Exhibit 10.1

                                PROMISSORY NOTE

FACE  AMOUNT                                       $1,412,500
PRICE                                              $1,130,000
INTEREST  RATE                                     0%  per  month
NOTE  NUMBER                                       March-2006-101
ISSUANCE  DATE                                     March  23,  2006
MATURITY  DATE                                     March  23,  2007

FOR VALUE RECEIVED, Hybrid Fuel Systems, Inc., a Georgia corporation, and all of
its  subsidiaries  (the  "Company") (OTC BB: HYFS) hereby promises to pay to the
order  of  DUTCHESS  PRIVATE EQUITIES FUND, L.P. (collectively, the "Holder") by
the  Maturity  Date, or earlier, the Face Amount of One Million Four Hundred and
Twelve  Thousand  Five  Hundred Dollars ($1,412,500) U.S., (this "Note") in such
amounts,  at such times and on such terms and conditions as are specified herein
(sometimes  hereinafter  the Company and the Holder are referred to collectively
as  "the  Parties").

Any  capitalized  term  not  defined  in this Note are defined in the Investment
Agreement  for the Equity Line of Credit between Dutchess Private Equities Fund,
LP  (as  the  "Investor") and the Company (the "Equity Line"), which definitions
the  Company  and  the  Holder  incorporate  herein  by  reference.

ARTICLE  1          Method  of  Payment

Section 1.1  Payments made to the Holder by the Company in satisfaction of  this
Note  (referred  to  as a "Payment," or "Payments") shall be drawn from each Put
under  the  Equity  Line  of Credit provided by the Investor to the Company. The
Company shall make payments to the Holder in the amount of the greater of a) one
hundred  percent  (100%)  of  each  Put  (as defined in the Investment Agreement
between  the  Company  and  the  Investor  dated  November 4, 2005) given to the
Investor  from  the Company; or, b) one hundred seventeen thousand seven hundred
and  eight  dollars  and thirty-three cents ($117,708.33) (the "Payment Amount")
until  the  Face  Amount  is paid in full, minus any fees due. The First Payment
will  be  due  on  May  1,  2006 and each subsequent Payment will be made at the
Closing  of each Put ("Payment Date" or "Payment Dates") until this Note is paid
in  full,  with a minimum amount of one hundred seventeen thousand seven hundred
and eight dollars and thirty-three cents ($117,708.33)per month. Notwithstanding
any  provision  to the contrary in this Note, the Company may pay in full to the
Holder  the  Face Amount, or any balance remaining thereon, in readily available
funds  at  any  time  and  from  time  to  time  without  penalty.

Section 1.2  Payments  pursuant  to  this Note shall be drawn directly from  the
Closing  of  each  Put  and shall be wired directly to the Holder on the Closing
Date  and  shall  be  included  in  the  calculation of the Threshold Amount (as
defined  in  Section  1.4,  below).  The  Company  agrees  to  fully execute and
diligently  carry  out  Puts  to  the  Investor,  on  the terms set forth in the
Investment  Agreement.  The  Company agrees that the Put Amount shall be for the
maximum  amount  allowed  under  the  Investment Agreement. Further, the Company
agrees to issue Puts to the Investor for the maximum frequency allowed under the
Investment  Agreement.  Failure  to  comply  with  the  terms  of the Investment
Agreement with respect to the Puts will result in an Event of Default as defined
in  this  Agreement  in  Article  4.

Section 1.3 In order to assist the Company in meeting its obligations under this
Note, the Company hereby authorizes the Investor to transfer funds from each Put
directly  to  the  Holder.  A  Put  shall  be  deemed closed after the funds are
transferred  to  the  Holder.

Section 1.4 After Closing, the Company must make a prepayment to the Holder when
the  aggregate  amount  of financing ("Financing") received by the Company is in
excess  of  one  million  dollars ($1,000,000) ("Threshold Amount"). The Company
agrees  to  pay one hundred percent (100%) of any proceeds raised by the Company
over  the  Threshold  Amount toward the prepayment of the Note, Interest and any
penalties  until  the Face Amount is paid in full. The prepayments shall be made
to  the  Holder  within  one  (1)  business  day of the Company's receipt of the
Financing.  Failure  to  do so will result in an Event of Default. The Threshold
Amount  shall also pertain to any assets sold, transferred or disposed of by the
Company  and  any cash balances in the Company bank or brokerage accounts at the
end  of  each  month.

ARTICLE  2             Collateral

Section 2.1  The  Company  does  hereby agree to issue to the Holder for use  as
Collateral  forty  (40)  signed  Put  Notices consistent with the conditions set
forth  in  Section 12. In the event, the Holder uses the Collateral in full, the
Company  shall  immediately  deliver  to  the  Holder  additional  Put Sheets as
requested  by  the  Holder.

Section 2.2 Upon the completion of the Company's obligation to the Holder of the
Face  Amount  of this Note, the Company will not be under any further obligation
to  complete additional Puts. All remaining Put sheets shall be marked "VOID" by
the  Holder  and  returned  to  the  Company  at  the  Company's  request.


ARTICLE  3             Unpaid  Amounts

Section 3.1 In the event that on the Maturity Date the Company has any remaining
amounts unpaid on this Note (the "Residual Amount"), the Holder can exercise its
right to increase the Face Amount by ten percent (10%) as an initial penalty AND
an  additional  two and one-half percent (2.5%) per month --- paid, pro rata for
partial periods, compounded daily, as liquidated damages ("Liquidated Damages").
If a Residual Amount remains, the Company is in Default and the Holder may elect
remedies  as  set  forth  in  Article  4,  below.  The  Parties acknowledge that
Liquidated  Damages  are  not  interest  and  should  not consititute a penalty.


