Document:

SUBSCRIPTION
        AGREEMENT

       

      This
        SUBSCRIPTION
        AGREEMENT (this
        “Agreement”)
        is
        entered into as of the date of its acceptance by H2Diesel Holdings, Inc.,
        a
        Florida corporation (the “Company”),
        set
        forth below (the “Effective
        Date”),
        by
        and between the Company and the subscriber set forth on the signature page
        hereto (the “Subscriber”).

       

      RECITALS

       

      WHEREAS,
        in
        connection with the transactions contemplated by this Agreement, the Company
        desires to create a new series of preferred stock designated as Series B
        Cumulative Convertible Preferred Stock, par value $.001 per share (the
“Preferred
        Stock”),
        by
        filing Articles of Amendment in the form attached hereto as Exhibit
        A
        (the
“Articles
        of Amendment”)
        with
        the Secretary of State of the State of Florida;

       

      WHEREAS,
        the
        Company desires to offer (the “Offering”)
        up to
        $10,000,000 in shares of Preferred Stock at a purchase price of $100 per
        share
        and an initial conversion price of $4.25 per share (the “Shares”),
        together with warrants in the form attached hereto as Exhibit
        B,
        exercisable for a number of shares of common stock of
        the
        Company, $.001 par value per share (the “Common
        Stock’)
        equal
        to 25% of the number of shares of Common Stock that
        would be issuable upon initial conversion of the Preferred Stock, (the
“Warrants”,
        and
        together with the Shares, the “Securities”)
        at an
        exercise price of $6.25 per share;

       

      WHEREAS,
        the
        Company desires to issue and sell to the Subscriber the Securities set forth
        on
        the signature page hereof;

       

      WHEREAS,
        in
        connection with the Offering the Company or its agents have provided to
        Subscriber a copy of the Company’s Confidential Private Offering Memorandum
        dated March 26, 2008 (together with the annexes, exhibits and attachments
        thereto, the “Memorandum”),
        which
        provides certain material disclosures in connection with the Offering;
        and

       

      WHEREAS,
        as
        part
        of the Offering the Company will agree to register shares of Common Stock
        issuable (i) upon the conversion of the Preferred Stock, (ii) upon the payment
        of dividends on the Preferred Stock, and (iii) upon the exercise of the
        Warrants, under the registration rights agreement in the form attached as
        Exhibit
        C
        (the
“Registration
        Rights Agreement”).

       

      AGREEMENT

       

      NOW
        THEREFORE, based
        upon the premises and mutual promises set forth below, the parties agree
        as
        follows:

       

      1. Subscription
        for Preferred Stock; Terms of the Offering.

       

      1.1. Subscription
        and Issuance of the Securities.
        Subject
        to the terms and conditions hereinafter set forth, the Subscriber hereby
        subscribes for and agrees to purchase the Securities set forth on the signature
        page hereof, for an aggregate purchase price equal to $____________ (the
        “Purchase
        Price”).
        The
        Company reserves the right in its sole discretion to increase the number
        of
        Shares in the Offering if sufficient demand exists. The Purchase Price is
        payable by wire transfer (in accordance with the wire transfer instructions
        set
        forth in the Memorandum) of immediately available funds delivered at the
        Closing
        (as defined below). 

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      1.2. Subscription
        Period.
        The
        Company may, in its sole discretion, continue to accept subscriptions on
        or
        before the third calendar day following the initial Closing Date (as defined
        below). 

       

      1.3. Right
        to Reject.
        The
        Company reserves the right to reject this subscription in whole or in part
        or
        terminate the Offering in its sole and absolute discretion. If Subscriber’s
        subscription is rejected in whole, or the Offering is terminated without
        a
        Closing occurring, all funds received from the Subscriber will be promptly
        returned without interest, penalty, expense or deduction, and this Agreement
        shall thereafter be of no further force or effect. If Subscriber’s subscription
        is rejected in part, the funds for the rejected portion of such subscription
        will be promptly returned without interest, penalty, expense or deduction
        and
        this Agreement will continue in full force and effect to the extent such
        subscription was accepted.

       

      2. Closing.

       

      2.1. Closing.
        The
        Closing of the transactions contemplated hereby (the “Closing”)
        shall
        take place on the date the Company declares the Closing effective (the
“Closing
        Date”).
        The
        Closing shall occur at such place as determined by the Company.

       

      2.2. Termination
        of Offering.
        All
        payments will be held by the Company until the Company declares the Closing
        effective or terminates the Offering. The Offering will be terminated if
        either
        (i) the Closing does not become effective on or prior to April 15, 2008,
        which
        date the Company may extend, in its sole discretion, but not beyond May 15,
        2008, or (ii) the Company elects to terminate the Offering. If the Offering
        is
        terminated, the Company will return any payments received, without interest,
        to
        the Subscribers. 

       

      3. Representations
        and Warranties of the Company.
        The
        Company hereby represents and warrants to the Subscriber that the following
        representations and warranties shall be true immediately prior to the
        Closing:

       

      3.1. Organization;
        Good Standing; Qualification.
        The
        Company is a corporation duly organized, validly existing and in good standing
        under the laws of the state of Florida and has all requisite corporate power
        and
        authority to carry on its business as presently conducted and as proposed
        to be
        conducted. The Company is duly qualified to transact business and is in good
        standing in each jurisdiction in which the failure to so qualify would have
        a
        material adverse effect on the consolidated financial condition or results
        of
        operations of the Company.

       

      3.2. Capitalization.
        Capitalization.
        The
        authorized capital stock of the Company immediately prior to the Closing
        consists of 100,000,000 shares of Common Stock of which 18,285,964 shares
        are
        outstanding as of March 10, 2008 and 10,000,000 shares of preferred stock,
        par
        value $.001 per share, of which 40,050 shares are outstanding as of March
        1,
        2008. The options to purchase 7,136,000 shares of Common Stock are outstanding
        as of March 1, 2008 and warrants to purchase 3,196,565 shares of Common Stock
        are outstanding as of March 1, 2008. All of the issued and outstanding capital
        stock of H2Diesel, Inc., a Delaware corporation and wholly owned subsidiary
        of
        the Company (“Subsidiary”)
        is
        owned by the Company. The Company owns 100% of Subsidiary, and has no direct
        or
        indirect ownership interest in any entity other than Subsidiary.

