Exhibit 10.1
 
GASIFIER PURCHASE AGREEMENT
 
THIS GASIFIER PURCHASE AGREEMENT (this “Agreement”) is made as of this 20th day
of March, 2013 (the “Effective Date”) by and between MAGNEGAS CORPORATION, a
Delaware corporation (“MagneGas”) and CLEAR SKY ENERGY, S.A. DE C.V. a company
constituted under the laws of Mexico (“CSE”). MagneGas and CSE are each referred
to herein individually as a “Party,” and jointly as the “Parties.”
 
RECITALS
 
A.           MagneGas is engaged in the business of generating gaseous fuel with
its proprietary Plasma Arc Flow technology and is the developer of Gasifiers (as
defined below) used for such purpose.
 
B.           CSE is in the business of selling gaseous fuel and has established
and maintains, or intends to establish and maintain, connections with customers
in the Territory (as defined below) sufficient to allow CSE to promote the sale
of Products (as defined below) to customers in the Territory.
 
C.           MagneGas desires to sell Gasifiers to CSE and to have the Products
actively promoted for sale to Mexico and other parts of Latin America.
 
D.           MagneGas and CSE wish to formalize their business relationship
whereby MagneGas manufactures Gasifiers and supplies them to CSE.
 
E.           The purpose of this Agreement is to set forth the terms and
conditions upon which CSE will purchase the Gasifiers from MagneGas 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 (as  set forth in the Distribution
Agreement and the Limited License Agreement, each as defined herein).
 
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           “Affiliate” means any legal entity that is owned by, owns, or is
under common Ownership with a party. "Ownership" means more than 50% of the
voting interests of a Party, whether attained through stock or equity ownership
or through a contractual arrangement.
 
1.2            “Commissioning Date” shall have the meaning set forth in Section
5.2.
 
 
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1.3           “Confidential Information” shall have the meaning set forth in
Section 11.1.
 
1.4           “CSE Indemnified Parties” shall have the meaning set forth in
Section 10.1.
 
1.5           “Distribution Agreement” shall have the meaning set forth in
Section 4.7.
 
1.6           “Force Majeure Event” shall have the meaning set forth in Section
12.1.
 
1.7           “F.O.B.” shall mean “Free on Board” and shall have the meaning
ascribed to such term by the International Commercial Terms (“Incoterms”) as
published from time to time by the International Chamber of Commerce.
 
1.8           “Gasifier” shall mean a gasifier refinery manufactured by MagneGas
based on Plasma Arc Flow technology, as specified on Exhibit A.
 
1.9           “Limited License Agreement” shall have the meaning set forth in
Section 6.1.
 
1.10           “List Price” shall have the definition set forth in Section 4.8.
 
1.11           “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.
 
1.12           “MagneGas Indemnified Party” shall have the meaning set forth in
Section 10.2.
 
1.13           “Mexico” shall mean the United Mexican States.
 
1.14           Notice of Completion” shall have the meaning set forth in Section
4.2.
 
1.15           “Other Revenues” shall mean any revenue derived from the use of a
Gasifier or the sale or trade of any by-product or output thereof, whether such
revenues are derived from services rendered (such as waste disposal), Products
manufactured and sold, or other activity.
 
1.16           “Person” or “person” shall mean any natural person, corporation,
partnership, limited liability company, proprietorship, association, trust, or
other legal entity.
 
 
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1.17           “Product” shall mean the fuels or byproducts manufactured by a
MagneGas Gasifier.
 
1.18           “Progress Payment” shall have the meaning set forth in Section
4.2.
 
1.19            “Reports” shall have the meaning set forth in Section 8.2.
 
1.20           “Royalties” shall have the meaning set forth in the Distribution
Agreement.
 
1.21           “Territory” shall mean the United Mexican States (on an exclusive
basis pursuant to Section 2.1 of the Distribution Agreement), and the rest of
Latin America (on a non-exclusive basis pursuant to Section 2.2 of the
Distribution Agreement); provided that the exclusive Territory is subject to
change in accordance with the Distribution Agreement.
 
2.           TERM
 
2.1           Term. The term of this Agreement will be effective from the date
first set forth above and will remain in effect thereafter for five (5) years
from its effective date (the “Term”).
 
2.2           Renewal.  Any renewal terms of this Agreement shall be negotiated
by the Parties.
 
2.3           Terms of Other Documents Incorporated by
Reference.  Notwithstanding anything stated herein, the terms of the
Distribution Agreement or Limited License Agreement are set forth in each such
document, and shall be independent of the Term contemplated for this Purchase
Agreement by Section 2.1, except as specifically provided in the Distribution
Agreement or Limited License Agreement, as applicable.
 
