Exhibit
10.8


DEPARTMENT
OF NATURAL RESOURCES


ecoENERGY FOR BIOFUELS


New Renewable Alternatives to
Diesel Production Facility Agreement


NON-REPAYABLE CONTRIBUTION
AGREEMENT


THIS AGREEMENT is made in duplicate


	
  

 	
  

 	
  

 
	
 BETWEEN:

 	
  

 
	
  

 	
 HER MAJESTY THE QUEEN IN RIGHT OF CANADA
 (“Canada”), represented by the Minister of
 Natural Resources,

 	
  

 
	
  

 	
  

 	
  

 
	
 AND:

 	
  

 
	
  

 	
 METHES ENERGIES CANADA INC., a for profit
 organization incorporated under the laws in force in the Province of Ontario
 (the “Proponent”).

 	
  

 


                         WHEREAS
Canada
wishes to encourage the adoption of ecoENERGY for Biofuels (the Program);


                         WHEREAS the Proponent has
submitted to Canada a Proposal which qualifies for support under the
Program;


                         WHEREAS Canada and the Proponent agree that the
Incentive paid to the Proponent will be
based on Eligible Sales in litres multiplied by the Incentive Rate in dollars;


                         WHEREAS
the
Project is owned in whole by the Proponent;


                         AND
WHEREAS Canada is willing to provide an Incentive in the manner and upon the
terms and conditions hereinafter set forth;


                         NOW,
THEREFORE, Canada and the Proponent agree as follows:


	
  

 	
  

 
	
 1.

 	
 INTERPRETATION

 
	
  

 	
  

 
	
 1.1

 	
 In this Agreement:

 
	
  

 	
  

 
	
  

 	
  “Agreement” means this Agreement
 and the attached Schedules A, B, C, D and E. In the case of a conflict between the
 Agreement and the Schedules, the terms of the Agreement shall take precedence;

 
	
  

 	
  

 
	
  

 	
  “Biodiesel” means a fuel produced
 from Feedstock that is a Renewable Alternative to Diesel;

 
	
  

 	
  

 
	
  

 	
  “Cost Elements” means costs of
 Feedstock and methanol used for Total Sales produced and sold during the reporting
 period as identified in Paragraph 10.2;

 
	
  

 	
  

 
	
  

 	
  “Eligible Sales” means the portion of
 Total Sales sold by the Proponent during the reporting period identified in Paragraph 10.2, that
 meets the terms and conditions of this agreement including Schedules A and B;

 
	
  

 	
  

 
	
  

 	
  “Fair Value” means the price that
 would be agreed upon in an arm’s length transaction between fully informed,
 knowledgeable, and willing parties;

 


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  “Feedstock” means a renewable
 substance used as the primary input for the production of the Biodiesel;

 
	
  

 	
  

 
	
  

 	
  “Fiscal Year” means the period
 beginning on April 1st of any year and ending on March 31st
 in the next year;

 
	
  

 	
  

 
	
  

 	
  “Incentive” means the amount paid
 to the Proponent by Canada and calculated pursuant to the terms and conditions
 of this Agreement as described in Schedule C;

 
	
  

 	
  

 
	
  

 	
  “Incentive Rate” means the fixed
 declining rate set by the Program as described in Schedule C;

 
	
  

 	
  

 
	
  

 	
  “Intellectual Property” means any Intellectual
 Property right recognized by the law, including any Intellectual Property
 right protected through legislation (such as that governing patents, copyright,
 trade-marks, and industrial designs);

 
	
  

 	
  

 
	
  

 	
  “Minister” means the Minister of
 Natural Resources and includes any duly authorized officers or representatives;

 
	
  

 	
  

 
	
  

 	
  “Nameplate Capacity” means the number of
 litres per year of Biodiesel that the facility is capable of producing
 as certified by an engineer registered in Canada on behalf of the Proponent,
 technology or construction provider or a qualified subcontractor;

 
	
  

 	
  

 
	
  

 	
  “Production” means the number of litres of Biodiesel that are produced by the
 Proponent in accordance with Schedule A,
 during the reporting period as identified in Paragraph 10.2;

 
	
  

 	
  

 
	
  

 	
  “Project” means the description
 of the Proponent’s operation, as outlined in Schedule A;

 
	
  

 	
  

 
	
  

 	
  “Proposal” means a written
 ecoENERGY for Biofuels application form and all additional information received
 from the Proponent;

 
	
  

 	
  

 
	
  

 	
  “Renewable Alternatives to Diesel” means a fuel accepted
 under the Program, made from Feedstock;

 
	
  

 	
  

 
	
  

 	
  “Revenue Elements” means revenues received
 from any sales of Biodiesel that contribute to Total Sales, as well as revenues received from
 direct provincial production incentives for Biodiesel produced by the facility described in
 Schedule A, that is sold by the Proponent during the reporting period
 as identified in Paragraph 10.2;

 
	
  

 	
  

 
	
  

 	
  “Revenues” means all
 consideration received by the Proponent for Total Sales;

 
	
  

 	
  

 
	
  

 	
  “Total Sales” means the number of
 litres of Biodiesel produced by the facility described in Schedule A, that are
 sold by the Proponent during the reporting period as identified in Paragraph
 10.2, and that is produced from Feedstock owned by the Proponent, or from
 Feedstock owned by an organization other than the Proponent, for which the Proponent has
 received a fee for its Biodiesel Production during the reporting period as
 identified in Paragraph 10.2.

 
	
  

 	
  

 
	
 1.2

 	
 Grammatical variations of the above terms have similar
 meanings. Words importing the singular number only shall include the plural
 and vice versa.

 
	
  

 	
  

 
	
 2.

 	
 REPRESENTATIONS AND WARRANTIES

 
	
  

 	
  

 
	
 2.1

 	
 The Proponent represents and warrants that all factual
 matters contained in the Proposal and Project and all supporting material submitted are
 true and accurate, and that all estimates, forecasts and other related matters involving
 judgement were prepared in good faith and to the best of its ability,
 skill and judgement.

 
	
  

 	
  

 
	
 2.2

 	
 The Proponent represents and warrants that it shall
 make its best efforts to construct and commission the facility within the timeframes
 set out in this Agreement.

 
	
  

 	
  

 
	
 2.3

 	
 The Proponent represents and warrants that the
 Eligible Sales are produced in Canada.

 
	
  

 	
  

 
	
 2.4

 	
 The
 Proponent represents and warrants that all information submitted to Canada as
 set out in Schedule D is true, accurate
 and was prepared in good faith and to the best of its ability, skill and
 judgement.

 


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 2.5

 	
 The Proponent undertakes to submit to Canada all
 information set out in Schedule D in strict compliance of the time
 set out in Schedule D.

 
	
  

 	
  

 	
  

 
	
 3.

 	
 COMING INTO FORCE

 
	
  

 	
  

 	
  

 
	
 3.1

 	
 This Agreement comes into force when signed by the
 parties.

 
	
  

 	
  

 	
  

 
	
 4.

 	
 COMPLIANCE WITH ENVIRONMENTAL
 LEGISLATION

 
	
  

 	
  

 	
  

 
	
 4.1

 	
 The Proponent shall comply with all applicable federal,
 provincial and municipal environmental legislation in relation to the
 Project. Canada may consider failure to comply with this obligation as a material breach.

 
	
  

 	
  

 	
  

 
	
 4.2

 	
 The Proponent shall provide any information requested
 by Canada to satisfy its obligations under the Canadian Environmental Assessment Act as a result of the
 Project under this Agreement.

