SUBSCRIPTION AGREEMENT
 
This SUBSCRIPTION AGREEMENT (this “Agreement”) is entered into as of the date of
its acceptance by H2Diesel Holdings, Inc., a Florida corporation (the
“Company”), set forth below (the “Effective Date”), by and between the Company
and the subscriber set forth on the signature page hereto (the “Subscriber”).
 
RECITALS
 
WHEREAS, in connection with the transactions contemplated by this Agreement, the
Company desires to create a new series of preferred stock designated as Series B
Cumulative Convertible Preferred Stock, par value $.001 per share (the
“Preferred Stock”), by filing Articles of Amendment in the form attached hereto
as Exhibit A (the “Articles of Amendment”) with the Secretary of State of the
State of Florida;
 
WHEREAS, the Company desires to offer (the “Offering”) up to $10,000,000 in
shares of Preferred Stock at a purchase price of $100 per share and an initial
conversion price of $4.25 per share (the “Shares”), together with warrants in
the form attached hereto as Exhibit B, exercisable for a number of shares of
common stock of the Company, $.001 par value per share (the “Common Stock’)
equal to 25% of the number of shares of Common Stock that would be issuable upon
initial conversion of the Preferred Stock, (the “Warrants”, and together with
the Shares, the “Securities”) at an exercise price of $6.25 per share;
 
WHEREAS, the Company desires to issue and sell to the Subscriber the Securities
set forth on the signature page hereof;
 
WHEREAS, in connection with the Offering the Company or its agents have provided
to Subscriber a copy of the Company’s Confidential Private Offering Memorandum
dated March 26, 2008 (together with the annexes, exhibits and attachments
thereto, the “Memorandum”), which provides certain material disclosures in
connection with the Offering; and
 
WHEREAS, as part of the Offering the Company will agree to register shares of
Common Stock issuable (i) upon the conversion of the Preferred Stock, (ii) upon
the payment of dividends on the Preferred Stock, and (iii) upon the exercise of
the Warrants, under the registration rights agreement in the form attached as
Exhibit C (the “Registration Rights Agreement”).
 
AGREEMENT
 
NOW THEREFORE, based upon the premises and mutual promises set forth below, the
parties agree as follows:
 
1. Subscription for Preferred Stock; Terms of the Offering.
 
1.1. Subscription and Issuance of the Securities. Subject to the terms and
conditions hereinafter set forth, the Subscriber hereby subscribes for and
agrees to purchase the Securities set forth on the signature page hereof, for an
aggregate purchase price equal to $____________ (the “Purchase Price”). The
Company reserves the right in its sole discretion to increase the number of
Shares in the Offering if sufficient demand exists. The Purchase Price is
payable by wire transfer (in accordance with the wire transfer instructions set
forth in the Memorandum) of immediately available funds delivered at the Closing
(as defined below).
 
 

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1.2. Subscription Period. The Company may, in its sole discretion, continue to
accept subscriptions on or before the third calendar day following the initial
Closing Date (as defined below).
 
1.3. Right to Reject. The Company reserves the right to reject this subscription
in whole or in part or terminate the Offering in its sole and absolute
discretion. If Subscriber’s subscription is rejected in whole, or the Offering
is terminated without a Closing occurring, all funds received from the
Subscriber will be promptly returned without interest, penalty, expense or
deduction, and this Agreement shall thereafter be of no further force or effect.
If Subscriber’s subscription is rejected in part, the funds for the rejected
portion of such subscription will be promptly returned without interest,
penalty, expense or deduction and this Agreement will continue in full force and
effect to the extent such subscription was accepted.
 
2. Closing.
 
2.1. Closing. The Closing of the transactions contemplated hereby (the
“Closing”) shall take place on the date the Company declares the Closing
effective (the “Closing Date”). The Closing shall occur at such place as
determined by the Company.
 
2.2. Termination of Offering. All payments will be held by the Company until the
Company declares the Closing effective or terminates the Offering. The Offering
will be terminated if either (i) the Closing does not become effective on or
prior to April 15, 2008, which date the Company may extend, in its sole
discretion, but not beyond May 15, 2008, or (ii) the Company elects to terminate
the Offering. If the Offering is terminated, the Company will return any
payments received, without interest, to the Subscribers.
 
3. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Subscriber that the following representations and warranties
shall be true immediately prior to the Closing:
 
3.1. Organization; Good Standing; Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Florida and has all requisite corporate power and authority to carry on
its business as presently conducted and as proposed to be conducted. The Company
is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the consolidated financial condition or results of operations of the
Company.
 
3.2. Capitalization. Capitalization. The authorized capital stock of the Company
immediately prior to the Closing consists of 100,000,000 shares of Common Stock
of which 18,285,964 shares are outstanding as of March 10, 2008 and 10,000,000
shares of preferred stock, par value $.001 per share, of which 40,050 shares are
outstanding as of March 1, 2008. The options to purchase 7,136,000 shares of
Common Stock are outstanding as of March 1, 2008 and warrants to purchase
3,196,565 shares of Common Stock are outstanding as of March 1, 2008. All of the
issued and outstanding capital stock of H2Diesel, Inc., a Delaware corporation
and wholly owned subsidiary of the Company (“Subsidiary”) is owned by the
Company. The Company owns 100% of Subsidiary, and has no direct or indirect
ownership interest in any entity other than Subsidiary.
 
 
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3.3. Authorization. All corporate action required to be taken by the Company’s
Board of Directors and shareholders in order to authorize the Company, as the
case may be, to enter into this Agreement, the Registration Rights Agreement and
to issue the Securities has been taken. Each of this Agreement and the
Registration Rights Agreement when executed and delivered by the Company, shall
constitute the valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws of general application relating to or affecting the
enforcement of creditors’ rights generally, or (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies and public policy limitations on the enforcement of
indemnification for violations of securities laws.
 
3.4. Valid Issuance of Securities. The Securities, when issued, sold and
delivered in accordance with the terms and for the consideration set forth in
this Agreement, and the shares of Common Stock issuable (i) upon conversion of
the Shares, (ii) upon payment as dividends on the Shares and (iii) upon exercise
of the Warrants (collectively, the “Additional Shares”), will be duly
authorized, validly issued, fully paid and non-assessable and free of
restrictions on transfer other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws.
 
3.5. SEC Documents, Financial Statements.
 
(a) True and complete copies of the Incorporated SEC Reports (as defined in the
Memorandum) are publicly available on the Securities and Exchange Commission
(“SEC”) EDGAR database (www.sec.gov). As of their respective filing dates, the
Incorporated SEC Reports complied as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and the Securities Act of 1933, as amended, and each of the Incorporated
SEC Reports was timely filed. To the Company’s knowledge, as of the date hereof,
none of the Incorporated SEC Reports is subject to ongoing SEC review or
outstanding SEC comment. Each of the Incorporated SEC Reports, as of the date it
was filed with the SEC, did not contain any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected, supplemented or
superseded by a subsequently filed Incorporated SEC Report.
 
(b) The financial statements of the Company, including the notes thereto,
included in the Incorporated SEC Reports (the “Company Financial Statements”)
(i) complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates; (ii) have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements, included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC); and (iii) present
fairly in all material respects the consolidated financial condition and results
of operations of the Company as of the respective dates and for the respective
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments).
 
 
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3.6. Absence of Undisclosed Liabilities. The Company has no material liabilities
except (i) liabilities provided for or reserved against in the Company Financial
Statements, (ii) liabilities disclosed in the Memorandum, and (iii) liabilities
arising in the ordinary course of business consistent with past practice since
January 31, 2007.
 
4. Representations and Warranties of the Subscriber. The Subscriber hereby
acknowledges, agrees with and represents and warrants to the Company as follows:
 
4.1. Authorization. The Subscriber has full power and authority to enter into
this Agreement and the Registration Rights Agreement, the execution and delivery
of which has been duly authorized, if applicable, and this Agreement and the
Registration Rights Agreement constitute a valid and legally binding obligation
of the Subscriber.
 
