Document:

ROWAN
COMPANIES, INC.

     

    as
the Company

     

    and

     

    U.S.
BANK NATIONAL ASSOCIATION

     

    as
Trustee

     

    SECOND
SUPPLEMENTAL INDENTURE

     

    Dated
as of August 30, 2010

     

    to

     

    INDENTURE

     

    Dated
as of July 21, 2009

     

    5%
SENIOR NOTES DUE 2017

     

    
      

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE
OF CONTENTS

     

    
      
        
          
            
              
                
                  	 
      	 	
                          Page

                        
	 
      	 	 
      
	
                          ARTICLE
      ONE Relation to Indenture; Definitions

                        	 	
                          1

                        
	
                          SECTION
      1.01. Relation to Indenture

                        	 	
                          1

                        
	
                          SECTION
      1.02. Definitions

                        	 	
                          1

                        
	
                          SECTION
      1.03. General References

                        	 	
                          1

                        
	 
      	 	 
      
	
                          ARTICLE
      TWO The Series of Securities

                        	 	
                          1

                        
	
                          SECTION
      2.01. The Form and Title of the Securities

                        	 	
                          1

                        
	
                          SECTION
      2.02. Amount

                        	 	
                          2

                        
	
                          SECTION
      2.03. Stated Maturity

                        	 	
                          2

                        
	
                          SECTION
      2.04. Interest and Interest Rates

                        	 	
                          2

                        
	
                          SECTION
      2.05. Place of Payment

                        	 	
                          2

                        
	
                          SECTION
      2.06. Optional Redemption

                        	 	
                          2

                        
	
                          SECTION
      2.07. Defeasance and Discharge; Covenant Defeasance

                        	 	
                          2

                        
	
                          SECTION
      2.08. Global Securities

                        	 	
                          3

                        
	 
      	 	 
      
	
                          ARTICLE
      THREE Amendments to Original Indenture

                        	 	
                          3

                        
	
                          SECTION
      3.01. Defined Terms

                        	 	
                          3

                        
	
                          SECTION
      3.02. Additional Event of Default

                        	 	
                          7

                        
	 	 	 
	
                          ARTICLE
      FOUR Additional Covenants

                        	 	
                          7

                        
	
                          SECTION
      4.01. Limitation on Liens

                        	 	
                          7

                        
	
                          SECTION
      4.02. Limitation on Sale and Leaseback Transactions

                        	 	
                          7

                        
	 
      	 	 
      
	
                          ARTICLE
      FIVE Miscellaneous

                        	 	
                          8

                        
	
                          SECTION
      5.01. Certain Trustee Matters

                        	 	
                          8

                        
	
                          SECTION
      5.02. Continued Effect

                        	 	
                          8

                        
	
                          SECTION
      5.03. Governing Law

                        	 	
                          9

                        
	
                          SECTION
      5.04. Counterparts

                        	 	
                          9

                        

                

              

            

          

        

      

    

    

    EXHIBITS

    
      Exhibit
A:  Form of Note

    

     

    
      
        
          	
                  Second
      Supplemental Indenture

                	 
      

        

      

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SECOND SUPPLEMENTAL INDENTURE,
dated as of August 30, 2010 (this “Supplemental Indenture”), by and between
ROWAN
COMPANIES, INC., a corporation duly organized and existing under the laws
of the State of Delaware (the “Company”), and U.S. BANK
NATIONAL ASSOCIATION, a nationally chartered banking association, as
trustee under the Indenture referred to below (in such capacity, the
“Trustee”).

     

    RECITALS
OF THE COMPANY

     

    WHEREAS,
the Company and the Trustee have heretofore entered into an Indenture dated as
of July 21, 2009 (the “Original Indenture”) (the Original Indenture, as
supplemented from time to time, including without limitation pursuant to this
Supplemental Indenture, being referred to herein as the “Indenture”);
and

     

    WHEREAS,
under the Original Indenture, a new series of Securities may at any time be
established by an indenture supplemental to the Original Indenture;
and

     

    WHEREAS,
the Company proposes to create under the Indenture a new series of Securities;
and

     

    NOW,
THEREFORE, in consideration of the premises, agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree,
for the equal and proportionate benefit of all Holders of the Notes (as defined
below), as follows:

     

    ARTICLE
ONE

    Relation
to Indenture; Definitions

     

    SECTION
1.01.  Relation to
Indenture.

     

    With
respect to the Notes, this Supplemental Indenture constitutes an integral part
of the Indenture.

     

    SECTION
1.02.  Definitions.

     

    For all
purposes of this Supplemental Indenture, capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned thereto in the
Original Indenture.

     

    SECTION
1.03.  General
References.

     

    Unless
otherwise specified or unless the context otherwise requires, (i) all references
in this Supplemental Indenture to Articles and Sections refer to the
corresponding Articles and Sections of this Supplemental Indenture and (ii) the
terms “herein”, “hereof”, “hereunder” and any other word
of similar import refer to this Supplemental Indenture.

     

    ARTICLE
TWO

    The
Series of Securities

     

    SECTION
2.01.  The Form and
Title of the Securities.

     

    There is
hereby established a new series of Securities to be issued under the Indenture
and to be designated as the Company’s 5% Senior Notes due 2017 (the
“Notes”).  The Notes shall be substantially in the form attached as
Exhibit A
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by the Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as the Company may deem appropriate or as may be
required or appropriate to comply with any laws or with any rules made pursuant
thereto or with the rules of any securities exchange or automated quotation
system on which the Notes may be listed or traded, or to conform to general
usage, or as may, consistently with the Indenture, be determined by the officers
executing such Notes, as evidenced by their execution thereof.

     

    
      
        
          	
                  Second
      Supplemental Indenture

                	 
      

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The Notes
shall be executed, authenticated and delivered in accordance with the provisions
of, and shall in all respects be subject to, the terms, conditions and covenants
of the Original Indenture as supplemented by this Supplemental Indenture
(including the form of Note attached as Exhibit A hereto
(the terms of which are incorporated in and made a part of this Supplemental
Indenture for all intents and purposes)).

     

    SECTION
2.02.  Amount.

     

    The
aggregate principal amount of the Notes that may be authenticated and delivered
pursuant hereto is unlimited.  The Trustee shall initially
authenticate and deliver Notes for original issue in an initial aggregate
principal amount of up to $400,000,000, upon delivery to the Trustee of a
Company Order for the authentication and delivery of such Notes.  The
aggregate principal amount of the Notes to be issued hereunder may be increased
at any time hereafter and the series may be reopened for issuances of Additional
Notes, upon Company Order, without the consent of any Holder and without any
further supplement or amendment to the Original Indenture or this Supplemental
Indenture.  The Notes issued on the date hereof and any such
Additional Notes that may be issued hereafter shall be part of the same series
of Securities for all purposes under the Indenture.

     

    SECTION
2.03.  Stated
Maturity.

     

    The Notes
may be issued on any Business Day on or after August 30, 2010, and the Stated
Maturity of the Notes shall be September 1, 2017.

     

    SECTION
2.04.  Interest and
Interest Rates.

     

    The rate
or rates at which the Notes shall bear interest, the date or dates from which
such interest shall accrue, the Interest Payment Dates on which any such
interest shall be payable and the Regular Record Date for any interest payable
on any Interest Payment Date, in each case, shall be as set forth in the form of
Note attached as Exhibit A
hereto.

     

    SECTION
2.05.  Place of
Payment.

     

    As long
as any Notes are Outstanding, the Company shall maintain an office or agency in
the United States where Notes may be presented for payment.  Such
office or agency shall initially be the office or agency of the Trustee in
Houston, Texas.

     

    SECTION
2.06.  Optional
Redemption.

     

    At its
option, the Company may redeem the Notes, in whole or in part, in principal
amounts of $2,000 or integral multiples of $1,000 in excess thereof, at any time
or from time to time, at the applicable Redemption Price determined as set forth
in the form of Note attached hereto as Exhibit A, in
accordance with the terms set forth in the Notes and in accordance with Article
Eleven of the Original Indenture.

     

    SECTION
2.07.  Defeasance
and Discharge; Covenant Defeasance.

     

    Article
Thirteen of the Original Indenture (as amended and supplemented by this
Supplemental Indenture) shall apply to the Notes.  Furthermore, the
additional Event of Default specified in Section 3.02. of this Supplemental
Indenture, each of the covenants set forth in ARTICLE Four of this Supplemental
Indenture, and the Events of Default specified in Sections 5.1(c) and 5.1(d) of
the Original Indenture, shall, in each case, constitute “Additional Defeasible
Provisions” (as such term is used in the Original Indenture).

     

    
      
        
          	
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      Supplemental Indenture

                	 
      

        

      

    

    
      
         

      

      
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    SECTION
2.08.  Global
Securities.

     

    The Notes
shall initially be issuable in whole or in part in the form of one or more
Global Securities.  Such Global Securities (i)  shall be
deposited with, or on behalf of, the Depository Trust Company, New York, New
York, which shall act as Depositary with respect to the Notes, (ii) shall bear
the legends applicable to Global Securities set forth in Sections 2.2 and 2.4 of
the Original Indenture, (iii) may be exchanged in whole or in part for
Securities in definitive form upon the terms and subject to the conditions
provided in Section 3.5 of the Original Indenture and in this Supplemental
Indenture and (iv) shall otherwise be subject to the applicable provisions
of the Indenture.

     

    ARTICLE
THREE

    Amendments
to Original Indenture

     

    With
respect to the Notes, the Original Indenture is hereby amended as set forth
below in this ARTICLE Three; provided, however, that each such
amendment shall apply only to the Notes and not to any other series of
Securities issued under the Indenture.

     

    SECTION
3.01.  Defined
Terms.

     

    Subject
to the limitations set forth in the preamble to ARTICLE Three of this
Supplemental Indenture, Section 1.1 of the Original Indenture is hereby amended
by inserting or restating, as the case may be, each of the following defined
terms in its appropriate alphabetical position:

     

    “Additional
Defeasible Provisions” means the provisions of Sections 5.1(c), 5.1(d), 5.1(h),
10.7 and 10.8 of the Indenture.

     

    “Additional
Notes” means an unlimited maximum aggregate principal amount of Notes (other
than the Notes issued on the date hereof) issued under the Indenture pursuant to
Section 2.02. of this Supplemental Indenture.

     

    “Attributable
Indebtedness,” when used with respect to any Sale and Leaseback Transaction,
means, as at the time of determination, the present value (discounted at the
rate set forth or implicit in the terms of the lease included in such
transaction) of the rental payments during the remaining term of the lease
included in such Sale and Leaseback Transaction (other than amounts required to
be paid on account of taxes, maintenance, repairs, insurance, assessments,
utilities, operating and labor costs and other items that do not constitute
payments for property rights), including any period for which such lease has
been extended.  In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall be the lesser of the
net amount determined assuming termination upon the first date such lease may be
terminated (in which case the net amount shall also include the amount of the
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) or the net
amount determined assuming no such termination.

     

    “Capital
Lease Obligation” means, at the time any determination is to be made, the amount
of the liability in respect of a capital lease that would at that time be
required to be capitalized on a balance sheet in accordance with GAAP, and the
stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be prepaid by the lessee without payment of a penalty.

     

    
      
        
          	
                  Second
      Supplemental Indenture

                	 
      

        

      

    

    
      
         

      

      
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    “Capital
Stock” means:

     

    (1)           in
the case of a corporation, corporate stock;

     

    (2)           in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock;

     

    (3)           in
the case of a partnership or limited liability company, partnership interests
(whether general or limited) or membership interests; and

     

    (4)     
     any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.

     

    “Consolidated
Net Tangible Assets” of any Person means the total amount of assets (after
deducting applicable reserves and other properly deductible items) of such
Person and its consolidated Subsidiaries minus all current liabilities
(excluding liabilities that are extendable or renewable at the option of such
Person or any of its consolidated Subsidiaries to a date more than 12 months
after the date of calculation and excluding current maturities of long-term
indebtedness) and all goodwill, trade names, trademarks, patents, unamortized
indebtedness discount and expense and other like intangible
assets.  Consolidated Net Tangible Assets of any Person shall be based
on the most recently available consolidated quarterly balance sheet of such
Person, and shall be calculated in accordance with GAAP.

     

    “Funded
Indebtedness” means all Indebtedness that matures on or is renewable to a date
more than one year after the date the Indebtedness is incurred.

     

    “Indebtedness”
of any Person means:

     

    (1)           all
indebtedness of such Person for borrowed money (whether full or limited
recourse);

     

    (2)           all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;

     

    (3)           all
obligations of such Person under letters of credit or other similar instruments,
other than standby letters of credit, performance bonds and other obligations
issued in the ordinary course of business, to the extent not drawn or, to the
extent drawn, if such drawing is reimbursed not later than the third business
day following demand for reimbursement;

     

    (4)           all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in the
ordinary course of business;

     

    (5)           all
Capital Lease Obligations of such Person;

     

    (6)           all
Indebtedness of others secured by a Lien on any asset of such Person: provided that if the
obligations so secured have not been assumed in full or are not otherwise fully
such Person’s legal liability, then such obligations may be reduced to the value
of the asset or the liability of such Person; and

     

    (7) 
         all Indebtedness of others
(other than endorsements in the ordinary course of business) guaranteed by such
Person to the extent of such guarantee.

