subscribers for such Registration Default.
 
4.  Registration Procedures.
 
(a)  In connection with the Shelf Registration Statement, the Company shall
comply with all the provisions of Section 4(b) hereof and shall use its
reasonable best efforts to effect such registration to permit the sale of the
Registrable Securities being sold in accordance with the intended method or
methods of distribution thereof, and pursuant thereto, shall expeditiously
prepare and file with the SEC a Shelf Registration Statement relating to the
registration on any appropriate form under the Securities Act.
 
(b)  In connection with the Shelf Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Registrable
Securities, the Company shall:
 
(i)  Subject to any notice by the Company in accordance with this Section 4(b)
of the existence of any fact or event of the kind described in Section
4(b)(iii)(D), use its best efforts to keep the Shelf Registration Statement
continuously effective during the Effectiveness Period; upon the occurrence of
any event that would cause the Shelf Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or (B) not
be effective and usable for the resale of Registrable Securities during the
Effectiveness Period, the Company shall file promptly an appropriate amendment
to the Shelf Registration Statement, a supplement to the Prospectus or a report
filed with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, in the case of clause (A), correcting any such misstatement or omission,
and, in the case of either clause (A) or (B), use its best efforts to cause any
such amendment to be declared effective and the Shelf Registration Statement and
the related Prospectus to become usable for their intended purposes as soon as
practicable thereafter. Notwithstanding anything to the contrary contained
herein, the Company may delay the filing or declaration of effectiveness, and/or
suspend the effectiveness, of the Shelf Registration Statement by written notice
to the Holders for a period (each such period, a “Suspension Period”) not to
exceed an aggregate of 45 days in any 90-day period, and not to exceed an
aggregate of 120 days in any 360-day period, if:
 
 

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   (x)  an event occurs and is continuing as a result of which the Shelf
Registration Statement would, in the Company’s reasonable judgment, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and
 
(y) the Company reasonably determines that the disclosure of such event at such
time would be seriously detrimental to the Company or its business;
 
provided, that in the event that the disclosure relates to a previously
undisclosed proposed or pending material business transaction, the disclosure of
which would impede the Company’s ability to consummate such transaction, the
Company may extend a Suspension Period from 45 days to 60 days during any 90-day
period.
 
(ii)  Notify in writing each selling Holder of the effectiveness of the Shelf
Registration Statement and prepare and file with the SEC such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement continuously effective during
the Effectiveness Period; cause the Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely manner;
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Shelf Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in the Shelf Registration
Statement or supplement to the Prospectus.
 
(iii)  Advise the underwriter(s), if any, and selling Holders promptly (but in
any event within two Business Days) and, if requested by such Persons, to
confirm such advice in writing:
 
(A)  when the Prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to the Shelf Registration Statement
or any post-effective amendment thereto, when the same has become effective,
 
(B)  of any request by the SEC for amendments to the Shelf Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto,
 
(C)  of the issuance by the SEC of any stop order suspending the effectiveness
of the Shelf Registration Statement under the Securities Act or of the
suspension by any state securities commission of the qualification of the
Registrable Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes,
 
(D)  of a pending proceeding against the Company under Section 8A of the
Securities Act in connection with the offering of the Registrable Securities, or
 
(E)  of the existence of any fact or the happening of any event, during the
Effectiveness Period, that makes any statement of a material fact made in the
Shelf Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein, untrue, or that
requires the making of any additions to or changes in the Shelf Registration
Statement or the Prospectus in order to make the statements therein not
misleading. Each Holder of Registrable Securities, by accepting the same, agrees
to hold any communication from the Company pursuant to this Section 4(b)(iii) in
confidence.
 
 

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If at any time the SEC shall issue any stop order suspending the effectiveness
of the Shelf Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Registrable Securities under state
securities or “blue sky” laws, the Company shall use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time and will
provide to the each Holder who is named in the Shelf Registration Statement
prompt notice of the withdrawal of any such order.
 