       

      
        
           

        

        
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      3.3. Authorization.
        All
        corporate action required to be taken by the Company’s Board of Directors and
        shareholders in order to authorize the Company, as the case may be, to enter
        into this Agreement, the Registration Rights Agreement and to issue the
        Securities has been taken. Each of this Agreement and the Registration Rights
        Agreement when executed and delivered by the Company, shall constitute the
        valid
        and legally binding obligation of the Company, enforceable against the Company
        in accordance with its terms except (i) as limited by applicable bankruptcy,
        insolvency, reorganization, moratorium, fraudulent conveyance, or other laws
        of
        general application relating to or affecting the enforcement of creditors’
rights generally, or (ii) as limited by laws relating to the availability
        of
        specific performance, injunctive relief, or other equitable remedies and
        public
        policy limitations on the enforcement of indemnification for violations of
        securities laws.

       

      3.4. Valid
        Issuance of Securities.
        The
        Securities, when issued, sold and delivered in accordance with the terms
        and for
        the consideration set forth in this Agreement, and the shares of Common Stock
        issuable (i) upon conversion of the Shares, (ii) upon payment as dividends
        on
        the Shares and (iii) upon exercise of the Warrants (collectively, the
“Additional
        Shares”),
        will
        be duly authorized, validly issued, fully paid and non-assessable and free
        of
        restrictions on transfer other than restrictions on transfer under this
        Agreement and under applicable state and federal securities laws.

       

      3.5. SEC
        Documents, Financial Statements.
        

       

      (a) True
        and
        complete copies of the Incorporated SEC Reports (as defined in the Memorandum)
        are publicly available on the Securities and Exchange Commission (“SEC”)
        EDGAR
        database (www.sec.gov).
        As of
        their respective filing dates, the Incorporated SEC Reports complied as to
        form
        in all material respects with the requirements of the Securities Exchange
        Act of
        1934, as amended (the “Exchange
        Act”)
        and
        the Securities Act of 1933, as amended, and each of the Incorporated SEC
        Reports
        was timely filed. To the Company’s knowledge, as of the date hereof, none of the
        Incorporated SEC Reports is subject to ongoing SEC review or outstanding
        SEC
        comment. Each of the Incorporated SEC Reports, as of the date it was filed
        with
        the SEC, did not contain any untrue statement of material fact or omitted
        to
        state a material fact required to be stated therein or necessary to make
        the
        statements made therein, in light of the circumstances in which they were
        made,
        not misleading, except to the extent corrected, supplemented or superseded
        by a
        subsequently filed Incorporated SEC Report. 

       

      (b) The
        financial statements of the Company, including the notes thereto, included
        in
        the Incorporated SEC Reports (the “Company
        Financial Statements”)
        (i)
        complied as to form in all material respects with applicable accounting
        requirements and with the published rules and regulations of the SEC with
        respect thereto as of their respective dates; (ii) have been prepared in
        accordance with GAAP applied on a basis consistent throughout the periods
        indicated and consistent with each other (except as may be indicated in the
        notes thereto or, in the case of unaudited statements, included in Quarterly
        Reports on Form 10-Q, as permitted by Form 10-Q of the SEC); and (iii) present
        fairly in all material respects the consolidated financial condition and
        results
        of operations of the Company as of the respective dates and for the respective
        periods indicated therein (subject, in the case of unaudited statements,
        to
        normal, recurring year-end adjustments).

       

      
        
           

        

        
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      3.6. Absence
        of Undisclosed Liabilities.
        The
        Company has no material liabilities except (i) liabilities provided for or
        reserved against in the Company Financial Statements, (ii) liabilities disclosed
        in the Memorandum, and (iii) liabilities arising in the ordinary course of
        business consistent with past practice since January 31, 2007.

       

      4. Representations
        and Warranties of the Subscriber.
        The
        Subscriber hereby acknowledges, agrees with and represents and warrants to
        the
        Company as follows:

       

      4.1. Authorization.
        The
        Subscriber has full power and authority to enter into this Agreement and
        the
        Registration Rights Agreement, the execution and delivery of which has been
        duly
        authorized, if applicable, and this Agreement and the Registration Rights
        Agreement constitute a valid and legally binding obligation of the
        Subscriber.

       

      4.2. Securities
        Exemption.
        The
        Subscriber acknowledges his, her or its understanding that the offering and
        sale
        of the Securities is intended to be exempt from registration under the
        Securities Act of 1933, as amended (the “Securities
        Act”),
        by
        virtue of Section 4(2) of the Securities Act and the provisions of Regulation
        D
        promulgated thereunder (“Regulation
        D”).
        In
        furtherance thereof, the Subscriber represents and warrants to the Company
        as
        follows:

       

      (a) The
        Subscriber realizes that the basis for the exemption from registration may
        not
        be available if, notwithstanding the Subscriber’s representations contained
        herein, the Subscriber is merely acquiring the Securities for a fixed or
        determinable period in the future, or for a market rise, or for sale if the
        market does not rise. The Subscriber does not have any such
        intention.

       

      (b) The
        Subscriber is acquiring the Securities solely for the Subscriber’s own
        beneficial account, for investment purposes, and not with view to, or resale
        in
        connection with, any distribution of the Securities.

       

      (c) The
        Subscriber has the financial ability to bear the economic risk of his, her
        or
        its investment, has adequate means for providing for their current needs
        and
        contingencies, and has no need for liquidity with respect to the investment
        in
        the Company.

       

      (d) The
        Subscriber and the Subscriber’s attorney, accountant, purchaser representative
        and/or tax advisor, if any (collectively, “Advisors”),
        have
        received this Agreement, together with the Memorandum, and all other documents
        provided by the Company pursuant to the requests of the Subscriber or its
        Advisors, if any, and have carefully reviewed them and they understand the
        information contained therein, prior to the execution of this
        Agreement.

       

      (e) The
        Subscriber (together with his, her or its Advisors, if any) has such knowledge
        and experience in financial and business matters as to be capable of evaluating
        the merits and risks of the prospective investment in the Securities. If
        other
        than an individual, the Subscriber also represents it has not been organized
        solely for the purpose of acquiring the Securities.

       

      
        
           

        

        
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      4.3. Investor
        Questionnaire.
        The
        information in the Investor Questionnaire completed and executed by the
        Subscriber in the form attached as Exhibit
        C
        hereto
        (the “Investor
        Questionnaire”)
        is
        true and accurate in all respects, and the Subscriber is an “accredited
        investor,” as that term is defined in Rule 501(a) of Regulation D.