 
	
  

 	
  

 	
  

 
	
 4.3

 	
 The Proponent shall comply with all conditions arising
 out of an environmental assessment conducted in accordance with the Canadian
 Environmental Assessment Act as a result of the Project under this Agreement, including the
 implementation of mitigation measures and any follow-up program.

 
	
  

 	
  

 	
  

 
	
 4.4

 	
 Notwithstanding any other provisions of this Agreement,
 it is a condition of this Agreement that, where an environmental
 assessment of a Project is required under the Canadian Environmental Assessment Act, Canada
 shall not make any payments to the Proponent unless and until:

 
	
  

 	
  

 	
  

 
	
  

 	
 a)

 	
 an
 environmental assessment has been carried out in accordance with the Canadian Environmental
 Assessment Act; and

 
	
  

 	
  

 	
  

 
	
  

 	
 b)

 	
 the
 responsible authority(ies), pursuant to the Canadian
 Environmental Assessment Act, has(have) determined
 that taking into account the implementation of mitigation measures, the
 Project is not likely to cause significant adverse environmental effects.

 
	
  

 	
  

 	
  

 
	
 4.5

 	
 Notwithstanding
 any other provision of this Agreement, if a change that would trigger a reassessment of the
 Project under the Canadian Environmental
 Assessment Act is proposed for, or made to the Project, the parties agree that
 Canada’s obligation under this Agreement will be suspended until an
 environmental assessment is completed and Canada determines that the Project
 as modified is unlikely to result in any significant adverse environmental
 effects.

 
	
  

 	
  

 	
  

 
	
 4.6

 	
 The Proponent shall inform Canada of any circumstance
 where Project components or activities result in additional or unforeseen environmental
 effects during the time for which Canada is considered a responsible authority, pursuant to the Canadian Environmental Assessment Act. Furthermore, the Proponent shall review with
 Canada and other federal authorities, as appropriate, the potential significance of these
 environmental effects. The Proponent agrees to implement any measures that are considered to be technically
 and economically feasible to mitigate significant adverse environmental effects and, if
 necessary, to implement a follow-up program to ensure the effectiveness of
 the proposed mitigation measures.

 
	
  

 	
  

 	
  

 
	
 4.7

 	
 The Proponent shall be responsible for meeting any
 conditions on the Project stipulated by Canada and deemed necessary and reasonable to
 address any outstanding issues identified through the consultation of
 potentially impacted aboriginal groups that are not covered under the environmental
 assessment.

 
	
  

 	
  

 	
  

 
	
 5.

 	
 COMMENCEMENT OF CONSTRUCTION OF PROJECT

 
	
  

 	
  

 	
  

 
	
 5.1

 	
 In
 order for Minister to verify satisfactory progress of construction of the
 facility by the Proponent,
 the Proponent shall within ninety (90)
 calendar days after the date of coming into force
 of this Agreement, provide
 the following in writing:

 
	
  

 	
  

 	
  

 
	
  

 	
 a)

 	
 proof
 of progress against construction milestones noted in Schedule A; and

 
	
  

 	
  

 	
  

 
	
  

 	
 b)

 	
 letter(s)
 from the Proponent’s lender(s) or other financing authority(ies) confirming
 that the full financing of the Project has been secured; and

 
	
  

 	
  

 	
  

 
	
  

 	
 c)

 	
 letter(s)
 from the manufacturer(s) confirming the Proponent’s purchase order of the
 main equipment and the expected date(s) of delivery; and

 


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 d)

 	
 proof that the Proponent
 has secured the property rights (ie. lease or purchase) to the required land to construct and operate the facility, and
 that the location is adequate for the intended purpose and any site issues
 have been resolved, and

 
	
  

 	
  

 	
  

 
	
  

 	
 e)

 	
 letter(s)
 from fuel purchaser(s), or copy of signed contract(s), confirming that
 purchase agreement(s)
 has been signed accounting for the maximum annual Eligible Sales as stated in
 Schedule B, and

 
	
  

 	
  

 	
  

 
	
  

 	
 f)

 	
 proof of progress made on
 permits, licenses or authorizations and measured against timelines or process as outlined in the application.

 
	
  

 	
  

 	
  

 
	
 5.2

 	
 The Minister shall verify the accuracy of the
 information submitted.

 
	
  

 	
  

 	
  

 
	
 6.

 	
 REPORTING ON PROGRESS OF CONSTRUCTION

 
	
  

 	
  

 	
  

 
	
 6.1

 	
 Up to the date of construction completion (no later than
 September 30, 2012), the Proponent shall provide reports on a
 quarterly basis, signed by a professional engineer registered in Canada, detailing the progress
 on the construction of the facility, as outlined in their comprehensive project plan.

 
	
  

 	
  

 	
  

 
	
 7.

 	
 COMMISSIONING OF PROJECT

 
	
  

 	
  

 	
  

 
	
 7.1

 	
 Notwithstanding any other provision of this Agreement, Canada shall not make any payments to the
 Proponent unless:

 
	
  

 	
  

 	
  

 
	
  

 	
 a)

 	
 the Proponent has completed the construction of the
 facility on or before September 30, 2012;

 
	
  

 	
  

 	
  

 
	
  

 	
 b)

 	
 the commissioning date of the Project is within one
 hundred and twenty (120) calendar days of the construction completion date of the
 facility, as evidenced in the commissioning report submitted by the Proponent; and

 
	
  

 	
  

 	
  

 
	
  

 	
 c)

 	
 the Proponent shall within sixty (60) calendar days
 after of the commissioning date send to Canada a commissioning report, signed by a
 professional engineer registered in Canada, that indicates the commissioning date,
 Nameplate Capacity, and its expected annual production of renewable fuels based on a
 long-term resource assessment.

 
	
  

 	
  

 	
  

 
	
 8.

 	
 CONDUCT OF PROJECT

 
	
  

 	
  

 	
  

 
	
 8.1

 	
 The
 Proponent shall carry out the Project promptly, diligently and in a
 professional manner and in accordance with
 the terms and conditions of this Agreement.

 
	
  

 	
  

 	
  

 
	
 8.2

 	
 The Proponent shall comply with all applicable federal,
 provincial and municipal laws in relation to the Project.

 
	
  

 	
  

 	
  

 
	
 8.3

 	
 The Proponent shall produce and sell Renewable
 Alternatives to Diesel in accordance with Schedules A and B.

 
	
  

 	
  

 	
  

 
	
 8.4

 	
 In any given Fiscal Year where the Proponent reasonably
 anticipates that its Eligible Sales during that Fiscal Year will be less than seventy
 (70) percent of the maximum Eligible Sales stipulated in Schedule B, the Proponent shall make a written
 request for exemption to Paragraph 8.3 one hundred and twenty (120) days prior to the last day of that Fiscal
 Year. Canada may grant them such an exemption or, at its sole
 discretion, adjust the maximum annual Eligible Sales specified in Schedule B.

 
	
  

 	
  

 	
  

 
	
 8.5

 	
 Notwithstanding
 any other provision of this Agreement, if over a period of three (3)
 consecutive months the Proponent produces a volume of Renewable Alternatives
 to Diesel that totals less than a minimum of five (5) percent of the maximum
 annual Eligible Sales, Canada may, at its sole discretion, invoke any of the
 default remedies of this Agreement.

 


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 9.

 	
 INCENTIVE

 
	
  

 	
  

 	
  

 
	
 9.1

 	
 Notwithstanding any other provision of this Agreement,
 Canada’s liability under this Agreement shall not in any circumstances exceed TWENTY-TWO MILLION FIVE HUNDRED ONE THOUSAND
 TWO HUNDRED DOLLARS ($22,501,200.00).