4.2. Securities Exemption. The Subscriber acknowledges his, her or its
understanding that the offering and sale of the Securities is intended to be
exempt from registration under the Securities Act of 1933, as amended (the
“Securities Act”), by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D promulgated thereunder (“Regulation D”). In
furtherance thereof, the Subscriber represents and warrants to the Company as
follows:
 
(a) The Subscriber realizes that the basis for the exemption from registration
may not be available if, notwithstanding the Subscriber’s representations
contained herein, the Subscriber is merely acquiring the Securities for a fixed
or determinable period in the future, or for a market rise, or for sale if the
market does not rise. The Subscriber does not have any such intention.
 
(b) The Subscriber is acquiring the Securities solely for the Subscriber’s own
beneficial account, for investment purposes, and not with view to, or resale in
connection with, any distribution of the Securities.
 
(c) The Subscriber has the financial ability to bear the economic risk of his,
her or its investment, has adequate means for providing for their current needs
and contingencies, and has no need for liquidity with respect to the investment
in the Company.
 
(d) The Subscriber and the Subscriber’s attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively, “Advisors”), have
received this Agreement, together with the Memorandum, and all other documents
provided by the Company pursuant to the requests of the Subscriber or its
Advisors, if any, and have carefully reviewed them and they understand the
information contained therein, prior to the execution of this Agreement.
 
(e) The Subscriber (together with his, her or its Advisors, if any) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of the prospective investment in the Securities.
If other than an individual, the Subscriber also represents it has not been
organized solely for the purpose of acquiring the Securities.
 
 
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4.3. Investor Questionnaire. The information in the Investor Questionnaire
completed and executed by the Subscriber in the form attached as Exhibit C
hereto (the “Investor Questionnaire”) is true and accurate in all respects, and
the Subscriber is an “accredited investor,” as that term is defined in Rule
501(a) of Regulation D.
 
4.4. Restricted Securities. The Subscriber represents, warrants and agrees that
he, she or it will not sell or otherwise transfer the Shares or any Additional
Shares without registration under the Securities Act or an exemption therefrom,
and fully understands and agrees that the Subscriber must bear the economic risk
of his, her or its purchase because, among other reasons, the Securities have
not been registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are subsequently registered under the Securities Act and under
the applicable securities laws of such states, or an exemption from such
registration is available. In particular, the Subscriber is aware that the
Securities are “restricted securities,” as such term is defined in Rule 144
promulgated under the Securities Act (“Rule 144”), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The
Subscriber also understands that, except as otherwise provided in the
Registration Rights Agreement, the Company is under no obligation to register
the Securities on his, her or its behalf or to assist them in complying with any
exemption from registration under the Securities Act or applicable state
securities laws. The Subscriber understands that any sales or transfers of the
Securities are further restricted by state securities laws and the provisions of
this Agreement.
 
4.5. Reliance on Representations. No representations or warranties have been
made to the Subscriber by the Company, or any of their respective officers,
employees, agents, sub-agents, affiliates or subsidiaries, other than any
representations of the Company contained herein, and in subscribing for the
Securities the Subscriber is not relying upon any representations other than
those contained herein.
 
4.6. Investment Risk. The Subscriber understands and acknowledges that his, her
or its purchase of the Securities is a speculative investment that involves a
high degree of risk and the potential loss of their entire investment and has
carefully read and considered the matters set forth in the Memorandum and in the
Incorporated SEC Reports and in particular the matters under the caption “Risk
Factors” therein, and, in particular, acknowledges that the Company has a
limited operating history and is engaged in a highly competitive business.
 
4.7. Commitment to Investments. The Subscriber’s overall commitment to
investments that are not readily marketable is not disproportionate to the
Subscriber’s net worth, and an investment in the Securities will not cause such
overall commitment to become excessive.
 
4.8. Legend. The Subscriber understands and agrees that the certificates for the
Securities shall bear substantially the following legend until (i) such shares
shall have been registered under the Securities Act and effectively disposed of
in accordance with a registration statement that has been declared effective or
(ii) in the opinion of counsel for the Company such Securities may be sold
without registration under the Securities Act, as well as any applicable “blue
sky” or state securities laws:
 
 
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
 
4.10. Status of Securities. Neither the U.S. Securities and Exchange Commission
(the “SEC”) nor any state securities commission has approved the Securities or
passed upon or endorsed the merits of the Offering or confirmed the accuracy or
determined the adequacy of any information provided by the Company to the
Subscriber or its Advisors. Neither this Agreement nor any of such information
has been reviewed by any federal, state or other regulatory authority.
 