ARTICLE  4          Defaults  and  Remedies

Section 4.1     Events  of  Default. An "Event of Default" occurs if any one  of
the  following  occur:

     (a) The Company does not make a Payment within two (2) business days of (i)
the Closing of a Put; or (ii) a Payment Date; or, (iii) a Residual Amount on the
Note  exists  on  the  Maturity  Date;  or

     (b)  The  Company,  pursuant to or within the meaning of any Bankruptcy Law
(as  hereinafter  defined): (i) commences a voluntary case; (ii) consents to the
entry  of  an order for relief against it in an involuntary case; (iii) consents
to the appointment of a Custodian (as hereinafter defined) of the Company or for
its  property; (iv) makes an assignment for the benefit of its creditors; or (v)
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law  that:  (A)  is  for  relief against the Company in an involuntary case; (B)
appoints  a  Custodian  of  the  Company  or for its property; or (C) orders the
liquidation  of  the  Company,  and  the order or decree remains unstayed and in
effect  for  sixty  (60)  calendar  days;  or

     (c)  The  Company's  $0.001  par value common stock (the "Common Stock") is
suspended  or  is  no  longer  listed  on  any recognized exchange, including an
electronic over-the-counter bulletin board, for in excess of two (2) consecutive
trading  days;  or

     (d)  Either  the  registration  statement  for the underlying shares in the
Investment  Agreement  is  not  effective for any reason and is not cured within
five  (5)  days;  or,

     (e)  Any  of  the Company's representations or warranties contained in this
Agreement  were  false  when  made;  or,

     (f)  The  Company  breaches this Agreement, and such breach, if and only if
such  breach  is  subject  to cure, continues for a period of three (3) business
days.

As  used  in  this  Section 4.1, the term "Bankruptcy Law" means Title 11 of the
United  States  Code  or  any  similar  federal  or  state law for the relief of
debtors.  The term "Custodian" means any receiver, trustee, assignee, liquidator
or  similar  official  under  any  Bankruptcy  Law.

Section 4.2  Remedies. In the Event of Default, the Holder may elect to  garnish
Revenue  from  the  Company  in  an  amount  that  will  repay the Holder on the
schedules  outlined  in  this Agreement and fully enforce the Security Agreement
dated  this  date  between  the  Holder  and  the  Company.

     For  EACH  AND  EVERY  Event of Default, as outlined in this Agreement, the
          ----------------
Holder  can  exercise  its  right to increase the Face Amount of the Note by ten
percent  (10%)  as  an  initial  penalty.  In  addition, the Holder may elect to
increase  the  Face  Amount  of  the  Note by two and one-half percent (2.5%) as
Liquidated  Damages,  compounded daily.  The Parties acknowledge that Liquidated
Damages  are  not  interest  under  the  terms  of this Agreement, and shall not
constitute  a  penalty.

     In  the  event  of  a  Default hereunder, the Holder, at its sole election,
shall  have  the  right,  but  not  the  obligation,  to  either:

          a)  Switch  the Residual Amount to a three-year ("Convertible Maturity
Date"),  eighteen  percent  (18%)  interest bearing convertible debenture at the
terms  described  hereinafter  (the  "Convertible  Debenture").  In the event of
Default,  the  Convertible  Debenture  shall  be considered closed ("Convertible
Closing  Date"),  as of the date of the Event of Default.  If the Holder chooses
to  convert  the  Residual  Amount to a Convertible Debenture, the Company shall
have  twenty  (20)  business  days  after notice of default from the Holder (the
"Notice  of Convertible Debenture") to file a registration statement covering an
amount  of  shares equal to three hundred percent (300%) of the Residual Amount.
Such registration statement shall be declared effective under the Securities Act
of  1933,  as  amended  (the  "Securities  Act"), by the Securities and Exchange
Commission (the "Commission") within sixty (60) business days of the Convertible
Closing  Date.   In  the  event  the  Company  does  not  file such registration
statement  within  twenty  (20)  business  days of the Holder's request, or such
registration  statement  is not declared by the Commission to be effective under
the  Securities  Act  within the time period described above the Residual Amount
shall  increase  by  five  thousand  dollars ($5,000) per day.  In the event the
Company  is  given  the option for accelerated effectiveness of the registration
statement,  the  Company  will  cause such registration statement to be declared
effective  as  soon  as  reasonably  practicable and will not take any action to
delay  the  registration  to become effective.  In the event that the Company is
given  the  option  for accelerated effectiveness of the registration statement,
but chooses not to cause such registration statement to be declared effective on
such  accelerated  basis,  the  Residual  Amount shall increase by five thousand
dollars  ($5,000)  per  day  commencing  on  the  earliest date as of which such
registration  statement  would  have been declared to be effective if subject to
accelerated  effectiveness;  or

           b) The Holder may increase the Payment Amount described under Article
1  to  fulfill  the repayment of the Residual Amount.  The Company shall provide
full  cooperation to the Holder in directing funds owed to the Holder on any Put
made  by  the Company to the Investor.    The Company agrees to diligently carry
out  the  terms  outlined  in  the Investment Agreement for delivery of any such
shares.  In the event the Company is not diligently fulfilling its obligation to
direct  funds  owed  to  the  Holder  from  Puts  to the Investor, as reasonably
determined  by  the  Holder,  the  Holder  may, after giving the Company two (2)
business days advance notice to cure the same, elect to increase the Face Amount
of  the  Note by 2.5% each day, compounded daily, in additional to and on top of
additional  remedies  available  to  the  Holder  under  this  Note.