(iv)  Furnish to each selling Holder and to each of the underwriter(s), if any,
and their respective counsel, if any, before filing with the SEC, a copy of the
Shelf Registration Statement and copies of any Prospectus included therein or
any amendments or supplements to the Shelf Registration Statement or Prospectus
(other than documents incorporated by reference after the initial filing of the
Shelf Registration Statement), which documents will be subject to the review of
such selling Holders, underwriter(s) and counsel for a period of at least five
Business Days, and the Company will not file the Shelf Registration Statement or
Prospectus or any amendment or supplement to the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference) to which a selling
Holder of Registrable Securities covered by the Shelf Registration Statement or
the selling Holders, underwriter(s), if any, shall reasonably object within five
Business Days after the receipt thereof. The Company shall also furnish to each
of the underwriter(s), if any, and their respective counsel, if any, before
filing with the SEC, if reasonably practicable, or otherwise promptly after
filing with the SEC, copies of any amendments to the Shelf Registration
Statement or supplements to the Prospectus (other than documents incorporated by
reference after the initial filing of the Shelf Registration Statement), and
make the Company’s representatives available for discussion of such amendments
or supplements and make such changes in such amendments or supplements prior to
the filing thereof, if reasonably practicable, or prepare and file further
amendments or supplements, as the selling Holders, underwriter(s), if any, or
their respective counsel, if any, may reasonably request. An objection by a
selling Holder or an underwriter or by counsel to a selling Holder or an
underwriter shall be deemed to be a reasonable objection to such filing if the
Shelf Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, would contain a material misstatement or
omission.
 
(v)  Make available at reasonable times for inspection by one or more
representatives of the selling Holders designated in writing by a Majority of
Holders whose Registrable Securities are included in the Shelf Registration
Statement, any underwriter participating in any distribution pursuant to the
Shelf Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the Company’s officers, directors, managers,
employees and independent accountants to supply all information reasonably
requested by any such representative or representatives of the selling Holders,
underwriter, attorney or accountant in connection with the Shelf Registration
Statement after the filing thereof and before its effectiveness, provided,
however, that any information designated by the Company as confidential at the
time of delivery of such information shall be kept confidential by the recipient
thereof; and provided, further, that in no event shall the Company be required
to furnish any material nonpublic information pursuant to this subsection (v).
 
(vi)  If requested by any selling Holders or the underwriter(s), if any,
promptly incorporate in the Shelf Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation: (A) information relating to the
“Plan of Distribution” of the Registrable Securities, (B) information with
respect to the number of Registrable Securities being sold, (C) the purchase
price being paid therefor and (D) any other terms of the offering of the
Registrable Securities to be sold in such offering; provided, however, that with
respect
 
 

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to any information requested for inclusion by a selling Holder, this clause (vi)
shall apply only to such information that relates to the Registrable Securities
to be sold by such selling Holder; and make all required filings of such
prospectus supplement or post-effective amendment as soon as reasonably
practicable after the Company is notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment.
 
(vii)  Furnish to each selling Holder and each of the underwriter(s), if any,
without charge, at least one copy of the Shelf Registration Statement, as first
filed with the SEC, and of each amendment thereto (and any documents
incorporated by reference therein or exhibits thereto (or exhibits incorporated
in such exhibits by reference) as such Person may request).
 
(viii)  Deliver to each selling Holder and each of the underwriter(s), if any,
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons reasonably
may request; subject to any notice by the Company in accordance with this
Section 4(b) of the existence of any fact or event of the kind described in
Section 4(b)(iii)(D), the Company hereby consents to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders and each
of the underwriter(s), if any, in connection with the offering and the sale of
the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto.
 
(ix)  If an underwriting agreement is entered into in connection with the
registration, the Company shall:
 
(A)  upon request, furnish to each selling Holder and each underwriter, in such
substance and scope as they may reasonably request and as are customarily made
by issuers to underwriters in primary underwritten offerings for selling
security holders, upon the date of closing of any sale of Registrable Securities
in an Underwritten Offering:
 
(1)  opinions, each dated the date of such closing, of counsel to the Company
covering such of the matters as are customarily covered in legal opinions to
underwriters in connection with underwritten offerings of securities; and
 
(2)  customary comfort letters, dated the date of such closing, from the
Company’s independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in connection
with primary underwritten offerings of securities;
 
(B)  set forth in full in the underwriting agreement, if any, indemnification
provisions and procedures which provide rights no less protective than those set
forth in Section 6 hereof with respect to all parties to be indemnified; and
 
(C)  deliver such other documents and certificates as may be reasonably
requested by such parties to evidence compliance with clause (A) above and with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the selling Holders pursuant to this clause (ix).
 
(x)  Before any public offering of Registrable Securities, use its best efforts
to register or qualify the Registrable Securities under the securities or Blue
Sky laws of such jurisdictions in the United States as the selling Holders or
underwriter(s), if any, may reasonably request and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Shelf Registration Statement;
provided, however, that the Company
 
 

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shall not be required (A) to register or qualify as a foreign corporation or a
dealer of securities where it is not now so qualified or to take any action that
would subject it to the service of process in any jurisdiction where it is not
now so subject or (B) to subject itself to taxation in any such jurisdiction if
it is not now so subject.
 
(xi)  Cooperate with the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends
(unless required by applicable securities laws) and enable such Registrable
Securities to be in such denominations and registered in such names as the
Holders or the underwriter(s), if any, may request at least two Business Days
before any sale of Registrable Securities.
 