     

    “Issue
Date” means the first date on which any Notes are issued, authenticated and
delivered under the Indenture.

     

    
      
        
          	
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      Supplemental Indenture

                	 
      

        

      

    

    
      
         

      

      
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    “Joint
Venture” means any partnership, corporation or other entity in which up to and
including 50% of the partnership interests, outstanding Voting Stock or other
equity interests is owned, directly or indirectly, by the Company and/or one or
more Subsidiaries of the Company.

     

    “Lien”
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, regardless of
whether filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
any asset and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).

     

    “Notes”
means a series of Securities designated as the Company’s 5% Senior Notes due
2017, issued pursuant to this Indenture, as amended and supplemented by the
Second Supplemental Indenture hereto dated as of August 30, 2010.

     

    “Permitted
Liens” means:

     

    (1)           Liens
existing on the Issue Date;

     

    (2)           Liens
on any Person’s property or assets existing at the time the Company acquires
such Person or its property or assets, or at the time such Person becomes a
Subsidiary of the Company;

     

    (3)           intercompany
Liens in favor of the Company or any Subsidiary of the Company;

     

    (4)           Liens
on assets either (a) securing all or part of the cost of acquiring,
constructing, improving, developing or repairing the assets or (b) securing
Indebtedness incurred to finance the acquisition of the assets or the cost of
constructing, improving, developing, expanding or repairing the assets and
commencing commercial operation of the assets if the applicable Indebtedness was
incurred prior to, at the time of or within 24 months after the acquisition, or
completion of construction, improvement, development, expansion or repair of the
assets or their commencing commercial operation;

     

    (5)           Liens
in favor of governmental entities to secure (a) payments under any contract or
statute to secure progress or advance payments or (b) industrial development,
pollution control or similar indebtedness;

     

    (6)           governmental
Liens under contracts for the sale of products or services;

     

    (7)           Liens
imposed by law, such as mechanic’s or workmen’s Liens;

     

    (8)           Liens
under workers’ compensation laws or similar legislation;

     

    (9)           Liens
in connection with legal proceedings or securing taxes or other
assessments;

     

    (10)         statutory
or other Liens arising in the ordinary course of business of the Company or of
any Subsidiary of the Company and relating to amounts that are not yet
delinquent or that the Company or any Subsidiary of the Company is contesting in
good faith;

     

    (11)         Liens
on stock, partnership or other equity interests of the Company in any Joint
Venture or of any Subsidiary of the Company that owns an equity interest in a
Joint Venture to secure Indebtedness contributed or advanced solely to that
Joint Venture;

     

    
      
        
          	
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    (12)        good
faith deposits in connection with bids, tenders, contracts or
leases;

     

    (13)        deposits
made in connection with maintaining self-insurance, to obtain the benefits of
laws, regulations or arrangements relating to unemployment insurance, old age
pensions, social security or similar matters or to secure surety, appeal or
customs bonds; and

     

    (14)        any
extensions, substitutions, renewals or replacements of the above-described
Liens.

     

    “Principal
Property” means any drilling rig, or integral portion thereof, owned or leased
by the Company or any Subsidiary of the Company and used for drilling offshore
oil and gas wells, which, in the opinion of the Board of Directors of the
Company, is of material importance to the business of the Company and its
Subsidiaries considered as a whole; provided, however that no
such drilling rig, or portion thereof, shall be deemed of material importance if
its net book value (after deducting accumulated depreciation) is less than 2% of
the Consolidated Net Tangible Assets of the Company.

     

    “Sale and
Leaseback Transaction” means any arrangement with any Person under which the
Company or any Subsidiary of the Company leases any Principal Property that the
Company or that Subsidiary has or will sell or transfer to that Person; provided, however, that each
of the following shall be deemed not to be a Sale and Leaseback
Transaction:

     

    (1)           temporary
leases for a term of not more than five years;

     

    (2)           intercompany
leases between the Company and a Subsidiary or between two or more Subsidiaries
of the Company; and

     

    (3)           leases
of a Principal Property executed by the time of or within 12 months after the
acquisition, the completion of construction, alteration, improvement or repair,
or the commencement of commercial operation of such Principal
Property.

     

    “Significant
Subsidiary” means any Subsidiary of the Company that would be a “significant
subsidiary” as defined in Article 1, Rule 1-02(w) of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the Issue
Date.

     

    “Subsidiary”
means, with respect to any Person,

     

    (1) any
corporation, association or other business entity of which more than 50% of the
total voting power of the Voting Stock thereof is at the time owned or
controlled, directly or indirectly, by such Person; and

     

    (2) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or an entity described in clause (1) and related to such
Person or (b) the only general partners of which are such Person or of one or
more entities described in clause (1) and related to such Person (or any
combination thereof ).

     

    “Voting
Stock” of any specified Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors (or similar governing body) of such Person.

     

    
      
        
          	
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    SECTION
3.02.  Additional
Event of Default.

     

    With
respect to the Notes, the occurrence of any of the following events shall, in
addition to the other events or circumstances described as Events of Default in
Section 5.1 of the Original Indenture, constitute an Event of Default: default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness of the Company or
any of its Significant Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Significant Subsidiaries), whether such Indebtedness
or guarantee now exists or is created after the date of issuance of the Notes,
if (a) that default (x) is caused by a failure to pay principal of or premium,
if any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a “Payment
Default”), or (y) results in the acceleration of such Indebtedness prior to its
express maturity, and (b) in each case described in clauses (x) or (y) above,
the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $35.0
million or more.

     

    ARTICLE
FOUR

    Additional
Covenants

     

    With
respect to the Notes, Article Ten of the Original Indenture is hereby amended as
set forth below in this ARTICLE Four; provided, however, that each such
amendment shall apply only to the Notes and not to any other series of
Securities issued under the Indenture.

     

    SECTION
4.01.  Limitation on
Liens.

     

    Subject
to the limitations set forth in the preamble to ARTICLE Four of this
Supplemental Indenture, Article Ten of the Original Indenture is hereby further
amended by adding the following Section 10.7 thereto:

     

    Section
10.7          Limitation on
Liens.

     

    (a)           The
Company shall not, and shall not permit any of its Subsidiaries to, issue,
assume or guarantee any Indebtedness for borrowed money secured by any Lien upon
any Principal Property without making effective provision whereby the Notes
(together with, if the Company shall so determine, any other Indebtedness or
other obligation of the Company or any Subsidiary) shall be secured equally and
ratably with (or, at the option of the Company, prior to) the Indebtedness so
secured for so long as such Indebtedness is so secured. The foregoing
restrictions will not, however, apply to Indebtedness secured by Permitted
Liens.

     

    (b)          Notwithstanding
the immediately preceding paragraph (a), without securing the Notes, the Company
or any Subsidiary of the Company may issue, assume or guarantee Indebtedness
that such paragraph (a) would otherwise restrict or prohibit, in a total
principal amount that, when added to all of other outstanding Indebtedness of
the Company and its Subsidiaries that such paragraph (a) would otherwise
restrict or prohibit and the total amount of Attributable Indebtedness
outstanding for Sales and Leaseback Transactions (other than any such
Attributable Indebtedness for outstanding Sale and Leaseback Transactions in
connection with which the Company has voluntarily retired debt securities issued
under this Indenture, Indebtedness of equal rank or Funded Indebtedness (in each
case as described in clause (3) of Section 10.8)), does not exceed 15% of the
Consolidated Net Tangible Assets of the Company.

     

    SECTION
4.02.  Limitation on
Sale and Leaseback Transactions.

     

    Subject
to the limitations set forth in the preamble to ARTICLE Four of this
Supplemental Indenture, Article Ten of the Original Indenture is hereby further
amended by adding the following Section 10.8 thereto:

     

    
      
        
          	
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    Section
10.8          Limitation on Sale and
Leaseback Transactions.

     

    The
Company shall not, and shall not permit any of its Subsidiaries to, enter into a
Sale and Leaseback Transaction, unless one of the following
applies:

     

    (1) the
Company or such Subsidiary of the Company could incur Indebtedness in a
principal amount equal to the Attributable Indebtedness for that Sale and
Leaseback Transaction and, without violating Section 10.7, could secure that
Indebtedness by a Lien on the property to be leased without equally or ratably
securing the Notes;

     

    (2) after
the issuance of the Notes and within the period beginning nine months before the
closing of the Sale and Leaseback Transaction and ending nine months after such
closing, the Company or any of its Subsidiaries have expended for property used
or to be used in the ordinary course of business an amount equal to all or a
portion of the net proceeds of the transaction, and the Company has elected to
designate that amount as a credit against that transaction (with any amount not
so designated to be applied as set forth in clause (3) below or as otherwise
permitted); or

     

    (3)
during the nine-month period after the effective date of the Sale and Leaseback
Transaction, the Company has applied to the voluntary defeasance or retirement
of any debt securities under the Indenture, any Indebtedness of equal rank to
the Notes or any Funded Indebtedness, an amount equal to the net proceeds of the
sale or transfer of the property leased in the Sale and Leaseback Transaction
(or, if greater, the fair value of that property at the time of the Sale and
Leaseback Transaction as determined by the Board of Directors of the Company)
adjusted to reflect the remaining term of the lease and any amount expended as
set forth in the immediately preceding clause (2).

     

    ARTICLE
FIVE

    Miscellaneous

     

    SECTION
5.01.  Certain
Trustee Matters.

     

    The
recitals contained herein shall be taken as the statements of the Company, and
the Trustee assumes no responsibility for their correctness.

     

    The
Trustee makes no representations as to the validity or sufficiency of this
Supplemental Indenture or the Notes or the proper authorization or the due
execution hereof or thereof by the Company.

     

    Except as
expressly set forth herein, nothing in this Supplemental Indenture shall alter
the duties, rights or obligations of the Trustee set forth in the Original
Indenture.

     

    The
Trustee makes no representation or warranty as to the validity or sufficiency of
the information contained in the prospectus supplement related to the Notes,
except such information which specifically pertains to the Trustee itself, or
any information incorporated therein by reference.

     

    SECTION
5.02.  Continued
Effect.

     

    Except as
expressly supplemented and amended by this Supplemental Indenture, the Original
Indenture shall continue in full force and effect in accordance with the
provisions thereof, and the Original Indenture (as supplemented and amended by
this Supplemental Indenture) is in all respects hereby ratified and
confirmed.  This Supplemental Indenture and all its provisions shall
be deemed a part of the Original Indenture in the manner and to the extent
herein and therein provided.

     

    
      
        
          	
                  Second
      Supplemental Indenture

                	 
      

        

      

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    SECTION
5.03.  Governing
Law.

     

    This
Supplemental Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.

     

    SECTION
5.04.  Counterparts.

     

    This
instrument may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

     

    (Remainder of Page Intentionally Left
Blank)

     

    
      
        
          	
                  Second
      Supplemental Indenture

                	 
      

        

      

    
 

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to
be duly executed and delivered, all as of the date first written
above.

     

    
      
        
          	 
      	
                  THE
      COMPANY:

                
	 
      	 
      
	 
      	
                  ROWAN
      COMPANIES, INC.

                
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/
      William H. Wells

                
	 
      	
                  Name:

                	
                  William
      H. Wells

                
	 
      	
                  Title:

                	
                  Senior
      Vice President, Chief Financial Officer and
  Treasurer

                

        

      

    

     

    
      
        	
                Second
      Supplemental Indenture

              	 
      

      

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    
 

    
      
        	 
      	
                TRUSTEE:

              
	 
      	 
      
	 
      	
                U.S.
      BANK NATIONAL ASSOCIATION

              
	 
      	 
      
	 
      	
                By:
      /s/ Steven Finklea

              
	 
      	
                Name:
      Steven Finklea

              
	 
      	
                Title:  Authorized
      Officer

              

      

    

    

    
      
        
          	
                  Second
      Supplemental Indenture

                	 
      

        

      

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    [FORM
OF FACE OF NOTE]

     

    [If
a Global Security, insert—THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF.  THIS SECURITY MAY NOT BE TRANSFERRED
TO, OR REGISTERED OR EXCHANGED FOR SECURITIES REGISTERED IN THE NAME OF, ANY
PERSON OTHER THAN THE DEPOSITARY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY
BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.  EVERY SECURITY AUTHENTICATED AND DELIVERED UPON
REGISTRATION OF TRANSFER OF, OR IN EXCHANGE FOR OR IN LIEU OF, THIS SECURITY
SHALL BE A GLOBAL SECURITY SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.]

