Exhibit 10.1

                                 PROMISSORY NOTE

FACE  AMOUNT                                       $1,362,500
PRICE                                              $1,090,000
INTEREST  RATE                                     0%  per  month
NOTE  NUMBER                                       December-2005-101
ISSUANCE  DATE                                     December  20,  2005
MATURITY  DATE                                     December  21,  2006

     FOR  VALUE  RECEIVED, Hybrid Fuel Systems, Inc., a Georgia corporation (the
"Company"),  (OTC  BB:  HYFS)  hereby  promises  to pay to the order of DUTCHESS
PRIVATE  EQUITIES  FUND,  L.P.  AND  DUTCHESS  PRIVATE  EQUITIES  FUND,  II,  LP
(collectively,  the  "Holder") by the Maturity Date, or earlier, the Face Amount
of  One  Million  Three  Hundred  and  Sixty-Two  Thousand  Five Hundred Dollars
($1,362,500)  U.S.,  in  such  amounts,  at  such  times  and  on such terms and
conditions  as  are  specified  herein  (this  "Note").

     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  (the  "Investor")  and  the  Company  (the  "Equity  Line").

ARTICLE  1          METHOD  OF  PAYMENT

     Payments  made  by  the  Company  in  satisfaction  of  this  Note  (each a
"Payment,"  and  collectively,  the "Payments") shall be made from each Put from
the  Equity  Line  of  Credit  with  the  Investor  given  by the Company to the
Investor.   The  Company  shall make payments to the Holder in the amount of the
greater  of  a) one hundred percent (100%) of each Put to  the Investor from the
Company; or, b) one hundred thirteen thousand five hundred and forty-one dollars
and  sixty-seven  cents ($113,541.67) (collectively, the "Payment Amount") until
the Face Amount is paid in full, minus any fees due.   First Payment will be due
on  February  1, 2006 and all subsequent Payments will be made at the Closing of
every  Put  to  the Investor thereafter until  this Note is paid in full, with a
minimum  amount  of  one  hundred  thirteen  thousand five hundred and forty-one
dollars  ($113,541.67)  per  month.  ("Payment  Date"  or  "Payment  Dates").
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 thereof, in
readily  available  funds  at  any  time  and from time to time without penalty.

     Payments  pursuant  to this Note shall be made directly from the Closing of
each  Put  ("Put  Closing")  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  below).  The  Company agrees to fully execute and diligently carry
out  Puts  to the Investor.  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  do  so  will result in an Event of Default.

     The  Company  hereby  authorizes  Dutchess  Private  Equities  Fund, LP, to
transfer  funds  directly  to  the  Holder  from each Put in connection with the
Company's execution of the Collateral (as defined below in Article 2).  The Puts
shall  be  deemed  closed  for the amounts transferred to the Holder immediately
upon  the  Put  Closing.

     After  Closing,  the  Company must make a Prepayment to the Holder when the
aggregate  amount  of  financing  received  by  the  Company is in excess of one
million dollar ($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.

ARTICLE  2             COLLATERAL

     The Company does hereby agree to issue forty (40) signed Put Notices to the
Holder  to  use  as Collateral.  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.

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


ARTICLE  3             UNPAID  AMOUNTS

     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 liquated damages ("Liquidated Damages").
The Liquated Damages will be compounded daily. If the aforementioned occurs, the
Company  will  be  in  Default and the remedies as described in Article 4 may be
taken  at  the  Holder's discretion.  It is the intention and acknowledgement of
both  parties  that  the  Liquidated  Damages  not  be  deemed  as  interest.


ARTICLE  4          DEFAULTS  AND  REMEDIES

Section 4.1     Events of Default.  An "Event of Default" or "Default" occurs if
     (a)  the  Company does not make the Payment on the Face Amount of this Note
within two (2) business days of the applicable Closing of a Put, a Payment Date;
or,  a  balance  on  the  Note  exists on the Maturity Date, as applicable, upon
redemption  or  otherwise, (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  it  or  for  all  or substantially all of its property; (iv) makes a general
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 all or substantially all of 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; (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 does not remain effective
for any reason and is not cured within 5 days or (e) the Company fails to comply
with any of the Articles of this Agreement as outlined and is not cured within 5
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.