3.           PURCHASE AND SALE  COMMITMENT
 
3.1           Subject to the terms and conditions herein, MagneGas will sell to
CSE, and CSE will purchase from MagneGas, one (1) or more Gasifiers.  Upon
execution of this Agreement, CSE commits to the purchase of one (1)
Gasifier.  MagneGas commits to supplying up to 5 additional Gasifiers during the
Term, upon CSE’s issuance of a purchase order for any additional Gasifiers. For
the avoidance of doubt, CSE has no obligation to purchase any additional
Gasifiers beyond the one (1) unit ordered.  MagneGas agrees that during any
period of exclusivity, MagneGas shall not sell or otherwise provide Gasifiers to
any third party in any exclusive Territory.
 
3.2           The purchase price for the first Gasifier is Two Million Seven
Hundred Thousand U.S. Dollars and no/100 (U.S. $2,700,000.00) plus Royalties as
set forth in the Distribution Agreement (the “Purchase Price”).  The Purchase
Price for the second and additional Gasifiers shall be as provided in Section
4.8.
 
 
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3.3           Delivery of each Gasifier will be FOB at MagneGas’s facilities in
Tarpon Springs, Florida (Incoterms 2000).
 
4.           DEPOSIT, DELIVERY AND PAYMENT
 
4.1           Acknowledgment of Initial Deposit/Delivery of Fuel
Cylinders.  MagneGas acknowledges receipt of CSE’s payment of a non-refundable
deposit of One Hundred Thousand and no/100 U.S. Dollars (U.S. $100,000.00).  CSE
acknowledges receipt of 500 fuel cylinders shipped by MagneGas on or about
August 16, 2012, and included as part of the Gasifier sale hereunder.
 
4.2           Progress Payments/Timing of Payments. With respect to the first
Gasifier purchased hereby, a second non-refundable deposit of One Hundred
Thousand and no/100 U.S. Dollars (U.S. $100,000.00) shall be due on or before
the date which is ten (10) business days following the Effective Date of this
Agreement.  If said second payment of $100,000 is not received by such date,
this Agreement is automatically null and void without recourse to either
party.  Thereafter, a First Progress Payment  of Seven Hundred Sixty-Five
Thousand and no/100 U.S. Dollars (U.S. $765,000.00) will be due not later than
15 days after CSE’s receipt of all required permits to operate the Gasifier in
Mexico (as determined by CSE) (the “First Progress Payment”).  If the First
Progress Payment is not paid within 180 days from the date of execution of this
Agreement (subject to extension with the mutual written agreement of the
parties),  this Agreement shall be null and void and of without further effect
or recourse to either party.   An additional payment of Eight Hundred Sixty-Five
Thousand and no/100 U.S. Dollars (U.S. $865,000.00)  will be due at such time
that (i) all required permits to operate the Gasifier in Mexico (as determined
by CSE) have been received and (ii) MagneGas certifies to CSE that it has
completed construction of the Gasifier (a “Notice of Completion”). The final
payment of Eight Hundred Seventy Thousand and no/100 U.S. Dollars (U.S.
$870,000.00) will be due at such time that (i) all required permits to operate
the Gasifier in Mexico (as determined by CSE) have been received and (ii)
successful testing of the completed Gasifier has occurred at the facilities of
MagneGas in Florida over a period of three weeks following the date of the
Notice of Completion, in accordance with Article 5.  Each of the foregoing
payments shall be referred to herein as a “Progress Payment”.  Subject to the
provisions of Article 5 below, CSE representatives will be required to be on
site for such testing.  All amounts owed under this Section 4.2 (with the
exclusion of the second $100,000 payment referenced above, the payment of which
shall not be subject to a  cure period) shall be paid within five (5) business
days of the due date stated herein, time being of the essence for receipt of
each of such payments.  If a payment is not received five (5) business days
after the due date, and is not disputed in good faith by CSE, MagneGas shall
provide written notice to CSE of the payment default, and if not cured within
twenty (20) business days after receipt of the written notice from MagneGas, it
shall be considered a “Payment Breach” and MagneGas shall not be obligated to
continue construction, to perform any testing or to ship the Gasifier, as
applicable, and in general reserves the right to withhold any other deliverables
under this Agreement until the Payment Breach is cured.  In the event of a
Payment Breach, the provisions of Section 4.4 below shall cease to apply to this
Agreement and MagneGas’s sole obligation will be to complete performance
hereunder upon receipt of the delinquent Progress Payment without effect on
MagneGas’s rights to exercise any remedies under Article 7
below.  Notwithstanding anything to the contrary contained in this Agreement,
CSE’s failure to make any Progress Payment  due to (i) the failure or revocation
of all any required permits to operate the Gasifier in Mexico as
manufactured  to issue, or (ii) the failure of the Gasifier to achieve
successful testing pursuant to the standards set forth at Section 5.1 below,
shall not be deemed a Payment Breach and the sole remedy of the parties
hereunder shall be the termination of this Agreement without cause in accordance
with Section 7.1 (except that MagneGas shall retain the non-refundable deposits
referenced in Sections 4.1 and 4.2).  CSE will not make any of the Progress
Payments without having received the required permits and if it does, such
Progress Payment shall be non-refundable.