     

    [If
a Global Security, insert—UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]

     

    ROWAN
COMPANIES, INC.

     

    5%
Senior Note due 2017

     

    
      	
              No.
      _________

            	
              U.S.$_____________

            
	 
      	 
      
	
              CUSIP:  779382AN0

            	 
      
	 
      	 
      
	
              ISIN:
      US779382AN00

            	 
      

    

     

    ROWAN
COMPANIES, INC., a Delaware corporation (herein called the “Company”, which term
includes any successor or resulting Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum of
_____________________________ United States Dollars on September 1, 2017, and to
pay interest thereon from August 30, 2010, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 1 and September 1 in each year, commencing on March 1, 2011, at the
rate of 5% per annum, until the principal hereof is paid or made available for
payment and at the rate of 5% per annum on any overdue principal and premium and
on any overdue installment of interest (to the extent that the payment of such
interest shall be legally enforceable).  The amount of interest
payable for any period shall be computed on the basis of twelve 30-day months
and a 360-day year.  The amount of interest payable for any partial
period shall be computed on the basis of a 360-day year of twelve 30-day months
and the days elapsed in any partial month.  In the event that any date
on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) with the same force and effect as if made on the date
the payment was originally payable.  A “Business Day” shall mean,
when used with respect to any Place of Payment, each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in that
Place of Payment are authorized or obligated by law, executive order or
regulation to close.  The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the “Regular Record Date” for such
interest, which shall be the February 15 or August 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment
Date.  Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice of which shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Securities of
this series may be listed or traded, and upon such notice as may be required by
such exchange or automated quotation system, all as more fully provided in such
Indenture.
 

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    [If a
Global Security, insert—Payment of the principal of (and premium, if any) and
any such interest on this Security will be made by transfer of immediately
available funds to a bank account in the United States of America designated by
the Holder in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts.]

     

    [If a
Definitive Security, insert—Payment of the principal of (and premium, if any)
and any such interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the Borough of Manhattan, the City
and State of New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts or subject to any laws or regulations applicable thereto and to the right
of the Company (as provided in the Indenture) to rescind the designation of any
such Paying Agent, at the offices of _________________ in the Borough of
Manhattan, The City and State of New York, or at such other offices or agencies
as the Company may designate, by United States Dollar check drawn on, or
transfer to a United States Dollar account maintained by the payee with, a bank
in The City of New York (so long as the applicable Paying Agent has received
proper transfer instructions in writing at least 10 days prior to the payment
date); provided,
however, that payment of interest may be made at the option of the
Company by United States Dollar check mailed to the addresses of the Persons
entitled thereto as such addresses shall appear in the Security Register or by
transfer to a United States Dollar account maintained by the payee with a bank
in The City of New York (so long as the applicable Paying Agent has received
proper transfer instructions in writing by the Record Date prior to the
applicable Interest Payment Date).]

     

    Reference
is hereby made to the further provisions of this Security set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.

     

    Unless
the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

     

    IN
WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

     

    Dated:  ______________,
____

     

    
      
        
          
            
              	 
      	
                      ROWAN
      COMPANIES, INC.

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	 
      
	 
      	
                      Name:

                    	 
      
	 
      	
                      Title:

                    	 
      

            

          

        

      

    

     

    This is
one of the Securities of the series designated 5% Senior Notes due 2017 referred
to in the within-mentioned Indenture.

     

    U.S. BANK
NATIONAL ASSOCIATION,

    as
Trustee

     

    
      
        
          	
                  By:

                	 
      	 
      
	 
      	
                  Authorized
      Signatory

                	 
      

        

      

    
 

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    [REVERSE
OF NOTE]

     

    ROWAN COMPANIES,
INC.

     

    5%
Senior Note due 2017

     

    This
Security is one of a duly authorized issue of senior securities of the Company
(the “Securities”),
issued and to be issued in one or more series under an Indenture, dated as of
July 21, 2009, as amended and supplemented by the Second Supplemental Indenture
thereto dated as of August 30, 2010 (such Indenture, as so amended and
supplemented being referred to herein as the “Indenture”), between the
Company and U.S. Bank National Association, a national banking association
organized and existing under the laws of the United States of America, as
Trustee (the “Trustee,”
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, obligations, duties
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.  This Security is one of the series
designated on the face hereof.

     

    This
Security is redeemable, in whole or in part, at the Company’s option at any time
prior to maturity at a redemption price equal to the greater of (a) 100% of the
principal amount of this Security, and (b) as determined by the Quotation Agent
(as defined below), the sum of the present values of the remaining scheduled
payments of principal and interest (not including any portion of those payments
of interest accrued as of the date of redemption) discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate (as defined below) plus 50 basis
points, plus, in each case, accrued and unpaid interest to the date of
redemption.

     

    For
purposes of determining any redemption price, the following definitions shall
apply:

     

    “Adjusted Treasury Rate”
means, with respect to any date of redemption, the rate per annum equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue (as
defined below), assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price (as
defined below) for the date of redemption.  The Adjusted Treasury Rate
will be calculated on the third Business Day preceding the redemption
date.

     

    “Comparable Treasury Issue”
means the United States Treasury security selected by the applicable Quotation
Agent as having a maturity comparable to the remaining term of this Security
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of this Security.

     

    “Comparable Treasury Price”
means, with respect to any date of redemption, (a) the average of the Reference
Treasury Dealer Quotations (as defined below) for the date of redemption, after
excluding the highest and lowest Reference Treasury Dealer Quotations, or (b) if
the Company obtains fewer than four such Reference Treasury Dealer Quotations,
the average of all such Reference Treasury Dealer Quotations.

     

    “Quotation Agent” means the
Reference Treasury Dealer (as defined below) appointed by the
Company.

     

    “Reference Treasury Dealer”
means (a) Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and their
respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer (a “Primary Treasury
Dealer”), the Company shall substitute another Primary Treasury Dealer;
and (b) any other Primary Treasury Dealer selected by the Company.

     

    “Reference Treasury Dealer
Quotations” means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. (New York City time) on the third Business Day
preceding that redemption date.

     

    Unless
the Company defaults in payment of the redemption price, on and after the date
of redemption, interest will cease to accrue on this Security or the portions
hereof called for redemption.
 

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation
hereof.

     

    The
Indenture contains provisions for defeasance at any time of (1) the entire
indebtedness of this Security or (2) certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.

     

    If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the
Indenture.

     

    The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities of each series to be affected under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected (with each series voting as a separate
class).  The Indenture also contains provisions permitting the Holders
of specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.  Any
such consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, regardless of whether notation of such consent or waiver is
made upon this Security.

     

    No Holder
of this Security shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless (a) such Holder has
previously given written notice to the Trustee of a continuing Event of Default
with respect to the Securities of this series, (b) the Holders of not less than
25% in principal amount of the Outstanding Securities of this series shall have
made written request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder, (c) such Holder or
Holders have offered to the Trustee reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request, (d) the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity has failed to institute any such proceeding and (e) no direction
inconsistent with such written request has been given to the Trustee during such
60-day period by the Holders of a majority in principal amount of the
Outstanding Securities of this series; it being understood and intended that no
one or more of such Holders shall have any right in any manner whatsoever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all such Holders.

     

    No
reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any premium and interest on this
Security at the times, place(s) and rate, and in the coin or currency, herein
prescribed.

     

    [If a
Global Security, insert—This Global Security or portion hereof may not be
exchanged for Definitive Securities of this series except in the limited
circumstances provided in the Indenture. The holders of beneficial interests in
this Global Security will not be entitled to receive physical delivery of
Definitive Securities except as described in the Indenture and will not be
considered the Holders thereof for any purpose under the
Indenture.]

     

    [If a
Definitive Security, insert—As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registerable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in The City of New York, or,
subject to any laws or regulations applicable thereto and to the right of the
Company (limited as provided in the Indenture) to rescind the designation of any
such transfer agent, at the offices of _________________ in the Borough of
Manhattan, The City of New York or at such other offices or agencies as the
Company may designate, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.]

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    The
Securities of this series are issuable only in registered form without coupons
in denominations of U.S. $2,000 and any integral multiple of U.S. $1,000 in
excess thereof.  As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of this series and of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.

     

    No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

     

    Prior to
due presentment of this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security is overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.

     

    No
recourse under or upon any obligation, covenant or agreement of or contained in
the Indenture or of or contained in any Security, or for any claim based thereon
or otherwise in respect thereof, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, shareholder, member,
officer, manager or director, as such, past, present or future, of the Company
or of any successor Person, either directly or through the Company or any
successor Person, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment, penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released by the acceptance hereof and as a condition of, and as part of the
consideration for, the execution of the Indenture and the issuance of the
Securities.

     

    This
Security shall be governed by and construed in accordance with the laws of the
State of New York.

     

    All terms
used in this Security which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    [If a
Definitive Security, insert as a separate page—

     

    FOR VALUE
RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
_____________________________________ (Please Print or Typewrite Name and
Address of Assignee) the within instrument of ROWAN COMPANIES, INC., and does
hereby irrevocably constitute and appoint ________________________ Attorney to
transfer said instrument on the books of the within-named corporation, with full
power of substitution in the premises.

     

    Please
Insert Social Security or

    Other
Identifying Number of Assignee:

     

    
      
        
          
            
              
                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                        Dated:

                      	 
      	 
      	 
      
	 
      	
                          

                      	
                        (Signature)

                      

              

            

          

        

      

    

     

    
      
        
          
            
              	
                      Signature
      Guarantee:

                    	
                       

                    
	
                      (Participant
      in a Recognized Signature

                    
	
                      Guaranty
      Medallion
Program)

                    

            

          

        

      

    

     

    NOTICE:  The
signature to this assignment must correspond with the name as written upon the
face of the within instrument in every particular, without alteration or
enlargement or any change whatsoever.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    [If a
Global Security, insert as a separate page—

     

    SCHEDULE
OF INCREASES OR DECREASES

    IN
GLOBAL SECURITY

     

    The
following increases or decreases in this Global Security have been
made:

     

    
      
        
          
            
              	
                      Date of Exchange

                    	 
      	
                      Amount of

                      Decrease in

                      Principal

                      Amount of this

                      Global Security

                    	 
      	
                      Amount of

                      Increase in

                      Principal Amount

                      of this 

                      Global Security

                    	 
      	
                      Principal Amount

                      of this Global

                      Security Following

                      Such Decrease 

                      (or Increase)

                    	 
      	
                       

                      Signature of

                      Authorized Officer

                      of Trustee or

                      Depositary]JOINT DEVELOPMENT
AGREEMENT

    

    This
Joint Development Agreement is entered into as of the 23rd of
August, 2010, between:

    

    PETROBRAS AMERICA INC., a
company organized and incorporated under the laws of Delaware, with operational
office at 10350 Richmond Ave., Suite 1400 Houston, TX 77042, Zip Code: 77042,
USA, herein duly represented by Mr. José Orlando Melo de Azevedo, President,
hereinafter referred to as "PAI"; and

    

    KL Energy Corp., a company
organized and incorporated under the laws of Nevada, with its offices at 306
East St. Joseph Street, Suite 200 - Rapid City, South Dakota  57701, United
States of America (USA), herein duly represented by Mr. Peter Gross, President
and CEO, hereinafter referred to as "KLE" ;

    

    Each
hereinafter referred to as “Party” and collectively as “Parties”, that sign the
present joint development agreement, hereinafter referred to as
“JDA”,

    

    WHEREAS:

    

    
      	
              A

            	
              KLE
      has developed the proprietary know-how and intellectual property rights
      regarding  the “Technology” as defined in Section
      1.20;

            

    

    

    
      	
              B

            	
              PAI
      is a wholly owned Affiliate of Petróleo Brasileiro S.A. – PETROBRAS
      (hereinafter referred to as PETROBRAS) recognized as an oil exploration,
      production and refining world leader and high quality fuels producer,
      including chemicals and
  fuel  additives;

            

    

    

    
      	
              C

            	
              PETROBRAS
      - by itself or through its Affiliates (as defined herein) - intends to be
      the leading producer of high quality fuels, especially biofuels. In
      addition, to achieve this aim, PETROBRAS and its Affiliates intend to
      deepen their understanding of the production of biofuels from different
      biomass feedstocks, specially sugar
cane;

            

    

    

    
      	
              D

            	
              PETROBRAS
      and its Affiliates intend to invest in developing new technologies
      and  business opportunities in this
  market;

            

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    
      	
              E

            	
              The
      Parties intend to jointly further develop the Technology in accordance
      with the terms and conditions set forth in this
  JDA;

            

    

    

    
      	
              F

            	
              The
      Parties shall, in principle, cooperate in relation to the Project on the
      basis of this JDA.

            

    

    

    Now
THEREFORE, the Parties hereby agree as follows:

    

    
      	
              1.