Section 4.3 Conversion  Privilege

     (a)  The  Holder  shall have the right to convert the Convertible Debenture
into  shares  of Common Stock at any time following the Convertible Closing Date
and before the close of business on the Convertible Maturity Date. The number of
shares of Common Stock issuable upon the conversion of the Convertible Debenture
shall  be  determined pursuant to Section 4.4, but the number of shares issuable
shall  be  rounded  up  to  the  nearest  whole  share.

     (b)  The  Holder may convert the Convertible Debenture in whole or in part,
at  any  time  and  from  time  to  time.

     (c)  In  the  event all or any portion of the Convertible Debenture remains
outstanding  on the Convertible Maturity Date (the "Debenture Residual Amount"),
the  unconverted  portion  of  such  Convertible Debenture will automatically be
converted  into  shares  of Common Stock on such date in the manner set forth in
Section  4.4.

Section 4.4     Conversion  Procedure.

     (a) The Holder may elect to convert the Residual Amount in whole or in part
any  time  and  from  time  to time following the Convertible Closing Date. Such
conversion  shall be effectuated by providing the Company, or its attorney, with
that  portion  of  the  Convertible  Debenture  to  be converted together with a
facsimile  or  original  of  the  signed  notice  of  conversion (the "Notice of
Conversion").  The  date  on  which  the  Notice  of  Conversion  is  effective
("Conversion  Date")  shall  be  deemed  to  be the date on which the Holder has
delivered  to  the  Company  a  facsimile  or  original  of the signed Notice of
Conversion, as long as the original Convertible Debenture(s) to be converted are
received  by  the  Company  within  five  (5) business days thereafter. When the
Convertible  Debenture has been provided to the Company, the Holder can elect to
either  reissue  the  Convertible Debenture, or continually convert the existing
Debenture.  Any  Notice  of  Conversion  faxed by the Holder to the Company on a
particular  day shall be deemed to have been received no later than the previous
business day (receipt being via a confirmation of the time such facsimile to the
Company  is  received).

     (b)  Common  Stock  to  be  Issued.  Upon the conversion of any Convertible
Debentures by the Holder, the Company shall instruct its transfer agent to issue
stock  certificates  without  restrictive legends or stop transfer instructions,
if, at that time, the aforementioned registration statement described in Section
4.2  has  been  declared  effective  (or  with proper restrictive legends if the
registration  statement  has  not  as  yet  been  declared  effective),  in such
denominations  representing  the  number of shares of Common Stock issuable upon
such  conversion.  In the event that the Debenture is deemed saleable under Rule
144  of the Securities Exchange Act of 1933, the Company shall, upon a Notice of
Conversion,  instruct  the  transfer  agent  to  issue free trading certificates
without  restrictive  legends,  subject to other applicable securities laws. The
Company  is  responsible  to  for  all costs associated with the issuance of the
shares,  including  but  not  limited  to  the  opinion  letter,  FedEx  of  the
certificates  and any other costs that arise. The Company shall act as registrar
of  the  Shares  of  Common Stock to be issued and shall maintain an appropriate
ledger  containing  the  necessary  information with respect to each Convertible
Debenture.  The Company warrants that no instructions have been given or will be
given  to  the  transfer agent which limit, or otherwise prevent resale and that
the  Common  Stock  shall otherwise be freely resold, except as may be set forth
herein  or  subject  to  applicable  law.

     (c)  Conversion  Rate.  The  Holder  is  entitled  to convert the Debenture
Residual  Amount,  plus  accrued  interest  and penalties, anytime following the
Convertible Closing Date, at the lesser of either (i) fifty percent (50%) of the
lowest  closing  bid  price  during  the  fifteen  (15) trading days immediately
preceding  the  Convertible  Maturity Date, or (ii) 100% of the lowest bid price
for  the  twenty (20) trading days immediately preceding the Convertible Closing
Date  ("Fixed  Conversion  Price").  No  fractional shares or scrip representing
fractions  of  shares  will  be  issued  on conversion, but the number of shares
issuable  shall  be  rounded  up  to  the  nearest  whole  share.

     (d)  Nothing  contained  in  the  Convertible  Debenture shall be deemed to
establish  or  require  the  Company  to pay interest to the Holder at a rate in
excess  of  the  maximum rate permitted by applicable law. In the event that the
rate  of  interest  required  to  be  paid exceeds the maximum rate permitted by
governing  law,  the  rate  of  interest required to be paid thereunder shall be
automatically  reduced to the maximum rate permitted under the governing law and
such  excess  shall  be returned with reasonable promptness by the Holder to the
Company.  In  the  event this Section 4.4(d) applies, the Parties agree that the
terms  of this Note shall remain in full force and effect except as is necessary
to  make  the  interest  rate  comply  with  applicable  law.