4.11. Disclosure of Information. The Subscriber and his, her or its Advisors, if
any, have had a reasonable opportunity to ask questions of and receive answers
from a person or persons acting on behalf of the Company concerning the offering
of the Securities and the business, financial condition, results of operations
and prospects of the Company, and all such questions have been answered to the
full satisfaction of the Subscriber and his, her or its Advisors, if any. The
Subscriber is unaware of, is in no way relying on, and did not become aware of
the offering of the Securities through or as a result of, any form of general
solicitation or general advertising including, without limitation, any article,
notice, advertisement or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio, or electronic
mail over the internet, in connection with the offering and sale of the
Securities and is not subscribing for Securities and did not become aware of the
offering of the Securities through or as a result of any seminar or meeting to
which the Subscriber was invited by, or any solicitation of a subscription by, a
person not previously known to the Subscriber in connection with investments in
securities generally. The Subscriber further acknowledges that the Subscriber
has had the opportunity to request and receive drafts of the Company’s financial
statements for the year ended December 31, 2007 and its annual report on
Form 10-K for the fiscal year ended December 31, 2007 and that such information
is not yet publicly available and accordingly has not been provided to
investors. To the extent that the Subscriber has requested and received this
material in its current draft form, or any other non-public information which
the Company identifies as likely to be material, the Subscriber acknowledges
that they must keep such information confidential and may not trade in the
Company’s securities until the Company has filed its annual report on Form 10-K
for the fiscal year ended December 31, 2007, expected to be filed by March 31,
2008.
 
 
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4.12. No Claim. The Subscriber has taken no action which would give rise to any
claim by any person for brokerage commissions, finders’ fees or the like
relating to this Agreement or the transactions contemplated hereby.
 
4.13. Forward-Looking Statements. The Subscriber acknowledges that any estimates
or forward-looking statements or projections included in the information
provided by the Company, were prepared by the management of the Company in good
faith, but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed by the Company or such
management and should not be relied upon.
 
4.14. No Inconsistent Information. No oral or written representations have been
made, or oral or written information furnished, to the Subscriber or his, her or
its Advisors, if any, in connection with the offering of the Shares which are in
any way inconsistent with the information contained herein or in the Memorandum.
 
4.15. ERISA. (For ERISA plans only) The fiduciary of the Employee Retirement
Income Security Act of 1974 (“ERISA”) plan (the “Plan”) represents that such
fiduciary has been informed of an understands the Company’s investment
objectives, policies and strategies, and that the decision to invest “plan
assets” (as such term is defined in ERISA) in the Company is consistent with the
provisions of ERISA that require diversification of plan assets and impose other
fiduciary responsibilities. The Subscriber or Plan fiduciary (a) is responsible
for the decision to invest in the Company; (b) is independent of the Company and
any of their respective affiliates; (c) is qualified to make such investment
decision; and (d) in making such decision, the Subscriber or Plan fiduciary has
not relied primarily on any advice or recommendation of the Company or any of
its affiliates.
 
5. Insider Trading Prohibition; Indemnity.
 
5.1. Insider Trading. Until the filing by the Company of a current report on
Form 8-K with the SEC describing the Offering, the Subscriber hereby agrees to
(i) refrain from (A) engaging in any transactions with respect to the capital
stock of the Company or securities exercisable or convertible into or
exchangeable for any shares of capital stock of the Company, and (B) entering
into any transaction which would have the same effect, or entering into any
swap, hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of the capital stock of the Company and (ii)
indemnify and hold harmless the Company, and their respective officers and
directors, employees, agents, sub-agents and affiliates and each other person,
if any, who controls any of the foregoing, against any loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever) arising
out of or based upon any violation of this Section 6 by the Subscriber.
 
 
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5.2. Indemnity. The Subscriber agrees to indemnify and hold harmless the Company
and their respective officers and directors, employees, agents, sub-agents and
affiliates and each other person, if any, who controls any of the foregoing,
against any loss, liability, claim, damage and expense whatsoever (including,
but not limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty by the Subscriber, or the Subscriber’s breach of, or
failure to comply with, any covenant or agreement made by the Subscriber herein
or in any other document furnished by the Subscriber to the Company, the Finder
and their respective officers and directors, employees, agents, sub-agents and
affiliates and each other person, if any, who controls any of the foregoing in
connection with the Offering.
 