     In  the  Event  of Default, the Holder may elect to secure a portion of the
Company's  assets  not to exceed 200% of the Face Amount of the Note, including,
but not limited to: accounts receivable, cash, marketable securities, equipment,
building,  land  or  inventory.  The  Holder may also elect to garnishee 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
November  4,  2005,  between  the  Holder  and  the  Company.

     For  EACH  Event  of Default, as outlined in this Agreement, the Holder can
exercise  its  right to increase the Face Amount of the Debenture by ten percent
(10%)  as an initial penalty.  In addition, the Holder may elect to increase the
Face  Amount  by two and one-half percent (2.5%) per month paid as a penalty for
Liquidated  Damages.  The  Liquated Damages will be compounded daily.  It is the
intention and acknowledgement of both parties that the Liquidated Damages not be
deemed  as  interest.

     In  the  event of a Default hereunder, the Holder shall have the right, but
not  the  obligation,  to  1)  switch  the  Residual  Amount  to  a  three-year
("Convertible  Maturity  Date"),  fifteen  percent  (15%)  interest  bearing
convertible  debenture  at  the terms described in Section 4.2 (the "Convertible
Debenture").  At  such  time  of  Default,  the  Convertible  Debenture shall be
considered  closed  ("Convertible  Closing  Date").  If  the  Holder  chooses to
convert  the  Residual Amount to a Convertible Debenture, the Company shall have
twenty  (20)  business days after notice of the same (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 forty (40) business days of the date the Company files such
Registration  Statement.   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,  it  agrees  that  it  shall  cause  such  registration
statement  to  be  declared effective as soon as reasonably practicable.  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 2) 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 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.

     Section  4.2  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
which  is  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 4.3, but the number of shares
issuable  shall  be rounded up or down, as the case may be, to the nearest whole
share.

(b)  The Convertible Debenture may be converted, whether 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  4.3.

     Section  4.3  Conversion  Procedure.

     The Residual Amount may be converted, in whole or in part any time and from
time  to time, following the Convertible Closing Date.  Such conversion shall be
effectuated  by  surrendering  to  the Company, or its attorney, 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.  At such time that the original Convertible Debenture
has  been  received by the Company, the Holder can elect to whether a reissuance
of the Convertible Debenture is warranted, or whether the Company can retain the
Convertible  Debenture  as  to  a  continual  conversion  by  the  Holder.
Notwithstanding  the  above,  any Notice of Conversion received by 4:00 P.M. EST
shall  be deemed to have been received the following business day (receipt being
via  a  confirmation  of  the  time  such facsimile to the Company is received).

(a) Common Stock to be Issued. Upon the conversion of any Convertible Debentures
and  upon  receipt  by the Company or its attorney of a facsimile or original of
the  Holder's  signed  Notice  of  Conversion,  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 4.1 has been declared effective (or with proper restrictive
legends  if  the registration statement has not as yet been declared effective),
in  such  denominations to be specified at conversion representing the number of
shares  of  Common  Stock  issuable  upon such conversion, as applicable. In the
event  that  the  Debenture is aged one year and deemed sellable under Rule 144,
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 provide 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  and  shall  maintain  an  appropriate ledger
containing the necessary information with respect to each Convertible Debenture.
The  Company  warrants that no instructions, other than these instructions, have
been  given  or  will  be  given to the transfer agent and that the Common Stock
shall  otherwise  be freely resold, except as may be set forth herein or subject
to applicable law.