     (e)  The Holder shall be treated as a shareholder of record on the date the
Company  is  required  to  issue the Common Stock to the Holder. If prior to the
issuance  of  stock  certificates,  the  Holder designates another person as the
entity  in  the  name of which the stock certificates requesting the Convertible
Debenture  are  to  be  issued, the Holder shall provide to the Company evidence
that either no tax shall be due and payable as a result of such transfer or that
the  applicable  tax  has  been paid by the Holder or such person. If the Holder
converts  any  part of the Convertible Debentures, or will be, the Company shall
issue to the Holder a new Convertible Debenture equal to the unconverted amount,
immediately  upon  request  by  the  Holder.

     (f)  Within  three  (3)  business  days  after receipt of the documentation
referred  to  in  this Section, the Company shall deliver a certificate, for the
number  of shares of Common Stock issuable upon the conversion. In the event the
Company  does  not  make  delivery  of  the Common Stock as instructed by Holder
within  five  (5) business days after the Conversion Date, the Company shall pay
to  the Holder an additional one percent (1%) per day in cash of the full dollar
value  of  the  Debenture  Residual  Amount  then  remaining  after  conversion,
compounded  daily.

     (g)  The  Company  shall  at all times reserve (or make alternative written
arrangements  for  reservation or contribution of shares) and have available all
Common  Stock  necessary to meet conversion of the Convertible Debentures by the
Holder  of  the entire amount of Convertible Debentures then outstanding. If, at
any  time,  the  Holder  submits a Notice of Conversion and the Company does not
have  sufficient  authorized but unissued shares of Common Stock (or alternative
shares  of  Common  Stock  as may be contributed by stockholders of the Company)
available  to  effect,  in  full,  a conversion of the Convertible Debentures (a
"Conversion  Default,"  the date of such default being referred to herein as the
"Conversion  Default  Date"),  the  Company shall issue to the Holder all of the
shares  of  Common Stock which are available. Any Convertible Debentures, or any
portion  thereof,  which  cannot  be  converted  due  to  the  Compnay's lack of
sufficient authorized common stock (the "Unconverted Debentures"), may be deemed
null and void upon written notice sent by the Holder to the Company. The Company
shall provide notice of such Conversion Default ("Notice of Conversion Default")
to  the  Holder,  by  facsimile,  within  one (1) business days of such default.

     (h)  The Company agrees to pay the Holder payments for a Conversion Default
("Conversion  Default  Payments")  in  the  amount  of (N/365) multiplied by .24
multiplied  by the initial issuance price of the outstanding or tendered but not
converted Convertible Debentures held by the Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company  authorizes  a  sufficient  number  of  shares of Common Stock to effect
conversion  of  all  remaining  Convertible  Debentures.  The Company shall send
notice  ("Authorization  Notice") to the Holder that additional shares of Common
Stock  have  been authorized, the Authorization Date, and the amount of Holder's
accrued  Conversion  Default  Payments.  The accrued Conversion Default shall be
paid  in  cash  or shall be convertible into Common Stock at the conversion rate
set  forth  in the first sentence of this paragraph, upon written notice sent by
the Holder to the Company, which Conversion Default shall be payable as follows:
(i)  in  the  event the Holder elects to take such payment in cash, cash payment
shall  be made to the Holder within five (5) business days, or (ii) in the event
Holder  elects  to  take  such  payment  in stock, the Holder may convert at the
conversion  rate  set  forth  in  the first sentence of this paragraph until the
expiration  of  the  conversion  period.

     (i)  The  Company  acknowledges  that  its failure to maintain a sufficient
number  of  authorized  but  unissued shares of Common Stock to effect in full a
conversion of the Convertible Debentures in full will cause the Holder to suffer
irreparable harm, and that the actual damages to the Holder will be difficult to
ascertain.  Accordingly,  the parties agree that it is appropriate to include in
this  Agreement  a provision for liquidated damages. The Parties acknowledge and
agree that the liquidated damages provision set forth in this section represents
the parties' good faith effort to quantify such damages and, as such, agree that
the  form  and  amount  of such liquidated damages are reasonable, and under the
circumstances,  do  not  constitute a penalty. The payment of liquidated damages
shall  not  relieve the Company from its obligations to deliver the Common Stock
pursuant  to  the  terms  of  this  Convertible  Debenture.

     (j)  If,  by  the  third  (3rd) business day after the Conversion Date, any
portion  of  the shares of the Convertible Debentures have not been delivered to
the Holder and the Holder purchases, in an open market transaction or otherwise,
shares  of  Common  Stock  (the "Covering Shares") necessary to make delivery of
shares  which  would  had  been delivered if the full amount of the shares to be
converted  had  been  delivered to the Holder, then the Company shall pay to the
Holder,  in  addition  to  any  other  amounts  due  to  Holder pursuant to this
Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined  below).  The  "Buy  In  Adjustment  Amount"  is the amount equal to the
excess,  if  any,  of (x) the Holder's total purchase price (including brokerage
commissions,  if  any) for the Covering Shares minus (y) the net proceeds (after
brokerage  commissions, if any) received by the Holder from the sale of the Sold
Shares.  The  Company  shall  pay  the Buy-In Adjustment Amount to the Holder in
immediately  available  funds within five (5) business days of written demand by
the  Holder.  By  way of illustration and not in limitation of the foregoing, if
the  Holder  purchases  shares  of  Common  Stock  having a total purchase price
(including  brokerage  commissions) of $11,000 to cover a Buy-In with respect to
shares  of  Common  Stock  it  sold  for  net  proceeds  of  $10,000, the Buy-In
Adjustment  Amount  which the Company will be required to pay to the Holder will
be  $1,000.