 
	
  

 	
  

 	
  

 
	
 9.2

 	
 The Incentive will be calculated in accordance with
 Schedule C of this Agreement.

 
	
  

 	
  

 	
  

 
	
 9.3

 	
 The Proponent shall be entitled to claim Incentive in
 a given Fiscal Year, up to the maximum set out in Schedule B.

 
	
  

 	
  

 	
  

 
	
 9.4

 	
 The Proponent shall declare to Canada any amounts
 owing under any legislation or contribution agreements by the
 Proponent to Canada and Canada may set-off any such amounts owing to Canada.

 
	
  

 	
  

 	
  

 
	
 10.

 	
 METHOD OF PAYMENT

 
	
  

 	
  

 	
  

 
	
 10.1

 	
 Subject to the terms and conditions of this Agreement,
 following receipt of a claim for payment, acceptable to Canada,
 accompanied by copies of documents in accordance with Schedule D or as
 otherwise requested by the Minister, Canada shall pay an Incentive to the
 Proponent.

 
	
  

 	
  

 	
  

 
	
 10.2

 	
 The Proponent shall claim the Incentive on a monthly
 basis starting JANUARY 1, 2012 until MARCH
 31, 2017.

 
	
  

 	
  

 	
  

 
	
 10.3

 	
 In order to receive an Incentive, each
 claim for payment must be submitted by the Proponent
 to Canada within fifteen (15) business days after the end of a month. If the Proponent
 fails to submit its claim for payment within fifteen (15) business days after
 the end of a month, the Proponent shall not receive its
 Incentive for that month.

 
	
  

 	
  

 	
  

 
	
 11.

 	
 ACCOUNTS AND AUDIT

 
	
  

 	
  

 	
  

 
	
 11.1

 	
 For a period of ten (10) years from the signing of
 this Agreement, the Proponent shall:

 
	
  

 	
  

 	
  

 
	
  

 	
 a)

 	
 keep proper books, accounts, and records of the
 Eligible Sales, including audit reports from an independent accredited
 auditor, Cost Elements and Revenue Elements in connection with the Project and shall
 keep its invoices, receipts, and vouchers relating thereto;

 
	
  

 	
  

 	
  

 
	
  

 	
 b)

 	
 keep proper and accurate records relating to the
 environmental impact (if any) of the Project;

 
	
  

 	
  

 	
  

 
	
  

 	
 c)

 	
 on demand, make available to Canada such books,
 accounts, records, invoices, receipts, and vouchers referred to
 above and permit Canada to examine and audit and take copies and extracts from such
 documents;

 
	
  

 	
  

 	
  

 
	
  

 	
 d)

 	
 allow Canada, at Canada’s discretion, to conduct audits
 to verify accuracy of reports submitted under Schedule D and E; and

 
	
  

 	
  

 	
  

 
	
  

 	
 e)

 	
 allow Canada, at Canada’s discretion, to conduct a
 technical audit to verify the Proposal and the Project.

 
	
  

 	
  

 	
  

 
	
 11.2

 	
 If, at any time, any discrepancy is identified between
 the amounts paid by Canada and the amounts actually payable under this Agreement,
 the appropriate adjustments shall be promptly made between the parties. If there has been an
 overpayment by Canada, the amount of the overpayment shall constitute a debt due to
 Canada and may be so recovered.

 
	
  

 	
  

 	
  

 
	
 12.

 	
 INTELLECTUAL PROPERTY

 
	
  

 	
  

 	
  

 
	
 12.1

 	
 All Intellectual Property that arises in the course of
 the Project shall vest in the Proponent.

 
	
  

 	
  

 	
  

 
	
 12.2

 	
 The Proponent shall supply to Canada the reports and
 documents described in Schedule D or as otherwise required by Canada under Article 16 (Reports), and the
 Proponent hereby grants to Canada a
 non-exclusive, irrevocable, world-wide, free and royalty-free licence in
 perpetuity to use and modify such
 reports and documents for internal non-commercial governmental purposes.

 


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 13.

 	
 INDEMNITY

 
	
  

 	
  

 	
  

 
	
 13.1

 	
 The Proponent shall indemnify and save harmless Canada
 and its ministers, employees and agents, from any and all claims, demands,
 losses, costs (including lawyers’ fees), damages, actions or proceedings
 resulting from or related to any wilful misconduct or negligent act or omission of the Proponent or its employees
 and agents in the performance of this Agreement, except to the extent caused by a breach of duty of Canada or its
 ministers, employees and agents.

 
	
  

 	
  

 	
  

 
	
 13.2

 	
 The Proponent shall indemnify and save harmless Canada
 and its ministers, employees and agents, from any and all claims, demands,
 losses, costs (including lawyers’ fees), damages, actions or proceedings
 resulting from or related to any claim, demand or action made by a third party against them or
 any of them based upon Canada’s capacity as a provider of financial assistance under this
 Agreement, including, without limitation, any claim in respect of materials or services provided by a third party to the
 Proponent or to a subcontractor of the Proponent.

 
	
  

 	
  

 	
  

 
	
 13.3

 	
 The Proponent shall indemnify and save harmless Canada
 and its ministers, employees and agents, from any and all claims, demands,
 losses, costs (including lawyers’ fees), damages, actions or proceedings resulting from or
 related to the Proponent or its employees and agents entering into a loan, capital lease or other long term obligation in
 relation to the Project.

 
	
  

 	
  

 	
  

 
	
 14.

 	
 DEFAULT

 
	
  

 	
  

 	
  

 
	
 14.1

 	
 If,
 in the opinion of Canada, there has been a misrepresentation or a breach of
 warranty under Article 2 (Representations
 and Warranties), or a breach of condition under Article 4 (Compliance With Environmental Legislation), Article 6
 (Reporting on Progress of Construction) or Article 8 (Conduct of Project), or
 the Proponent fails to proceed diligently with the Project or is otherwise in default in carrying out any of the terms,
 conditions, covenants, or obligations of this Agreement, or if the
 Proponent becomes bankrupt or insolvent, or has a receiving order made against it (either under the Bankruptcy and Insolvency Act or
 otherwise), or a receiver is appointed, or the Proponent makes an
 assignment for the benefit of creditors, or if an order is made or a resolution passed for the winding up
 of the Proponent, or if the Proponent takes the benefit of any statute for the time being in
 force relating to bankrupt or insolvent debtors, Canada may, by giving notice
 in writing to the Proponent, exercise any or all of the following remedies:

 
	
  

 	
  

 	
  

 
	
  

 	
 a)

 	
 direct the Proponent to come into compliance with the
 terms and conditions of the Agreement within a specified period;

 
	
  

 	
  

 	
  

 
	
  

 	
 b)

 	
 terminate the whole or any part of this Agreement;

 
	
  

 	
  

 	
  

 
	
  

 	
 c)

 	
 suspend the obligation of Canada to pay the Proponent
 until breach of this Agreement is cured and compliance has been verified;

 
	
  

 	
  

 	
  

 
	
  

 	
 d)

 	
 terminate the obligation on the part of Canada to pay
 any monies in respect of the Project, including monies due or accruing due; and

 
	
  

 	
  

 	
  

 
	
  

 	
 e)

 	
 direct the Proponent to repay forthwith all or any part
 of monies paid by Canada pursuant to this Agreement and that amount is a debt due to
 Canada and may be so recovered.