       

      4.4. Restricted
        Securities.
        The
        Subscriber represents, warrants and agrees that he, she or it will not sell
        or
        otherwise transfer the Shares or any Additional Shares without registration
        under the Securities Act or an exemption therefrom, and fully understands
        and
        agrees that the Subscriber must bear the economic risk of his, her or its
        purchase because, among other reasons, the Securities have not been registered
        under the Securities Act or under the securities laws of any state and,
        therefore, cannot be resold, pledged, assigned or otherwise disposed of unless
        they are subsequently registered under the Securities Act and under the
        applicable securities laws of such states, or an exemption from such
        registration is available. In particular, the Subscriber is aware that the
        Securities are “restricted securities,” as such term is defined in Rule 144
        promulgated under the Securities Act (“Rule
        144”),
        and
        they may not be sold pursuant to Rule 144 unless all of the conditions of
        Rule
        144 are met. The Subscriber also understands that, except as otherwise provided
        in the Registration Rights Agreement, the Company is under no obligation
        to
        register the Securities on his, her or its behalf or to assist them in complying
        with any exemption from registration under the Securities Act or applicable
        state securities laws. The Subscriber understands that any sales or transfers
        of
        the Securities are further restricted by state securities laws and the
        provisions of this Agreement.

       

      4.5. Reliance
        on Representations.
        No
        representations or warranties have been made to the Subscriber by the Company,
        or any of their respective officers, employees, agents, sub-agents, affiliates
        or subsidiaries, other than any representations of the Company contained
        herein,
        and in subscribing for the Securities the Subscriber is not relying upon
        any
        representations other than those contained herein.

       

      4.6. Investment
        Risk.
        The
        Subscriber understands and acknowledges that his, her or its purchase of
        the
        Securities is a speculative investment that involves a high degree of risk
        and
        the potential loss of their entire investment and has carefully read and
        considered the matters set forth in the Memorandum and in the Incorporated
        SEC
        Reports and in particular the matters under the caption “Risk Factors” therein,
        and, in particular, acknowledges that the Company has a limited operating
        history and is engaged in a highly competitive business.

       

      4.7. Commitment
        to Investments.
        The
        Subscriber’s overall commitment to investments that are not readily marketable
        is not disproportionate to the Subscriber’s net worth, and an investment in the
        Securities will not cause such overall commitment to become
        excessive.

       

      4.8. Legend.
        The
        Subscriber understands and agrees that the certificates for the Securities
        shall
        bear substantially the following legend until (i) such shares shall have
        been
        registered under the Securities Act and effectively disposed of in accordance
        with a registration statement that has been declared effective or (ii) in
        the
        opinion of counsel for the Company such Securities may be sold without
        registration under the Securities Act, as well as any applicable “blue sky” or
        state securities laws:

       

      
        
           

        

        
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      THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
        STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
        PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
        TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
        COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
        SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
        REQUIRED.

       

      4.10. Status
        of Securities.
        Neither
        the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities
        commission has approved the Securities or passed upon or endorsed the merits
        of
        the Offering or confirmed the accuracy or determined the adequacy of any
        information provided by the Company to the Subscriber or its Advisors. Neither
        this Agreement nor any of such information has been reviewed by any federal,
        state or other regulatory authority.

       

      4.11. Disclosure
        of Information.
        The
        Subscriber and his, her or its Advisors, if any, have had a reasonable
        opportunity to ask questions of and receive answers from a person or persons
        acting on behalf of the Company concerning the offering of the Securities
        and
        the business, financial condition, results of operations and prospects of
        the
        Company, and all such questions have been answered to the full satisfaction
        of
        the Subscriber and his, her or its Advisors, if any. The Subscriber is unaware
        of, is in no way relying on, and did not become aware of the offering of
        the
        Securities through or as a result of, any form of general solicitation or
        general advertising including, without limitation, any article, notice,
        advertisement or other communication published in any newspaper, magazine
        or
        similar media or broadcast over television or radio, or electronic mail over
        the
        internet, in connection with the offering and sale of the Securities and
        is not
        subscribing for Securities and did not become aware of the offering of the
        Securities through or as a result of any seminar or meeting to which the
        Subscriber was invited by, or any solicitation of a subscription by, a person
        not previously known to the Subscriber in connection with investments in
        securities generally. The Subscriber further acknowledges that the Subscriber
        has had the opportunity to request and receive drafts of the Company’s financial
        statements for the year ended December 31, 2007 and its annual report on
        Form 10-K for the fiscal year ended December 31, 2007 and that such
        information is not yet publicly available and accordingly has not been provided
        to investors. To the extent that the Subscriber has requested and received
        this
        material in its current draft form, or any other non-public information which
        the Company identifies as likely to be material, the Subscriber acknowledges
        that they must keep such information confidential and may not trade in the
        Company’s securities until the Company has filed its annual report on
        Form 10-K for the fiscal year ended December 31, 2007, expected to be
        filed by March 31, 2008. 

       

      
        
           

        

        
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      4.12. No
        Claim.
        The
        Subscriber has taken no action which would give rise to any claim by any
        person
        for brokerage commissions, finders’ fees or the like relating to this Agreement
        or the transactions contemplated hereby.

       

      4.13. Forward-Looking
        Statements.
        The
        Subscriber acknowledges that any estimates or forward-looking statements
        or
        projections included in the information provided by the Company, were prepared
        by the management of the Company in good faith, but that the attainment of
        any
        such projections, estimates or forward-looking statements cannot be guaranteed
        by the Company or such management and should not be relied upon.

       

      4.14. No
        Inconsistent Information.
        No oral
        or written representations have been made, or oral or written information
        furnished, to the Subscriber or his, her or its Advisors, if any, in connection
        with the offering
        of the Shares which are in any way inconsistent with the information contained
        herein or
        in the
        Memorandum.

       

      4.15. ERISA.
        (For
        ERISA plans only) The fiduciary of the Employee Retirement Income Security
        Act
        of 1974 (“ERISA”)
        plan
        (the “Plan”)
        represents that such fiduciary has been informed of an understands the Company’s
        investment objectives, policies and strategies, and that the decision to
        invest
“plan assets” (as such term is defined in ERISA) in the Company is consistent
        with the provisions of ERISA that require diversification of plan assets
        and
        impose other fiduciary responsibilities. The Subscriber or Plan fiduciary
        (a) is
        responsible for the decision to invest in the Company; (b) is independent
        of the
        Company and any of their respective affiliates; (c) is qualified to make
        such
        investment decision; and (d) in making such decision, the Subscriber or Plan
        fiduciary has not relied primarily on any advice or recommendation of the
        Company or any of its affiliates.