 
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4.3           Transfer of Title/Shipment and Delivery.  Title to the Gasifier
will transfer to CSE upon completion of all of the Progress Payments required in
Section 4.2.  In no event will MagneGas arrange for shipment of the Gasifier out
of its facilities to a CSE-designated location until all Progress Payments have
been received by MagneGas.
 
4.4           Construction Completion Deadline.  MagneGas will complete the
first Gasifier not later than 90 days from its receipt of the first Progress
Payment (the “Completion Date”).  To the extent that the first unit is not
completed by the Completion Date, the Purchase Price will be reduced by $5,000
per completed week that transpires after the Completion Date up until the actual
date on which the first unit is completed, up to a maximum reduction of
$150,000.00, subject to CSE’s right to terminate this Agreement for cause in
accordance with Section 7.2.  If CSE terminates this Agreement due to delays in
accordance with this Section 4.4, MagneGas shall promptly refund all amounts
paid by CSE hereunder (except for the two non-refundable deposits referenced in
Sections 4.1 and 4.2 above).
 
4.5           Shipping and Delivery Terms.
 
(i)           Each Gasifier will be packed and shipped in a commercially
reasonable manner mutually agreed by the parties, consistent with industry
standards, and in compliance with applicable law.  MagneGas shall, at its sole
cost and expense, be solely responsible for and will prepare all documentation
necessary for compliance with U.S. requirements for the exportation of the
Gasifers to Mexico, including obtaining any export licenses for the Gasifier and
Products if any are required.  In this connection, CSE will cooperate fully with
MagneGas with respect to any information that may be required for MagneGas
compliance with U.S. laws, including but not limited to information on end-user,
purpose, or background check.
 
 
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(ii)           CSE will prepare all documentation necessary for importation of
the Gasifiers and Products to the Territory, subject to MagneGas
approval.  MagneGas will not be held responsible for delays or costs related to
the importation of said Gasifiers to Mexico, as long as MagneGas has used good
faith efforts to provide technical information or documentation that may be
required by CSE or CSE’s attorneys in a timely manner.
 
4.6           Manner of Payment: Currency. All payments for the Purchase Price
of the Gasifiers or otherwise in connection therewith shall be calculated and
paid in U.S. Dollars. All payments shall be paid by cash wire transfer to an
account in the name of MagneGas at SunTrust Bank pursuant to wire instructions
that MagneGas will provide to CSE.
 
4.7           Exclusive Appointment.  MagneGas shall grant to CSE exclusive
distribution rights in Mexico, and non-exclusive distribution rights in the rest
of Latin America in accordance with the terms and conditions hereof and of that
certain Distribution Agreement of even date herewith, a copy of which is
appended as Exhibit B hereto and incorporated herein by reference (the
“Distribution Agreement”).  This right is granted subject to MagneGas’s
explicitly reserved right to terminate this exclusive distribution right if no
additional Gasifiers are purchased on or before the third anniversary of the
Commissioning Date of the first Gasifier, and to convert it to a non-exclusive
distribution right as provided in the Distribution Agreement.
 
 
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4.8           Purchase of Subsequent Refineries.  The timing and structure of
the Progress Payments for any additional Gasifiers purchased under this
Agreement shall follow the same structure as provided in Sections 4.1 and 4.2
for the first Gasifier, except that no additional non-refundable deposits will
be required and that the  payment due dates for each Progress Payment will be
calculated from the date of the purchase orders for such
Gasifiers.  Accordingly, the first Progress Payment (equivalent to approximately
one-third of the List Price) for any such Gasifier will be due not later than 60
days from the date of the purchase order for such Gasifier, the second Progress
Payment will be due when the Notice of Completion is issued by MagneGas, and the
third Progress Payment of will be due when successful testing of the Gasifier is
completed.   The price of each Gasifier shall be calculated by reference to  the
“List Price”.  “List Price” shall be the reference price at which a Gasifier is
sold in any given year to a purchaser who is not purchasing subject to any
discounts, and MagneGas reserves the right to raise such List Price at any time,
provided that such List Price shall not exceed $2,900,000, except in the event
of a material increase in material component costs (defined as at least
15%).  Subject to special discounts in connection with bulk orders as provided
under Section 4.9 below, the following provisions shall govern the calculation
of Gasifier prices for additional Gasifiers purchased during the Term
hereof  (after the initial Gasifier purchase order submitted with this Agreement
and in addition thereto) and other relevant terms of purchase:
 