(b) Conversion Rate. Holder is entitled to convert the Debenture Residual Amount
, plus accrued interest, anytime following the Convertible Maturity Date, at the
lesser  of  (i)  fifty  percent (50%) of the lowest closing bid price during the
fifteen (15) trading immediately preceding the Convertible Maturity Date or (ii)
100%  of  the  lowest  bid  price  for  the twenty (20) trading days immediately
preceding  the  Convertible  Maturity  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 or down, as
the case may be, to the nearest whole share.

(c)     Nothing  contained  in  the  Convertible  Debenture  shall  be deemed to
establish  or  require the payment of interest to the Holder at a rate in excess
of  the  maximum rate permitted by governing 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.

(d)     It  shall  be the Company's responsibility to take all necessary actions
and  to  bear  all  such  costs  to  issue  the Common Stock as provided herein,
including  the  responsibility and cost for delivery of an opinion letter to the
transfer  agent,  if  so  required.  Holder shall be treated as a shareholder of
record  on  the  date  Common Stock is issued to the Holder. If the Holder shall
designate  another  person  as  the  entity  in  the  name  of  which  the stock
certificates  issuable  upon  conversion  of the Convertible Debenture are to be
issued  prior  to the issuance of such certificates, 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. Upon surrender of any Convertible Debentures that are to be converted in
     part,  the  Company  shall  issue to the Holder a new Convertible Debenture
equal  to  the  unconverted  amount,  if  so requested in writing by the Holder.

(e) Within five (5) business days after receipt of the documentation referred to
above in Section 4.2, 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, then in such event the Company
shall  pay  to  the  Holder  one percent (1%) in cash of the dollar value of the
Debenture Residual Amount remaining after said conversion, compounded daily, per
each  day  after the fifth (5th) business day following the Conversion Date that
the Common Stock is not delivered to the Purchaser.

           The Company acknowledges that its failure to deliver the Common Stock
within five (5) business days after the Conversion Date will cause the Holder to
suffer  damages  in an amount that will be difficult to ascertain.  Accordingly,
the  parties  agree  that it is appropriate to include in this  Note 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 will 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.

(f)  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,  and  the  Notice  of Conversion as to any
Convertible  Debentures  requested  to  be  converted  but  not  converted  (the
"Unconverted  Convertible 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  three  (3)  business  days of such default (with the original
delivered  by  overnight  mail  or  two  day courier), and the Holder shall give
notice  to  the Company by facsimile within five (5) business days of receipt of
the  original  Notice  of  Conversion  Default  (with  the original delivered by
overnight  mail or two day courier) of its election to either nullify or confirm
the Notice of Conversion.

     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 payments
shall  be  made  to the Holder  by the fifth (5th) day of the following calendar
month,  or  (ii)  in  the event Holder elects to take such payment in stock, the
Holder may convert such payment amount into Common Stock at  the conversion rate
set  forth  in  the first sentence of this paragraph at any time after the fifth
(5th)  day  of the calendar month following the month in which the Authorization
Notice  was  received,  until  the  expiration  of  the mandatory three (3) year
conversion  period.

     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  will  cause the Holder to suffer damages in an
amount that 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  will  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.

(g) If, by the third (3rd) business day after the Conversion Date of any portion
of  the  Convertible  Debentures  to  be  converted  (the  "Delivery Date"), the
transfer  agent fails for any reason to deliver the Common Stock upon conversion
by  the  Holder  and  after such Delivery Date, the Holder purchases, in an open
market  transaction or otherwise, shares of Common Stock (the "Covering Shares")
solely  in  order  to make delivery in satisfaction of a sale of Common Stock by
the  Holder  (the "Sold Shares"), which delivery such Holder anticipated to make
using  the Common Stock issuable upon conversion (a "Buy-In"), 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 over (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.