       

      5. Insider
        Trading Prohibition; Indemnity.

       

      5.1. Insider
        Trading.
        Until
        the filing by the Company of a current report on Form 8-K with the SEC
        describing the Offering, the Subscriber hereby agrees to (i) refrain from
        (A)
        engaging in any transactions with respect to the capital stock of the Company
        or
        securities exercisable or convertible into or exchangeable for any shares
        of
        capital stock of the Company, and (B) entering into any transaction which
        would
        have the same effect, or entering into any swap, hedge or other arrangement
        that
        transfers, in whole or in part, any of the economic consequences of ownership
        of
        the capital stock of the Company and (ii) indemnify and hold harmless
        the Company, and their respective officers and directors, employees,
        agents, sub-agents
        and affiliates and each other person, if any, who controls any of the foregoing,
        against
        any
        loss, liability, claim, damage and expense whatsoever (including, but not
        limited to, any and all expenses whatsoever reasonably incurred in
        investigating, preparing or defending against any litigation commenced or
        threatened or any claim whatsoever) arising out of or based upon any violation
        of this Section 6 by the Subscriber.

       

      
        
           

        

        
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      5.2. Indemnity.
        The
        Subscriber agrees to indemnify and hold harmless the Company and their
        respective officers and directors, employees, agents, sub-agents and affiliates
        and each other person, if any, who controls any of the foregoing, against
        any
        loss, liability, claim, damage and expense whatsoever (including, but not
        limited to, any and all expenses whatsoever reasonably incurred in
        investigating, preparing or defending against any litigation commenced or
        threatened or any claim whatsoever) arising out of or based upon any false
        representation or warranty by the Subscriber, or the Subscriber’s breach of, or
        failure to comply with, any covenant or agreement made by the Subscriber
        herein
        or in any other document furnished by the Subscriber to the Company, the
        Finder
        and their respective officers and directors, employees, agents, sub-agents
        and
        affiliates and each other person, if any, who controls any of the foregoing
        in
        connection with the Offering.

       

      6. Notices
        to Subscribers.

       

      (a) THE
        SECURITIES HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS
        OF ANY
        STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES
        HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES
        COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
        AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
        OR ADEQUACY OF THIS AGREEMENT OR ANY INFORMATION PROVIDED IN CONNECTION
        HEREWITH. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

       

      (b) THE
        SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
        MAY NOT
        BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT, AND
        APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
        THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
        THE
        FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
        TIME.

       

      8. Miscellaneous
        Provisions.

       

      8.1. Modification.
        Neither
        this Agreement, nor any provisions hereof, shall be waived, modified, discharged
        or terminated except by an instrument in writing signed by the party against
        whom any waiver, modification, discharge or termination is sought.

       

      8.2. Survival.
        The
        Subscriber’s representations and warranties made in this Agreement shall survive
        the execution and delivery of this Agreement, the delivery of the Securities
        and
        the Closing and shall in no way be affected by any investigation of the subject
        matter thereof made by or on behalf of any of the Subscribers, their Advisors
        or
        the Company, as the case may be.

       

      8.3. Notices.
        Any
        party may send any notice, request, demand, claim or other communication
        hereunder to the Subscriber at the address set forth on the signature page
        of
        this Agreement or to the Company at H2Diesel Holdings, Inc., 11111 Katy Freeway,
        Suite 910, Houston, Texas 77079 (fax: (713) 973-5777), Attention: Chief
        Executive Officer, or such other address or facsimile number as shall have
        been
        furnished to the party giving or making such notice, demand or delivery using
        any means (including personal delivery, expedited courier, messenger service,
        fax, ordinary mail or electronic mail), but no such notice, request, demand,
        claim or other communication will be deemed to have been duly given unless
        and
        until it actually is received by the intended recipient. Any party may change
        the address to which notices, requests, demands, claims and other communications
        hereunder are to be delivered by giving the other parties written notice
        in the
        manner herein set forth.

       

      
        
           

        

        
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      8.4. Binding
        Effect.
        Except
        as otherwise provided herein, this Agreement shall be binding upon, and inure
        to
        the benefit of, the parties to this Agreement and their heirs, executors,
        administrators, successors, legal representatives and assigns. If the Subscriber
        is more than one person or entity, the obligation of the Subscriber shall
        be
        joint and several and the agreements, representations, warranties and
        acknowledgments contained herein shall be deemed to be made by, and be binding
        upon, each such person or entity and his or its heirs, executors,
        administrators, successors, legal representatives and assigns. This Agreement
        sets forth the entire agreement and understanding between the parties as
        to the
        subject matter thereof and merges and supersedes all prior discussions,
        agreements and understandings of any and every nature among them.

       

      8.5. Assignability.
        This
        Agreement is not transferable or assignable by the Subscriber.

       

      8.6. Counterparts.
        This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument.

       

      8.7. Severability.
        Whenever possible, each provision of this Agreement shall be interpreted
        in such
        manner as to be effective and valid under applicable law, but if any provision
        of this Agreement is held to be prohibited by or invalid under applicable
        law,
        such provision shall be ineffective only to the extent of such prohibition
        or
        invalidity, without invalidating the remainder of such provision or the
        remaining provisions of this Agreement.

       

      8.8. Interpretation.
        The
        headings and captions used in this Agreement are for convenience of reference
        only and do not constitute a part of this Agreement and shall not be deemed
        to
        limit, characterize or in any way affect any provision of this Agreement,
        and
        all provisions of this Agreement shall be enforced and construed as if no
        caption or heading had been used herein or therein. Each defined term used
        in
        this Agreement shall have a comparable meaning when used in its plural or
        singular form. The use of the word “including” herein shall mean “including
        without limitation.” The parties have participated jointly in the negotiation
        and drafting of this Agreement. In the event an ambiguity or question of
        intent
        or interpretation arises, this Agreement shall be construed as if drafted
        jointly by the parties, and no presumption or burden of proof shall arise
        favoring or disfavoring any party by virtue of the authorship of any of the
        provisions of this Agreement.

