2. Payment of Purchase Price — Converted Organics to Waste Systems. The purchase pricefor the Equipment shall be One Million Six Hundred Thousand Dollars ($1,600,000). ConvertedOrganics shall pay such amount in three scheduled payments to Waste Systems by cashier’s check,wire transfer or other immediately available funds as follows: **•** *Scheduled Payment 1*. Six Hundred Thousand Dollars ($600,000) dueJanuary 1, 2011;  **•** *Scheduled Payment 2.*Five Hundred Thousand Dollars ($500,000) due April1, 2011; and  **•** *Scheduled Payment 3.*Five Hundred Thousand Dollars ($500,000) due July1, 2011, or such later date as the final CDPHE Air Permit is issued.Buyer shall also be responsible for the payment to Waste Systems of all applicable sales, use orsimilar tax related to the purchase of the Equipment; such payment shall be made by ConvertedOrganics as and when required under applicable state and local law.3. Operation; Payment — Waste Systems to Converted Organics. During the entire Term ofthis Agreement, Converted Organics shall (except to the extent that such obligations and dutieshave been delegated to Waste Systems under the terms of this Agreement) keep, operate and maintainthe Equipment on the Landfill in good working order and state of repair and shall fulfill allliquid waste management services under the South Canyon Contract in accordance with the terms ofsuch Contract. In consideration of Converted Organics’ ownership, maintenance and operation of theEquipment on the Landfill and fulfillment of all liquid waste management services under the SouthCanyon Contract, from and after January 1, 2011 and during the remainder of the Term, Waste Systemsshall pay to Converted Organics 100% of all payments from Enterprise for water waste services underthe South Canyon Contract, subject to and within five (5) days after Waste Systems’ receipt ofsame, less the following deductions for the provisions of the following services by Waste Systemson behalf of Converted Organics: (a) The sum of $5,616.00 per month to reimburse Waste Systems the cost of labor tooperate the Equipment; provided, however, such sum shall increase by two percent (2%)on April 1 of each calendar year during the Term;  (b) The sum of $3,333.33 per month for marketing services provided by Waste Systemsto bring water waste into the Landfill (in accordance with the scope of work attachedhereto as Attachment C); provided, however, such sum shall increase by twopercent (2%) on April 1 of each calendar year during the Term;  (c) A sum equal to all costs (calculated based on the actual cost to Waste Systemsfor such costs without any mark-up) of repair and maintenance, laboratory supplies,third-party laboratory testing, and miscellaneous expenses incurred by Waste Systems inservicing, operating, maintaining and repairing the Equipment,
2

 
   however not including those costs associated with the initial testing of theEquipment that is required for the final permit;  (d) The sum of $833.00 per month for use of the existing employee building and theexisting maintenance building on the Landfill;  (e) The cost of all thermal energy required to power the concentrator at the rateof $2.20 per MMBtu; provided, however, such sum shall increase by two percent (2%) onApril 1 of each calendar year during the Term;  (f) A sum equal to all costs (calculated based on the actual cost to Waste Systemsfor such costs without any mark-up) of all utilities used in the operation, maintenanceand repair of the Equipment and operation of the waste water treatment systems at theLandfill, except any costs covered by applicable warranty(ies); and  (g) Any and all sales, use or similar taxes, if any, payable in connection with thepayments from Waste Systems to Converted Organics under this Section 3.Waste Systems shall provide Converted Organics with reasonable documentation supporting alldeductions under paragraphs (c), (e) or (f) above from payments otherwise payable to ConvertedOrganics under the provisions of this Section 3.Converted Organics shall be entitled to all applicable carbon credits and waste heat credits thatmay be generated from the operation of the Equipment.4. Title. Waste Systems and Converted Organics agree that title to the Equipment will passto Converted Organics immediately following full payment by Converted Organics to Waste Systems ofthe entire purchase price set forth in Section 2 above, together with any applicable sales, use orsimilar tax. If Converted Organics fails to pay the entire purchase price to Waste Systems,together with any applicable sales, use or similar tax, title to the Equipment shall remain inWaste Systems, Converted Organics shall forfeit any installments of the purchase price previouslypaid by Converted Organics to Waste Systems, and Waste Systems shall have the right to terminatethis Agreement by written notice to Converted Organics. Waste Systems covenants and agrees thatall payments of the purchase price from Converted Organics shall be used to pay down the debtcurrently encumbering the Equipment. Converted Organics shall have the right to file in theappropriate UCC records, and/or record in the appropriate real property records relating to theLandfill, UCC or other statements evidencing and giving notice of such contract to purchase and,when the entire purchase price has been paid, ownership in Converted Organics. Waste Systemsagrees to reasonably cooperate with Converted Organics in making any such filings, including theexecution of any appropriate UCC or other statements.5. Operation by Waste Systems. During the Term of this Agreement, Waste Systems shalloperate the Equipment on the Landfill on behalf of Converted Organics in a manner intended to
3