ARTICLE  5          Additional  Financing  and  Registration  Statements

Section 5.1 The Company will not enter into any additional financing  agreements
whether  for  debt  or  equity, without prior expressed written consent from the
Holder. Violation of this Section 5.1 will result in an Event of Default and the
Holder  may  elect  to  take  the  action  or  actions  outlined  in  Article 4.

Section 5.2 The Company agrees that it shall not file any registration statement
which  includes any of its Common Stock, including those on Form S-8, until such
time  as  the  Note  is paid off in full ("Lock-Up Period") or without the prior
written consent of the Holder. The Company also agrees that no further issuances
of  stock  will  be  made from the current S-8 on file with the SEC, File Number
333-130554.  Failure  by the Company to fully comply with this Section 5.2 shall
result  in  an  Event  of Default and the Holder may elect to take the action or
actions  outlined  in  Article  4  or  Section  5.3.

Section 5.3 If, at any time, while this Note is outstanding, the  Company issues
or  agrees  to  issue  to  any  entity  or person ("Third Party") for any reason
whatsoever,  any  common stock or securities convertible into or exercisable for
shares  of  common  stock  (or  modify  any  such  terms  in effect prior to the
execution  of  this  Note)  (a  "Third Party Financing"), at terms deemed by the
Holder  to  be more favorable to the Third Party, then the Company grants to the
Holder  the  right,  at the Holder's election, to modify the terms of this Note,
including  but not limited to the Incentive Shares outlined in Article 15 below,
to  match  or  conform  to  the  more favorable term or terms of the Third Party
Financing.  The  rights of the Holder in this Section 5.3 are in addition to all
other  rights  the  Holder  has pursuant to this Note and the Security Agreement
between  the  Holder  and  the  Company.

Section 5.4 During the period of time that this Note is in force, the  Company's
officers,  insiders,  affiliates  or  other  related  parties shall refrain from
selling  any  Stock.

ARTICLE  6          Notice.

Section 6.1  Any notices, consents, waivers or other communications required  or
permitted  to  be given under the terms of this Note must be in writing and will
be  deemed  to have been delivered (i) upon delivery, when delivered personally;
(ii)  upon  receipt,  when  sent  by  facsimile  (provided  a  confirmation  of
transmission is mechanically or electronically generated and kept on file by the
sending  party); or (iii) one (1) day after deposit with a nationally recognized
overnight  delivery  service, so long as it is properly addressed. The addresses
and  facsimile  numbers  for  such  communications  shall  be:

If  to  the  Company:

Mark  Clancy
Hybrid  Fuel  Systems
12409  Telecom  Drive
Tampa,  FL  33637
Telephone:  813-979-9222
Facsimile:  813-979-9224

With  copy  to:

Darrin  M.  Ocasio,  Esq.
Sichenzia  Ross  Friedman  Ference  LLP
1065  Avenue  of  the  Americas
New  York,  New  York  10018
Phone:  (212)  930-9700
Fax:  (212)  930-9725


If  to  the  Holder:

Dutchess  Capital  Management,  LLC
Douglas  Leighton
50  Commonwealth  Ave,  Suite  2
Boston,  MA  02116
Phone:  (617)  301-4700
Facsimile:  (617)  249-0947

Section 6.2     The  Parties  are  required to provide each other with  five (5)
business  days  prior  notice to the other party of any change in address, phone
number  or  facsimile  number.

ARTICLE  7          Time

     Where  this  Note  authorizes  or  requires  the  payment  of  money or the
performance of a condition or obligation on a Saturday or Sunday or a holiday on
which  the  United  States  Stock Markets ("US Markets") are closed ("Holiday"),
such  payment  shall  be  made  or condition or obligation performed on the last
business day preceding such Saturday, Sunday or Holiday.  A "business day" shall
mean  a  day  on  which  the  US  Markets are open for a full day or half day of
trading.

ARTICLE  8          No  Assignment.

      This  Note  and the obligations hereunder shall not be assigned, except as
otherwise  provided  herein.

ARTICLE  9          Rules  of  Construction.

     In  this Note, unless the context otherwise requires, words in the singular
number  include the plural, and in the plural include the singular, and words of
the  masculine gender include the feminine and the neuter, and when the tense so
indicates,  words of the neuter gender may refer to any gender.  The numbers and
titles  of  sections  contained  in  the  Note  are  inserted for convenience of
reference  only,  and  they  neither form a part of this Note nor are they to be
used  in  the  construction or interpretation hereof.  Wherever, in this Note, a
determination of the Company is required or allowed, such determination shall be
made  by  a majority of the Board of Directors of the Company and, if it is made
in  good  faith,  it  shall  be  conclusive  and  binding  upon  the  Company.

ARTICLE  10          Governing  Law

     The  validity,  terms,  performance  and  enforcement of this Note shall be
governed  and construed by the provisions hereof and in accordance with the laws
of  the  Commonwealth  of  Massachusetts  applicable  to  agreements  that  are
negotiated,  executed,  delivered  and  performed  solely in the Commonwealth of
Massachusetts.