            	
              DEFINITIONS

            

    

    

    
      The
definitions set forth in this Clause 1 shall apply whenever any of the following
words and expressions is used in this JDA with an initial capital letter. Unless
the context otherwise requires, the singular shall include the plural and the
plural the singular, and words importing persons shall include their respective
firms and corporations.

    

    

    
      
        	
                1.1

              	
                “Affiliate” means an
      entity that is controlled by, under common control with or which controls
      the other entity.  For purposes of this definition, an entity
      shall be deemed to have control of another if (directly or indirectly) it
      owns or has the right to cast votes of greater than fifty percent (50%) of
      the voting shares or other ownership interests of, or is entitled
      (directly or indirectly) to appoint a majority of the directors or
      equivalent management body of, or to direct the policies or operations of
      the other entity.

              

      

    

    

    
      	
              1.2

            	
              “Business Day” means a
      day (excluding Saturdays, Sundays and public holidays) on which commercial
      banks are open for business in  Houston,  Texas, USA
      and in the cities  of Rio de Janeiro/RJ
      and  Salvador/BA, both cities in
  Brazil.

            

    

    

    
      	
              1.3

            	
              “Clause” means a Clause
      of this JDA.

            

    

    

    
      	
              1.4

            	
              “Dollars” or “US Dollars” or
      “US$” means United States
Dollars.

            

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    
      	
              1.5

            	
              “Effective Date” means
      the date on which the last of all required PARTIES has executed this
      JDA.

            

    

    

    
      	
              1.6

            	
              “Excluded
      Information” means all knowledge,
      development or technology outside the field of the Technology belonging to
      a Party, whether generated before or after the Effective
    Date.

            

    

    

    
      	
              1.7

            	
              “Force Majeure” means,
      without limitation, blockades, embargoes, riots, national strikes (except
      those strikes made by the employees of KLE), lockouts, labor and civil
      disturbances, Acts of God, storms, fire, flood, earthquakes, sabotage,
      terrorism, insurrections, acts of war (declared or undeclared), acts of
      any governmental or military agency acting under actual or assumed
      authority or any cause or events or circumstances beyond the control of
      either Party, whether or not similar to the matters herein specifically
      enumerated, but excluding financial distress, which prevent or impede or
      suspend the due performance of the Service and which by the exercise of
      all reasonable diligence such Party is unable to prevent. The Parties
      agree that the following shall not constitute a Force Majeure event:
      adverse weather conditions, mere shortage of supplies or any contractual
      commitment made to a Third Party which limits the ability of a Party to
      perform its obligations hereunder.

            

    

    

    
      	
              1.8

            	
              “KLE Personnel” means
      the personnel, employees or outsourced service providers working in the
      organization of KLE, its Affiliates or subcontractors for any purpose
      under this JDA.

            

    

    

    
      	
              1.9

            	
              “KLE Representative”
      means one KLE Personnel to be designated by KLE and who will have
      the authority to act on behalf of KLE in all matters concerning this
      JDA.

            

    

    

    
      	
              1.10

            	
              “Intellectual Property Rights”
      means (i) patent applications, patents, trademarks, utility models,
      industrial designs, non-patented technology, copyrights, and any other
      intellectual property rights that can be legally registered with
      government authorities, and (ii) trade secrets and know
    how.

            

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    
      	
              1.11

            	
              “Monthly Detailed Work Plan and
      Budget” means a detailed work plan and budget that has been
      prepared by KLE and approved by PAI, as specified in Exhibit B, covering
      all costs and expenses – detailed on a monthly basis and covering the
      entire Project scope under this JDA. Such “Monthly Detailed Work Plan and
      Budget” shall be updated on a monthly basis by KLE until all services
      specified in this JDA are
completed.

            

    

    

    
      	
              1.12

            	
              “Monthly Report” means
      the monthly report detailing the development of the Project and the use of
      the proceeds from funds provided by PAI in the preceding month, including
      a comparison of the actual use of the proceeds with the projection in the
      Monthly Detailed Work Plan and Budget as well as proof of expenses, which
      shall be submitted by the Technical-Financial Committee to
      PAI.

            

    

    

    
      	
              1.13

            	
              “PAI Personnel” means
      the personnel, employees or outsourced service providers, working in the
      organization of PAI or its Affiliates or any PAI subcontractors for any
      purpose under this JDA.

            

    

    

    
      	
              1.14

            	
              “PAI Representative”
      means one of PAI’s Personnel to
      be designated by PAI and who will have the authority to act on its behalf
      in all matters concerning this JDA.

            

    

    

    
      	
              1.15

            	
              “PETROBRAS Group” means
      any entity in which PETROBRAS, directly or indirectly, has ownership
      interest of at least twenty percent
(20%).

            

    

    

    
      	
              1.16

            	
              “Pre Existing IP” means
      any Intellectual Property Rights owned by, licensed to or in the
      possession of each Party within the field of Technology and prior to the
      Effective Date, as listed in Exhibit
C.

            

    

    

    
      	
              1.17

            	
              “Prior Information”
      means any and all knowledge, development or technology other than Pre
      Existing IP within the field of Technology (and consequently not being
      Excluded Information) belonging to a Party prior to the Effective
      Date.

            

    

    

    
      	
              1.18

            	
              “Project” means adapting
      KLE’s WBE Upton plant to the use of sugar cane bagasse feedstock and
      conducting laboratory and pilot plant tests as detailed in Exhibit
      A.

            

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    
      	
              1.19

            	
              “Project Results” means
      all inventions, designs, copyrightable works, know-how and any other
      technical results whether or not patentable or reduced to practice, that
      are created or developed as a result of the JDA, as well as reports for
      each stage and the consolidated Final Report with all accompanying
      documentation, and including possible conclusions and recommendations
      provided by KLE on the subject-matter of this
  JDA.

            

    

    

    
      	
              1.20

            	
              “Technology” means the
      proprietary know-how and Intellectual Property Rights regarding a
      technology for the production of ethanol and lignin from lignocellulosic
      material feedstock using thermal-mechanical pre-treatment, enzymatic
      hydrolysis and fermentation of C5 and/or C6 sugar
  polymers.

            

    

    

    
      	
              1.21

            	
              “Term” has the meaning
      set forth in Clause 20.

            

    

    

    
      	
              1.22

            	
              “Third Party” means any
      and all persons or entities other than the Parties and “PETROBRAS
      Group”.

            

    

    

     In this JDA, unless the
context otherwise requires:

    

    
      	
               
      

            	
              (i)

            	
              references
      to this JDA include this JDA and any ancillary document as varied,
      modified or supplemented in any manner from time to
  time;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              references
      to any Party shall, where relevant, be deemed to be references to or to
      include, as appropriate, their respective permitted successors, assigns or
      transferees;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              references
      to recitals, Clauses and Exhibits and subdivisions of them are references
      to the recitals and Clauses of, and Exhibits to, this JDA and
      sub-divisions of them respectively;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              references
      to any act or law include references to such act or law as amended or
      extended on or before the date of this JDA and any subordinate legislation
      made from time to time under it;

            

    

    

    
      	
               
      

            	
              (v)

            	
              references
      to a "person" include any individual, company, corporation, firm,
      partnership, joint venture, foundation, association, organization,
      institution, trust or agency, whether or not having a separate legal
      personality;

            

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (vi)

            	
              references
      to an amount in US Dollars shall include its respective market rate
      equivalent at the relevant time in any other currency or combination of
      currencies;

            

    

    

    
      	
               
      

            	
              (vii)

            	
              general
      words introduced by the words “other” (or any similar term), or followed
      by the words “including”, “include”, “in particular” (or similar term),
      shall not be given a restricted meaning because they are preceded or
      followed by more specific words indicating a particular class of acts,
      matter or things; and

            

    

    

    
      	
               
      

            	
              (viii)

            	
              headings
      are inserted for convenience only and shall be ignored in construing this
      JDA.

            

    

    

    
      	
              2.

            	
              OBJECTIVE

            

    

    

    
      	
              2.1

            	
              The
      objective of this JDA is to:

            

    

    

    
      	
               
      

            	
              (i)

            	
              optimize
      the Technology for the use of sugar cane bagasse
  feedstock;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              validate
      the optimized Technology in KLE Upton
plant;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              meet
      the performance criteria as defined in Exhibit
  D;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              jointly
      develop a feasibility study and basic engineering for one industrial scale
      cellulosic ethanol production facility based on the KLE process technology
      and integrated into an adequate sugarcane mill belonging to the PETROBRAS
      Group according to Exhibit H.

            

    

    

    
      	
              2.2

            	
              Each
      Party shall be free to pursue technology and business opportunities
      outside the field of Technology as applied to sugar cane
      bagasse.

            

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
      	
              2.3

            	
              The
      Parties may agree to jointly pursue technology and business opportunities
      in the field of Technology as applied to sugar cane bagasse with terms to
      be jointly defined and documented in written
  form.

            

    

    

    
      	
              3.

            	
              DEVELOPMENT OF THE
      PROJECT

            

    

    

    
      	
              3.1

            	
              The
      Parties shall cooperate in developing the Project according to the Monthly
      Detailed Work Plan and Budget
(Exhibit B).

            

    

    
      

      
        	
                3.2

              	
                The
      activities related to this JDA shall be primarily carried out in the
      USA.

              

      

    

    

    
      	
              3.3

            	
              KLE
      shall be responsible for the operational management and completion of all
      tests related to the Project and described in the Monthly Detailed Work
      Plan and Budget, in articulation with PAI
  representatives.

            

    

    

    
      	
              3.4

            	
              The
      Parties will have full and non restricted access to all technical and
      economical information, operational data and procedures, development
      information and data during the execution of the Work Plan and will
      participate effectively in the
Project.

            

    

    

    
      	
              3.5

            	
              PAI
      shall have the right to purchase up to 80% of the total volume of ethanol
      produced as a result of this JDA at a price of ***** per liter
      ex-works. KLE shall provide samples of feedstock material, intermediates,
      products and by-products free of charge upon request of
    PAI.

            

    

    

    
      	
              3.6

            	
              KLE
      undertakes to keep at least (4) four of the following technicians and
      professionals herein actively involved in the performance of this
      JDA.

            

    

    

    
      	
               
      

            	
              (i)

            	
              *****;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              *****;

            

    

    
      

      
        	
                 
      

              	
                (iii)

              	
                *****;

              

      

    

     

    
      
        

      

      
        ***** Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

      

      

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

      

    

    
      

      
        	
                 
      

              	
                (iv)

              	
                *****;

              

      

    
      	
               
      

            	
              (v)

            	
              *****;

            

    

    

    
      	
               
      

            	
              (vi)

            	
              *****;

            

    

    
      

      
        	
                 
      

              	
                (vii)

              	
                
                  *****;
      and

                

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                *****.

              

      

    

    

    
      	
              3.7

            	
              KLE
      shall include a six (6) months (from Effective Date) “non-compete” clause
      in the employment contracts of all employees and/or technicians involved
      in the tests, object of this JDA. In this respect, the Parties agree and
      acknowledge that the costs related to these technicians and professionals
      during the entire Project have been considered in the Monthly Detailed
      Work Plan and Budget.

            

    

    

    
      
        	
                3.8

              	
                PAI
      shall nominate at least one technician or professional to work on the
      Project. In this respect, the Parties agree and acknowledge that the costs
      related to such technicians and professionals shall not fall within the
      Project budget.

              

      

    

    

    
      
        	
                3.9

              	
                KLE
      shall conclude the Project tests set forth in the Monthly Detailed Work
      Plan and Budget within two hundred and forty (240) calendar days from
      the    Effective
Date.

              

      

    

    

    
      	
              4.

            	
              TECHNICAL-FINANCIAL
      COMMITTEE

            

    

    

    
      	
              4.1

            	
              PAI
      and KLE, within seven (7) days from the Effective Date, shall establish a
      Technical-Financial Committee in order to supervise, analyze, evaluate as
      well as decide on issues related  but not limited
      to:

            

    

    

      
        

      

      
        ***** Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

      

      

        
          
             

          

          
            8

            
              

            

          

          
             

          

        

      

    

    
      

      
        	
                 
      

              	
                (i)

              	
                the
      execution of the  Project’s Monthly Detailed Work Plan and
      Budget  (Exhibit
B);

              

      

    

    

    
      	
               
      

            	
              (ii)

            	
              the
      development of the Technology and the feasibility study and basic
      engineering for the industrial scale cellulosic ethanol production
      facility;

            

    

    
    

    
      	
               
      

            	
              (iii)

            	
              the
      preparation of the Monthly Reports;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              the
      approval of the (updated) Monthly Detailed Work Plan and Budget in
      accordance with Clause 6;

            

    

    

    
      	
               
      

            	
              (v)

            	
              the
      pre-approval of the terms of all contracts related to the
      Project;

            

    

    

    
      	
               
      

            	
              (vi)

            	
              the
      use of the financial resources provided by
PAI.