       (h)     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  "Section  4.3(h) Indemnitees") 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  Section 4.3(h) Indemnitee is a party to the action for which
indemnification  hereunder  is sought), and including reasonable attorneys' fees
and  disbursements  (the  "Section 4.3(h) Indemnified Liabilities"), incurred by
any  Section 4.3(h) 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 Transaction Documents 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 Transaction Documents
or  any  other  certificate,  instrument,  or  document  contemplated  hereby or
thereby,  (iii) any cause of action, suit, or claim brought or made against such
Section  4.3(h) Indemnitee by a third party and arising out of or resulting from
the  execution,  delivery,  performance,  or  enforcement  of  the  Transaction
Documents  or any other certificate, instrument, or document contemplated hereby
or thereby, (iv) any transaction financed or to be financed in whole or in part,
directly  or  indirectly,  with the proceeds of the issuance of the Common Stock
underlying  the  Convertible  Debenture ("Securities"), or (v) the status of the
Holder or holder of the Securities as an investor in the Company, 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 the Holder or
the  Investor which is specifically intended by the Holder or the Investor to be
relied  upon  by  the  Company, including for use in the preparation of any such
registration  statement,  preliminary  prospectus, or prospectus, or is based on
illegal trading of the Common Stock by the Holder or the Investor. 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  5     ADDITIONAL  FINANCING  AND  REGISTRATION  STATEMENTS

     The  Company  will not enter into any additional financing agreements, debt
or  equity, without prior expressed written consent from the Holder, which shall
not  be  unreasonably  withheld.  Failure  to  do  so will result in an Event of
Default  and  the  Holder  may  elect  to take the action outlined in Article 4.

     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 Holder shall also reserve the right to switch to the
terms  of  the  new  financing  ("Most  Favored  Nations").

     The  Company  agrees that any and all its officers, insiders, affiliates or
other  related  parties shall refrain from selling any Stock, during the Lock-Up
Period.

ARTICLE  6     NOTICE.

     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 receipt, 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,  in  each  case properly addressed to the party to
receive  the  same.  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,  21st  flr.
New  York,  NY  10018
Telephone:  212-930-9700
Facsimile:  212-930-9725

If  to  the  Holder:

     Dutchess  Private  Equities  Fund,  II,  LP
     Douglas  Leighton
     50  Commonwealth  Ave,  Suite  2
     Boston,  MA  02116
     (617)  301-4700
     (617)  249-0947

     Each  party  shall provide 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 in
which  the United States Stock Markets ("US Markets") are closed ("Holiday"), or
authorizes or requires the payment of money or the performance of a condition or
obligation  within,  before  or  after  a period of time computed from a certain
date,  and such period of time ends on a Saturday or a Sunday or a Holiday, such
payment  may  be  made  or  condition  or  obligation  performed on the previous
business  day,  and  if the period ends at a specified hour, such payment may be
made  or  condition  performed,  at  or  before  the  same hour of such previous
business  day,  with  the  same  force  and  effect  as  if made or performed in
accordance  with  the  terms of this Note.  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  shall  not  be  assigned.

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 and the
Holder.

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     LITIGATION

     The  parties  to this agreement will submit all disputes arising under this
agreement  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.

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 shall pay fees associated with the transaction in the amount of
ninety  thousand  dollars  ($90,000)  directly  from  the  Closing of this Note.

ARTICLE  14        INDEMNIFICATION

     In  consideration  of the Holder's execution and delivery of this Agreement
and  the  acquisition  and  funding  by  the Holder of the Note hereunder 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  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  ten  million  two  hundred  and  fifty thousand
(10,250,000) shares of unregistered, restricted Common Stock to the Holder as an
incentive  for  the  investment  ("Shares").  The  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, ten million two
hundred  and  fifty  thousand (10,250,000) additional shares of common stock for
each  time  a  registration  statement is filed and the Shares are not included.
The  Holder retains the right to waive such penalty, in the event Holder chooses
to  do  so.  Failure  to do so will result in an Event of Default and the Holder
may  elect to take the action outlined in Article 4.  This Event of Default will
survive  this  Agreement  until  such time as the Shares are no longer under the
control  of  the  Holder.

ARTICLE  16  USE  OF  PROCEEDS

     The  Company  shall  use  the  funds  for  general  corporate  purposes.