 
	
  

 	
  

 	
  

 
	
 14.2

 	
 In the event of the termination of this Agreement
 by Canada under Paragraph 14.1, Canada may, in the discretion of
 Canada, pay to the Proponent Canada’s share of the Incentive for Eligible Sales of the Project produced to the date of
 termination.

 
	
  

 	
  

 	
  

 
	
 15.

 	
 ACCESS

 
	
  

 	
  

 	
  

 
	
 15.1

 	
 The Proponent shall ensure that Canada has access
 during normal working hours to any premises or place where the
 Project is being carried out for the purposes of inspecting and assessing the
 progress of the Project and all matters pertaining thereto.

 
	
  

 	
  

 	
  

 
	
 16.

 	
 REPORTS

 
	
  

 	
  

 	
  

 
	
 16.1

 	
 The Proponent shall submit Project reports satisfactory
 to the Minister in accordance with the provisions of Schedules D and E or as otherwise
 requested by the Minister.

 


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 17.

 	
 LEGAL RELATIONSHIP

 
	
  

 	
  

 	
  

 
	
 17.1

 	
 Nothing
 contained in this Agreement shall create the relationship of principal and
 agent, employer and employee, partnership
 or joint venture between the parties.

 
	
  

 	
  

 	
  

 
	
 17.2

 	
 The Proponent shall not make any representation that:

 
	
  

 	
  

 	
  

 
	
  

 	
 a)

 	
 the Proponent is an agent of Canada; or

 
	
  

 	
  

 	
  

 
	
  

 	
 b)

 	
 could reasonably lead any member of the public to
 believe that the Proponent or its contractors are agents of Canada.

 
	
  

 	
  

 	
  

 
	
 18.

 	
 ACKNOWLEDGEMENT

 
	
  

 	
  

 	
  

 
	
 18.1

 	
 The Proponent will acknowledge the financial support of
 Canada in all public information produced as part of the Project.

 
	
  

 	
  

 	
  

 
	
 18.2

 	
 The Proponent shall inform the Minister of all media
 announcements in relation to the Project.

 
	
  

 	
  

 	
  

 
	
 19.

 	
 TIME OF ESSENCE

 
	
  

 	
  

 	
  

 
	
 19.1

 	
 Time is of the essence with respect to all provisions
 of this Agreement that specify a time for performance.

 
	
  

 	
  

 	
  

 
	
 20.

 	
 MEMBERS OF PARLIAMENT

 
	
  

 	
  

 	
  

 
	
 20.1

 	
 No Member of the House of Commons or Senate shall be
 admitted to any share or part of this Agreement or to any benefit arising therefrom.

 
	
  

 	
  

 	
  

 
	
 21.

 	
 CONFLICT OF INTEREST

 
	
  

 	
  

 	
  

 
	
 21.1

 	
 It is a term of this Agreement that no public servant
 or public office holder, either currently or formerly employed by a federal
 entity, and to whom the Conflict of
 Interest Act, the Conflict of Interest
 and Post-Employment Code for Public Office Holders or the Values and Ethics Code for the
 Public Service applies, shall derive any direct or indirect benefit from the Agreement
 unless the
 provision or receipt of such benefits is in compliance with such legislation
 and codes; and that no member of the Senate or the House of Commons shall be admitted to
 any share or part of the agreement, or to any benefit arising from it, that is
 not otherwise available to the general public.

 
	
  

 	
  

 	
  

 
	
 21.2

 	
 If any individual working for the Proponent formerly
 provided consultancy services to the Minister that are related to this Agreement,
 particularly any services associated with developing the Agreement or
 developing the Project which is the subject of this Agreement, the Proponent
 is considered to be in a real, perceived, or potential conflict of interest
 situation.

 
	
  

 	
  

 	
  

 
	
 21.3

 	
 If a conflict of interest situation arises during the
 Agreement the Proponent shall notify the Minister, in the manner prescribed in
 Paragraph 25.1. Upon request, the Proponent shall notify the Minister of all reasonable steps taken to
 identify, avoid, prevent, and where it exists, resolve any conflict of
 interest situation.

 
	
  

 	
  

 	
  

 
	
 21.4

 	
 The
 Minister may investigate a real, perceived, or potential conflict of interest
 and take such steps and measures as the
 Minister considers appropriate, including without limitation: informing the Proponent that it is in a conflict of interest
 situation; requesting specific actions be taken to correct the situation; requiring the Proponent
 to withdraw any individual from participation in the Project for reasons of conflict of interest;
 suspending payments under the Agreement; or terminating the Agreement.

 


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 22.

 	
 FORCE MAJEURE

 
	
  

 	
  

 
	
 22.1

 	
 The parties shall not be in default or in breach of
 this Agreement due to any delay or failure to meet any of their
 obligations caused by or arising from any event beyond their reasonable
 control and
 without their fault or negligence, including any act of God or other cause
 which fully frustrates
 the performance of this Agreement or which fully discontinues operation of
 the Project (a
 “force majeure event”). In the event of a force majeure event which fully
 frustrates or discontinues the performance of this Agreement Canada will only be
 liable for its proportionate share of the Incentive up to the date of the
 occurrence of such event.

 
	
  

 	
  

 
	
 22.2

 	
 The performance of the obligation affected by a “force
 majeure event”, as set out in Paragraph 22.1, shall be delayed by the length of time over which the event
 lasted. However, should the interruption
 continue for more than one hundred and eighty (180) days, this Agreement may
 be terminated by Canada.

 
	
  

 	
  

 
	
 22.3

 	
 Should either party claim the existence of a “force
 majeure event” as set out in Paragraph 22.1, prompt notice thereof shall be
 given to the other party and the party claiming the existence of a “force majeure event”,
 shall have the obligation to use its best efforts to mitigate any damages to
 the other party and to provide reasonably satisfactory evidence of the
 existence of such event to the other party.

 
	
  

 	
  

 
	
 23.

 	
 GOVERNING LAW

 
	
  

 	
  

 
	
 23.1

 	
 This
 Agreement shall be interpreted in accordance with the applicable federal laws
 and the laws in force in the Province of Ontario.

 
	
  

 	
  

 
	
 24.

 	
 PROJECT ASSIGNMENT AND TRANSFER OF
 RIGHTS

 
	
  

 	
  

 
	
 24.1

 	
 The
 Proponent shall not assign this Agreement without the prior written consent
 of Canada, which shall not be unreasonably withheld and any assignment
 made without that consent is void and of no effect.

 
	
  

 	
  

 
	
 25.

 	
 NOTICES

 
	
  

 	
  

 
	
 25.1

 	
 The claims for payment, requests, notices, and
 information referred to in this Agreement shall be sent in writing or by
 any method of telecommunication and, unless notice to the contrary is given,
 shall be addressed to the party concerned at the following address:

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
 To Canada:

 
	
  

 	
  

 
	
  

 	
  

 	
 Catherine
 Kerr

 
	
  

 	
  

 	
 ecoENERGY
 for Biofuels

 
	
  

 	
  

 	
 Fuels
 Policy and Programs

 
	
  

 	
  

 	
 Office
 of Energy Efficiency

 
	
  

 	
  

 	
 Natural
 Resources Canada

 
	
  

 	
  

 	
 580
 Booth Street

 
	
  

 	
  

 	
 Ottawa,
 Ontario

 
	
  

 	
  

 	
 K1A
 0E4

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Telephone:

 	
 (613)
 947-7789

 
	
  

 	
  

 	
 Facsimile:
 

 	
 (613)
 995-8961

 
	
  

 	
  

 	
 E-mail:

 	
 catherine.kerr@nrcan-rncan.gc.ca

 
	
  

 	
  

 	
  

 
	
  

 	
 To the Proponent:

 
	
  

 	
  

 
	
  

 	
  

 	
 John
 Loewen

 
	
  

 	
  

 	
 President

 
	
  

 	
  

 	
 Methes
 Energies Canada Inc.