            

    

    

    
      	
              4.2

            	
              The
      Technical-Financial Committee shall be constituted by four (4) members, of
      which two (2) members shall be appointed by PAI and two (2) members shall
      be appointed by KLE. PAI shall have the casting vote concerning all
      decisions related to the financial management of the
    Project.

            

    

    

    
      	
              4.3

            	
              The
      Technical-Financial Committee shall meet every month – or more often, upon
      the reasonable request of a member – to plan and validate the technical
      implementation of the Project and the application of the financial
      resources related to it. The Technical-Financial Committee shall notify
      the appointed representatives of PAI and KLE about every technical
      relevant event of the Project. All meetings shall be held in the office
      premises of KLE in Rapid City unless the members of the
      Technical-Financial Committee mutually agree that the meetings will be
      held elsewhere or by means of video conference or conference
      calls.

            

    

    

    
      	
              5.

            	
              PAYMENTS

            

    

     

    
      
        	
                5.1 

              	
                The
      Parties agree that PAI shall pay to KLE for the execution of the Project
      the total amount of six million Dollars (U$6,000,000.00), in accordance
      with the Monthly Detailed Work Plan and
Budget.

              

      

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
      	
              5.2

            	
              The
      amount established in Section 5.1 shall be paid by PAI according to the
      mutually agreed and approved “Payments and Technical-Financial Report
      Schedule” as specified in Exhibit F according to the following
      procedure:

            

    

    

    
      	
               
      

            	
              (i)

            	
              Within
      seven (7) Business Days after the Effective Date, PAI shall pay the First
      Installment to KLE;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              PAI
      shall pay each of the next three (3) Installments to KLE within seven (7)
      Business Days from approval of the respective Monthly Report, as per
      defined in Clause 6 and in the Exhibit
F;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              As
      provided in Clause 6, in the event that there are deviations between the
      actual Monthly Report and the latest version of the Monthly Detailed Work
      Plan and Budget, and PAI disputes the Technical-Financial Committee’s
      explanation regarding such deviations, the following Installments may at
      PAI sole discretion  be
suspended;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              Any
      amount paid to KLE shall be made to the following KLE’s bank
      account:

            

    

    *****

    *****

    *****

    *****

    *****

    

    
      	
              6.

            	
              REPORT AND APPROVAL
      PROCEDURES

            

    

    

    
      	
              6.1

            	
              Within
      thirty (30) days from each payment as set forth in the Exhibit F (Payments
      and Technical-Financial Report Schedule) the Monthly Detailed Work Plan
      and Budget (Exhibit B) shall be updated by the Technical-Financial
      Committee and sent to PAI along with the Monthly Report containing
      Project’s development status and the accountability for the previous (30)
      thirty day period.

            

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
      	
              6.2

            	
              PAI
      shall within (10) ten Business Days from receipt of the Monthly Report
      either approve it or declare in a detailed written notice to KLE the
      reason for the non-approval.

            

    

    

    
      	
              6.3

            	
              If
      PAI does not approve the Monthly Detailed Work Plan and Budget, the
      Technical-Financial Committee shall modify it taking into account the
      instructions provided by PAI. Technical-Financial Committee will
      subsequently submit the modified Monthly Detailed Work Plan and Budget to
      PAI for approval, in which respect Section 5.2.(ii) applies mutatis
      mutandis.

            

    

    

    
      	
              6.4

            	
              Subject
      to Section 5.1, any deviation in the Monthly Report from the projected
      figures specified in the last version of the Monthly Detailed Work Plan
      and Budget shall be explained by the Technical-Financial Committee to PAI,
      and all relevant information (copies of invoices, bank statements etc)
      necessary to account for the reported use of the proceeds shall be
      attached to such Monthly Report. At any time PAI may require KLE to
      provide additional documents concerning costs and expenses related to the
      Project.

            

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    
      	
              7.

            	
              INTELLECTUAL PROPERTY
      RIGHTS

            

    

    

    
      	
              7.1

            	
              Any
      and all Intellectual Property Rights deriving from this JDA shall be the
      joint property of the Parties, in equal proportions, respecting the Pre
      Existing IP and Prior Information owned or controlled by such Party prior
      to the Effective Date.

            

    

    

    
      	
               
      

            	
               
      7.1.1

            	
              Notwithstanding
      the provisions set forth above, subject to the terms of this JDA, each
      Party hereby grants to the other Party and/or its Affiliates, as the case
      may be, a royalty-free, worldwide and non-exclusive license to use its
      Prior Information and Pre- Existing IP solely for the purpose of the
      Project, and during the Term of this JDA, which includes but is not
      limited to those items specifically set forth in the Monthly Detailed Work
      Plan and Budget (Exhibit B).

            

    

    

    
      	
               
      

            	
               
      7.1.2

            	
              Subject
      to the terms of this JDA, if the Performance Criteria (Exhibit D) is
      achieved, then KLE shall grant to PAI and/or other entity of PETROBRAS
      Group (chosen by PAI at its sole discretion) a license of its Pre Existing
      IP defining the terms of the use in any assets owned by the PETROBRAS
      Group in the Brazilian territory for a period of ***** years in accordance
      with the terms and conditions set forth in the Technology and Patent
      License Agreement Guidelines (TPLAG) annexed to this JDA (Exhibit G). KLE
      and PAI shall execute the Technology Patent License Agreement within 90
      days from the approval of the Final Project
  Report.

            

    

    

    
      	
              7.2

            	
              The
      Parties hereby acknowledge and agree that PAI and KLE shall have full
      right and title to use any and all Intellectual Property Rights, deriving
      form this JDA, at any time, irrespective of any later authorization from
      the other Party, and they shall jointly own the Project Results in equal
      proportions. The Parties agree that the right of use provided herein
      extends to the PETROBRAS Group and KLE Affiliates, in order to allow for
      the extensive exploitation of the industrial and the commercial activities
      of the Parties.

            

    

    

      
        

      

    

    
      ***** Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
      	
            	
              7.2.1 

            	
              Notwithstanding  the
      provisions set forth in Section 7.2, the Parties acknowledge that
      exploitation by Third Parties of any  Intellectual Property
      Rights deriving from this JDA shall, at all times, be conditional upon the
      prior, expressed and written approval of the Parties. The Parties agree
      that the royalty income related to the potential licensing to Third
      Parties of Project Results during or after the Project shall be equally
      shared by the Parties.

            

    

    

    
      	
              7.3

            	
              Each
      Party shall immediately disclose to the other Party all Project Results
      following its discovery thereof. Disclosure to the Technical-Financial
      Committee shall in any event be deemed to be a disclosure under this
      Clause.

            

    

    

    
      	
              7.4

            	
              Decisions
      regarding the viability of patent applications covering Project Results
      shall be made by the Technical-Financial Committee. Decisions regarding
      the filing of patent applications covering Project Results, and the
      issuance and maintenance of patents resulting there from, shall be made
      jointly by PAI and KLE. Any patent applications related to Project Results
      shall be filed in the name of PAI and KLE. Patents’ filing, prosecution
      and maintenance costs shall be shared in equal proportions between the
      Parties. Day to day supervision and management of the patent application
      filing and prosecution efforts shall be the responsibility of KLE, which
      shall keep PAI informed through the issuance of quarterly status
      reports.

            

    

    

    
      	
               
      

            	
               
      7.4.1

            	
              If,
      for any reason, one of the Parties does not have interest in filing a
      patent application for any Project Result it shall inform the other Party
      in writing and in this case the other Party is entitled to file a patent
      application, in its own name and for its own account, in which case the
      costs relating to such request for protection would be fully borne by the
      filing Party.

            

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    
      	
              7.5

            	
              The
      Parties shall divide, according to the proportion of each Party’s
      ownership of the intellectual property, as provided in Section 7.1, the
      costs relating to any Intellectual Property Rights claims related to the
      Projects Results, and shall, in the same proportion, be liable for any
      burden they may bear as the result of any such
  claim.

            

    

    

    
      	
              7.6

            	
              Each
      Party shall retain sole and exclusive ownership of the Pre Existing IP and
      Prior Information owned or controlled by such Party prior to the Effective
      Date, and nothing in this JDA shall be construed as granting the other
      Party, by implication or otherwise, any rights or licenses with respect to
      any Intellectual Property Rights it holds, except as otherwise set forth
      herein and in Section 7.1.1. KLE shall provide PAI with a document
      describing all of its Prior Information within fourteen (14) days from the
      Effective Date.

            

    

    

    
      	
              7.7

            	
              All
      information and know-how developed outside the scope of the JDA shall be
      considered Excluded Information, of which each Party shall have and
      maintain full ownership.

            

    

    

    
      	
              7.8

            	
              

                

                  If the project goals
      are achieved as described in Exhibit D, and taking into account the
      licensing mentioned in Section 7.1.2 above, PAI will pay to KLE a one-time
      technology license fee in the value of up to five million Dollars
      (US$5.000.000,00) payable in one installment after executing the
      Technology Patent License Agreement (TPLA). The TPLA will be free of
      running royalties. Before executing this license agreement, this amount
      shall be ratified by a reputable independent technical consulting firm or
      investment bank to be hired by
PAI.

                

              

            

    

    

    
      	
               
      

            	
               
      7.8.1

            	
              If
      the appraisal is lower than five million Dollars (U$5,000,000.00), KLE may
      hire another independent technical consulting firm or investment bank to
      perform another appraisal. If the difference between both appraisals is
      lower than 10%, the licensing fee will be the average of either values, or
      five million Dollars (U$5,000,000.00), whichever is lower. If the
      difference between both appraisals is higher than 10% and the Parties do
      not reach an agreement, the licensing fee shall be arbitrated by a third
      recognized and reputable independent technical consulting firm, provided
      the five million Dollar (U$5,000,000.00) cap is
  observed.

            

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    
      	
               
      

            	
               
      7.8.2

            	
              If
      the appraisal of the first reputable independent technical consulting firm
      or investment bank is higher than five million Dollars (U$5,000,000.00),
      no further appraisals shall be done and PAI shall pay to KLE five million
      Dollars (U$5,000,000.00), according to Section
  7.8.

            

    

    

    
      	
              8.

            	
              HSE

            

    

    

    
      	
              8.1

            	
              KLE
      shall ensure compliance with applicable laws or regulations, maintaining
      good practices. KLE shall also comply with its own HSE Plan, with any
      reasonable requirement or determination provided by PAI regarding HSE and
      with the standards according to specific statements established in Exhibit
      E. KLE shall assume all liability arise from any breach or failure to
      comply of any legal requirement.

            

    

    

    
      	
              8.2

            	
              For
      the performance of the Project hereunder, KLE shall ensure that KLE
      Personnel comply with all applicable safety and environmental protection
      and pollution control, international laws, regulations, rules and
      ordinances of all relevant governments and jurisdictions in the Country as
      well as all PAI rules, regulations and standards, and the provisions of
      this JDA.

            

    

    

    
      	
            	
              8.2.1

            	
              KLE
      shall ensure that KLE Personnel have attended all survival and
      safety-training courses as may be required by applicable law or
      regulations as well as by the standard procedures applicable to the scope
      of the Project.

            

    

    

    
      	
            	
              8.2.2

            	
              KLE
      shall, at its own expense and sole cost, supply and maintain its personnel
      with adequate protective clothing and equipment. This clothing and
      equipment shall conform to good practices, applicable regulations or any
      recognized international standards, as well as shall be maintained in good
      condition and shall be worn and used on all relevant occasions as
      indicated by notices and/or instructions and according to the scope of the
      Project.

            

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    
      	
              8.3

            	
              KLE
      shall at all times assume responsibility and liability for the control,
      removal, cleaning up and containing pollution or seepage or contamination
      which originates, directly or indirectly, from its equipment related to
      this JDA, including but not limited to, spills of hydraulic fluids,
      fuels, lubricants, motor oils, drilling fluids, pipe dope, paints or
      solvents, rubbish, other products resultant from the Technology and so
      on.

            

    

    

    
      	
              9.

            	
              INDEMNIFICATION

            

    

    

    
      	
              9.1

            	
              Each
      Party will defend, hold harmless and indemnify the other Parties, their
      respective Affiliates (in case of PAI, PETROBRAS Group is included),
      directors, officers, agents and employees for any and all claims, losses,
      costs, delays, standby, demands, damages, suits, judgments, penalties,
      liabilities, debts, expenses and causes of action and every other claim or
      litigation (including all costs thereof and attorneys' fees) for bodily
      injury, illness, disease, or death to any Third Party personnel and/or
      loss of or damage to any Third Party property, or infringement of Third
      Parties Intellectual Property Rights by the use of its Pre Existing IP in
      relation to the Project and/or for any and all other loss, damage or delay
      sustained by any Third Party which may in any manner arise from, grow out
      of, or be incidental to the Project and which is caused or contributed to
      by the willful misconduct, fault or negligence of any
    parties.