(i)           If CSE purchases a second Gasifier on or before the third
anniversary of the Commissioning Date of the first Gasifier, then the Progress
Payments for such second Gasifier and all additional Gasifiers will be subject
to a 35% discount off the List Price of such Gasifier at the time of the
purchase  PLUS an additional discount of $100,000.00 if CSE provides its own
MagneGas-approved compressor for the Gasifier.  Such discount shall be deducted
solely from the final two Progress Payments and shall be split evenly between
such payments. Accordingly, if the second Gasifier is ordered within calendar
year 2013 and there are no material increases in material component costs, the
price for such second Gasifier will be $1,885,000, based on a List Price of
$2,900,000 (or $1,785,000.00 if CSE provides its own qualifying compressor that
is approved by MagneGas).   Based on the foregoing prices, and by way of
example, if a Purchase Order for a second Gasifier is sent to MagneGas (and
assuming for this example that CSE does not use its own compressor), the first
Progress Payment for such order will be $628,333.33, the second Progress Payment
will be $628,333.33, and the  third Progress Payment will be  $628,333.34.
 
(ii)           If CSE fails to order the second Gasifier and make at least one
Progress Payment in respect thereof by the third anniversary of the
Commissioning Date on the first Gasifier purchased hereunder, as MagneGas’s sole
remedy therefor, CSE shall be deemed to have elected to convert its exclusive
distribution rights in Mexico to non-exclusive distribution rights, as provided
in the Distribution Agreement, and all other provisions of this Agreement will
remain in full force and effect for the Term hereof.  Notwithstanding anything
stated herein, MagneGas’s obligation to provide Gasifiers under this Section 4.8
is subject to the delivery and sale of such Gasifier not being contrary to then
applicable laws or regulations.
 
(iii)           The terms of Section 4.2 with respect to CSE’s failure to make
any Progress Payments shall also apply to additional Gasifiers.
 
4.9           Additional Discount for Order of Multiple Gasifiers.    In the
event that CSE orders multiple Gasifiers at a time the following additional
discounts will apply: (A) at 3 or more Gasifiers, 50% discount from the List
Price shall apply, and (B) orders in excess of 5 units at a time shall be
subject to a 60% discount from the List Price if made within 5 years from the
Effective Date of this Agreement.  An additional $100,000 discount applies per
unit if CSE provides its own compressors.
 
 
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4.10           Extension of Term of Exclusivity.  Subject to the provisions of
the Distribution Agreement (and in accordance with the example shown in the
Distribution Agreement), each additional Gasifier purchased hereunder shall
extend the term of exclusivity under the Distribution Agreement by three (3)
years.  To the extent that CSE completes the purchase of all six (6) Gasifiers
contemplated by this Agreement within the Term, CSE’s status as an exclusive
distributor in Mexico shall be deemed to be perpetual, subject to compliance
with any minimum sales requirements set forth under the Distribution Agreement,
as such may be amended from time to time (as long as the Distribution Agreement
is not otherwise terminated).
 
4.11           Termination for Failure to Purchase Additional Gasifiers. Should
CSE fail to order any additional Gasifiers under the terms of this Agreement
after completing the purchase of the first Gasifier, this Agreement shall
terminate without further obligation between the Parties except as may be
provided in the Distribution Agreement.  Notwithstanding the foregoing, to the
extent that any purchase orders for any Gasifiers are issued by CSE under the
terms of this Agreement, the Parties shall have the obligation to complete such
purchase and sale pursuant to the outstanding purchase order, regardless of
whether the Term expires before the pending transaction is completed.
 
5.           ADDITIONAL OBLIGATIONS OF THE PARTIES
 
5.1           Testing.  CSE will send two technicians, at CSE’s sole expense, to
participate in the testing of the Product at MagneGas’s facilities in
Florida.  The CSE technicians will be required to remain on site at MagneGas’s
facility during the full 3 weeks of the test period.  The test procedures,
criteria and requisite standards for approving test results and certifying the
Gasifier as having passed all tests are set forth on Exhibit C.
 
5.2           Training.
 
(i)           At its sole expense, MagneGas shall provide at least one and up to
10 members of CSE personnel with training relating to the operation of the
Gasifiers at CSE’s facility in Mexico.  For such purpose, subsequent to shipment
of the first Gasifier to CSE, MagneGas will provide the services of one MagneGas
technician to CSE for a period of two (2) continuous weeks to provide training
at CSE’s site, as may be required, and commissioning of the Gasifier.  Upon
completion of such period, MagneGas will certify the Gasifier as operational in
accordance with such standards as the parties have accepted as set forth on
Exhibit C (the “Commissioning Date”).
 