 
	
  

 	
  

 	
 4170
 Sladeview Crescent, Unit 5

 
	
  

 	
  

 	
 Mississauga,
 Ontario

 
	
  

 	
  

 	
 L5L
 0A1

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Telephone:

 	
 (905)
 828-2700

 
	
  

 	
  

 	
 Facsimile:
 

 	
 1-866-276-9598

 
	
  

 	
  

 	
 E-mail:

 	
 jlowen@methes.com

 


-8-









	
  

 	
  

 	
  

 
	
 25.2

 	
 Notices,
 requests and documents are deemed to have been received, if sent by
 registered mail, when the postal receipt
 is acknowledged by the other party; by facsimile or electronic mail, when transmitted and receipt is confirmed; and by
 messenger or specialized courier agency, when delivered.

 
	
  

 	
  

 	
  

 
	
 26.

 	
 AMENDMENTS AND WAIVERS

 
	
  

 	
  

 	
  

 
	
 26.1

 	
 To be effective, any Amendment to the Agreement must
 be done in writing by Canada and the authorized representative of the Proponent.

 
	
  

 	
  

 	
  

 
	
 26.2

 	
 A waiver will only be valid, binding or affect the
 rights of the parties if it is made in writing by Canada.

 
	
  

 	
  

 	
  

 
	
 26.3

 	
 The waiver by Canada of a breach of any condition of the
 Agreement will not be treated or interpreted as a waiver of any subsequent breach and therefore will
 not prevent Canada from enforcing of that
 term or condition in the case of a subsequent breach.

 
	
  

 	
  

 	
  

 
	
 27.

 	
 DISPUTE RESOLUTION

 
	
  

 	
  

 	
  

 
	
 27.1

 	
 The parties may attempt to resolve any dispute arising
 out of or pursuant to this Agreement by recourse to the dispute resolution
 methods identified in the following sequence, although steps may be by-passed by
 mutual consent.

 
	
  

 	
  

 	
  

 
	
  

 	
 1)

 	
 negotiations;

 
	
  

 	
 2)

 	
 non-binding mediation or conciliation; or

 
	
  

 	
 3)

 	
 binding arbitration.

 
	
  

 	
  

 	
  

 
	
 27.2

 	
 Any party may within fifteen (15) days take the
 dispute to the next step if the parties fail to agree on the appointment or
 procedure referred to in this Article.

 
	
  

 	
  

 	
  

 
	
 27.3

 	
 When mediation or conciliation is selected by the
 parties, they shall jointly appoint one impartial expert mediator or
 conciliator to undertake the process according to mutually agreed upon procedures.

 
	
  

 	
  

 	
  

 
	
 27.4

 	
 If the parties decide to submit a dispute to
 arbitration, it shall be carried out pursuant to the Commercial
 Arbitration Act of Canada. The arbitral award shall be in terms of money only, and shall not include
 punitive damages, costs or interim measures. The parties shall attempt to
 appoint jointly
 one impartial expert arbitrator. If the parties cannot agree within thirty
 (30) days on the choice of an arbitrator, each party shall appoint, at its own cost,
 one impartial expert arbitrator and those two arbitrators shall appoint an expert
 third arbitrator as chairperson of an arbitral tribunal.

 
	
  

 	
  

 	
  

 
	
 27.5

 	
 When one of the above steps is selected to resolve a
 dispute, the parties shall jointly enter into a contract with the
 required mediator or conciliator, third party, arbitrator or arbitrators, as
 the case may be, to pay the costs for the desired services and to bear their
 own costs of participating in the process involved. The contracts referred to and
 contemplated by this Article shall be in the form and content as
 proposed by Canada.

 
	
  

 	
  

 	
  

 
	
 28.

 	
 APPROPRIATION

 
	
  

 	
  

 	
  

 
	
 28.1

 	
 The payment of monies by Canada under this Agreement is
 subject to there being an appropriation by Parliament for the Fiscal Year in
 which the payment of monies is to be made.

 
	
  

 	
  

 	
  

 
	
 28.2

 	
 Notwithstanding any other provision of this Agreement,
 Canada may reduce or cancel its financial contribution to the
 Project upon written notice to the Proponent in the event that the funding levels for the
 Department of Natural Resources are changed by Parliament during the term of
 this Agreement. In the event
 that Canada reduces or cancels its financial contribution, the parties agree to amend the Project and the Incentives for
 Eligible Sales of the Project, namely this Agreement, to take into account the reduction or cancellation of
 Canada’s financial contribution.

 
	
  

 	
  

 	
  

 
	
 29.

 	
 LOBBYING ACT

 
	
  

 	
  

 	
  

 
	
 29.1

 	
 The
 Proponent shall ensure that any person lobbying on behalf of the Proponent is
 registered pursuant to the Lobbying Act and
 that the fees paid to the lobbyist are not to be related to the value of the financial contribution pursuant to
 the terms of this Agreement.

 


-9-









	
  

 	
  

 	
  

 
	
 30.

 	
 SUCCESSORS AND ASSIGNS

 
	
  

 	
  

 	
  

 
	
 30.1

 	
 This
 Agreement shall inure to the benefit of and be binding on the parties and
 their respective representatives, successors and assigns.

 
	
  

 	
  

 	
  

 
	
 31.

 	
 OFFICIAL LANGUAGES/LANGUES OFFICIELLES

 
	
  

 	
  

 	
  

 
	
 31.1

 	
 This
 Agreement is drawn in English at the request of the parties. Les parties ont
 convenu que le présent Accord soit rédigé en anglais.

 
	
  

 	
  

 	
  

 
	
 31.2

 	
 All
 public information documents related to the Project prepared or paid in whole
 or in part by Canada must be made available in both official languages, when
 the Department of Natural Resources judges that this is required under the Official Languages Act. Tout document
 d’information publique préparé ou payé en tout ou en partie par le Canada
 ayant trait au Projet doit être offert dans les deux langues officielles,
 lorsque le Ministère des Ressources naturelles le juge pertinent, conformément
 à la Loi sur les langues officielles

 
	
  

 	
  

 	
  

 
	
 32.

 	
 SEVERABILITY

 
	
  

 	
  

 	
  

 
	
 32.1

 	
 Invalidity or
 unenforceability of one or more provisions of this Agreement shall not affect
 any other provision of this Agreement. If any provisions or portion thereof
 of this Agreement is held to be unenforceable or invalid, the remaining
 provisions and portions thereof shall nevertheless be given full force and
 effect, and the parties agree to negotiate in good faith, a substitute
 provision which most nearly affects the parties’ intent in entering into this
 Agreement.

 
	
  

 	
  

 	
  

 
	
 33.

 	
 PRIORITY OF DOCUMENTS

 
	
  

 	
  

 	
  

 
	
 33.1

 	
 The wordings of the
 documents listed below are hereby incorporated into and form part of this
 Agreement. If there is a discrepancy between the wordings of any documents
 that appear on the list, the wording of the document that first appears on
 the list has priority over the wording of any document that subsequently
 appears on the list as follows:

 
	
  

 	
  

 	
  

 
	
  

 	
 1.

 	
 the
 Articles of Agreement;

 
	
  

 	
 2.

 	
 Schedules
 A, B, C, D, and E of Agreement;

 
	
  

 	
 3.

 	
 the
 Proponent’s Application dated March 29, 2010.