ARTICLE  17     WAIVER

     The  Holder's  delay  or  failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants shall
not  waiver, affect, or diminish any right of the Holder under this Agreement 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  Agreement,  and no Event of Default, shall be
deemed  to  have  been  waived by the Holder, nor may this Agreement be amended,
changed  or  modified,  unless such waiver, amendment, change or modification is
evidenced  by an instrument in writing specifying such waiver, amendment, change
or  modification  and  signed  by  the  Holder.

ARTICLE  18     WAIVER  OF  JURY  TRIAL

     AS  A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT,
THE  PARTIES  HERETO  HEREBY  WAIVE  ANY  RIGHT  TO  TRIAL  BY JURY IN ANY LEGAL
PROCEEDING  RELATED  IN  ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER
DOCUMENTS  ASSOCIATED  WITH  THIS  TRANSACTION.

ARTICLE  19  SENIOR  OBLIGATION

     The  Company  shall cause this Note ("Holder's Debt") to be senior in right
of  payment  to  all  other  Indebtedness  of  the  Company.

ARTICLE  20      TRANSACTIONS  WITH  AFFILIATES

     The  Company  shall  not,  and shall cause each of its Subsidiaries not to,
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  21     EQUITY  LINE  OBLIGATIONS

     At  such  time, when the Company's current effective registration statement
for  the  Equity Line of Credit with Dutchess Private Equities, II, LP (File No:
333-129928),  has  fifty  million  (50,000,000)  shares  or  less  remaining for
issuance,  or  upon  the  request  of  the Holder, 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  underlying  the  shares  in  the
Investment  Agreement,  to  be filed only with the Holder's consent.  The Holder
shall  also  retain  the  right  to  determine  the  date  of  the filing of the
registration  statement.  Failure to do any action outlined in this Article will
result  in  an  Event  of  Default.

ARTICLE  22     SECURITY

     The Holder shall have full right to exercise the Security Agreement between
the  Company  and  the  Holder  dated  November  4,  2005.

ARTICLE  23     MISCELLANEOUS

a.     All  pronouns  and  any variations thereof used herein shall be deemed to
refer  to  the  masculine,  feminine,  impersonal,  singular  or  plural, as the
identity  of  the  person  or  persons  may  require.

b.     Neither  this  Note  nor  any provision hereof shall be waived, modified,
changed, discharged, terminated, revoked or canceled, except by an instrument in
writing  signed  by  the  party  effecting  the  same  against  whom any change,
discharge  or  termination  is  sought.

c.     Notices  required  or permitted to be given hereunder shall be in writing
and  shall  be deemed to be sufficiently given when personally delivered or sent
by  facsimile  transmission:  (i) if to the Company, at its executive offices or
(ii)  if  to  the  Holder,  at  the  address for correspondence set forth in the
Article 6, or at such other address as may have been specified by written notice
given  in  accordance  with  this  paragraph.

d.     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.

e.     This Written Agreement represent the FINAL AGREEEMENT between the Company
and  the  Holders  and  may  not  be  contradicted  by  evidence  of  prior,
contemporaneous,  or  subsequent  oral  agreements  of the parties, there are no
unwritten  oral  agreements  among  the  parties.

f.     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. 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 reasonably lead to delisting of
the  Common  Stock  by  the  Principal  Market  in  the  foreseeable  future.

g.     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.

h.     Authorization;  Enforcement;  Compliance with Other Instruments.  (i) The
Company  has  the  requisite  corporate  power  and  authority to enter into and
perform  this  Note, and to issue the Note and Incentive Debenture in accordance
with  the  terms hereof and thereof, (ii) the execution and delivery of the 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 Debenture 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)  the  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.

i.  The  execution  and  delivery of this Note shall not alter any prior written
agreements  between  the  Company  and  the  Investor  including the Transaction
Documents  associated  with  Debenture  Number  November  2005  101.
                                      * * *

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

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