ARTICLE  11          Disputes  Subject  to  Arbitration

     The  parties  to  this  Note  will  submit all disputes arising under it to
arbitration  in Boston, Massachusetts before a single arbitrator of the American
Arbitration  Association  ("AAA").  The  arbitrator  shall  be  selected  by
application  of  the  rules  of  the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in the
Commonwealth  of  Massachusetts.  No  party to this agreement will challenge the
jurisdiction  or  venue provisions as provided in this section.  Nothing in this
section  shall  limit the Holder's right to obtain an injunction for a breach of
this  Agreement  from  a  court  of  law.


ARTICLE  12          Conditions  to  Closing

     The Company shall have delivered the proper Collateral to the Holder before
Closing  of  this  Note.

ARTICLE  13          Structuring  and  Administration  Expense

     The Company agrees to pay for related expenses associated with the proposed
transaction  of  $90,000.  This  amount  shall cover, but is not limited to, the
following:  due  diligence  expenses,  UCC-1  filing  fees,  document  creation
expenses,  closing  costs,  and  transaction  administration  expenses. All such
structuring  and  administration  expenses  shall  be  deducted  from  the first
closing.

ARTICLE  14          Indemnification

     In  consideration  of the Holder's execution and delivery of this Agreement
and  the  acquisition  and funding by the Holder of this Note and in addition to
all  of the Company's other obligations under the documents contemplated hereby,
the  Company  shall  defend, protect, indemnify and hold harmless the Holder and
all  of its shareholders, officers, directors, employees, counsel, and direct or
indirect  investors  and  any  of  the  foregoing  person's  agents  or  other
representatives  (including,  without  limitation,  those retained in connection
with  the  transactions  contemplated  by  this  Agreement)  (collectively,  the
"Indemnities")  from  and  against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection  therewith (irrespective of whether any such Indemnitee is a party to
the  action  for  which  indemnification  hereunder  is  sought), and including,
without  limitation,  reasonable  attorneys'  fees  and  disbursements  (the
"Indemnified  Liabilities"),  incurred  by  any  Indemnitee  as  a result of, or
arising  out  of,  or  relating  to  (i)  any misrepresentation or breach of any
representation  or  warranty  made  by  the  Company  in  the Note, or any other
certificate,  instrument  or  document  contemplated  hereby or thereby (ii) any
breach  of any covenant, agreement or obligation of the Company contained in the
Note  or  any  other  certificate, instrument or document contemplated hereby or
thereby,  except  insofar  as  any  such misrepresentation, breach or any untrue
statement,  alleged  untrue  statement,  omission or alleged omission is made in
reliance  upon  and  in  conformity  with  written  information furnished to the
Company  by,  or  on behalf of, the Holder or is based on illegal trading of the
Common  Stock by the Holder. To the extent that the foregoing undertaking by the
Company  may be unenforceable for any reason, the Company shall make the maximum
contribution  to  the  payment  and  satisfaction  of  each  of  the Indemnified
Liabilities  that  is permissible under applicable law. The indemnity provisions
contained  herein  shall be in addition to any cause of action or similar rights
the  Holder  may  have,  and  any  liabilities  the  Holder  may  be subject to.

ARTICLE  15          Incentive  Shares

     The  Company shall issue one million eight hundred and fifty-eight thousand
(1,858,000)  shares of unregistered, restricted Common Stock to the Holder as an
incentive  for  the investment ("Incentive Shares").  The Incentive Shares shall
be  issued  and  delivered  immediately  to the Holder and shall carry piggyback
registration  rights.   In  the  event the Shares are not registered in the next
registration  statement,  the Company shall pay to the Holder, as a penalty, one
million  eight hundred and fifty-eight thousand (1,858,000) additional shares of
common  stock for each time a registration statement is filed and the Shares are
not  included.  The  Holder  at its sole discretion may waive such penalty.  The
Company's failure to issue the Incentive Shares constitutes an  Event of Default
and  the  Holder  may  elect to enforce the remedies outlined in Article 4.  The
Company's  obligation  to  provide  the Holder with the Incentive Shares, as set
forth  herein,  shall  survive the operation of the Agreement and any default on
this  obligation  shall provide the Holder with all rights, remedies and default
provisions  set  forth  in  this  Note,  or  otherwise  available  by  law.

ARTICLE  16          Use  of  Proceeds

     Five  hundred  and  forty-one  thousand  five  hundred  forty-two  dollars
($541,542)  shall to go to redeem Alpha Capital, Whalehaven Funds and Ellis Fund
(the  "Previous  Investors").  The  Company  hereby  authorized  the  Holder  to
directly  transfer  funds  to  the Previous Investors directly from Closing.  In
addition,  the  Holder  shall directly transfer funds to Sichenzia Ross Friedman
Ference  LLP  in  the amount of $23,863.77 to cover outstanding legal fees.  The
remaining  proceeds shall be used for specifically for the purchase of equipment
outlined  below:

Final  Payment  for  Taylor  Dynomameter                   $ 165,000
Purchase  500  Electronic  Control  Unit  for  resale      $ 130,000
Purchase  component  parts  for  resale                    $ 110,000

The Holder shall have full right to the equipment through the Security Agreement
of  this  date,  as  outlined  in  Article  21.