(xii)  Use its best efforts to cause the Registrable Securities covered by the
Shelf Registration Statement to be registered with or approved by such other
U.S. governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate the
disposition of such Registrable Securities.
 
(xiii)  Subject to Section 4(b)(i) hereof, if any fact or event contemplated by
Section 4(b)(iii)(E) hereof shall exist or have occurred, use its reasonable
best efforts to prepare a supplement or post-effective amendment to the Shelf
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Registrable Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
 
(xiv)  Provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of the Shelf Registration
Statement.
 
(xv)  Enter into such customary agreements (including underwriting agreements in
customary form) and take all such other actions as a Majority of Holders or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of Registrable Securities (including effecting a stock split or
combination of shares).
 
(xvi)  Cooperate and assist in any filings required to be made with the NASD and
in the performance of any due diligence investigation that is required to be
retained in accordance with the rules and regulations of the NASD.
 
(xvii)  Otherwise use its commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC and all reporting requirements of
the Exchange Act.
 
(xviii)  Cause all Registrable Securities covered by the Shelf Registration
Statement to be listed or quoted, as the case may be, on each securities
exchange or automated quotation system on which similar securities issued by the
Company are then listed or quoted.
 
(xix)  Provide promptly to each Holder upon written request each document filed
with the SEC pursuant to the requirements of Section 13 and Section 15 of the
Exchange Act during the Effectiveness Period.
 
(xx)  If reasonably requested by the underwriter(s), make appropriate officers
of the Company reasonably available to the underwriter(s) for meetings with
prospective purchasers of the Registrable Securities and prepare and present to
potential investors customary “road show” or
 
 

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marketing material in a manner consistent with other new issuances of other
securities similar to the Registrable Securities.
 
(xxi)  File each Shelf Registration Statement and Prospectus required to be
filed in accordance with this Agreement and any amendments and/or supplements
thereto electronically on EDGAR.
 
(c)  Each Holder agrees that, upon receipt of any notice (a “Suspension Notice”)
from the Company of the existence of any fact of the kind described in Section
4(b)(x) or Section 4(b)(iii)(E) hereof, such Holder will, and will use its
reasonable efforts to cause any underwriter(s) in an Underwritten Offering to,
forthwith discontinue disposition of Registrable Securities pursuant to the
Shelf Registration Statement until:
 
(i)  such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xiii) hereof; or
 
(ii)  such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.
 
If so directed by the Company, each Holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such
Holder’s possession, of the Prospectus covering such Registrable Securities that
was current at the time of receipt of such notice of suspension.
 
(d)  If a Holder is identified in the Shelf Registration Statement as an
“underwriter” (any such Holder, an “Identified Holder”), then at the request of
such Identified Holder the Company shall furnish to such Identified Holder, on
the date of the effectiveness of the Shelf Registration Statement and thereafter
from time to time on such dates as such Identified Holder may reasonably
request, (i) a letter, dated such date, from the Company’s independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to such Identified Holder, and (ii) an opinion, dated as of such date,
of counsel representing the Company for purposes of the Shelf Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to such Identified Holder.
 
(e)  Notwithstanding anything herein to the contrary, no Holder shall be
designated as an “underwriter” by the Company in the Shelf Registration
Statement without the consent of such Holder unless otherwise required by law.
In connection with the due diligence efforts of any Identified Holder, the
Company shall make available for inspection during business hours and upon
reasonable advance request by (i) any Identified Holder, (ii) counsel for the
holders of majority of the Registrable Securities held by all Identified Holders
and (iii) one firm of accountants or other agents retained by holders of a
majority of Registrable Securities held by the Identified Holders (collectively,
the “Inspectors”), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the “Records”),
as shall be reasonably deemed necessary by each Inspector, and cause the
Company’s officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree in writing to hold in strict confidence and shall not make any disclosure
(except to a Identified Holder) or use of any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the Shelf
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from
 
 

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a court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each Holder agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Holder) shall be deemed to limit the Holders’ ability to
sell Registrable Securities in a manner that is otherwise consistent with
applicable laws and regulations.
 
5.  Registration Expenses.
 
(a)  The Company shall pay all Registration Expenses incident to the Company’s
performance of or compliance with this Agreement. The Company shall bear its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal, accounting or other duties), the
expenses of any annual audit or quarterly review, the expense of any liability
insurance and the fees and expenses of any Person, including special experts,
retained by the Company.
 