 
reasonably maximize payments from Enterprise for waste water services under the South CanyonContract. Subject to reimbursement for the cost thereof as provided in Section 3 above, WasteSystems shall use, service and maintain the Equipment in good condition and state of repair, inaccordance with the instructions and recommendations contained in the Operating Manual for theEquipment and in compliance with all applicable laws and permits. Waste Systems shall at all timeskeep the Equipment free from all liens, security interests and other encumbrances created by orimposed on Waste Systems or its property. Converted Organics and its officers, employees, agentsand guests shall have the right, at any reasonable time during normal working hours and subject tothe prior approval of Waste Systems, to enter upon the Landfill to examine the Equipment.6. Term and Termination. The term of this Agreement (“Term”) shall begin on the date setforth in the first paragraph of this Agreement, and shall continue until the expiration or earliertermination of the South Canyon Contract, as such South Canyon Contract may be renewed pursuant toone or more of the four (4) 5-year renewal periods thereunder. Upon the expiration or earliertermination of this Agreement, Converted Organics shall, at its sole cost and expense, promptlydisassemble and remove the Equipment from the Landfill and leave the area upon which the Equipmentwas installed in a neat and orderly condition, substantially similar as to that which such area wasin prior to installations of the Equipment.     Any and all obligations of either party which have accrued prior to the expiration or earliertermination of this Agreement (including all indemnity obligations), shall survive such expirationor earlier termination.7. Risk of Loss; Insurance. Until such time as title to the Equipment is transferred toConverted Organics, Waste Systems shall maintain with respect to the Equipment “special form”property/casualty insurance in an amount equal to the full replacement cost of the Equipmentinsuring against damage to or destruction of the Equipment from those causes of loss normallyinsured by a standard policy of “special form” insurance. During the period that Waste Systems isrequired to insure the Equipment, Converted Organics shall have no liability with respect to, andWaste Systems hereby releases Converted Organics from any liability with respect to, any damage toor destruction of the Equipment arising from causes of loss insurable by such “special form”insurance; provided, however, Converted Organics shall be liable to Waste Systems for any and alldamage to or destruction of the Equipment arising from acts or omissions of Converted Organics, itsagents and employees which are not insurable by “special form” insurance. Waste Systems shallcause its policies of “special form” or other property/casualty insurance with respect to theEquipment to contain a provision or endorsement waiving the insurer’s rights of subrogation againstConverted Organics and its agents and employees.     From and after the date that title to the Equipment is transferred to Converted Organics,Converted Organics shall maintain with respect to the Equipment “special form” property/casualtyinsurance in an amount equal to the full replacement cost of the Equipment insuring against damageto or destruction of the Equipment from those causes of loss normally
4

 
insured by a standard policy of “special form” insurance. During the period that ConvertedOrganics is required to insure the Equipment, Waste Systems shall have no liability with respectto, and Converted Organics hereby releases Waste Systems from any liability with respect to, anydamage to or destruction of the Equipment arising from causes of loss insurable by such “specialform” insurance; provided, however, Waste Systems shall be liable to Converted Organics for any andall damage to or destruction of the Equipment arising from the gross negligence or intentionallydestructive acts of Waste Systems, its agents and employees which are not insurable by “specialform” insurance. Converted Organics shall cause its policies of “special form” or otherproperty/casualty insurance with respect to the Equipment to contain a provision or endorsementwaiving the insurer’s rights of subrogation against Waste Systems and its agents and employees.     Following the transfer of title to the Equipment from Waste Systems to Converted Organics,Converted Organics agrees that while the Equipment is present on the Landfill or ConvertedOrganics’ agents or employees are performing work in connection with the Equipment or otherwisepresent on the Landfill, Converted Organics shall maintain in full force and effect a policy(ies)of commercial general liability insurance, including contractual liability coverage, with a minimumcombined single limit of Three Million Dollars ($3,000,000) with respect to Converted Organics’activities upon the Landfill (such coverage to be afforded utilizing one or more commercial generalliability and/or umbrella liability policies). Similarly, at all times while this Agreement is ineffect, Waste Systems shall maintain in full force and effect a policy(ies) of commercial generalliability insurance, including contractual liability coverage, with minimum limits as prescribed bythe South Canyon Contract with respect to the Landfill (such coverage to be afforded utilizing oneor more commercial general liability and/or umbrella liability policies). All such policies ofcommercial general liability insurance carried by Converted Organics shall name Waste Systems andthe Enterprise/City of Glenwood Springs as additional insureds and shall: (i) be issued byfinancially responsible insurance companies having at least an A/VIII rating with Best InsuranceReports and licensed and authorized to do business in the State of Colorado; (ii) provide that suchpolicies shall not be subject to cancellation or reduction in coverage except after at least twenty(20) days (ten (10) days in the event of cancellation due to nonpayment of premium) prior writtennotice to Waste Systems and the Enterprise/City of Glenwood Springs; and (iii) shall be primary,and any insurance carried by Waste Systems or the Enterprise/City of Glenwood Springs shall benoncontributing.All insurance required to be carried by Converted Organics and Waste Systems hereunder may becarried under blanket policies covering the Equipment, Landfill and other locations, provided thatthe coverage afforded by reason of the use of such blanket policy(ies) shall not be reduced ordiminished from the requirements for such insurance set forth in this Section 7. The parties shalleach, within five (5) days after request by the other party, provide such party with reasonableevidence that the policies of insurance required to be maintained under this Section 7 arecurrently in place.
5