 
	
  

 	
  

 	
  

 
	
 34.

 	
 ENTIRE AGREEMENT

 
	
  

 	
  

 	
  

 
	
 34.1

 	
 This
 Agreement constitutes the entire Agreement between the parties with respect
 to the subject matter of this Agreement and supersedes all previous
 negotiations, communications, and other agreements, whether written or verbal
 between the parties.

 
	
  

 	
  

 	
  

 
	
  

 	
 IN WITNESS WHEREOF this Agreement has been executed on behalf
 of Her Majesty the Queen in right of Canada
 by an officer duly authorized by the Minister of Natural Resources
 and on behalf of the Proponent, by
 an officer duly authorized on its behalf.

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 HER
 MAJESTY THE QUEEN IN RIGHT OF CANADA 

 
	
 DEC - 6 2011

 	
  

 	
 

 	
  

 
	
 

 	
  

 	
 

 	
  

 
	
 Date

 	
  

 	
 Mark Corey 

 	
  

 
	
  

 	
  

 	
 Assistant Deputy Minister 

 	
  

 
	
  

 	
  

 	
 Energy Sector

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 METHES
 ENERGIES CANADA INC.

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
 Nov 29, 2011

 	
  

 	
 

 	
  

 
	
 

 	
  

 	
 

 	
  

 
	
 Date

 	
  

 	
 John Loewen 

 	
  

 
	
  

 	
  

 	
 President

 	
  

 


-10-






SCHEDULE
A


To the Agreement between


HER MAJESTY THE QUEEN IN RIGHT OF CANADA


And


METHES ENERGIES CANADA INC. 


DESCRIPTION OF OPERATION


	
  

 	
  

 	
  

 
	
 1.

 	
 DESCRIPTION/SCOPE:

 
	
  

 	
  

 	
  

 
	
  

 	
 a) Owners

 
	
  

 	
  

 	
  

 
	
  

 	
 The
 facility is owned by Methes Energies Canada Inc.

 
	
  

 	
  

 	
  

 
	
  

 	
 The
 total Nameplate Capacity of all facilities that Methes Energies Canada Inc. owns is 55 million litres of
 Biodiesel.

 
	
  

 	
  

 
	
  

 	
 b) Location

 
	
  

 	
  

 
	
  

 	
 The
 facility is located in Sombra, Ontario. The Methes Energies Canada Inc.
 Sombra Biodiesel facility is located at 42°41’36.72” north and
 82°29’01.02” west, and regionally located in southwestern Ontario, Lambton County, in St.
 Clair Township.

 
	
  

 	
  

 
	
  

 	
 c) Nameplate
 Capacity

 
	
  

 	
  

 
	
  

 	
 The
 facility’s Nameplate Capacity is 50
 million litres of Biodiesel.

 
	
  

 	
  

 
	
  

 	
 d) Technology

 
	
  

 	
  

 
	
  

 	
 The
 Methes Energies Canada Inc. Sombra Biodiesel facility will produce Biodiesel
 using Methes Energies Canada Inc. proprietary Denami 3000TM Biodiesel processor.
 The Denami 3000TM Biodiesel process module incorporates a process reactor,
 settling tank system, polishing system and evaporator which is capable of
 producing Biodiesel with a designed formulation at a rate of 3000L per hour
 on a continuous basis. The system is designed to run twenty four (24) hours a
 day,
 seven (7) days a week for three hundred and sixty five (365) days a year with
 scheduled shut-downs for maintenance. The system is designed to produce 50
 million litres of Biodiesel per year.

 
	
  

 	
  

 
	
  

 	
 The
 processors are produced in a specialized manufacturing facility of a Methes
 Energies Canada Inc. development partner in Mississauga, Ontario
 (manufacturing time is less than 16 weeks) and will be delivered by
 trucks. The installation process is quick and can be described as a “plug and
 play”
 process. Installation and commissioning is approximately 5 days in duration
 and consists of bolt up connections of inlet / discharge piping and connection to
 site utilities.

 
	
  

 	
  

 
	
  

 	
 e) Site Development and Construction

 
	
  

 	
  

 	
  

 
	
  

 	
 The Methes Energies Canada Inc.Sombra Biodiesel plant
 would have a Production capacity of 50 million litres per year that will proceed in
 two phases, with construction starting in May 2011. The plant will be
 located on a 22-acre property acquired by Methes Energies Canada in 2009. An existing plant will be
 converted to a Biodiesel Production facility. The Project consists of the retrofitting of that
 existing plant infrastructure and the installation of the Biodiesel
 processors. No site development is required. The property includes infrastructure
 including buildings, storage tanks, several rail spurs, loading and unloading
 equipment, as well as heating and cooling system. No construction is required
 to accommodate the conversion to a Biodiesel Production facility, besides repairing the
 existing piping infrastructure. The Project development includes the following main
 milestones:

 






	
  

 	
  

 	
  

 
	
  

 	
 •

 	
 Complete installation and retrofitting – January 2012;

 
	
  

 	
 •

 	
 Complete the manufacturing of 1st Denami 3000TM
 Biodiesel processor (25 million litres per year Production) – January 2012;

 
	
  

 	
 •

 	
 Complete and installation and commissioning of 1st
 Denami 3000TM Biodiesel processor – January 2012;

 


-11-









	
  

 	
  

 	
  

 
	
  

 	
 •

 	
 Complete the manufacturing of 2nd Denami
 3000TM Biodiesel processor (additional 25 million
 litres per year Production) – January 2012;

 
	
  

 	
 •

 	
 Complete
 installation and commissioning of 2nd Denami 3000TM Biodiesel processor – February 2012.

 
	
  

 	
  

 	
  

 
	
  

 	
 f) Permits and
 Licenses

 
	
  

 	
  

 
	
  

 	
 No
 permits were submitted during the application process; however the permits
 and licenses that Methes Energies Canada Inc. has applied for are the
 following:

 






	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 a.

 	
 Certificate
 of Approval of Air/Noise issued by the Ministry of Environment. The application
 was submitted on March 25, 2010;

 
	
  

 	
  

 	
 b.

 	
 Certificate
 of Approval for Stormwater issued by the Ministry of Environment. The application was
 submitted on January 21, 2010;

 
	
  

 	
  

 	
 c.

 	
 An
 application was submitted for the municipal site plan amendment prior to
 submission of the application in March 31, 2010.

 






	
  

 	
  

 
	
  

 	
 The
 timeline to approve the provincial permits depends on the review period
 needed by the Ministry. The Program is not aware of other permits
 required by the facility to operate. This will be evaluated at the Environmental Assessment
 stage.

 
	
  

 	
  

 
	
  

 	
 g) Operation

 
	
  

 	
  

 
	
  

 	
 The Project will require
 approximately 50,000 tonnes of Feedstock per year in the form of beef tallow and choice white grease representing
 100% of total Feedstock requirements. Great Lakes Feed and Energy Corporation
 will supply all Feedstock.

 
	
  

 	
  

 
	
  

 	
 Energy
 inputs are electricity and natural gas. The facility will require
 approximately 2,642,800 kWh of electricity for the operation of power
 pumps and controls and 798,000m3 of natural gas to heat products during reaction.

 
	
  

 	
  

 
	
  

 	
 No
 water use was reported in the application to the Program.