            

    

    

    
      	
              10.

            	
              POTENTIAL COOPERATION
      IN THE AREA OF THE TECHNOLOGY
IP

            

    

    

    
      	
              10.1

            	
              In
      case that the requirements for the licensing of the technology
      (“Performance Criteria”) are met and that co-owned IP is generated as a
      result of this JDA, the Parties shall discuss upon termination of this JDA
      the incorporation of a jointly owned vehicle which should acquire and
      commercialize KLE’s Pre Existing IP and the co-owned IP resulting from
      this JDA.

            

    

    

    
      	
              10.2

            	
              The
      participation of the Parties in the jointly owned vehicle shall be based
      on the total  investments made by PAI during the execution of
      this JDA, including any fees,  and the value of the Pre Existing
      IP, as of the Effective Date, contributed by any of the Parties to the
      jointly owned vehicle plus the value of any investment in the development
      of the Technology made by KLE outside the scope of this JDA in the period
      between the Effective Date of the JDA and the date of incorporation of the
      jointly owned vehicle.

            

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    
      	
              11.

            	
              TERMINATION

            

    

    

    
      	
              11.1

            	
              The
      Parties may jointly terminate this JDA by mutual consent at any time and
      for any reason.

            

    

    

    
      	
              11.2

            	
              Each
      Party has the right to terminate this JDA in the event of a material
      breach, inconsistent compliance with JDA clauses, specifications, designs
      or deadlines, caused by an act of, fault, willful misconduct or gross
      negligence of the other Party and in case the steps to remedy such breach
      have not been taken by the defaulting Party within thirty (30) days from
      the date of receipt of a written notice to remedy such
    breach.

            

    

    

    
      	
              11.3

            	
              If
      this JDA is terminated by a Party (the “Non-defaulting Party”) due to a
      material breach or inconsistent compliance with JDA clauses,
      specifications, designs or deadlines by the other Party (the “Defaulting
      Party”) as referred  to in item 11.2 the Non-defaulting Party
      will become the sole owner of the Project Results, in which case the
      defaulting Party shall fully cooperate in all aspects with the transfer of
      the Defaulting Party’s rights in the Project Results to the Non-defaulting
      Party. The Non-defaulting Party will have the option to further develop
      the Technology alone or with Third
Parties.

            

    

    

    
      	
               
      

            	
              11.3.1

            	
              In
      case KLE is the Defaulting Party, besides having the obligation to
      reimburse PAI for the installments already paid, KLE shall upon request of
      PAI license its Pre Existing IP at the same conditions set out in Section
      7.1.2 and at a 50% (fifty percent) discount over the value determined in
      Section 7.8.

            

    

    

    
      	
              11.4

            	
              This
      JDA may also be terminated by PAI in case of the existence of an
      enforceable and irrevocable judicial order obtained by a Third Party
      against KLE, preventing the consummation of this JDA, provided that such
      order is in effect before the Effective Date and remains valid through
      three (3) months after the Effective Date, in which case the Parties shall
      mutually agree upon the ownership of the Project Results (if any), and the
      guiding principle will be that the ownership of the Project Results shall
      be split between the Parties, in accordance with Section 7.2. In this
      case, any paid installments shall be fully reimbursed, within 90 (ninety)
      days by KLE to PAI.

            

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    
      	
              11.5

            	
              This
      JDA shall automatically terminate upon the occurrence of the execution by
      the Parties of an agreement which specifically, by its terms, supersedes
      and terminates the JDA.

            

    

    

    
      	
              11.6

            	
              The
      rights and obligations set forth in Clauses 7, 11, 14, 15, 24 and 26,
      shall remain in full force and effect and shall survive the expiration or
      termination of this JDA for any reason
  whatsoever.

            

    

    

    
      	
              11.7

            	
              If
      PAI terminates this JDA for a cause different from what is determined in
      Clauses 11.2, 11.4 or 11.5, PAI and KLE shall ultimately within 30
      (thirty) days after the submission of the final Project report, meet and
      discuss the terms of the licensing of KLE’s Pre Existing IP to PETROBRAS
      Group as well as the use of the jointly owned Project
    Results.

            

    

    

    
      
        	
                12.

              	
                REPRESENTATIONS
      AND WARRANTIES

              

      

    

    

    
      	
              12.
      1

            	
              KLE
      represents and warrants that it is duly organized, validly existing and in
      good standing under the applicable legislation and has the requisite
      corporate power and authority to own, operate, develop or license the Pre
      Existing IP, and to operate and conduct the Project, as well as to carry
      out the JDA.

            

    

    

    
      	
              12.2

            	
              PAI
      represents and warrants that it is duly organized, validly existing and in
      good standing under the applicable legislation and has the required
      corporate power and authority to develop the Project, as well as to carry
      out the JDA.

            

    

    

    
      	
              12.3

            	
              The
      Parties, as represented by its signatories herein, have the legal right,
      power, authority and corporate approvals to enter into and perform this
      JDA, subject to the terms and conditions
hereof.

            

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    
      	
              12.4

            	
              The
      Parties represent and warrant that the execution and delivery of this JDA,
      as well as other agreements referred to and required in connection with
      the transaction described herein, as the case may be, and the consummation
      of the transaction contemplated hereby and thereby have been duly
      authorized by all necessary corporate board approvals or other action of
      the Parties, and constitute legal, valid, binding and enforceable
      obligation of the Parties, in accordance with its terms and conditions.
      Any further definitive agreement(s) to be identified as desirable and to
      be signed between the Parties as a result of this JDA will depend on the
      conclusion of satisfactory feasibility studies, the negotiation of
      mutually agreed definitive agreement(s) and will require necessary and
      express corporate approvals.

            

    

    

    
      	
              12.5

            	
              The
      Parties represent and warrant that the execution of this JDA, as well as
      any other agreements referred to and required in connection with the
      Project described herein, as the case may be, or the consummation of the
      transaction contemplated hereby and thereby shall not conflict with,
      result in a breach of, constitute a default under, violate or contravene
      any terms of any law, order or permit and shall not result in the
      termination of a right.

            

    

    

    
      	
              12.6

            	
              The
      Parties represent and warrant that there is no claim, suit, action,
      proceeding, injunction inquiry, arbitration, mediation collection or
      similar event or matter pending or threatened that may prevent the
      consummation of the transaction contemplated by this JDA. Moreover, the
      Parties are not subject to any judgment, decree, injunction, rule or order
      or any Governmental Authority, which may seek the restraint or prohibition
      of the consummation of the transaction contemplated by this JDA. There are
      no bankruptcies, reorganization or arrangement proceedings threatened,
      pending or contemplated by or against the
  Parties.

            

    

    

    
      	
              12.7

            	
              KLE
      shall not dispose and shall maintain all its Prior Information and Pre
      Existing IP free and clear of all and any liens, encumbrances, pre-emptive
      or Third Parties’ Rights, during all Phases of the
  Project.

            

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    
      	
              12.8

            	
              Except
      as otherwise expressly provided herein, no Party makes any representations
      or warranties, express or implied, arising by law, out of any course of
      dealing or performance, custom, industry standard or otherwise, as to any
      matter whatsoever, including, without limitation, the accuracy or
      completeness of any report, any materials produced or provided under this
      JDA, or the merchantability, or fitness for a particular purpose of any of
      the foregoing, all of which are hereby
  disclaimed.

            

    

    

    
      	
              12.9

            	
              Notwithstanding
      the foregoing, each Party represents and warrants that the regular use of
      its Prior Information and Pre Existing IP will not infringe any Third
      Parties' Intellectual Property
Rights.

            

    

    

    
      	
              12.10

            	
              KLE
      hereby represents and warrants that there is no restriction, prevention or
      prohibition on the export of Prior Information and Pre Existing IP to
      Brazil under the rules of the U.S. Bureau of Industry and Security ("BIS")
      of the Department of Commerce.

            

    

    

    
      	
              13.

            	
              EXCLUSIVITY

            

    

    

    
      Without
prejudice to KLE’s rights, during the execution of the Project under this JDA,
each of the Parties shall maintain mutual exclusivity and shall not, without the
written and prior consent of the other Party, directly or indirectly enter into
any negotiations, discussions or agreements with any person or entity regarding
the Technology and its further development as applied to sugar cane bagasse
until the termination of this JDA or the withdrawal of either of the Parties in
accordance with this JDA.

    

    

    
      	
              14.

            	
              CONFIDENTIALITY

            

    

    

    
      	
              14.1

            	
              Due
      to the performance of this JDA, the Parties came to the possession of
      certain confidential and proprietary information that constitutes trade
      secrets owned by each Party, in which they have rights of indeterminable
      commercial value.

            

    

    

    
      	
              14.2.

            	
              Therefore,
      all these information, including without limitation all oral and written
      information about know-how, industrial secrets, methods, technical data
      and information, as well as commercial, financial and operational data and
      information related to the Project and this JDA shall be kept in strict
      confidence and treated as non-public, confidential and proprietary
      information ("Information"), regardless of whether identified or marked as
      "proprietary" or
"confidential”.

            

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    
      	
              14.3

            	
              The
      Parties agree to use the Information only for the purpose of this JDA, and
      shall protect such Information from disclosure to others using the same
      degree of care used to protect their own secrets. The Information shall
      not be reproduced in any form, sold, traded, published or otherwise
      disclosed to anyone in any manner, whatsoever except as required by one
      Party to the other Party.

            

    

    

    
      	
              14.4

            	
              Notwithstanding
      the foregoing, the Parties may disclose the Information without the other
      Party's prior written consent only to the extent such
      Information:

            

    

    

    
      	
               
      

            	
              (i)

            	
              is
      already known to the Party as of the date of
  disclosure;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              is
      already in possession of the public or becomes available to the public
      other than through the act or omission of the Party receiving the
      information;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              is
      independently developed by one of the Parties without reliance on the
      Information of the Party; or

            

    

    

    
      	
               
      

            	
              (iv)

            	
              is
      required to be disclosed under applicable law or by a governmental order,
      decree, regulation or rule (provided that the requested Party shall give
      written notice to the other Party prior to such disclosure. This
      obligation aims to give the other Party an opportunity to seek an
      injunction with respect to such
Information).

            

    

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    
      	
              14.5

            	
              The
      Parties shall be entitled to disclose the Information without the other
      Party’s prior written consent to any of the following persons who have a
      clear need to know in order to evaluate the Information disclosed or to
      evaluate the Project:

            

    

    

    
      	
               
      

            	
               (i)

            	
              employees,
      officers and directors of each Party directly related to the
      Project;

            

    

    

    
      	
               
      

            	
               (ii)

            	
              employees,
      officers and directors of an Affiliate directly related to the Project;
      or

            

    

    

    
      	
               
      

            	
               (iii)

            	
              any
      professional consultant, advisor or agent retained by the each Party
      directly related to the Project for the purpose of evaluating the
      Information.

            

    

    

    
      	
              14.6

            	
              Prior
      to making any such disclosures to persons under subparagraphs (i), (ii)
      and (iii) above, however, the Parties shall obtain an undertaking of
      confidentiality equivalent in substance to the confidentiality obligations
      set forth in this JDA from each such
person.

            

    

    

    
      	
              14.7

            	
              The
      technicians, postdocs, other scientists and students who are involved in
      the Project are allowed to publish articles in respect of the Project,
      subject to (i) the prior written consent of both Parties, which consent
      shall not unreasonably be withheld, and (ii) a written notice to the
      Technical Committee at least six weeks before the article is submitted for
      publication in order to file a patent application if
      necessary.

            

    

    

    
      	
              14.8

            	
              Each
      Party acknowledges that any disclosure or misappropriation of Information
      by such Party in violation of this confidentiality commitment could cause
      the other Party or its Affiliates irreparable harm, the amount of which
      may be extremely difficult to estimate, thus making any remedy at law or
      in damages inadequate. Therefore each Party agrees that the non-breaching
      Party shall have the right to apply to any court of competent jurisdiction
      for a restraining order or an injunction restraining or enjoining any
      breach or threatened breach of this confidentiality commitment and for any
      other equitable relief that such non-breaching Party deems appropriate.
      This right regarding injunction shall be in addition to any other remedy
      available to the Parties in
law.

            

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    
      	
              14.9

            	
              Notwithstanding
      the aforesaid provision, KLE represents and warrants that neither itself
      nor any of KLE Personnel, except with prior written consent of PAI, will
      make any reference in public, or to the press, or in books, magazines and
      periodicals to:

            

    

    

    
      	
               
      

            	
               (i)

            	
              this
      Contract, its existence or its terms and
  conditions;

            

    

    

    
      	
               
      

            	
               (ii)

            	
              the
      type or the extent of the Services required to be executed by KLE
      hereunder;

            

    

    

    
      	
               
      

            	
               (iii)

            	
              the
      methods, materials, and/or equipment used or personnel employed for the
      purposes of this Contract; or

            

    

    

    
      	
               
      

            	
               (iv)

            	
              any
      information in possession of KLE and/or KLE Personnel; and agents as to
      the operations of PAI, or to any area which PAI may have exploited or have
      the right to exploit.