       

      8.9. No
        Third-Party Beneficiaries.
        Nothing
        herein expressed or implied is intended or shall be construed to confer upon
        or
        give to any person or entity other than the parties hereto and their respective
        permitted successors and assigns any rights or remedies under or by reason
        of
        this Agreement.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      8.10. Entire
        Agreement.
        This
        Agreement, the Registration Rights Agreement and the documents referred to
        herein, together with all the Exhibits hereto, constitute the entire agreement
        and understanding of the parties with respect to the subject matter of this
        Agreement, and supersede any and all prior understandings and agreements,
        whether oral or written, between or among the parties hereto with respect
        to the
        specific subject matter hereof.

       

      8.11. Further
        Assurances.
        The
        parties agree to execute such further documents and instruments and to take
        such
        further actions as may be reasonably necessary to carry out the purposes
        and
        intent of this Agreement.

       

      8.12. Governing
        Law.
        This
        Agreement will be governed by and construed in accordance with the laws of
        the
        State of Florida, without giving effect to any choice of law or conflict
        of law
        provision or rule that would cause the application of the laws of any
        jurisdictions other than the State of Florida.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      ANTI-MONEY
        LAUNDERING REQUIREMENTS

      

      
        	
                The
                  USA PATRIOT Act

              	    	
                What
                  is money

                laundering?

              	    	
                How
                  big is the problem and why is it important?

              
	 	 	 	 	 
	
                The
                  USA PATRIOT Act is designed to detect, deter, and punish terrorists
                  in the
                  United States and abroad. The Act imposes new anti-money laundering
                  requirements on brokerage firms and financial institutions.
                  Since April 24,
                  2002, all brokerage firms have been required to have new, comprehensive
                  anti-money laundering programs.

                 

                To
                  help you understand these efforts, we want to provide you with
                  some
                  information about money laundering
                  and our steps to
                  implement the USA PATRIOT Act.

              	 	
                Money
                  laundering is the process of disguising illegally
                  obtained money so
                  that the funds appear to come from legitimate sources or
                  activities.

                 

                Money
                  laundering occurs in
                  connection with a wide variety
                  of crimes, including
                  illegal arms sales, drug trafficking, robbery, fraud, racketeering,
                  and
                  terrorism.

              	 	
                The
                  use of the U.S. financial system by criminals to facilitate terrorism
                  or
                  other crimes could taint our financial markets. According to the
                  U.S.
                  State Department, one recent estimate puts the amount of worldwide
                  money
                  laundering activity at $1 trillion a
                  year.

              

      

       

      
        	
                What
                  are we required to do to eliminate money
                  laundering?

              

      

       

      
        	
                Under
                  new rules required by the USA PATRIOT Act, our anti-money laundering
                  program must designate a special compliance officer, set up employee
                  training, conduct independent audits, and establish policies and
                  procedures to detect and report suspicious transactions and ensure
                  compliance with the new laws.

              	    	
                As
                  part of our required program, we may ask you to provide various
                  identification documents or other information. Until you provide
                  the
                  information or documents we need, we may not be able to effect
                  any
                  transactions for you.

              

      

      

      PRIVACY
        POLICY

       

      It
        is the
        policy of the Finder to respect the privacy of customers who subscribe to
        transactions underwritten by the Finder.

       

      Whether
        its own brokers introduce a Subscriber to the Finder or the introduction
        is made
        through selling agents, non-public personal information is protected by the
        Finder.

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      The
        Finder will not disclose any nonpublic personal information about a Subscriber
        to anyone, except as required or permitted by law and to effect, administer,
        or
        enforce transactions requested by a Subscriber in the ordinary processing,
        servicing or maintaining their accounts. Furthermore, the Finder does not
        reserve the right to disclose a Subscriber’s nonpublic personal information in
        the future without first notifying the Subscriber of a change in privacy
        policy
        and providing a convenient opportunity for the Subscriber to opt out of
        information sharing with nonaffiliated third parties.

       

      Under
        the
        USA PATRIOT Act of 2001 (Public Law 107-56) (together with all rules and
        regulations promulgated hereunder, the “Patriot
        Act”),
        the
        Finder and/or the Subscriber’s broker may be required or requested to disclose
        to one or more regulatory and/or law enforcement bodies certain information
        regarding transactions relating to the Subscriber’s account involving
        transactions with foreign entities and individuals, other transactions in
        your
        account as required in the Patriot Act and other activities described in
        the
        Patriot Act as “suspicious activities.” Neither the Finder nor the Subscriber’s
        broker shall have any obligation to advise the Subscriber of any such
        disclosures or reports made in compliance with the Patriot Act.

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      ALL
        SUBSCRIBERS MUST COMPLETE THIS PAGE

       

      IN
        WITNESS WHEREOF, the
        undersigned has executed this Agreement on the ______ day
        of
        ______________ 2008.

       

      _______________________________              x
        $100 for each
        Share                         =$______________________.

      
        	
                Shares
                  subscribed for

              	
                Aggregate
                  Purchase Price

              

      

       

      Each
        Subscriber shall also receive a number of Warrants initially exercisable
        for a
        number of shares
        of
        Common Stock equal to 25% of the number of Shares of Common Stock into which
        the
        Shares subscribed for under this Agreement are initially convertible.

       

      Manner
        in
        which Title is to be held (Please Check One):

       

        
          	
                  1.

                	
                  _____

                	
                  Individual

                	
                  7.

                	
                  _____

                	
                  Trust/Estate/Pension
                    or Profit Sharing

                
	 	 	 	 	 	 
	 	 	 	 	 	
                  Plan

                  Date
                    Opened:____________

                
	 	 	 	 	 	 
	
                  2.

                	
                  _____

                	
                  Joint
                    Tenants with Right of

                  Survivorship

                	
                  8.

                	
                  _____

                	
                  As
                    a Custodian for

                  ______________________________

                  Under
                    the Uniform Gift to Minors Act

                  of
                    the State of

                  ______________________________

                
	 	 	 	 	 	 
	
                  3.

                	
                  _____

                	
                  Community
                    Property

                	
                  9.

                	
                  _____

                	
                  Married
                    with Separate Property

                
	
                  4.

                	
                  _____

                	
                  Tenants
                    in Common

                	
                  10.

                	
                  _____

                	
                  Keogh

                
	
                  5.

                	 	
                  Corporation/Partnership/Limited
Liability
                    Company

                	
                  11.

                	
                  _____

                	
                  Tenants
                    by the Entirety

                
	
                  6.

                	
                  _____

                	
                  IRA

                	 	 	 

        

      

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      IF
        MORE
        THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.