 
	
  

 	
  

 
	
  

 	
 Methes
 Energies Canada Inc. will install a total of 2 Denmi 3000TM Biodiesel
 processors over two phases with a capacity of 23.18 metric tons (MT) or 25
 million litres of Biodiesel per year by March 31, 2012. The facility will have a total
 combined Nameplate Capacity of 46.36 MT tons of Biodiesel per year
 (50 million litres per year) after the completion of both phases.

 
	
  

 	
  

 
	
  

 	
 Reported
 co-products and expected annual Production volumes are: glycerine, each
 processor produces 4685 tonnes per year for a total of 9,370 tonnes per year.

 
	
  

 	
  

 
	
  

 	
 h) Fuel Quality

 
	
  

 	
  

 
	
  

 	
 All
 of the Biodiesel that Methes Energies Canada Inc. will produce and claim
 under the Program will meet the most recent national and international
 standards for quality Biodiesel, namely ASTM D6751-09. Additionally, a
 certificate of analysis will accompany each delivery of Biodiesel, and a
 sample of the Production will be tested monthly by an independent laboratory.
 It is
 expected that the Biodiesel produced by the Methes Energies Canada Inc. will
 be blended at approximately 1 to 3% with diesel or will be used in its pure
 form in diesel applications as generally accepted industry-wide.

 
	
  

 	
  

 
	
 2.

 	
 BENEFITS:

 
	
  

 	
  

 
	
  

 	
 Benefits to Stakeholders

 
	
  

 	
  

 
	
  

 	
 The
 Program’s operating incentives will partially offset the risk associated with
 fluctuating Feedstock and fuel prices.

 
	
  

 	
  

 
	
  

 	
 Benefits to Canada

 
	
  

 	
  

 
	
  

 	
 The
 Government of Canada is committed to expanding the Production and use of
 cleaner, renewable biofuels such as fuel ethanol and Biodiesel.

 
	
  

 	
  

 
	
  

 	
 The
 Project for the construction of a new facility will contribute to increase
 Canada’s total national nameplate capacity in regards to the
 Production of Renewable Alternatives to Diesel. This increase in Production
 will also be benefiting the development of a competitive domestic industry
 for renewable fuels.

 


-12-





The
Project will contribute to achieving the goals of the Government’s four-pronged
strategy. The strategy aims to reduce greenhouse gas (GHG) emissions resulting from
fuel use, encourage greater Production of biofuels, accelerate the commercialization of new
biofuel technologies, and provide new market opportunities for agricultural
producers and rural communities.


-13-





SCHEDULE B


To the Agreement between


HER MAJESTY THE QUEEN IN RIGHT OF
CANADA


And


METHES ENERGIES CANADA INC.


MAXIMUM ANNUAL ELIGIBLE SALES AND INCENTIVE AMOUNTS


	
 1.

 	
 CANADA’S MAXIMUM CONTRIBUTION SHALL NOT
 EXCEED TWENTY-TWO MILLION FIVE HUNDRED ONE THOUSAND TWO
 HUNDRED DOLLARS ($22,501,200.00) AS DETERMINED IN SECTION 2 BELOW.

 
	
  

 	
  

 
	
 2.

 	
 MAXIMUM ANNUAL ELIGIBLE SALES AND MAXIMUM INCENTIVES:

 






	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Fiscal Year

 	
  

 	
 Maximum Eligible Sales

 (millions of litres)

 	
  

 	
 Incentive Rate Payable

 ($ per L)

 	
  

 	
 Maximum Incentive

 	
  

 
	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 
	
  

 	
 2011-2012

 	
  

 	
 8.34

 	
  

 	
 0.18

 	
  

 	
 $

 	
 1,501,200.00 

 	
  

 
	
  

 	
 2012-2013

 	
  

 	
 50

 	
  

 	
 0.14

 	
  

 	
 $

 	
 7,000,000.00 

 	
  

 
	
  

 	
 2013-2014

 	
  

 	
 50

 	
  

 	
 0.10

 	
  

 	
 $

 	
 5,000,000.00 

 	
  

 
	
  

 	
 2014-2015

 	
  

 	
 50

 	
  

 	
 0.08

 	
  

 	
 $

 	
 4,000,000.00 

 	
  

 
	
  

 	
 2015-2016

 	
  

 	
 50

 	
  

 	
 0.06

 	
  

 	
 $

 	
 3,000,000.00 

 	
  

 
	
  

 	
 2016-2017

 	
  

 	
 50

 	
  

 	
 0.04

 	
  

 	
 $

 	
 2,000,000.00
 

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 	

 


 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
 Total

 	
  

 	
 $

 	
 22,501,200.00

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	

 


 	

 


 	
  

 






	
  

 	
  

 
	
 3.

 	
 The
 Incentive will be calculated in accordance with Schedule C of this Agreement.

 


-14-





SCHEDULE C


To the Agreement between


HER MAJESTY THE QUEEN IN RIGHT OF
CANADA


And 


METHES ENERGIES CANADA INC.


CALCULATION OF THE INCENTIVE


On a monthly basis, and for Proponents
who have submitted their claim for payment within fifteen (15) business days
after the end of a month, the Incentive paid by Canada shall be calculated in
the following manner.


	
  

 	
  

 
	
 1.

 	
 The
 Incentive will be determined in accordance with the following formula:

 
	
  

 	
  

 
	
 Incentive = Eligible Sales x Incentive Rate

 
	
  

 	
  

 
	
 2.

 	
 The
 Incentive Rate is described in the following table:

 






	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Incentive Rate Payable ($ per L)

 	
  

 
	

 


 	
  

 
	
 Fiscal Year

 	
  

 	
 2011-

 2012

 	
  

 	
 2012-

 2013

 	
  

 	
 2013-

 2014

 	
  

 	
 2014-

 2015

 	
  

 	
 2015-

 2016

 	
  

 	
 2016-

 2017

 	
  

 
	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 
	
 Renewable Alternatives to Diesel

 	
  

 	
 0.18

 	
  

 	
 0.14

 	
  

 	
 0.10

 	
  

 	
 0.08

 	
  

 	
 0.06

 	
  

 	
 0.04

 	
  

 


-15-





SCHEDULE D


To the Agreement between


HER MAJESTY THE QUEEN IN RIGHT OF
CANADA


And


METHES ENERGIES CANADA INC.


REPORTS


	
  

 	
  

 
	
 A.

 	
 CLAIMS FOR PAYMENT:

 
	
  

 	
  

 
	
 i)

 	
 When
 submitting each claim for payment and
 within fifteen (15) business days after the end
 of a month, the Proponent shall complete and submit the following claim for
 payment template.

 
	
  

 	
  

 
	
 ii)

 	
 The
 claim for payment must be prepared in accordance with accounting principles
 in force in Canada and signed by the Chief Financial Officer or Duly Authorized
 Officer of the Proponent.

 






	
  

 	
  

 	
  

 	
  

 	
  

 
	 	
 ecoENERGY for Biofuels- Renewable
 Alternatives to Diesel

 (insert
 name of company)

 Claim for Payment

 Information Requirement

 
	 	
  

 	
  

 	
  

 	
  

 
	 	
 For the month of

 	
  

 	
  

 	
  

 
	 	
  

 	
  

 	
  

 	
  

 
	


 	


 	


 	


 	


 
	 	
 Revenues

 	
 Sale
 of Biodiesel

 	
 $

 	
  

 
	 	
  

 	
  

 	
  

 	
  

 
	


 	


 	


 	


 	


 
	 	
 Production

 	
 Number
 of Litres Produced

 	
  

 	
 L 

 
	 	
  

 	
  

 	
  

 	
  

 
	


 	


 	


 	


 	


 
	 	
 Eligible Sales

 	
 Number
 of Litres Sold

 	
  

 	
 L 

 
	 	
  

 	
  

 	
  

 	
  

 
	


 	


 	


 	


 	


 
	 	
 Total Sales

 	
 Number
 of Litres Sold

 	
  

 	
 L 

 
	 	
  

 	
  

 	
  

 	
  

 
	


 	


 	


 	


 	


 
	 	
  

 	
  

 	
  

 	
  

 
	 	
  “I
 _____________________________ an officer, of ________________________________________
 duly authorized hereby represent and warrant that the above noted
 information is true and accurate, has been prepared in accordance with
 accounting principles in force in Canada, and any accruals have been identified. I also hereby
 represent and warrant that transactions with related parties, if applicable, are reported at Fair
 Value.”