(b)  In connection with the Shelf Registration Statement required by this
Agreement, including any amendment or supplement thereto, and any other
documents delivered to any Holders, the Company shall reimburse the Holders of
Registrable Securities being registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel (including local counsel), which shall be chosen by a Majority
of Holders for whose benefit the Shelf Registration Statement is being prepared.
The Company shall not be required to pay any underwriting discount, commission
or similar fee related to the sale of any securities.
 
(c)  Each Holder shall bear its Selling Expenses.
 
6.  Indemnification and Contribution.
 
(a)  The Company shall indemnify and hold harmless, to the fullest extent
permitted by law, each Holder, such Holder’s officers, directors, members,
agents, partners and employees and each person, if any, who controls such Holder
within the meaning of the Securities Act (each, an “Indemnified Holder”), from
and against any loss, claim, damage, liability or expense, joint or several, or
any action in respect thereof (including, but not limited to, any loss, claim,
damage, liability, expense, or action relating to resales of the Registrable
Securities), together with reasonable costs and expenses (including reasonable
attorney’s fees) to which such Indemnified Holder may become subject, insofar as
any such loss, claim, damage, liability, expense or action arises out of, or is
based upon:
 
(i)  any untrue statement or alleged untrue statement of a material fact
contained in (A) the Shelf Registration Statement or Prospectus or any amendment
or supplement thereto or (B) any blue sky application or other document or any
amendment or supplement thereto prepared or executed by the Company (or based
upon written information furnished by or on behalf of the Company expressly for
use in such blue sky application or other document or amendment on supplement)
filed in any jurisdiction specifically for the purpose of qualifying any or all
of the Registrable Securities under the securities law of any state or other
jurisdiction (such application or document being hereinafter called a “Blue Sky
Application”); or
 
(ii)  the omission or alleged omission to state therein any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances
 

--------------------------------------------------------------------------------

 
under which they were made, not misleading, and shall promptly reimburse each
Indemnified Holder promptly upon demand for any legal or other expenses
reasonably incurred by such Indemnified Holder in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability, expense or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability, expense or action arises out of, or is
based upon, (A) any untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf Registration Statement or Prospectus or
amendment or supplement thereto or Blue Sky Application or other document
referred to in Section 6(a)(i) hereof in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Holder (or
its related Indemnified Holder) specifically for use therein or (B) the failure
by the Holder or Indemnified Holder to deliver to any purchaser of its
Registrable Securities the Prospectus and any supplement or amendment thereto
after the Company has furnished such Holder or Indemnified Holder with a
sufficient number of copies of the same. The foregoing indemnity agreement is in
addition to any liability that the Company may otherwise have to any Indemnified
Holder.
 
(b)  Each Holder, severally and not jointly, shall indemnify and hold harmless,
to the fullest extent permitted by law, the Company, each other Holder, their
respective officers, directors, agents and employees and each person, if any,
who controls the Company or such other Holder within the meaning of the
Securities Act, from and against any loss, claim, damage, liability or expense,
joint or several, or any action in respect thereof, to which the Company, such
other Holder or any such officer, director, agent, employee or controlling
person may become subject, insofar as any such loss, claim, damage, liability,
expense or action arises out of, or is based upon:
 
(i)  any untrue statement or alleged untrue statement of any material fact
contained in the Shelf Registration Statement or Prospectus or any amendment or
supplement thereto or any Blue Sky Application or other document referred to in
Section 6(a)(i) hereof; or
 
(ii)  the omission or the alleged omission to state therein any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
 
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information prepared and furnished to the Company by or
on behalf of such Holder (or its related Indemnified Holder) specifically for
use therein, and shall reimburse the Company and any such officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Company or any such officer, employee or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability, expense or action as such
expenses are incurred, provided that the obligation to indemnify will be
individual, not joint and several, for each Holder and shall be limited to the
net amount of proceeds receive by such Holder from the sale of Registrable
Securities pursuant to Shelf Registration Statement.
 
(c)  Promptly after receipt by an indemnified party under this Section 6 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve the indemnifying party from any
liability which it may have under this Section 6 except to the extent the
indemnifying party has been prejudiced by such failure. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes,
 
 

--------------------------------------------------------------------------------

 
jointly with any other similarly notified indemnifying party, to assume the
defense thereof with counsel satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that a
Majority of Holders shall have the right to employ at the expense of such
Holders a single counsel to represent jointly the Holders and their respective
directors, officers, members, agents, partners, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by Holders against the Company under this
Section 6; and provided, further, that if a Majority of Holders shall have
reasonably concluded that there may be one or more legal defenses available to
them and their respective officers, employees and controlling persons that are
different from or additional to those available to the Company and its officers,
directors, employees and controlling persons, then the fees and expenses of such
single separate counsel shall be paid for by the indemnifying party. No
indemnifying party shall:
 