            

    

    

    
      	
              14.10

            	
              The
      provisions contained in this Clause shall be in full force from the
      Effective Date and shall remain in full force and effect after its
      termination or withdrawal, notwithstanding the reason thereof for five (5)
      years thereafter.

            

    

    

    
      	
              14.11

            	
              The
      existence of this JDA, which includes its object and its wording, shall be
      treated as Information and shall not be disclosed except to the Party’s
      Affiliates. The provisions of the Clause 14 shall be applied upon
      them.

            

    

    

    
      	
              14.12

            	
              The
      Parties are expressively authorized to disclose any information regarding
      this JDA as to fully comply with the laws and regulations applicable, in
      particular but not limited to the U.S. SEC
  requirements.”

            

    

    

    
      	
              15.

            	
              LIMITATION OF
      LIABILITIES

            

    

    

    
      No Party
will be liable to the other Party for any indirect, special, punitive,
incidental or consequential damages or loss of profits as a result of or in
connection with this JDA.

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    

    
      	
              16.

            	
              ASSIGNMENT

            

    

    

    
      None of
the Parties may assign any rights or obligations under this JDA to any Third
Party without the prior written consent of the respective other Parties, except
in case of assignment to one of its Affiliates.

    

    

    
      	
              17.

            	
              NOTICES

            

    

    

    
      	
              17.1

            	
              All
      notices, requests, demands or other communications made pursuant to this
      JDA may be delivered personally, by mail, by courier, by facsimile,
      telegram, telex, e-mail or similar means of communication. Oral
      communication does not constitute a notice for purposes of this
      JDA.

            

    

    

    If to
PAI, send all notices, requests, demands or other communications
to:

    

    Attn.:
José Orlando Melo de Azevedo

    Address:  10350
Richmond Ave., Suite 1400, Houston, TX 77042, USA

    Telephone:  +1713
808-2106

    Fax: +1
713 808 4141

    E-Mail:
orlandomelo@petrobras.com.br

    

    If to
KLE:

    

    KLE: KL ENERGY CORP.

    Attention:  Mr.
Peter Gross

    Address:
306 East Saint Joseph St. Suite 200, Rapid City, SD 57701, 

    USA

    Telephone: +1 605
718-0372 ext 38

    Telefax: + 1 605
718-1372

    E-mail:
pgross@klenergycorp.com

    

    
      
        
           

        

        
          24

          
            

          

        

        
           

        

      

    

    

    
      	
              17.2

            	
              A
      notice given under any provision of this JDA shall be deemed
      delivered:

            

    

    

    
      	
               
      

            	
              (i)

            	
              if
      sent by mail, when received by the Party that sent it the
      cross-receipt;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              if
      sent by facsimile, upon completion of transmission in full and without
      error as evidenced by the transmission report in relation thereto, unless
      the day of such receipt or delivery is not a Business Day, or is delivered
      after close of business of a Business Day in the receiving Party’s
      domicile, in which case such notice or communication shall be deemed
      received on the next immediate Business
Day;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              if
      sent by e-mail, when the Party that sent it, receives a written answer of
      the other Party, as cross-receipt. “Received”, for purposes of this
      Clause, means actual delivery of the notice to the address or facsimile
      address of the Party shown above.

            

    

    

    
      	
              17.3

            	
              Any
      Party may change its address for purposes of this Clause by notice to
      the other Parties of such change in the manner specified
      herein.

            

    

    

    
      	
              18.

            	
              COSTS

            

    

    

    
      	
              18.1

            	
              The
      Parties agree that all costs related to the Project up to US$ 6,000,000
      (six million Dollars) shall be borne by PAI in accordance with Clauses 5
      and 6 and the Project Budget. The investments estimated in the Project
      Budget have taken into consideration and include all tax and labor costs.
      The costs related to the Project which exceed US$ 6,000,000 (six million
      Dollars) shall be borne by KLE.

            

    

    

    
      	
              18.2

            	
              Unless
      otherwise agreed in writing among the Parties, each Party shall bear its
      own individual costs and expenses in connection with the preparation and
      execution of this JDA, including, but not limited to, tax, travel expenses
      and legal advisors.

            

    

    

    
      	
              18.3

            	
              In
      case external specialists from legal, tax, or accounting perspectives are
      engaged jointly by the Parties in connection with the drafting or
      implementation of this JDA, the Parties shall discuss and agree on the
      terms and conditions of which such costs and expenses shall be shared
      among the Parties prior to such
engagement.

            

    

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    
      	
              19.

            	
              TAXES

            

    

    

    
      	
              19.1.

            	
              Taxes
      (as defined hereinafter) due as a direct or indirect result of the present
      JDA or its performance, shall be the exclusive responsibility of the
      taxpayer, as defined in the tax laws, with no right to reimbursement
      against the other Party.

            

    

    

    
      	
              19.2.

            	
              “Tax”
      or “Taxes” means any and all taxes (together with any interest, penalties,
      additions to tax and additional amounts imposed with respect thereto)
      imposed by any governmental authority, including taxes on or with respect
      to income, profits, gross receipts, property, employment, social security,
      workers’ compensation, unemployment compensation, or net worth and taxes
      in the nature of withholding, or transfer
taxes.

            

    

    

    
      	
              19.3.

            	
              Except
      as otherwise expressly stated in this JDA, each Party shall be solely
      responsible for itself, its employees, subcontractors and its hired third
      parties for the payment of all Taxes and governmental charges of whatever
      nature.

            

    

    

    
      	
              19.4.

            	
              Parties ́
      subcontractors: for the avoidance of doubt, all Taxes and governmental
      charges of whatever nature, existing or to be created while performing
      this JDA, in respect of each Party Personnel and suppliers shall be
      exclusively borne by for the correspondent Party, and no reimbursement of
      such amount shall be claimed from the other
  Party.

            

    

    

    
      	
              20.

            	
              DURATION

            

    

    

    
      	
              20.1

            	
              This
      JDA shall be valid and in force for eighteen (18) months (“Term”) from the
      Effective Date, unless an early termination occurs as provided in this
      JDA.

            

    

    

    
      
        
           

        

        
          26

          
            

          

        

        
           

        

      

    

    

    
      	
              20.2

            	
              PAI
      shall have the right, at its sole discretion, to extend this JDA for an
      additional term up to one (1) year, as provided hereunder, at conditions
      to be agreed jointly by the
Parties.

            

    

    

    
      	
            	
              20.2.1

            	
              PAI
      shall give a written notice to KLE proposing an extension, not later than
      ninety (90) days prior to the end of the initial
  term.

            

    

    

    
      	
              21.

            	
              AMENDMENTS

            

    

    

    
      This JDA
shall not be amended except by mutual written agreement of the
Parties.

    

    

    
      	
              22.

            	
              FORCE
      MAJEURE

            

    

    

    
      	
              22.1

            	
              No
      Party to this JDA shall be under any liability for any failure, omission
      or delay by it in the performance or observance of any of its respective
      obligations under this JDA if such failure, omission or delay arises from
      events of force majeure which for the purposes of this JDA shall mean acts
      beyond the control of such Party, such as acts of God, acts of war or
      national emergency, accident, fire, acts of any Government or Lawful
      Authority, strike, unrest, riots or civil
  disobedience.

            

    

    

    
      	
              22.2

            	
              The
      Party invoking force majeure shall advise the other Parties as soon as
      practicable of the circumstances causing the failure, omission or delay in
      the performance or observance of its obligations and shall provide such
      information as is available to it regarding the progress and possible
      discontinuance of such circumstances. The performance and the observations
      of such obligations shall be resumed as soon as practicable after such
      circumstances have ceased. This JDA may be terminated by the unaffected
      Party(ies) if the cause referred to in this section or the resultant
      inability to perform continues for a period of more than 6 (six)
      months.

            

    

    

    
      
        
           

        

        
          27

          
            

          

        

        
           

        

      

    

    

    
      	
              23.

            	
              PUBLIC
      ANNOUNCEMENTS

            

    

    

    None of
Parties shall issue any press release, papers, publication of technical
information, public presentations regarding the technology or statement with
respect to this JDA without the written consent of the other Parties, provided,
however, that a Party or any Affiliate of a Party may issue or make such a
public announcement or statement if it is obligated by any law, rules and
regulations, including those of any recognized stock exchange or security or
regulatory agency to do so. 

    

    
      	
              24.

            	
              GENERAL
      PROVISIONS

            

    

    

    
      	
              24.1

            	
              Should
      any of the provisions of this JDA be or become fully or partly invalid or
      unenforceable, the remainder of the JDA shall be valid or enforceable. The
      invalid or unenforceable provision shall be replaced by a provision which
      shall come as close as possible to the economic purpose of the invalid
      provision. Any gaps in this JDA shall be filled by a provision which the
      Parties as prudent businessmen would in good faith have agreed to, had
      they considered the matter not covered by this
  JDA.

            

    

    

    
      	
              24.2

            	
              PAI
      is entitled to transfer all rights and obligations it has under this JDA
      to an Affiliate without the prior approval of
  KLE.

            

    

    

    
      	
              25.

            	
              ENTIRE
      AGREEMENT

            

    

    

    This JDA
and the Exhibits hereto contain the entire agreement and understanding of the
Parties and supersede all prior agreements, understandings or arrangements (both
oral and written) relating to the subject matter of this JDA (and any such
document). The terms of this JDA will always prevail in case of conflict with
the terms of the Exhibits hereto.

    

    
      
        
           

        

        
          28

          
            

          

        

        
           

        

      

    

    

    
      	
              26.

            	
              APPLICABLE LAW AND
      DISPUTE RESOLUTION

            

    

    

    
      	
              26.1

            	
              This
      JDA, its meaning and intention, the performance or any breach thereof, the
      relationship of the Parties and their respective rights and obligations
      hereunder, shall be construed, enforced and governed in accordance with
      the laws of Texas, irrespective of any conflict of laws or exclusive
      jurisdiction provisions in law or
equity.

            

    

    

    
      	
              26.2

            	
              KLE
      on the one hand, and PAI on the other hand (each a “Disputing Party”)
      agree to negotiate or to settle in good faith any and all claims,
      controversies, differences and/or disputes (each a “Dispute”), at any
      time, arising out of or in connection with this JDA including any
      questions regarding its existence, interpretation, validity, termination
      or any breach thereof, during the forty-five (45) Business Day period
      following the giving of notice in writing to the other Disputing Party
      specifying the cause thereof.

            

    

    

    
      	
              26.3

            	
              The
      Disputing Parties shall endeavor to reach a common agreement on all
      Disputes regarding technical and operational matters.  In the
      event that the Disputing Parties do not reach an agreement on such
      matters, the Dispute shall be referred to an independent expert according
      to the following procedures.

            

    

    

    
      	
              26.4

            	
              The
      Disputing Party wishing to submit the issue to the decision of an
      independent expert shall propose to the other Disputing Party two (2)
      candidates.

            

    

    

    
      	
              26.5

            	
              The
      other Disputing Party shall either respond by (i) selecting one of the
      candidates proposed by the Disputing Party, in which case the Parties
      shall proceed under this clause or (ii) electing to submit such issue to
      arbitration in accordance with Clause
26.9.

            

    

    

    
      	
              26.6

            	
              Each
      Disputing Party shall pay its own costs in connection with this procedure,
      and the fees of the independent expert shall be covered by the Disputing
      Parties in equal parts.

            

    

    

    
      
        
           

        

        
          29

          
            

          

        

        
           

        

      

    

    

    
      	
              26.7

            	
              Within
      thirty (30) days following the notification that a Dispute has been
      submitted for the review of the independent expert, each Party shall
      provide such independent expert with the information in its possession
      regarding the Dispute.  The independent expert may convene one
      or more meetings of the Parties, whether jointly or separately, and may
      request necessary supplementary
information.

            

    

    

    
      	
              26.8

            	
              The
      independent expert shall issue his decision within thirty (30) days
      following the conclusion of the proceeding, which proceeding may not
      exceed ninety (90) days from the date of its initiation, unless otherwise
      agreed by the Disputing Parties. The decision of the independent expert
      shall be final and binding on the Disputing Parties, except in the case of
      fraud or manifest error.

            

    

    

    
      	
              26.9

            	
              In
      case no agreement is reached in respect of the Dispute(s) pursuant to
      Clause 26.2, and the Parties have not submitted the matter in dispute to
      an independent expert as per the procedures under Clause 26.3, the
      Disputing Parties agree to submit the dispute to arbitration, to be
      conducted according to the international commercial rules of the American
      Arbitration Association – AAA then in force, as
  follows:

            

    

    

    
      	
              26.10

            	
              The
      venue of arbitration shall be Houston, TX, and the proceedings shall be
      conducted in the English language.