 
	 	
  

 	
  

 	
  

 	
  

 
	 	


 	


 	
  

 
	 	
  

 	
  

 	
  

 	
  

 
	 	
 Date

 	
 Name
 of Signing Authority

 Title



 	
  

 	
  

 


-16-








	
  

 	
  

 
	
 B.

 	
 ANNUAL REPORT:

 
	
  

 	
  

 
	
 i)

 	
 On an annual basis and no later than
 March 15th, the Proponent shall provide the anticipated Eligible
 Sales for the last month of the Fiscal Year, to allow Canada to establish a payable at year-end.

 
	
  

 	
  

 
	
 C.

 	
 AUDITED FINANCIAL STATEMENTS:

 
	
  

 	
  

 
	
 i)

 	
 On an annual basis and within thirty
 (30) calendar days from the approval of the statements, the
 Proponent shall provide its audited financial statements and a note signed by
 its
 auditor(s) providing assurance that the elements in the claims for payment
 (Part A) portion of this Schedule were assessed during the audit with respect to
 accuracy, compliance with accounting principles in force in Canada and that
 transactions with related parties have been reported at Fair Value.

 
	
  

 	
  

 
	
 D.

 	
 SPECIAL PURPOSES REPORT:

 
	
  

 	
  

 
	
 In order to allow Canada to review the profitability
 margin, on an annual basis and within
 thirty (30) calendar days from the approval of its audited financial
 statements, the Proponent shall provide a special
 purposes report for the Project. This report should be based on the same
 fiscal period
 as reported in the audited financial statements, be signed by the Chief
 Financial Officer or Duly Authorized Officer of the Proponent and include
 the following information:

 
	
  

 	
  

 
	
 i)

 	
 Details
 of the individual components of Revenues by total dollar value and the
 volumes of each component of Revenues
 sold, produced and inventoried to include Eligible Sales and Total Project Production;

 
	
  

 	
  

 
	
 ii)

 	
 Details of the individual components of Cost Elements
 by total dollar value and the volumes of each component of Cost Elements purchased
 and used in the production process;

 
	
  

 	
  

 
	
 iii)

 	
 A detailed summary of all Revenues and expense items,
 excluding items in i) and ii) above, that were used in the determination of net
 income as disclosed in the Audited Financial Statements;

 
	
  

 	
  

 
	
 iv)

 	
 Details of Project capital costs balances and
 expenditures occurring during the year to include plant construction
 costs, pre-opening costs, capitalized start-up costs, financing costs and any
 reductions to capital costs from government assistance and sales revenues;

 
	
  

 	
  

 
	
 v)

 	
 Details
 of shareholders’ equity balances and changes occurring during the year to
 include classes of shares, shares issued,
 consideration received, dividends paid, and voting and other rights;

 
	
  

 	
  

 
	
 vi)

 	
 Details of debt and government assistance payable
 balances and transactions occurring during the year to include
 principal outstanding, terms and conditions, principal advances and repayments, future
 payment requirements, and interest expenses;

 
	
  

 	
  

 
	
 vii)

 	
 A summary of all related party transactions that relate
 to items i), ii), iii), iv), v) and vi) above and disclosure of
 transaction details for any of the related party transactions that were not completed on terms
 and conditions that are similar to those of transactions with unrelated parties to include the
 measurement basis used, quantities exchanged and the monetary difference between the
 exchange amount and Fair Value;

 
	
  

 	
  

 
	
 viii)

 	
 A summary of gains and losses from hedging activities
 relating to i) and ii) above and disclosure of any speculative hedging gains or
 losses included in i) and ii) above; and

 
	
  

 	
  

 
	
 ix)

 	
 Disclosure of any related parties that have entered
 into an Agreement for the Program and a description of the relationship.

 
	
  

 	
  

 
	
 E.

 	
 COMPLEMENTARY INFORMATION SPREADSHEET:

 
	
  

 	
  

 
	
 i)

 	
 On a semi-annual basis and within
 fifteen (15) business days after September 30 and March
 31 of each year, the Proponent shall provide the complementary information spreadsheet that will
 include information on Production, Revenue Elements, Cost Elements, Biodiesel inventory,
 intercompany transactions, operational hedging and current market prices.

 


-17-





SCHEDULE E


To the Agreement between


HER MAJESTY THE QUEEN IN RIGHT
OF CANADA


And 


METHES ENERGIES CANADA INC.


COMPLEMENTARY REPORTS


	
  

 	
  

 
	
 A.

 	
 COMPLEMENTARY ENVIRONMENTAL
 PERFORMANCE REPORT:

 
	
  

 	
  

 
	
 In order to assess the environmental performance of
 the Project, on an annual basis and no
 later than June 1st, the Proponent shall provide reports on the
 environmental performance of the facility that will include information on:

 
	
  

 	
  

 
	
 i)

 	
 Energy
 Use

 
	
  

 	
  

 
	
  

 	
 Description
 of type and quantity of all energy inputs (e.g. natural gas, electricity,
 biomass, combined heat and power) used for
 overall plant operations and description of type and quantity of energy
 inputs used specifically for Renewable Alternative to Diesel and co-product production, if such values are
 different than that of the overall plant operations.

 
	
  

 	
  

 
	
 ii)

 	
 Water Use

 
	
  

 	
  

 
	
  

 	
 Description
 of the process, source and quantity of water used, and if available, such information for each stage of plant operations.

 
	
  

 	
  

 
	
 iii)

 	
 Feedstock Source(s) and Operation

 
	
  

 	
  

 
	
  

 	
 The type and geographical source of Feedstock supply:
 report distance and mode of transport from Feedstock source (including original source, intermediary
 processing/storage facilities) to fuel
 production facility; and

 
	
  

 	
  

 
	
  

 	
 Quantity of Feedstock required per litre of renewable
 fuel produced. 

 
	
  

 	
  

 
	
 iv)

 	
 Sale
 and Distribution

 
	
  

 	
  

 
	
  

 	
 The
 distribution pathway(s) for saleable products from the facility to buyer(s) –
 including renewable fuel and co-products.
 Report the distance and mode of transport required for delivering outputs.

 
	
  

 	
  

 
	
 v)

 	
 Waste Water

 
	
  

 	
  

 
	
  

 	
 Description of where and the volume of water
 discharged. In addition, the Proponent may also provide, if
 available, the quality of water discharged from the Project, such as any changes in temperature, pH,
 biological/chemical oxygen demand (BOD/COD), and contaminants of waste water discharged.

 
	
  

 	
  

 
	
 vi)

 	
 Waste and Waste Management

 
	
  

 	
  

 
	
  

 	
 The distribution or
 disposal of waste resulting from Renewable Alternative to Diesel and
 co-product production – report type, amount (by volume or mass) and
 proportion of all waste products and whether they are sold, distributed, or
 disposed of, where and how.

 


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