(i)  without the prior written consent of the indemnified parties (which consent
shall not be unreasonably withheld or delayed) settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding, or
 
(ii)  be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld or delayed),
but if settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
 
(d)  If the indemnification provided for in this Section 6 shall for any reason
be unavailable or insufficient to hold harmless an indemnified party under
Section 6(a) or 6(b) in respect of any loss, claim, damage, liability or expense
(or action in respect thereof) referred to therein, each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability (or action in respect thereof):
 
(i)  in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Holders on the other, or
 
(ii)  if the allocation provided by clause (6)(d)(i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative fault referred to in clause 6(d)(i) but also the relative benefits
received by the Company from the offering and sale of the Registrable Securities
on the one hand and a Holder with respect to the sale by such Holder of the
Registrable Securities on the other in connection with the statements or
omissions or alleged statements or alleged omissions that resulted in such loss,
claim, damage or liability (or action in respect thereof), as well as any other
relevant equitable considerations.
 
The relative benefits received by the Company on the one hand and a Holder on
the other with respect to such offering and such sale shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Registrable Securities (before deducting expenses) received by the Company, on
the one hand, bear to the total proceeds received by such Holder (before
deducting expenses) with respect to
 

--------------------------------------------------------------------------------

its sale of Registrable Securities on the other. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Holders on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder agree that it would not
be just and equitable if the amount of contribution pursuant to this
Section 6(d) were determined by pro rata allocation (even if the selling Holders
were treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). The amount paid or payable by an
indemnified party as a result of the loss, claim, damage, liability or expense,
or action in respect thereof, referred to above in this Section 6 shall be
deemed to include, for purposes of this Section 6 and subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending or preparing to
defend any such action or claim. Notwithstanding the provisions of this
Section 6, no Holder shall be required to contribute any amount in excess of the
amount by which net proceeds received by such Holder from the sale of
Registrable Securities covered by the Shelf Registration Statement exceeds the
amount of any damages which such Holder has otherwise been required to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Holders’
obligations to contribute as provided in this Section 6(d) are several and not
joint.
 
7.  Participation in Underwritten Offerings.
 
No Holder may participate in any Underwritten Offering hereunder unless such
Holder:
 
(a)  agrees to sell such Holder’s Registrable Securities on the basis provided
in any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements; and
 
(b)  completes and executes all reasonable and customary questionnaires, powers
of attorney, custody agreements, indemnities, underwriting agreements, lock-up
letters and other documents required under the terms of such underwriting
arrangements, provided that no Holder shall be required to make any
representations or warranties to the Company or the underwriters (other than
representations and warranties regarding such Holder and such Holder’s intended
method of distribution) or to undertake any indemnification obligations to the
Company or the underwriters with respect thereto, except as otherwise provided
in Section 6 hereof.
 
8.  Selection of Underwriters.
 
The Holders of Registrable Securities covered by the Shelf Registration
Statement who desire to do so may sell such Registrable Securities in an
Underwritten Offering. In any such Underwritten Offering, the investment banking
firm or firms and manager or managers that will administer the offering will be
selected by a Majority of Holders whose Registrable Securities are included in
such offering; provided, that such investment banking firms must be reasonably
satisfactory to the Company.
 
9.  Miscellaneous.
 
(a)  Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 2 hereof may result in
material irreparable injury to the Purchasers or the Holders for which there is
no adequate remedy at law, that it will not be possible
 
 

--------------------------------------------------------------------------------

 
to measure damages for such injuries precisely and that, in the event of any
such failure, the Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company’s obligations under Section 2
hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
 
(b)  No Inconsistent Agreements. The Company will not, on or after the date of
this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. In addition, the Company shall
not grant to any of its security holders the right to include any of its
securities in the Shelf Registration Statement provided for in this Agreement
other than the Registrable Securities. The Company has not previously entered
into any agreement (which has not expired or been terminated) granting any
registration rights with respect to its securities to any Person which rights
conflict with the provisions hereof. Each Holder which may be party to any other
agreement with the Company providing for the registration of securities agrees
that such agreement is hereby terminated in its entirety.
 
(c)  Amendments and Waivers. This Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
a Majority of Holders.
 
(d)  Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
 
(i)  if to a Holder, at the address set forth on the records Company of or the
transfer agent of the Registrable Securities, as the case may be; and
 
             (ii) if to the Company:
H2Diesel, Inc.
20283 State Road 7, Suite 40
Boca Raton, FL 33498
Tel: (561) 807-6325
Fax: (561) 807-6326
Attn: Lee S. Rosen
with a copy to:
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, FL 33131
Tel: (305) 579-0500
Fax: (305) 5791-0717
Attn: Ira N. Rosner, Esq.