(ii)           At CSE’s request, MagneGas will provide the services of a senior
commercial representative to CSE to assist in training and commercial activities
at the location designated by CSE in Mexico, once a month for the initial three
(3) months following completion of the initial on-site training required by
Section 5.2(i) above, and thereafter once a quarter for the following six (6)
months.  CSE will pay all pre-approved, reasonable travel, lodging, and meal
costs and expenses of such commercial representative(s).  MagneGas will not
charge CSE for the time of the senior commercial representative(s) designated to
provide the services contemplated by this subsection 5.2 (ii).
 
 
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5.3           Service and Repair.  MagneGas shall provide CSE with a service kit
containing the items identified on Exhibit A with each Gasifier, to support two
(2) years of component failures, at no additional cost to CSE.
 
5.4           Compliance with Law; Licenses and Approvals.  Each Party shall
comply in all material aspects with all laws, rules, regulations, and other
governmental requirements applicable to such Party’s performance or obligations
under this Agreement, and shall obtain and maintain all material governmental
permits, licenses, and consents required in connection therewith.
 
5.5           Solicitation and Sales Outside the Territory. Unless otherwise
permitted by the terms of the Distribution Agreement, CSE shall not purposefully
solicit orders for sales of Products from persons other than 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.
 
5.6            Other Activities of MagneGas. Subject to the terms of the
Distribution Agreement, nothing in this Agreement shall be construed to prohibit
or limit MagneGas’s ability to promote, offer, purchase, or sell Gasifiers or
Products to any person outside of the Territory (or in any non-exclusive country
in the Territory, should CSE lose its right to exclusivity), nor shall it limit
MagneGas’s ability to engage in any other type of activity that does not include
the sale of Products or Gasifiers in or out of the Territory.
 
5.7           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.
 
 
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5.8           Operations and Expenses. Subject to the express provisions of this
Agreement, the Distribution Agreement and the Limited License 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.
 
6.           TRADEMARKS AND PROMOTIONAL MATERIALS
 
6.1           License to Use MagneGas Trademarks. Simultaneously with the
execution of this Agreement, the Parties are executing a Limited License
Agreement in the form of Exhibit D hereto (the “Limited License Agreement”), the
terms of which are hereby incorporated by reference.
 
6.2           Promotional Materials. Subject to any provisions of the
Distribution Agreement, CSE shall design and create its own promotional
materials and sales literature for the Products manufactured by the Gasifiers,
including appropriate information about the Gasifiers (collectively, the
“Promotional Materials”) for use by CSE if CSE so chooses, in promoting sales of
Products in the Territory.   Notwithstanding the foregoing, all such Promotional
Materials shall use the MagneGas trademark, name and logos only in accordance
with the provisions of the Limited License Agreement.
 
7.           TERMINATION
 
7.1           Termination Without Cause.  Notwithstanding anything stated
herein, this Agreement may be terminated without cause only on the following
terms:
 
(i)           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; or
 
(ii)           By either Party in the event of a Payment Breach due to (i) the
inability of (i) CSE to receive all required permits to operate the Gasifier  in
Mexico (as determined by CSE) or the revocation of such permits prior to the
shipment of the Gasifier, or (ii) the failure of successful testing of the
completed Gasifier.
 
 
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7.2           Termination For Cause.  This Agreement may be terminated for cause
on the following terms:
 
(i)           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 under this Agreement, the Distribution
Agreement or the Limited License Agreement, and such material breach or failure
is not cured within forty-five (45) days following written notice thereof by the
terminating Party;
 
(ii)            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; or
 
(iii)           By MagneGas in the event of a Payment Breach other than as
described in Section 7.1 above.
 
7.3           Rights and Obligations on Expiration or Termination.
 
(i)           Upon and after the expiration or termination of this Agreement,
CSE shall remain entitled to sell Products exclusively within the Territory
(unless the rights to exclusivity have been relinquished pursuant to Section 4.7
hereof), in accordance with the Distribution Agreement, as manufactured from
such Gasifier or Gasifiers as CSE may have purchased hereunder, without use of
the Marks.  Any continuing rights to distribution of Products shall be governed
by the terms of the Distribution Agreement.
 
(ii)           In the event of a Termination for Cause, the terminating Party
may also be entitled to damages subject to the limitation of Article 9.  To the
extent termination is in connection with a Payment Breach (that is not otherwise
excused due to the events in Section 7.1, MagneGas may, at its option, make
demand for the sums due and owing or reclaim any other Gasifier on site as
liquidated damages.  In the event of a termination for cause by CSE, MagneGas
shall repurchase the Gasifiers on a straight-line depreciation basis.
 
(iii)           In the event of a Termination Without Cause, MagneGas shall
promptly refund all amounts paid it by CSE under this Agreement (subject to
retention of the deposits in accordance with the last two sentences of Section
4.2).
 
 
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7.4           Survival. The following Sections and Articles, as well as any
payment obligations of MagneGas, shall survive the expiration or termination of
this Agreement:  Sections 8, 9, 10 and 11, provided that Sections 8 and 10 shall
only survive for the duration of the Distribution Agreement.
 