6. Notices to Subscribers.
 
(a) THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE
SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF THIS AGREEMENT OR ANY INFORMATION PROVIDED IN CONNECTION
HEREWITH. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
 
(b) THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT,
AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
 
8. Miscellaneous Provisions.
 
8.1. Modification. Neither this Agreement, nor any provisions hereof, shall be
waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, modification, discharge or
termination is sought.
 
8.2. Survival. The Subscriber’s representations and warranties made in this
Agreement shall survive the execution and delivery of this Agreement, the
delivery of the Securities and the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of any of
the Subscribers, their Advisors or the Company, as the case may be.
 
8.3. Notices. Any party may send any notice, request, demand, claim or other
communication hereunder to the Subscriber at the address set forth on the
signature page of this Agreement or to the Company at H2Diesel Holdings, Inc.,
11111 Katy Freeway, Suite 910, Houston, Texas 77079 (fax: (713) 973-5777),
Attention: Chief Executive Officer, or such other address or facsimile number as
shall have been furnished to the party giving or making such notice, demand or
delivery using any means (including personal delivery, expedited courier,
messenger service, fax, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication will be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other parties
written notice in the manner herein set forth.
 
 
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8.4. Binding Effect. Except as otherwise provided herein, this Agreement shall
be binding upon, and inure to the benefit of, the parties to this Agreement and
their heirs, executors, administrators, successors, legal representatives and
assigns. If the Subscriber is more than one person or entity, the obligation of
the Subscriber shall be joint and several and the agreements, representations,
warranties and acknowledgments contained herein shall be deemed to be made by,
and be binding upon, each such person or entity and his or its heirs, executors,
administrators, successors, legal representatives and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter thereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
 
8.5. Assignability. This Agreement is not transferable or assignable by the
Subscriber.
 
8.6. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
 
8.7. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
 
8.8. Interpretation. The headings and captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption or heading had been used herein or therein. Each
defined term used in this Agreement shall have a comparable meaning when used in
its plural or singular form. The use of the word “including” herein shall mean
“including without limitation.” The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
 
8.9. No Third-Party Beneficiaries. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their respective permitted successors and
assigns any rights or remedies under or by reason of this Agreement.
 
 
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8.10. Entire Agreement. This Agreement, the Registration Rights Agreement and
the documents referred to herein, together with all the Exhibits hereto,
constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Agreement, and supersede any and all prior
understandings and agreements, whether oral or written, between or among the
parties hereto with respect to the specific subject matter hereof.
 
8.11. Further Assurances. The parties agree to execute such further documents
and instruments and to take such further actions as may be reasonably necessary
to carry out the purposes and intent of this Agreement.
 
8.12. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Florida, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdictions other than the State of Florida.
 
 
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ANTI-MONEY LAUNDERING REQUIREMENTS

The USA PATRIOT Act
    
What is money
laundering?
    
How big is the problem and why is it important?
         
The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
United States and abroad. The Act imposes new anti-money laundering requirements
on brokerage firms and financial institutions. Since April 24, 2002, all
brokerage firms have been required to have new, comprehensive anti-money
laundering programs.
 
To help you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the USA PATRIOT
Act.
 
Money laundering is the process of disguising illegally obtained money so that
the funds appear to come from legitimate sources or activities.
 
Money laundering occurs in connection with a wide variety of crimes, including
illegal arms sales, drug trafficking, robbery, fraud, racketeering, and
terrorism.
 
The use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could taint our financial markets. According to the U.S. State
Department, one recent estimate puts the amount of worldwide money laundering
activity at $1 trillion a year.

 
What are we required to do to eliminate money laundering?

 
Under new rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up employee training,
conduct independent audits, and establish policies and procedures to detect and
report suspicious transactions and ensure compliance with the new laws.
    
As part of our required program, we may ask you to provide various
identification documents or other information. Until you provide the information
or documents we need, we may not be able to effect any transactions for you.