All such notices and communications shall be deemed to have been duly given at:
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if transmitted by facsimile; and on the next
Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
 
(e)  Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including
without limitation subsequent Holders of Registrable Securities; provided,
however, that (i) this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign
 
 

--------------------------------------------------------------------------------

 
acquired Registrable Securities from such Holder and agreed in writing to be
bound by the terms of this Agreement and (ii) nothing contained herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of any Subscription Agreement or other agreement with
the Company which restricts the sale or disposition of Registrable Securities.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement.
 
(f)  Counterparts. This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
 
(gi)  Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
 
(h)  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its
principles of conflict of laws that would cause the laws of another jurisdiction
to apply.
 
(i)  Severability. If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
 
(j)  Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
 

 
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
 
H2Diesel, Inc.
 
By: ______________________________
Name: ________________________
Title: _________________________

 
[Purchaser Signature Page Follows]

 

--------------------------------------------------------------------------------

Holder Signature Page
 
Registration Rights Agreement - H2Diesel Inc.
 
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
 

______________________   
[Name of Holder]

By:______________________________   
Name:____________________________   
Title:_____________________________  

--------------------------------------------------------------------------------

EXHIBIT A
 
HOLDERS
 

 
[Names of each Holder shall be inserted upon the Closing]
 

 

 

--------------------------------------------------------------------------------

 

EXHIBIT B
 
NOTICE AND QUESTIONNAIRE

(TIME SENSITIVE MATERIAL)
 
THIS NOTICE AND QUESTIONNAIRE MUST BE RETURNED TO H2DIESEL (AT THE ADDRESS
LISTED BELOW) ON OR BEFORE THE 20TH BUSINESS DAY FOLLOWING DELIVERY OF THE
NOTICE AND QUESTIONNAIRE BY H2DIESEL TO THE REGISTERED HOLDER.
 
Capitalized terms used but not defined herein shall have the respective meanings
set forth in the Registration Rights Agreement, dated as of _______ ___, 2006
(the “Registration Rights Agreement”), between the Company and Holders named
therein.
 
Form of Selling Securityholder Notice and Questionnaire
 
The undersigned Holder of the Registrable Securities of the Company understands
that the Company has filed, or intends to file, with the SEC a Shelf
Registration Statement for the registration and resale under Rule 415 of the
Securities Act, Registrable Securities in accordance with the terms of the
Registration Rights Agreement. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below.
 
Each beneficial owner of Registrable Securities that has agreed in writing to be
bound by the Registration Rights Agreement is entitled to the benefits of the
Registration Rights Agreement. In order to sell or otherwise dispose of any
Registrable Securities pursuant to the Shelf Registration Statement, a
beneficial owner of Registrable Securities generally will be required to be
named as a selling securityholder in the related Prospectus, deliver a
Prospectus either to purchasers of Registrable Securities or, if relying on Rule
172 of the Securities Act, confirm that a current prospectus is deemed delivered
in connection with the sale of Registrable Securities, and be bound by those
provisions of the Registration Rights Agreement applicable to such beneficial
owner (including certain indemnification provisions, as described below).
Beneficial owners are encouraged to complete and deliver this Notice and
Questionnaire prior to the effectiveness of the Shelf Registration Statement so
that such beneficial owners may be named as selling securityholders in the
related prospectus.
 
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and the related Prospectus. Accordingly,
holders and beneficial owners of Registrable Securities are advised to consult
their own securities law counsel regarding the consequences of being named or
not being named as a selling securityholder in the Shelf Registration Statement
and the related Prospectus.
 
NOTICE
 
The undersigned Holder (the “Selling Securityholder”) of Registrable Securities
hereby gives notice to the Company of its intention to sell or otherwise dispose
of Registrable Securities beneficially owned by it and listed below in Item 3
(unless otherwise specified under Item 3) pursuant to the Shelf Registration
Statement. The undersigned, by signing and returning this Notice and
Questionnaire, understands that it will be bound by the terms and conditions of
this Notice and Questionnaire and the Registration Rights Agreement.
 

B-1

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Pursuant to Section 6(b) of the Registration Rights Agreement, the undersigned
has agreed to indemnify and hold harmless the Company and certain other persons,
from and against certain losses arising in connection with statements concerning
the undersigned made in the Shelf Registration Statement or the related
Prospectus in reliance upon the information provided in this Notice and
Questionnaire.
 