      INDIVIDUAL
        SUBSCRIBERS MUST COMPLETE PAGE 15.

      SUBSCRIBERS
        WHICH ARE ENTITIES MUST COMPLETE PAGE 17.

       

      ALL
        SUBSCRIBERS MUST ALSO COMPLETE AND

      EXECUTE
        THE INVESTOR QUESTIONNAIRE

      ATTACHED
        AS EXHIBIT C.

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      EXECUTION
        BY NATURAL PERSONS

       

      
        	 
	
                Exact
                  Name in Which Title is to be Held

              
	 	 	 
	
                Name
                  (Please Print)

              	 	
                Name
                  of Additional Purchaser

              
	 	 	 
	
                Address:
                  Number and Street

              	 	
                Address:
                  Number and Street

              
	 	 	 
	
                City,
                  State and Zip Code

              	 	
                City,
                  State and Zip Code

              
	 	 	 
	
                Social
                  Security Number

              	 	
                Social
                  Security Number

              
	 	 	 
	
                Telephone
                  Number

              	 	
                Telephone
                  Number

              
	 	 	 
	
                Fax
                  Number (if available)

              	 	
                Fax
                  Number (if available)

              
	 	 	 
	
                E-Mail
                  (if available)

              	 	
                E-Mail
                  (if available)

              
	 	 	 
	
                (Signature)

              	 	
                (Signature
                  of Additional Purchaser)

              

      

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      
 

      EXECUTION
        BY SUBSCRIBER WHICH IS AN ENTITY

      (Corporation,
        Partnership, LLC, Trust, Etc.)

       

      
        	 
	
                Name
                  of Entity (Please Print)

              
	
                Date
                  of Incorporation or
                  Organization:__________________________________________________

              
	 
	
                Federal
                  Taxpayer Identification
                  Number:________________________________________________

              

      

      

      
        	 	 
	
                Office
                  Address

              	 
	 	 
	
                City,
                  State and Zip Code

              	 
	 	 
	
                Telephone
                  Number

              	 
	 	 
	
                Fax
                  Number (if available)

              	 
	 	 
	
                E-Mail
                  (if available)

              	 

      

       

      Type
        of
        entity (e.g., corporation, trust, limited partnership, general partnership
        IRA
        Trust, Pension or Profit Sharing Plan or
        Trust):_____________________________________________________

       

      Date
        of
        formation or
        incorporation:                ___________________________

       

      Whether
        the Subscriber was organized for the specific purpose of acquiring securities
        of
        H2Diesel Holdings, Inc.:

       

      Yes ______     No______

       

      Each
        individual authorized to execute documents on behalf of the Subscriber in
        connection with
        this
        investment:

       

      
        	
                Name: 

              	 	 	
                Name:

              	 
	 	 	 	 	 
	
                Title:

              	 	 	
                Title:

              	 

      

      

      The
        Subscribers state of formation or incorporation: ________

       

      The
        business of the entity: _____________________________

       

      Certain
        Subscribers must provide the following information:

       

      
        	 	
                (A)

              	
                Corporations
                  MUST provide the articles of incorporation, by-laws, good standing
                  certificate and corporate resolution authorizing the purchase of
                  shares
                  and authorizing the person(s) signing the subscription documents
                  to do so.
                  All the documents must be certified by the Secretary or Assistant
                  Secretary of the corporation
                  as being true and correct copies thereof and in full force and
                  effect.

              

      

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

      
        	 	
                (B)

              	
                Partnerships
                  MUST provide a copy of the partnership agreement showing the date
                  of formation and giving evidence of the authority of the person(s)
                  signing
                  the subscription documents to do
                  so.

              

      

       

      
        	 	
                (C)

              	
                Trusts
                  MUST provide a copy of the trust agreement showing the date of
                  formation
                  and giving evidence of the authority of the person(s) signing the
                  subscription documents to do so.

              

      

       

      
        	 	
                (D)

              	
                Limited
                  Liability Companies and similar organizations MUST provide their
                  organizational document, operating agreement, good standing certificate
                  and evidence of authorization for the purchase of shares the person(s)
                  signing the subscription documents to do so. All the documents
                  must be
                  certified by an appropriate
                  officer of the organization as being true and correct copies thereof
                  in
                  full force and effect.

              

      

       

      
        	
                By: 

              	 	 
	 	
                Name:

              	 
	 	
                Title:

              	 

      

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      ACCEPTED
        this _____ day of ________________ 2008 on behalf of the
        Company.

      

      
        	
                By: 

              	 	 
	 	
                Name:

              	 
	 	
                Title:

              	 

      

      

      Subscription
        Agreement

      Company
        Signature Page

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      Exhibit
        A

      ARTICLES
        OF AMENDMENT

       

      
        
           

        

        
          A-1

          
            

          

        

        
           

        

      

       

      Exhibit
        B

      FORM
        OF WARRANT

       

      
        
           

        

        
          B-1

          
            

          

        

        
           

        

      

       

      Exhibit
        C

       

      INVESTOR
        QUESTIONNAIRE

       

      Instructions:
        Check all boxes below which correctly describe you and return this Investor
        Questionnaire to H2Diesel Holdings, Inc., 11111 Katy Freeway, Suite 910,
        Houston, Texas 77079, Attention: David A. Gillespie, Chief Executive
        Officer.

       

      
        	o	
                You
                  are (i) a bank, as defined in Section 3(a)(2) of the Securities
                  Act of
                  1933, as amended (the “Securities
                  Act”),
                  (ii) a savings and loan association or other institution, as defined
                  in
                  Section 3(a)(5)(A) of the Securities Act, whether acting in an
                  individual
                  or fiduciary capacity, (iii) a broker or dealer registered pursuant
                  to
                  Section 15 of the Securities Exchange Act of 1934, as amended (the
                  “Exchange
                  Act”),
                  (iv) an insurance company as defined in Section 2(13) of the Securities
                  Act, (v) an investment company registered under the Investment
                  Company Act
                  of 1940, as amended (the “Investment
                  Company Act”),
                  (vi) a business development company as defined in Section 2(a)(48)
                  of the
                  Investment Company Act, (vii)
                  a
                  Small Business Investment Company licensed by the U.S. Small Business
                  Administration under Section 301 (c) or (d) of the Small Business
                  Investment Act of 1958, as amended, (viii)
                  a
                  plan established and maintained by a state, its political subdivisions,
                  or
                  an agency or instrumentality of a state or its political subdivisions,
                  for
                  the benefit of its employees and you have total assets in excess
                  of
                  $5,000,000, or (ix) an employee benefit plan within the meaning
                  of the
                  Employee Retirement Income Security Act of 1974, as amended (“ERISA”)
                  and (1) the decision that you shall subscribe for and purchase
                  Securities,
                  is made by a plan fiduciary, as defined in Section 3(2 1) of ERISA,
                  which
                  is either a bank, savings and loan association, insurance company,
                  or
                  registered investment adviser, (2) you have total assets in excess
                  of
                  $5,000,000 and the decision that you shall subscribe for and purchase
                  the
                  Securities is made solely by persons or entities that are accredited
                  investors, as defined in Rule 501 of Regulation D promulgated under
                  the
                  Securities Act (“Regulation
                  D”)
                  or (3) you are a self-directed plan and the decision that you shall
                  subscribe for and purchase the Securities is made solely by persons
                  or
                  entities that are accredited
                  investors.