PRIVACY POLICY
 
It is the policy of the Finder to respect the privacy of customers who subscribe
to transactions underwritten by the Finder.
 
Whether its own brokers introduce a Subscriber to the Finder or the introduction
is made through selling agents, non-public personal information is protected by
the Finder.
 
 
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The Finder will not disclose any nonpublic personal information about a
Subscriber to anyone, except as required or permitted by law and to effect,
administer, or enforce transactions requested by a Subscriber in the ordinary
processing, servicing or maintaining their accounts. Furthermore, the Finder
does not reserve the right to disclose a Subscriber’s nonpublic personal
information in the future without first notifying the Subscriber of a change in
privacy policy and providing a convenient opportunity for the Subscriber to opt
out of information sharing with nonaffiliated third parties.
 
Under the USA PATRIOT Act of 2001 (Public Law 107-56) (together with all rules
and regulations promulgated hereunder, the “Patriot Act”), the Finder and/or the
Subscriber’s broker may be required or requested to disclose to one or more
regulatory and/or law enforcement bodies certain information regarding
transactions relating to the Subscriber’s account involving transactions with
foreign entities and individuals, other transactions in your account as required
in the Patriot Act and other activities described in the Patriot Act as
“suspicious activities.” Neither the Finder nor the Subscriber’s broker shall
have any obligation to advise the Subscriber of any such disclosures or reports
made in compliance with the Patriot Act.
 
 
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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
 
IN WITNESS WHEREOF, the undersigned has executed this Agreement on the ______
day of ______________ 2008.
 
_______________________________              x $100 for each
Share                         =$______________________.
Shares subscribed for
Aggregate Purchase Price

 
Each Subscriber shall also receive a number of Warrants initially exercisable
for a number of shares of Common Stock equal to 25% of the number of Shares of
Common Stock into which the Shares subscribed for under this Agreement are
initially convertible.
 
Manner in which Title is to be held (Please Check One):
 

1.
_____
Individual
7.
_____
Trust/Estate/Pension or Profit Sharing
                     
Plan
Date Opened:____________
           
2.
_____
Joint Tenants with Right of
Survivorship
8.
_____
As a Custodian for
______________________________
Under the Uniform Gift to Minors Act
of the State of
______________________________
           
3.
_____
Community Property
9.
_____
Married with Separate Property
4.
_____
Tenants in Common
10.
_____
Keogh
5.
 
Corporation/Partnership/Limited
Liability Company
11.
_____
Tenants by the Entirety
6.
_____
IRA
     

 
 
13

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IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 15.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 17.
 
ALL SUBSCRIBERS MUST ALSO COMPLETE AND
EXECUTE THE INVESTOR QUESTIONNAIRE
ATTACHED AS EXHIBIT C.
 
 
14

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EXECUTION BY NATURAL PERSONS
 

 
Exact Name in Which Title is to be Held
     
Name (Please Print)
 
Name of Additional Purchaser
     
Address: Number and Street
 
Address: Number and Street
     
City, State and Zip Code
 
City, State and Zip Code
     
Social Security Number
 
Social Security Number
     
Telephone Number
 
Telephone Number
     
Fax Number (if available)
 
Fax Number (if available)
     
E-Mail (if available)
 
E-Mail (if available)
     
(Signature)
 
(Signature of Additional Purchaser)

 
 
15

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EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, LLC, Trust, Etc.)
 

 
Name of Entity (Please Print)
Date of Incorporation or
Organization:__________________________________________________
 
Federal Taxpayer Identification
Number:________________________________________________

   
Office Address
     
City, State and Zip Code
     
Telephone Number
     
Fax Number (if available)
     
E-Mail (if available)
 

 
Type of entity (e.g., corporation, trust, limited partnership, general
partnership IRA Trust, Pension or Profit Sharing Plan or
Trust):_____________________________________________________
 
Date of formation or incorporation:                ___________________________
 
Whether the Subscriber was organized for the specific purpose of acquiring
securities of H2Diesel Holdings, Inc.:
 
Yes ______     No______
 
Each individual authorized to execute documents on behalf of the Subscriber in
connection with this investment:
 
Name: 
   
Name:
           
Title:
   
Title:
 

The Subscribers state of formation or incorporation: ________
 
The business of the entity: _____________________________
 
Certain Subscribers must provide the following information:
 

 
(A)
Corporations MUST provide the articles of incorporation, by-laws, good standing
certificate and corporate resolution authorizing the purchase of shares and
authorizing the person(s) signing the subscription documents to do so. All the
documents must be certified by the Secretary or Assistant Secretary of the
corporation as being true and correct copies thereof and in full force and
effect.