 
     6. Default. Upon a default or breach of any term or provision of this Agreement byeither party which is not cured within ten (10) days after the defaulting party’s receipt ofwritten notice of default or breach from the non-defaulting party (or if such default or breach isof such a nature that it cannot reasonably be cured within such 10-day period, then if thedefaulting party fails to commence to cure such default or breach within such 10-day period orfails to thereafter cure such default or breach within thirty (30) days after the defaultingparty’s receipt of written notice of default or breach from the non-defaulting party), thenon-defaulting party shall have all rights and remedies provided for in this Agreement and/or atlaw or in equity. All such remedies shall be cumulative.     7. Miscellaneous. (a) This Agreement, and the respective rights and obligations of the partieshereunder, shall be construed under and be governed by the laws of the State ofColorado without regard to principles of conflict of laws. Any action, claim orproceeding brought by any party hereunder shall be commenced exclusively in any stateor federal court located in Denver or Denver County, Colorado, and the parties heretoeach hereby irrevocably and unconditionally consent to the exclusive jurisdiction andvenue of such courts in any action, claim or proceeding brought under this Agreement.  (b) This Agreement shall be binding upon and shall inure to the benefit of thesuccessors and assigns of the parties hereto; provided, however, Converted Organicsshall not have the right to assign this Agreement to any other person or entity withoutthe prior written consent of Waste Systems, which consent shall not be unreasonablywithheld, conditioned or delayed.  (c) This Agreement, including the Attachments hereto, which are incorporated hereinby reference, sets forth the entire agreement and understanding of the parties heretowith respect to the subject matter of this Agreement and supersedes all prioragreements, if any, written or oral.  (d) Should this Agreement become the subject of litigation between Waste Systemsand Converted Organics, the prevailing party shall be entitled to recovery of allactual costs in connection therewith, including but not limited to, attorneys’ fees andexpert witness fees.  (e) This Agreement may be executed in counterparts, including any facsimile copies,each of which shall be deemed an original and all of which together shall constituteone and the same instrument.  (f) All notices hereunder shall be valid when given if personally delivered or two(2) days after deposit in the United States mail, postage prepaid, certified mail,return
6

 
   receipt requested and addressed as follows or to such new or additional address(es)as either party may from time to time designate in writing to the other:   If to Waste Systems: South Canyon Waste Systems, LLC  9870 Big Bend Blvd.  P.O. Box 221090  Kirkwood MO 63122  Attention: Manager   If to Converted Organics: Converted Organics Inc.  137A Lewis Wharf  Boston, MA 02110  ATTN: Edward J. Gildea     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date firstwritten above.           “Waste Systems”   “Converted Organics”           SOUTH CANYON WASTE SYSTEMS, LLC CONVERTED ORGANICS INC.           By: /s/ Larry Giroux By: /s/ Edward J. Gildea             Print Name: Larry Giroux   Print Name: Edward J. Gildea             Title:     Title: President and CEO           
7

 
     **Attachment A — Equipment**   **LM-HT****TM**Concentrator Model 12K-WB **SN # 10851-002****Flex Fuel Wood Burner and Control System**  **Heavy Duty Vibrating Conveyor** **SN # 21167****Rotophase**  
8

 
**Attachment B — Permits**
9****