              

      

       

      
        	o	
                You
                  are a private business development company as defined in Section
                  202(a)(22) of the Investment Advisers Act of 1940, as
                  amended.

              

      

       

      
        	o	
                You
                  are an organization described in Section 501(c)(3) of the Internal
                  Revenue
                  Code of 1986, as amended (the “Code”), a corporation, Massachusetts or
                  similar business trust or a partnership, in each case not formed
                  for the
                  specific purpose of making an investment in the Securities and
                  with total
                  assets in excess of $5,000,000.

              

      

       

      
        	o	
                You
                  are a director or executive officer of H2Diesel Holdings
                  Inc.

              

      

       

      
        	o	
                You
                  are a natural person whose individual net worth, or joint net worth
                  with
                  your spouse, exceeds $1,000,000 at the time of your subscription
                  for and
                  purchase of the Securities.

              

      

       

      
        
           

        

        
          C-1

          
            

          

        

        
           

        

      

       

      
        	o	
                You
                  are a natural person who had an individual income in excess of
                  $200,000 in
                  each of the two most recent years or joint income with your spouse
                  in
                  excess of $300,000 in each of the two most recent years, and who
                  has a
                  reasonable expectation of reaching the same income level in the
                  current
                  year.

              

      

       

      
        	o	
                You
                  are a trust, with total assets in excess of $5,000,000, not formed
                  for the
                  specific purpose of acquiring the Shares, whose subscription for
                  and
                  purchase of the Shares is directed by a sophisticated person as
                  described
                  in Rule 506(b)(2)(ii) of Regulation
                  D.

              

      

       

      
        	o	
                You
                  are an entity in which all of the equity owners are persons or
                  entities
                  described in one of the preceding
                  paragraphs.

              

      

       

      The
        undersigned hereby represents and warrants that all of its answers to this
        Investor Questionnaire are true as of the date of its execution of the
        Subscription Agreement pursuant to which it purchased Shares of the
        Company.

       

      
        	 	 	 
	
                Name
                  of Purchaser [please print]

              	 	
                Name
                  of Co-Purchaser [please print]

              
	 	 	 
	
                Signature
                  of Purchaser (Entities please

              	 	
                Signature
                  of Co-Purchaser

              
	
                provide
                  signature of Purchaser’s duly

              	 	 
	
                authorized
                  signatory.)

              	 	 
	 	 	 
	
                Name
                  of Signatory (Entities only)

              	 	 
	 	 	 
	
                Title
                  of Signatory (Entities only)

              	 	 

      

       

      
        
           

        

        
          C-2REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT (this
      “Agreement”),
      made
      as of _________________, 2008 (the “Effective
      Date”),
      by
      and between H2Diesel Holdings, Inc., a Florida corporation (the “Company”),
      and
      each of the persons and entities listed on Exhibit
      A
      attached
      hereto (the “Holders”).

     

    RECITALS

     

    WHEREAS,
      simultaneously
      with the execution and delivery of this Agreement, the Holders have committed
      to
      purchase up to $10,000,000 in shares of the Company’s Series B Non-Redeemable
      Convertible Preferred Stock (the “Preferred
      Stock”)
      at a
      purchase price of $100 per share, together with Warrants exercisable for a
      number of shares of Common Stock equal
      to
      25% of the number of shares of Common Stock that would be issuable upon initial
      conversion of the Preferred Stock,
      at an
      exercise price of $6.25 per share (the “Offering”);
      and

     

    WHEREAS,
      the
      Company desires to grant the registration rights set forth herein.

     

    AGREEMENT

     

    NOW,
      THEREFORE, for
      good
      and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereby agree as follows:

     

    1. Definitions. As
      used
      in this Agreement, the following capitalized terms have the following respective
      meanings:

     

    “Business
      Day”
means
      a
      day other than a Saturday or Sunday or any day on which banking institutions
      in
      New York City, New York are authorized or obligated by law or executive order
      to
      close.

     

    “Common
      Stock”
means
      the Common Stock of the Company, par value $.001 per share.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, or any similar federal statute
      then in effect, and a reference to a particular section thereof is deemed to
      include a reference to the comparable section, if any, of any such similar
      federal statute.

     

    “Majority
      of Holders”
means
      Holders holding more than 50% in aggregate principal amount of the Registrable
      Securities outstanding at the time of any determination in
      question.

     

    “Person”
means
      any individual, corporation, partnership, limited partnership, limited liability
      company, syndicate, trust, association or other entity.

     

    “Preferred
      Stock”
means
      the Series B Non-Redeemable Convertible Preferred Stock of the Company, par
      value $.001 per share.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Prospectus”
means
      the prospectus included in any Shelf Registration Statement, as amended or
      supplemented by any Prospectus supplement with respect to the terms of the
      offering of any portion of the Registrable Securities covered by such Shelf
      Registration Statement and all other amendments and supplements to the
      Prospectus, including post-effective amendments, and all material incorporated
      by reference in such Prospectus.