 
 
16

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(B)
Partnerships MUST provide a copy of the partnership agreement showing the date
of formation and giving evidence of the authority of the person(s) signing the
subscription documents to do so.

 

 
(C)
Trusts MUST provide a copy of the trust agreement showing the date of formation
and giving evidence of the authority of the person(s) signing the subscription
documents to do so.

 

 
(D)
Limited Liability Companies and similar organizations MUST provide their
organizational document, operating agreement, good standing certificate and
evidence of authorization for the purchase of shares the person(s) signing the
subscription documents to do so. All the documents must be certified by an
appropriate officer of the organization as being true and correct copies thereof
in full force and effect.

 
By: 
     
Name:
   
Title:
 

 
 
17

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ACCEPTED this _____ day of ________________ 2008 on behalf of the Company.

By: 
     
Name:
   
Title:
 

Subscription Agreement
Company Signature Page
 
 
18

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Exhibit A
ARTICLES OF AMENDMENT
 
 
A-1

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Exhibit B
FORM OF WARRANT
 
 
B-1

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Exhibit C
 
INVESTOR QUESTIONNAIRE
 
Instructions: Check all boxes below which correctly describe you and return this
Investor Questionnaire to H2Diesel Holdings, Inc., 11111 Katy Freeway, Suite
910, Houston, Texas 77079, Attention: David A. Gillespie, Chief Executive
Officer.
 

o
You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933,
as amended (the “Securities Act”), (ii) a savings and loan association or other
institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether
acting in an individual or fiduciary capacity, (iii) a broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), (iv) an insurance company as defined in Section
2(13) of the Securities Act, (v) an investment company registered under the
Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi)
a business development company as defined in Section 2(a)(48) of the Investment
Company Act, (vii) a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301 (c) or (d) of the Small Business
Investment Act of 1958, as amended, (viii) a plan established and maintained by
a state, its political subdivisions, or an agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees and you have
total assets in excess of $5,000,000, or (ix) an employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and (1) the decision that you shall subscribe for and purchase
Securities, is made by a plan fiduciary, as defined in Section 3(2 1) of ERISA,
which is either a bank, savings and loan association, insurance company, or
registered investment adviser, (2) you have total assets in excess of $5,000,000
and the decision that you shall subscribe for and purchase the Securities is
made solely by persons or entities that are accredited investors, as defined in
Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”)
or (3) you are a self-directed plan and the decision that you shall subscribe
for and purchase the Securities is made solely by persons or entities that are
accredited investors.

 

o
You are a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940, as amended.

 

o
You are an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar
business trust or a partnership, in each case not formed for the specific
purpose of making an investment in the Securities and with total assets in
excess of $5,000,000.

 

o
You are a director or executive officer of H2Diesel Holdings Inc.

 

o
You are a natural person whose individual net worth, or joint net worth with
your spouse, exceeds $1,000,000 at the time of your subscription for and
purchase of the Securities.

 
 
C-1

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o
You are a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with your spouse in excess of
$300,000 in each of the two most recent years, and who has a reasonable
expectation of reaching the same income level in the current year.

 

o
You are a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose subscription for and purchase of
the Shares is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D.

 

o
You are an entity in which all of the equity owners are persons or entities
described in one of the preceding paragraphs.

 
The undersigned hereby represents and warrants that all of its answers to this
Investor Questionnaire are true as of the date of its execution of the
Subscription Agreement pursuant to which it purchased Shares of the Company.
 

     
Name of Purchaser [please print]
 
Name of Co-Purchaser [please print]
     
Signature of Purchaser (Entities please
 
Signature of Co-Purchaser
provide signature of Purchaser’s duly
   
authorized signatory.)
         
Name of Signatory (Entities only)
         
Title of Signatory (Entities only)
   

 
 
C-2

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