The  remaining  $69,594.23  shall  be  used  for  miscellaneous  working capital

ARTICLE  17          Waiver

     The  Holder's  delay  or  failure at any time or times hereafter to require
strict  performance  by  Company of any obligations, undertakings, agreements or
covenants  shall  not  waive,  affect, or diminish any right of the Holder under
this  Note  to  demand strict compliance and performance herewith. Any waiver by
the  Holder of any Event of Default shall not waive or affect any other Event of
Default,  whether  such  Event  of  Default  is  prior or subsequent thereto and
whether  of  the  same or a different type. None of the undertakings, agreements
and  covenants  of  the Company contained in this Note, and no Event of Default,
shall be deemed to have been waived by the Holder, nor may this Note be amended,
changed  or  modified,  unless such waiver, amendment, change or modification is
evidenced by a separate instrument in writing specifying such waiver, amendment,
change  or  modification  and  signed  by  the  Holder.

ARTICLE  18          Senior  Obligation

     The  Company  shall cause this Note to be senior in right of payment to all
other  current  or future debt of the Company.  The Company warrants that it has
taken  all necessary steps to subordinate its other obligations to the rights of
the  Holder  in  this  Note.

ARTICLE  19          Transactions  With  Affiliates

     The  Company  shall  not,  and  shall cause each of its Subsidiaries to not
enter into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend,  modify  or  supplement,  any  agreement,  transaction,  commitment  or
arrangement with any of its or any Subsidiary's officers, directors, persons who
were  officers  or  directors  at  any  time  during  the  previous  two  years,
shareholders who beneficially own five percent (5%) or more of the Common Stock,
or  affiliates  or with any individual related by blood, marriage or adoption to
any  such  individual  or with any entity in which any such entity or individual
owns  a  five  percent (5%) or more beneficial interest (each a "Related Party")
during  the  Lock  Up  Period.

ARTICLE  20          Equity  Line  Obligations

     At  the  request  of  the  Holder,  at any time after the Company's current
effective  registration  statement  for  the Equity Line of Credit with Dutchess
Private  Equities,  II,  LP (File No: 333-129928), has eight million (8,000,000)
shares  or  less remaining for issuance, the Company shall immediately execute a
new  Investment  Agreement for an Equity Line of Credit under the same terms and
conditions  as  the previous Equity Line.  The Company shall immediately prepare
and file a registration statement for the registration of shares as set forth in
the  new  Investment  Agreement.  The  Holder  shall  also  retain  the right to
determine  the date of the filing of such registration statement.  Failure to do
any  action  outlined  in  this  Article  will  result  in  an Event of Default.

ARTICLE  21          Security

     The Holder shall have full right to exercise the Security Agreement between
the  Company  and  the  Holder  dated  this  date.

ARTICLE  22          Miscellaneous

Section 22.1 This Note may be executed in two or more counterparts, all of which
taken  together  shall constitute one instrument. Execution and delivery of this
Note  by exchange of facsimile copies bearing the facsimile signature of a party
shall constitute a valid and binding execution and delivery of this Note by such
party.  Such  facsimile  copies shall constitute enforceable original documents.

Section 22.2  The Company warrants that the execution, delivery and  performance
of  this  Note  by  the  Company  and  the  consummation  by  the Company of the
transactions  contemplated hereby and thereby will not (i) result in a violation
of  the  Articles of Incorporation, any Certificate of Designations, Preferences
and  Rights  of  any outstanding series of preferred stock of the Company or the
By-laws  or  (ii)  conflict  with, or constitute a material default (or an event
which  with  notice  or  lapse  of time or both would become a material default)
under,  or  give to others any rights of termination, amendment, acceleration or
cancellation  of,  any  material  agreement,  contract,  indenture  mortgage,
indebtedness  or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree,  including  United  States  federal  and  state  securities  laws  and
regulations  and  the rules and regulations of the principal securities exchange
or  trading market on which the Common Stock is traded or listed (the "Principal
Market"),  applicable  to the Company or any of its Subsidiaries or by which any
property  or  asset  of  the  Company  or  any  of  its Subsidiaries is bound or
affected.  Neither  the Company nor its Subsidiaries is in violation of any term
of,  or  in  default  under,  the  Articles of Incorporation, any Certificate of
Designations,  Preferences  and  Rights  of  any outstanding series of preferred
stock  of the Company or the By-laws or their organizational charter or by-laws,
respectively,  or  any  contract,  agreement, mortgage, indebtedness, indenture,
instrument,  judgment,  decree  or  order  or  any  statute,  rule or regulation
applicable  to  the  Company or its Subsidiaries, except for possible conflicts,
defaults,  terminations, amendments, accelerations, cancellations and violations
that  would  not individually or in the aggregate have a Material Adverse Effect
as  defined below. The business of the Company and its Subsidiaries is not being
conducted,  and  shall  not  be  conducted,  in  violation  of any law, statute,
ordinance,  rule,  order  or regulation of any governmental authority or agency,
regulatory  or  self-regulatory agency, or court, except for possible violations
the sanctions for which either individually or in the aggregate would not have a
Material  Adverse  Effect.  The  Company  is not required to obtain any consent,
authorization,  permit  or  order of, or make any filing or registration (except
the  filing of a registration statement) with, any court, governmental authority
or  agency,  regulatory  or self-regulatory agency or other third party in order
for  it  to  execute,  deliver  or  perform  any  of  its  obligations under, or
contemplated  by,  this Note in accordance with the terms hereof or thereof. All
consents,  authorizations,  permits, orders, filings and registrations which the
Company  is  required  to  obtain  pursuant  to the preceding sentence have been
obtained  or  effected  on or prior to the date hereof and are in full force and
effect  as  of  the date hereof. The Company and its Subsidiaries are unaware of
any  facts  or  circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal  Market  as  in  effect  on the date hereof and on each of the Closing
Dates  and is not aware of any facts which would lead to delisting of the Common
Stock  by  the  Principal  Market.