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate and complete:
 
QUESTIONNAIRE
 
1. Information Regarding Selling Securityholder
 

 
(a)
Full legal name of Selling Securityholder:

 
             
________________________________________________________________________________________
 

 
(b)
Full legal name of registered holder (if not the same as (a) above) through
which Registrable Securities listed in Item (3) below are held:

 
             
________________________________________________________________________________________
 

 
(c)
Full legal name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):

 
             
________________________________________________________________________________________
 
 

 
(d)
Is the Selling Securityholder an SEC-reporting company? If the Selling
Security-holder is not an SEC-reporting company, list below the individual or
individuals who exercise the voting and/or dispositive powers with respect to
the Securities:

 
             
________________________________________________________________________________________
 

 
(e)
Are you a broker-dealer registered pursuant to Section 15 of the Exchange Act?

 
o  Yes.    
 
o  No.
 
Note: If yes, the SEC’s staff has indicated that you should be identified as an
underwriter in the Shelf Registration Statement.
 

 
(f)
If your response to Item 1(e) above is “no,” are you an “affiliate” of a
broker-dealer registered pursuant to Section 15 of the Exchange Act?

 
o  Yes.
 
o  No.
 
For purposes of this Item 1(f), an “affiliate” of a registered broker-dealer
shall include any company that directly, or indirectly through one or more
intermediaries, controls, or
 

B-2

--------------------------------------------------------------------------------

is controlled by, or is under common control with, such broker-dealer, and does
not include any individuals employed by such broker-dealer or its affiliates.
 

 
(g)
If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities to be resold, and at the time of the purchase of the
Registrable Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the Registrable
Securities?

 
o  Yes.
 
o         No.
 
Note: If no, the SEC’s staff has indicated that you should be identified as an
underwriter in the Shelf Registration Statement.
 

 
(h)
Full legal name of person through which you hold the Registrable Securities -
(i.e. name of your broker or the DTC participant, if applicable, through which
your Registrable Securities are held):

 
Name of broker: 
________________________________________________________________________________  
 
DTC
No:______________________________________________________________________________________  
 
Contact person:
________________________________________________________________________________ 
 
Telephone No. (including area
code): ________________________________________________________________
 
E-mail
address:_________________________________________________________________________________ 
 
2. Address for Notices to Selling Securityholder
 
Telephone:____________________________________________________________________________________ 
 
Fax:_________________________________________________________________________________________  
 
Contact
Person:________________________________________________________________________________
 
 
Email
address:_________________________________________________________________________________ 
 
3. Beneficial Ownership of Registrable Securities
 
Number of shares of Registrable Securities of the Company beneficially owned:
 
        _____________________________________________________________________________________
 
    CUSIP No(s). of such Registrable Securities beneficially owned:
 
        _____________________________________________________________________________________
 

B-3

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4. Nature of Beneficial Ownership
 

 
(a)
Check if the Selling Securityholder set forth in your response to Item 1(a) is
any of the below:  o

 

 
(A)
A reporting company under the Exchange Act. o

 

 
(B)
A majority owned subsidiary of a reporting company under the Exchange Act. o

 

 
(C)
A registered investment fund under the Investment Company Act of 1940. o

 

 
(b)
If the Selling Securityholder set forth in your response to Item 1(a) above is a
limited partnership, state the names of the general partners of such limited
partnership:

 
             
__________________________________________________________________________________
 
             
__________________________________________________________________________________
 
 
 

 
(A)
With respect to each general partner listed in Item 4(b) above who is not a
natural person, and is not publicly-held, name each shareholder (or holder of
partnership interests, if applicable) of such general partner. If any of these
named shareholders are not natural persons or publicly-held entities, please
provide the same information. This process should be repeated until you reach
natural persons or a publicly-held entity.

 
 
                    ___________________________________________________________________________
 
                    ___________________________________________________________________________
 
 

 
(c)
Name your controlling shareholder(s) (the “Controlling Entity”). If the
Controlling Entity is not a natural person and is not a publicly-held entity,
name each shareholder of such Controlling Entity. If any of these named
shareholders are not natural persons or publicly-held entities, please provide
the same information. This process should be repeated until you reach natural
persons or a publicly-held entity.