8.            REPRESENTATIONS AND WARRANTIES; DISCLAIMER OF ADDITIONAL
WARRANTIES; COVENANTS BY CSE
 
8.1           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.
 
8.2           Additional Warranties of MagneGas. MagneGas additionally
represents and warrants to CSE that (a) it owns or has sufficient rights to
manufacture and sell the Gasifiers that are or will be supplied pursuant to this
Agreement, (b) title to all such Gasifiers will be conveyed to CSE free and
clear of any liens or encumbrances, (c) it has sufficient manufacturing capacity
and access to sufficient quantities of raw materials and component parts,
materials and ingredients to produce and provide the number of Gasifiers to
which it has committed hereunder, (d) such Gasifiers are protected by patents
issued by the US Patent and Trademark Office (the “USPTO”) or are otherwise
covered by patents pending with the USPTO, and to the best knowledge of MagneGas
do not infringe on the intellectual property of any third party in the United
States; (e) MagneGas is in the process of applying for a supplemental/additional
patent with the USPTO in connection with the Gasifier and, at such time, will
file for patent protection in Mexico under the applicable regulatory scheme and,
to the best  knowledge of MagneGas but without the benefit of having conducted a
search of the records of the Instituto Mexicano de la Propiedad Industrial
(Mexican Patent and Trademark Office),  the Gasifiers will not, at the time of
shipment, infringe or misappropriate any enforceable patent, copyright, trade
secret, or other intellectual property or proprietary rights of any third party
in the Territory, (e) such Gasifiers, at the time of shipment, and for a period
of one year thereafter, will conform in all material respects with the
agreed-upon specifications for such Gasifiers as set forth on Exhibit A, (f)
such Gasifiers shall be fit for their intended purpose, reasonably safe for use
in accordance with the instructions provided to CSE in writing, and free from
any defects in design or manufacturing, and (g) that as of the date hereof the
use of the Gasifiers to make Products complies with the applicable laws and
regulations of the United States and Florida,  and that MagneGas has provided or
made available to CSE all third party reports received by it certifying or
relating to such compliance or to the content of emissions from the Gasifiers
during the processing or manufacturing of Products (the “Reports”).  MagneGas
makes no representation as to the Gasifiers’ compliance with the laws
and  regulations of any country other than the United States of America, and has
not undertaken to determine whether use of the Gasifier in the Territory is
compliant with local laws and regulations.  MagneGas also provides the specific
warranties contained in Exhibit E hereto.
 
 
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8.3           Additional Warranties of CSE.  CSE additionally represents and
warrants to MagneGas that neither CSE nor any of its representatives will
intentionally make any oral or written representations which vary materially
from the specifications, warranties, or representations by MagneGas with respect
to the Gasifiers or the Products as stated in  packaging or written
documentation provided in writing by MagneGas to CSE relating to the Gasifiers
or Products.  CSE acknowledges receipt of the Reports and that CSE is solely
responsible for ensuring compliance with Mexican laws, including, but not
limited to, all environmental laws and regulations and all applicable laws and
regulations at the federal, state and local levels in the Territory, during the
use of the Gasifiers for the manufacture of the Products.  CSE further warrants
and covenants that it will not reverse engineer, grant access to the Gasifiers
to third parties for the purpose of reverse engineering, or
otherwise  misappropriate the Gasifier technology.   CSE acknowledges that the
foregoing covenant is particularly important pending MagneGas’s filing for
patent protection in Mexico and that MagneGas is relying on this covenant and on
the confidentiality provisions of Section 11 hereof in order to enter into this
Agreement.  CSE will further promptly notify MagneGas if and when it becomes
aware of any apparent infringement of the MagneGas technology in the Territory.
 
8.4           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, ARE HEREBY DISCLAIMED.
 
8.5           Warranty Remedies.    IN THE EVENT OF ANY BREACH OF ANY OF THE
GASIFIER WARRANTIES CONTAINED HEREIN, CSE MAY REQUIRE THE REPAIR
OR   REPLACEMENT OF THE DEFECTIVE GASIFIER OR PART, OR RETURN OF THE PRICE PAID
BY CSE.
 
9.            LIMITATIONS OF LIABILITY
 
9.1           Limitation on Certain Damages. EXCEPT TO THE EXTENT ARISING OUT OF
A THIRD PARTY CLAIM AS SET FORTH IN SECTION 10 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 GASIFIERS, 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.
 