            

    

    

    
      	
              26.11

            	
              The
      arbitration shall be heard and determined by three (3) arbitrators who
      shall be selected as set forth hereinafter. Notwithstanding the foregoing
      provisions of this clause, only one arbitrator shall be used in
      arbitrations where the net amount in controversy does not exceed
      US$10,000,000 (ten million Dollars) or where the controversy involves
      limited technical issues and the Parties unanimously agree. Such
      arbitrator shall be appointed jointly by the Parties to the arbitration;
      failing agreement, the AAA shall appoint such
  arbitrator.

            

    

    

    
      	
              26.12

            	
              The
      Disputing Party desiring arbitration shall notify the other Disputing
      Party in writing of the matter to be arbitrated including whenever
      possible the estimated US Dollar amount of the dispute and shall include
      the name of the arbitrator that it has
selected.

            

    

    

    
      	
              26.13

            	
              The
      other Disputing Party shall respond to such notice within ten (10)
      Business Days and shall name the arbitrator that it has
      selected.

            

    

    

    
      
        
           

        

        
          30

          
            

          

        

        
           

        

      

    

    

    
      	
              26.14

            	
              The
      Disputing Party-appointed arbitrators shall in turn appoint a presiding
      arbitrator of the tribunal within ten (10) Business Days following the
      appointment of the last disputing Party-appointed
    arbitrator.

            

    

    

    
      	
              26.15

            	
              If
      the arbitrators appointed by the parties cannot reach agreement on a
      presiding arbitrator of the tribunal and/or if a Disputing Party refuses
      to appoint its arbitrator within such ten (10) Business Day period, the
      AAA shall appoint an independent arbitrator as the presiding arbitrator,
      or for such Disputing Party, as applicable, who does not have any
      financial interest in the dispute, controversy or
  claim.

            

    

    

    
      	
              26.16

            	
              All
      decisions and awards by the arbitration tribunal shall be made by majority
      vote.

            

    

    

    
      	
              26.17

            	
              All
      decisions and awards of the arbitrators shall be final and binding upon
      such Parties in dispute, and there shall be no appeal there from to any
      court whatsoever. Judgment upon the award rendered by the arbitrators may
      be entered in any court having jurisdiction thereof. It is expressly
      agreed that punitive, consequential or indirect damages shall not be
      allowed.

            

    

    

    IN WITNESS WHEREOF, the
Parties hereto sign this JDA in 2 (two) counterparts, of equal form and content,
to one sole effect together with the two witnesses hereunder signed. All such
counterparts will be deemed to be an original, shall be construed together and
shall constitute one and the same instrument.

     

     

    
      
        
          	
                  PETROBRAS
      AMERICA INC.

                  /s/
      Jose Orlando Melo de Azevedo

                  Name:Jose
      Orlando Melo de Azevedo

                  Position:
      President

                  Date:
      8/23/10

                	 
      	
                  KL
      ENERGY CORP.

                  /s/
      Peter Gross

                  Name:
      Peter Gross

                  Position:
      CEO

                  Date:

                

        

      

    

    

    
      
        
           

        

        
          31

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
A –  “Description of Project and Specific Clauses”

    

    KLE shall
test the Technology in its demonstration plant in Upton, Weston County, Wyoming,
USA, providing primarily the following services:

    

    
      1.     
Laboratory
and pilot plant testing with different enzymes and yeasts;

    

    

    
      2.      Sourcing
of sugarcane bagasse, enzymes and yeasts;

    

    

    3.      Adaptation
and conversion of the demonstration plant to sugarcane bagasse
feedstock.

    

    
      
        	 	
                (a)

              	
                Process
      design

              

      

    

    
      
        	 	
                (b)

              	
                Engineering

              

      

    

    
      
        	 	
                (c)

              	
                Procurement

              

      

    

    
      
        	 	
                (d)

              	
                Permitting
      and licensing

              

      

    

    
      
        	 	
                (e)

              	
                Construction

              

      

    

    
      
        	 	
                (f)

              	
                Commissioning

              

      

    

    

    
      	
               

            	
              (i)

            	
              Processing
      capacity of ***** of dry sugarcane bagasse per hour and ***** of anhydrous
      ethanol per hour.

            

    

    

    
      4.  
 Operational
management of the sugar cane bagasse test program

    

    

    
      	
               
      

            	
              (a)

            	
              Minimum
      6 campaign runs:

            

    

    

    
      	
               
      

            	
              (i)

            	
              Each
      campaign shall last between ***** and ***** hours and consume ***** of dry
      bagasse.

            

    

     

    
      
        

      

      
        *****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              Production
      of ***** liters of anhydrous
ethanol.

            

    

    

    
      5.   
Off-take
agreements for anhydrous ethanol.

    

    
       

      
        

      

    

    
      *****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

    

    

    
      
        
           

        

        
          32

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
B – “ Monthly Detailed Work Plan and Budget” (1/2)

     

    *****

     

    
      
        

      

    

    ***** Text has been omitted
pursuant to Registrant’s confidential treatment request filed with the
Securities and Exchange Commission (“Commission”) pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934.  The omitted text has been filed
separately with the Commission.

    

    
      
        
           

        

        
          33

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
B – “ Monthly Detailed Work Plan and Budget” (2/2)

     

    *****

     

    
      
        

      

    

    *****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

    
      
      

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

    EXHIBIT
C – “Pre Existing IP”

    

    
      	
              ·

            	
              US
      provisional application serial No. 61/249,181, filed October 6,
      2009

            

    

    

    
      	
              ·

            	
              Brazilian
      Patent Application, filed June 2, 2010 (serial number not yet assigned),
      priority claim to U.S. application 61/249,181, filed October 6,
      2009.

            

    

    

    
      
        
           

        

        
          35

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
D – “Summary of Performance Criteria”

    

    The
Parties agree on the following goals to be achieved as a result of the
Services.

    

    
      	
              1.

            	
              A
      minimum production yield of ***** liters of anhydrous ethanol per
      metric ton of dry sugarcane
bagasse.

            

    

    

    
      	
               
      

            	
              (a)

            	
              This
      yield shall be achieved in ***** production
  campaigns;

            

    

    

    
      	
            	
              (b)

            	
              Each
      production campaign shall last between ***** and ***** hours and consume
      ***** dry kg of sugarcane bagasse;

            

    

    

    
      	 	
              (c)

            	
              The
      maximum enzyme dosage is limited to
*****.

            

    

    

    
      	
              2.

            	
              A
      projected maximum enzyme dosage cost of ***** produced by the date of
      termination of this JDA.

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      cost calculation shall be based on the production yield and the enzyme
      dosage achieved during the JDA period and the enzyme supply cost
      negotiated by KLE.

            

    

     

    
      
        

      

      *****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

    

    

    
      
        
           

        

        
          36

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
E – “Health, Safety and Environmental”

    

    The
demonstration plant shall be operated in compliance with the codes and standards
of both the EPA (Environmental Protection Agency) and OSHA (Occupational Safety
and Health Administration), as well as the laws of the State of
Wyoming.

     

    
      
        
           

        

        
          37

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
F – “Payments and Technical-Financial Report Schedule”

     

    *****

    
       

      
        

      

      *****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

      
        
           

        

        
          38

          
            

          

        

        
           

        

      

      EXHIBIT
G – “Technology License Agreement Guidelines”

      

      1              KL
Energy Corporation (KLE or “Licensor”) is the Owner and developer of certain
proprietary processes relating to the production of cellulosic ethanol and
lignin from lignocellulosic material feedstock using thermal-mechanical
pre-treatment, enzymatic hydrolysis and fermentation of C5 and/or C6 sugar
polymers from alternative feedstocks (as defined in the JDA as
“Technology”).

      

      2.       
     KLE will grant a non-exclusive (except as provided
by section 5.1 of this EXHIBIT G) license to PAI and PETROBRAS Group (as defined
in the JDA) (hereinafter referred to as “Licensees”) for use of the KLE Pre
Existing IP (as defined in the JDA and in the EXHIBIT C), including but not
limited to any and all processes-claimed by the KLE, patents, pending or issued
in Brazil, and know-how, for a period of ***** years of the Effective Date,
to practice the licensed process and to research, develop, make, have made, use,
market, offer for sale, sell and/or have sold the licensed products, import,
export, distribute and otherwise exploit and have exploited any KLE Pre Existing
IP.

      

      3.           
 All right, title and interest in and to the licensed patents and licensed
know-how shall remain owned by KLE.

      

      4.    
        The Licensees may develop and
construct multiple production plants for the production of licensed products.
The production of the licensed products will not be payable with extra
royalties. This payment is already included in the one-time technology license
fee fixed in the Section 5.

      

      5.         
   The Licensees will pay to KLE a one-time technology license
fee of up to
five million US Dollars (US$5,000,000) as defined in the JDA (section
7.1.2 and 7.8 of the JDA).

       

        
          
*****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

      

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

      
        	
                5.1

              	
                The
      license shall be exclusive on a global basis for ***** of its Effective
      Date against a payment of ***** by PAI to KLE. Licensee further pays
      to KLE a technology license fee of ***** per bone dry metric ton of
      nameplate biomass processing capacity commissioned within the period of
      exclusivity. PAI decides at its sole discretion whether it exercises this
      exclusivity option.

              

      

      

      
        	
                6

              	
                The
      Licensees are authorized by KLE on a royalty-free basis to sub-license the
      KLE Pre Existing IP to Affiliates and any entities belonging to the
      Petrobras Group.

              

      

       

      
        

      

      *****
Text has been omitted pursuant to
Registrant’s confidential treatment request filed with the Securities and
Exchange Commission (“Commission”) pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934.  The omitted text has been filed separately with
the Commission.

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

       

      Exhibit
H – “Scope of Feasibility Study and Basic Engineering Services”

      

      
        
          	
                  Service

                	 
      	
                  Sub items

                	 
      	
                  PAI support

                	 
      	
                  Particularities

                
	
                  Conceptual
      process design

                	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Criteria
      for selection of

                	 
      	
                  Required

                	 
      	 
      
	 
      	 
      	
                  sugarcane
      mill

                	 
      	 
      	 
      	 
      
	
                  Selection
      of sugarcane mill

                	 
      	 
      	 
      	
                  Required

                	 
      	 
      
	
                  Site
      visit and data collection

                	 
      	 
      	 
      	
                  Required

                	 
      	
                  Unrestricted
      access to site and all relevant data required

                
	
                  Process
      flow diagram

                	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Initial
      simulations

                	 
      	 
      	 
      	 
      
	
                  Front
      end loading design

                	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Aspen
      model integrating sugarcane mill and CBE plant

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Heat
      and material balance

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Water
      balance

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Emission
      summary

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Facility
      layout

                	 
      	 
      	 
      	 
      
	
                  Financial
      model

                	 
      	 
      	 
      	
                  Required

                	 
      	
                  Key
      assumptions to be jointly agreed

                
	
                  Feasibility
      report

                	 
      	 
      	 
      	 
      	 
      	 
      

        

        

        Basic
Engineering

        

        
          	
                  Service

                	 
      	
                  Sub items

                	 
      	
                  PAI support

                	 
      	
                  Particularities

                
	
                  Basis
      of design

                	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Conceptual
      plot plan

                	 
      	 
      	 
      	 
      	 
      	 
      
	
                  P&IDs
      and automation plan

                	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Material
      and energy balances

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Recycle
      streams

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Waste
      streams

                	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Utilities

                	 
      	 
      	 
      	 
      
	
                  Major
      equipment list

                	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                  Minimum
      design specs

                	 
      	 
      	 
      	 
      
	
                  Site
      plan

                	 
      	 
      	 
      	 
      	 
      	 
      
	
                  CAPEX
      and OPEX estimate

                	 
      	 
      	 
      	
                  Required

                	 
      	
                  Equipment
      quotes with qualified
suppliers

                

        

      

      

      The
following study and engineering services are expressively excluded from the
scope of this JDA:

      

      
        	
                 
      

              	
                ·

              	
                Raw
      material receiving and buffer
storage

              

      

      
        	
                 
      

              	
                ·

              	
                Heat
      and power generation

              

      

      
        	
                 
      

              	
                ·

              	
                Fresh
      and cooling water supply

              

      

      
        	
                 
      

              	
                ·

              	
                Waste
      water treatment

              

      

      
        	
                 
      

              	
                ·

              	
                Other
      required infrastructure

              

      

      
        	
                 
      

              	
                ·

              	
                Environmental
      conditions, requirements and
limitations

              

      

      
        	
                 
      

              	
                ·

              	
                Permitting

              

      

      
        	
                 
      

              	
                ·

              	
                Civil
      engineering

              

      

      
        	
                 
      

              	
                ·

              	
                Any
      other service not listed in above Feasibility Study and Basic engineering
      tables

              

      

      
        
           

        

        
          41

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