 
(A) (i) Full legal name of Controlling Entity(ies) or natural person(s) who have
sole or shared voting or dispositive power over the Registrable Securities:
 
            __________________________________________________________________________________
 
            __________________________________________________________________________________
                     
                      (ii) Business address (including street address) (or
residence if no business address), telephone number and facsimile number of such
person(s):
 
Address:______________________________________________________________________________  
 
Telephone
No.:_________________________________________________________________________  
 
Fax
No.:_______________________________________________________________________________
 
 

B-4

--------------------------------------------------------------------------------

 
(iii) Name of shareholders:  
 
                    ___________________________________________________________________________
 
                    ___________________________________________________________________________
 
(B) (i) Full legal name of Controlling Entity(ies):
 
                    ___________________________________________________________________________
 
(ii) Business address (including street address) (or residence if no business
address), telephone number and facsimile number of such person(s):
 
Address: _______________________________________________________________________________
 
Telephone No.:
__________________________________________________________________________ 
 
Fax
No.:________________________________________________________________________________
 
 
(iii) Name of
shareholders:__________________________________________________________________
       
 
5.
Beneficial Ownership of the Company’s Securities Owned by the Selling
Securityholder

 
Except as set forth below in this Item (5), the undersigned is not the
beneficial or registered owner of any securities of the Company other than the
Registrable Securities listed above in Item (3) (“Other Securities”).
 
Type and amount of Other Securities beneficially owned by the Selling
Securityholder:
 
        ______________________________________________________________________________________
 
CUSIP No(s). of such Other Securities beneficially owned:
 
        ______________________________________________________________________________________
 
6.
Relationship with the Company

 
Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (5% or more) has held any
position or office or has had any other material relationship with the Company
(or its predecessors or affiliates) during the past three years.
 
State any exceptions here:
 
        ______________________________________________________________________________________
 
 
7.
Plan of Distribution

 
Except as set forth below, the undersigned (including its donees or pledgees)
intends to distribute the Registrable Securities listed above in Item (3)
pursuant to the Shelf Registration Statement only as follows (if at all). Such
Registrable Securities may be sold from time to time directly by the undersigned
or, alternatively, through underwriters, broker-dealers or agents. If the
Registrable Securities are sold through underwriters or broker-dealers, the
Selling Securityholder will be responsible for underwriting discounts or
commissions or agent’s commissions. Such
 

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Registrable Securities may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions):
 
(a) on any national securities exchange or quotation service on which the
Registrable Securities may be listed or quoted at the time of sale;
 
(b) in the over-the-counter market;
 
(c) in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
 
(d) through the writing of options.
 
In connection with sales of the Registrable Securities or otherwise, the
undersigned may enter into hedging transactions with broker-dealers, which may
in turn engage in short sales of the Registrable Securities and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable Securities to broker-dealers that in turn may sell such securities.
 
State any exceptions
here: __________________________________________________________________
______________________________________________________________________________________
 
Note: In no event will such method(s) of distribution take the form of an
underwritten offering of the Registrable Securities without the prior agreement
of the Company.
 
8.
Acknowledgments

 
The undersigned acknowledges that it understands its obligation to comply with
the provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M thereunder (or any successor rules or
regulations), in connection with any offering of Registrable Securities pursuant
to the Shelf Registration Statement. The undersigned agrees that neither it nor
any person acting on its behalf will engage in any transaction in violation of
such provisions.
 
The Selling Securityholder hereby acknowledges its obligations under the
Registration Rights Agreement to indemnify and hold harmless certain persons as
set forth therein. Pursuant to the Registration Rights Agreement, the Company
has agreed under certain circumstances to indemnify the Selling Securityholders
against certain liabilities.
 
In accordance with the undersigned’s obligation under the Registration Rights
Agreement to provide such information as may be required by law for inclusion in
the Shelf Registration Statement, the undersigned agrees to promptly notify the
Company of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at any time while the Shelf Registration
Statement remains effective. All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing at the address set forth
below.
 
By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to items (1) through (7) above and the inclusion
of such information in the Shelf
 

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Registration Statement and the related Prospectus. The undersigned understands
that such information will be relied upon by the Company in connection with the
preparation or amendment of the Shelf Registration Statement and the related
Prospectus.
 
Once this Notice and Questionnaire is executed by the undersigned and received
by the Company, the terms of this Notice and Questionnaire, and the
representations and warranties contained herein, shall be binding on, shall
inure to the benefit of and shall be enforceable by the respective successors,
heirs, personal representatives and assigns of the Company and the undersigned
with respect to the Registrable Securities beneficially owned by the undersigned
and listed in Item (3) above.
 
This Notice and Questionnaire shall be governed in all respects by the laws of
the State of Florida.
 

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IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
 
Beneficial Owner
 
By:_________________________________________
Name: __________________________________
Title:___________________________________
Dated:_____________
 
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO H2DIESEL,
INC. NOT LATER THAN THE 20TH BUSINESS DAY AFTER THIS NOTICE AND QUESTIONNAIRE
HAVE BEEN DELIVERED TO THE REGISTERED HOLDER AT:
 
H2Diesel, Inc.
20283 State Road 7, Suite 40
Boca Raton, FL 33498
Attn: Lee S. Rosen
Phone: (561) 807-6325
Fax: (561) 807-6326