Section 22.3 The Company and its "Subsidiaries" (which for purposes of this Note
means  any  entity  in  which  the Company, directly or indirectly, owns capital
stock  or  holds  an equity or similar interest) are corporations duly organized
and  validly  existing  in  good  standing  under  the  laws  of  the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization  to  own  their  properties  and to carry on their business as now
being  conducted. Both the Company and its Subsidiaries are duly qualified to do
business and are in good standing in every jurisdiction in which their ownership
of  property  or  the  nature  of  the  business  conducted  by  them makes such
qualification  necessary,  except  to  the  extent  that  the  failure  to be so
qualified  or  be  in good standing would not have a Material Adverse Effect. As
used  in  this Note, "Material Adverse Effect" means any material adverse effect
on  the  business,  properties,  assets,  operations,  results  of  operations,
financial  condition  or  prospects of the Company and its Subsidiaries, if any,
taken  as  a  whole,  or  on  the  transactions  contemplated  hereby  or by the
agreements  and instruments to be entered into in connection herewith, or on the
authority  or  ability of the Company to perform its obligations under the Note.

Section 22.4 Authorization; Enforcement; Compliance with Other Instruments.  (i)
The  Company  has  the requisite corporate power and authority to enter into and
perform  its  obligations  under this Note, and to issue this Note and Incentive
Shares  in  accordance with the terms hereof and thereof, (ii) the execution and
delivery  of  this  Note  by  the  Company  and  the  consummation  by it of the
transactions  contemplated  hereby and thereby, including without limitation the
reservation  for  issuance  and the issuance of the Incentive Shares pursuant to
this  Note,  have  been  duly  and  validly authorized by the Company's Board of
Directors  and  no  further consent or authorization is required by the Company,
its  Board  of Directors, or its shareholders, (iii) this Note has been duly and
validly executed and delivered by the Company, and (iv) the Note constitutes the
valid  and binding obligations of the Company enforceable against the Company in
accordance  with  their  terms,  except as such enforceability may be limited by
general  principles  of  equity  or  applicable  bankruptcy,  insolvency,
reorganization,  moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally,  the  enforcement  of  creditors'  rights  and  remedies.

Section 22.5  The execution and delivery of this Note shall not  alter the prior
written  agreements  between  the  Company  and  the  Holder,  consisting of the
Transaction  Documents,  associated with Debenture Number November 2005 101, and
the  Note Number December 2005 101. This Note is the FINAL AGREEMENT between the
Company  and  the  Holder  with  respect  to  the terms and conditions set forth
herein,  and,  the  terms  of  this  Note may not be contradicted by evidence of
prior,  contemporaneous,  or  subsequent  oral  agreements  of  the Parties. The
execution and delivery of this Note is done in conjunction with the execution of
the  Security  Agreement,  as  defined  in  Article  21.

Section 22.6  There  are  no  disagreements  of any kind presently existing,  or
reasonably  anticipated  by  the  Company  to arise, between the Company and the
accountants,  auditors  and  lawyers  formerly or presently used by the Company,
including  but  not  limited  to disputes or conflicts over payment owed to such
accountants,  auditors  or  lawyers.

Section 22.7  All  representations  made  by  or  relating  to the Company  of a
historical  nature  and all undertakings described herein shall relate and refer
to  the  Company,  its  predecessors,  and  the  Subsidiaries.

Section 22.8 The only officer, director, employee and consultant stock option or
stock incentive plan currently in effect or contemplated by the Company has been
submitted  to  the Holder or is described or within past filings with the United
States  Securities  and Exchange Commission. The Company aggress not to initiate
or  institute  any  such  plan  or  to  issue  stock  options.

Section 22.9 The Company acknowledges that its failure to timely meet any of its
obligations  hereunder,  including,  but  without limitation, its obligations to
make  Payments,  deliver  shares  and,  as  necessary,  to register and maintain
sufficient  number  of  Shares, will cause the Holder to suffer irreparable harm
and  that  the  actual  damage  to  the  Holder  will be difficult to ascertain.
Accordingly,  the  parties  agree  that  it  is  appropriate  to include in this
Debenture  a provision for liquidated damages. The parties acknowledge and agree
that  the  liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form  and amount of such liquidated damages are reasonable and do not constitute
a  penalty. The payment of liquidated damages shall not relieve the Company from
its  obligations  to  deliver  the  Common  Stock  pursuant to the terms of this
Debenture.

                                      *.* *
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<PAGE>

Any  misrepresentations shall be considered a breach of contract and an Event of
Default  under  this  Agreement  and  the  Holder  may  seek  to take actions as
described  under  Article  4  of  this  Agreement.

IN WITNESS WHEREOF, the Company has duly executed this Note as of the date first
written  above.

HYBRID  FUEL  SYSTEMS,  INC.

By     /s/  Mark  Clancy
       -----------------
Name:  Mark  Clancy
Title: Chief  Executive  Officer

DUTCHESS  PRIVATE  EQUITIES  FUND,  L.P.
BY  ITS  GENERAL  PARTNER  DUTCHESS
CAPITAL  MANAGEMENT,  LLC


By:    /s/  Douglas  H.  Leighton
       --------------------------
Name:  Douglas  H.  Leighton
Title: A  Managing  Member