 
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9.2           EXCEPT TO THE EXTENT ARISING OUT OF A THIRD PARTY CLAIM AS SET
FORTH IN SECTION 10 BELOW, EACH PARTY’S TOTAL LIABILITY FOR ANY AND ALL LOSSES
AND DAMAGES ARISING OUT OF ANY CAUSE WHATSOEVER ARISING FROM THE PARTIES’
RELATIONSHIP HEREUNDER (WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE,
STRICT LIABILITY, OTHER TORT OR OTHERWISE) SHALL BE LIMITED TO ACTUAL
OUT-OF-POCKET DAMAGES, INCLUDING BUT NOT LIMITED TO ANY GOVERNMENTAL FINES, BUT
IN NO EVENT SHALL EXCEED THE PURCHASE PRICE (INCLUDING ROYALTIES PAID UNDER THE
DISTRIBUTION AGREEMENT) OF THE REFINERIES IN RESPECT TO WHICH SUCH CAUSE
ARISES.  IN THE EVENT THAT THE LIABILITY FOR LOSS AND/OR DAMAGE ARISES IN
CONNECTION WITH THE MALFUNCTION OF A GASIFIER OR PART THEREOF, AT MAGNEGAS’s
OPTION, MAGNEGAS MAY INSTEAD REPAIR OR REPLACE SUCH PRODUCTS, BUT, EXCEPT TO THE
EXTENT ARISING OUT OF A THIRD PARTY CLAIM AS SET FORTH IN SECTION 10 BELOW, IN
NO EVENT SHALL MAGNEGAS BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES RESULTING FROM ANY PRODUCT DEFECT.
 
9.3           Essential Part of the Bargain. The Parties acknowledge that the
limitations of liability set forth in this Article 9 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.
 
10.           INDEMNIFICATION
 
10.1           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, managers,
shareholders, members, agents, Affiliates, 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 8 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 10.1 shall be
subject to discussion with CSE and shall require the prior written consent of
both Parties.   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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10.2           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, managers,
shareholders, members, agents, Affiliates, successors, and assigns (each, a
“MagneGas Indemnified Party”), to the extent such claims, suits or actions arise
from or are based on any breach by CSE of any of its representations or
warranties set forth in Article 8 or any material modification of the Gasifiers
not approved by MagneGas, except to the extent caused by or arising out of the
tortious acts or omissions of MagneGas or any MagneGas Indemnified Party. All
settlements under this Section 10.2 shall be subject to discussion with MagneGas
and shall require the prior written consent of both Parties.   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.
 
11.           CONFIDENTIALITY
 
11.1           Confidential Information. As used in this Agreement,
“Confidential Information” means any material or information disclosed by either
Party to the other Party, in writing, orally or by inspection of tangible
objects (including, without limitation, material or information relating to such
Party’s research, development, customers, prospective customers, markets,
finances, or other business interests or trade secrets), which is designated in
writing as “Confidential,” “Proprietary” or some similar designation.
“Confidential Information” does not include the Promotional Materials or any
other items or materials intended to be disclosed to any customers in connection
with the promotion of the Products by CSE in the Territory hereunder.
 
11.2           Confidentiality and Non-Use. Each Party shall treat as
confidential all Confidential Information of the other Party, shall not use such
Confidential Information except to exercise its rights and perform its
obligations under this Agreement, and shall not disclose such Confidential
Information to any third party, except to its attorneys and other advisors
provided that such third party agrees in writing to abide by restrictions on
confidentiality and non-use that are substantially the same as those set forth
herein. Without limiting the foregoing, each Party shall use at least the same
degree of care it uses to prevent the disclosure of its own confidential
information of like importance, which care shall be no less than reasonable
care, to prevent the disclosure of Confidential Information of the other Party.
Each Party will promptly notify the other Party of any actual or suspected
misuse or unauthorized disclosure of the other Party’s Confidential Information.
 
 
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11.3           Exceptions. The provisions of this Article 11 shall not apply to
material or information that: (a) was in the public domain at the time it was
disclosed or has become in the public domain through no fault of the receiving
Party; (b) was known to the receiving Party, without restriction, at the time of
disclosure (other than through a disclosure to the receiving Party by the
disclosing Party prior to the Effective Date), as demonstrated by documentation
in existence at the time of disclosure; (c) is disclosed with the prior written
approval of the disclosing Party; (d) was independently developed by the
receiving any without use of any Confidential Information of the disclosing
Party; (e) becomes known to the receiving Party, without restriction, from a
third party not bound by an obligation of confidentiality; or (f) is disclosed
generally to third parties by the disclosing Party without restrictions similar
to those contained in this Article 11. In addition, the receiving Party may
disclose the other Party’s Confidential Information to the extent such
disclosure is required by law or by order or requirement of a court,
administrative agency, or other governmental body, provided that the receiving
Party provides prompt notice thereof to the disclosing Party so as to afford the
disclosing Party reasonable opportunity to seek a protective order or otherwise
prevent or restrict such disclosure.
 
11.4           Confidentiality of Agreement. The terms and conditions of this
Agreement, but not its existence, shall be treated as Confidential Information
of each Party. Upon the advance written consent of both Parties, not to be
unreasonably withheld, the Parties may elect to issue press releases or other
forms of publicity regarding the specific terms and conditions of this Agreement
or regarding the business relationship under this Agreement.
 
12.           GENERAL PROVISIONS
 
12.1           Force Majeure. Neither Party shall be considered in default of
its performance of any obligation hereunder (other than an obligation to make
any payment due 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. If
such Party is not able to perform within ninety (90) days after the event giving
rise to the excuse of Force Majeure, the other Party may terminate this
Agreement.
 
 
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12.2           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, equity
interests 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, Praxain, or 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.
 
12.3           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.
 
12.4           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.  Subject to
Section 12.5, the appropriate federal and state courts in Pinellas County in the
State of Florida 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.  Each party accepts the venue provisions of this
Section 12.4 and waives its right to any other forum to which it may otherwise
be entitled by virtue of its nationality or place of residence.
 
12.5           Dispute Resolution.  The parties agree to refer any and all
disputes which the parties cannot mutually resolve to binding arbitration by a
single arbitrator mutually agreeable to the parties, under the rules and
regulations set out by the American Arbitration Association. Arbitration shall
take place in Miami, Florida or Dallas, Texas.  The arbitrator’s ruling shall be
final and binding and judgment thereon may be entered by any court of competent
jurisdiction. The costs of said arbitration shall be borne by each party. The
losing party shall then reimburse the prevailing party for all out-of-pocket
costs and expenses (including reasonable attorneys’ fees) after the decision of
the arbitrator.
 
 
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12.6           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 Independencia 3438, Piso 4
   
El Fresno
   
Torreon, Coahuila Mexico
   
Attn:  Jorge Torres
       
with a copy to:             
Davis Wright Tremaine LLP
   
1201 Third Avenue, Suite 2200
   
Seattle, WA 98101
   
Attn:  Louisa Barash, Esq.

 
12.7           Entire Agreement; Choice of Language; 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. 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 was negotiated and drafted in the English language.  To the extent
that any translation of this Agreement into Spanish is facilitated to or by CSE,
such translation will be solely for convenience purposes and only the English
language version will govern.  This Agreement may be amended, modified, or
supplemented only by a written instrument in English duly executed by each of
the Parties.
 
 
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12.8           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.
 
12.9           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
9 and the indemnification provisions in Article 10 are considered by the Parties
to be integral to this Agreement and may not be modified or severed from this
Agreement.
 
12.10           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.
 
12.11           Background.  The Background information shall be incorporated in
and made a part of the operative terms and conditions of this Agreement.
 
12.12          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.
 
[Signature Page Next]
 
 
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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
DESCRIPTION OF GASIFIERS

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, hydraulic 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.
 
 
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ACCESSORIES

The above specified Refinery is delivered:

1) In fully operational and automatic condition;

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.
 
 
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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.

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.
 
 
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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   
 
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.
 
 
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PRODUCT WARRANTIES
 
Manufacturer hereby warrants that the Refinery will be delivered as identified
in the Purchase Agreement to which this Exhibit A is attached and will have the
performance specified in this Exhibit A and the Agreement.
 
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.
 
 
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EXHIBIT B
DISTRIBUTION AGREEMENT
 
 
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EXHIBIT C
TEST STANDARDS AND PROCEDURES
 
While a Gasifier will be operated under normal operating conditions for liquid
waste as determined by CSE in its sole discretion, the “standards” for each such
liquid will vary.  The “test standards” for certification of a Gasifier,
however, will be those applicable to Ethylene Glycol, as follows .
 
The test will demonstrate that the Gasifier produces a minimum of 2400 cubic
feet of Magnegas per hour and gasifies a minimum of 8 gallons per hour of
Ethylne Glycol. Magnegas will be comprised of Hydrogen, Carbon Monoxide, Carbon
Dioxide and Trace Elements.
 
 
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EXHIBIT D
LIMITED LICENSE AGREEMENT

 
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EXHIBIT E
SPECIFIC GASIFIER WARRANTIES

Magnegas Plasma Arc Through Module and Electronic Controls
 
1 Year Parts and Labor Warranty excluding general maintenance
 
Direct Manufacturer Warranties
 

 
AMCOT Cooling Tower ST-80 :
10 years parts and labor on outside casing
 
     
2 years parts and labor on the PVC fill
 
1 year parts and labor on internal component
           
Miller SUBARC DC 1000:
3 years parts and labor
           
Heat Exchangers Thermal Transfer Products C-1760-3.5-6-T :
1 year parts and labor
           
CompressorCOLTRI MCH/24 ETS:
1 year parts and labor
           
Moyno Pump Model 44402:
1 year parts and labor
 

 
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