     

    “Registrable
      Securities”
means
      any shares of Common Stock issued or issuable to a Holder upon conversion of
      any
      shares of Preferred Stock or upon the exercise of any Warrants. Registrable
      Securities also means any shares actually issued to a Holder as payment of
      dividends on the Preferred Stock, any shares of Common Stock that may be issued
      or distributed in respect thereof by way of stock dividend or stock split or
      other distribution, recapitalization or reclassification and any shares of
      Common Stock described in Section
      2(c)
      of this
      Agreement. Any particular Registrable Securities that are issued will cease
      to
      be Registrable Securities when (i) a registration statement with respect to
      the
      sale by the Holder of such securities becomes effective under the Securities
      Act
      and such securities have been disposed of in accordance with such registration
      statement, (ii) such securities have been distributed to the public pursuant
      to
      Rule 144 (or any successor provision) under the Securities Act, (iii) all of
      the
      Registrable Securities then owned by such Holder could be sold pursuant to
      Rule
      144(b), or (iv) such securities have ceased to be outstanding. For the avoidance
      of doubt, the Company is under no obligation to register the resale of any
      Preferred Stock or Warrants.

     

    “Registration
      Expenses”
means
      any and all expenses incident to performance of or compliance with this
      Agreement, including, without limitation, (i) all SEC and stock exchange or
      National Association of Securities Dealers, Inc. (the “NASD”)
      registration and filing fees (including, if applicable, the fees and expenses
      of
      any “qualified independent underwriter,” as such term is defined in NASD conduct
      rule 2720, and of its counsel), (ii) all fees and expenses of complying with
      securities or blue sky laws (including fees and disbursements of counsel for
      the
      underwriters in connection with blue sky qualifications of the Registrable
      Securities), (iii) all printing, messenger and delivery expenses, (iv)
all
      fees
      and expenses incurred in connection with the listing of the Registrable
      Securities on any securities
      exchange, (v) the fees and disbursements of counsel for the Company and of
      its
      independent public accountants, including the expenses of any special audits
      and/or “cold comfort” letters required by or incident to such performance and
      compliance, and (vi) the reasonable fees and disbursements of counsel selected
      pursuant to Section
      4(b)
      hereof.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, or any similar federal statute then
      in
      effect, and a reference to a particular section thereof will be deemed to
      include a reference to the comparable section, if any, of any such similar
      federal statute.

     

    “SEC”
means
      the Securities and Exchange Commission or any other federal agency at the time
      administering the Securities Act or the Exchange Act.

     

    “Selling
      Expenses”
means
      underwriting or brokerage discounts, fees and commissions and transfer taxes,
      if
      any, applicable to the sale of Registrable Securities.

     

    “Underwritten
      Offering”
means
      an offering pursuant to the Shelf Registration Statement in which Registrable
      Securities are sold to an underwriter for reoffering to the public.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Warrants”
shall
      mean any warrants to purchase Common Stock issued to a Holder by the Company
      in
      connection with the Holder’s purchase of shares of Preferred Stock from the
      Company.

     

    2. Shelf
      Registration.

     

    (a) The
      Company shall:

     

    (i) not
      later
      than 30 days after the Effective Date (the “Shelf
      Filing Deadline”),
      cause
      to be filed a registration statement on an appropriate form pursuant to Rule
      415
      (or any successor rule) under the Securities Act (together with any amendments
      thereto, and including any documents incorporated by reference therein if
      permitted by such form, the “Shelf
      Registration Statement”),
      which
      Shelf Registration Statement shall provide for resales of all Registrable
      Securities held by Holders that have provided the information required pursuant
      to the terms of Section
      2(b)
      hereof;

     

    (ii) use
      its
      commercially reasonable efforts to cause the Shelf Registration Statement to
      be
      declared effective by the SEC as promptly as is practicable after the date
      it is
      first filed with the SEC, but in no event later than 180 days after the
      Effective Date (the “Effectiveness
      Target Date”);
      and

     

    (iii) use
      its
      commercially reasonable efforts to keep the Shelf Registration Statement
      continuously effective, supplemented and amended as required by the provisions
      of Section
      3
      hereof
      to the extent necessary to ensure that: (A) it is available for resales by
      the
      Holders of Registrable Securities entitled to the benefit of this Agreement
      and
      (B) conforms with the requirements of this Agreement and the Securities Act,
      in
      each case, for a period (the “Effectiveness
      Period”)
      that
      will terminate when all Registrable Securities cease to be Registrable
      Securities in accordance with this Agreement.

     

    (b) To
      have
      its Registrable Securities included in the Shelf Registration Statement pursuant
      to this Agreement, each Holder shall complete the Selling Shareholder Notice
      and
      Questionnaire, the form of which is contained in Exhibit
      B
      to this
      Agreement (the “Questionnaire”).
      Holders that do not complete and deliver the Questionnaire will not be named
      as
      selling shareholders in the Prospectus. In addition, upon receipt of written
      request for additional information from the Company, each Holder who intends
      to
      be named as a selling shareholder in the Shelf Registration Statement shall
      furnish to the Company in writing, within 10 Business Days after such Holder’s
      receipt of such request, such additional information regarding such Holder
      and
      the proposed distribution by such Holder of its Registrable Securities, in
      connection with the Shelf Registration Statement or Prospectus or preliminary
      Prospectus included therein and in any application to be filed with or under
      state securities law, as the Company may reasonably request. Each Holder agrees
      to furnish promptly to the Company all information required to be disclosed
      in
      order to make any information previously furnished to the Company by such Holder
      not materially misleading.

     

    (c) The
      Company shall be entitled to include in the Shelf Registration Statement
other
      shares of Common Stock (i) to be sold for its own account or (ii) which the
      Company is obligated to
      register
      for resale by others, and such shares shall be Registrable Securities for all
      purposes hereof.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (d) Notwithstanding
      anything contained herein to the contrary, the Company shall be entitled to
      exclude from any Shelf Registration Statement such Registrable Securities as
      the
      Company determines is reasonably necessary for the offering to qualify as a
      secondary (rather than a primary) offering pursuant to Rule 415 under the
      Securities Act in response to comments from the staff of the SEC. To the extent
      any Registrable Securities are so excluded, the Penalty Amount or the Penalty
      Shares (as defined herein) will not apply to such excluded shares, and the
      Company agrees to register such excluded shares in accordance with this
Section
      2
      when
      eligible to do so under applicable federal securities laws, rules, regulations
      and policies, as reasonably determined in consultation with the Company’s
      counsel. 

     

    (e) The
      Company and the Holders agree that the Holders will suffer damages if the
      Company fails to fulfill its obligations under this Section
      2
      and that
      it would not be feasible to ascertain the extent of such damages with precision.
      Accordingly, if: 

     

    (i) except
      as
      provided in Section
      3(b)(i)
      hereof,
      the Shelf Registration Statement is not filed with the SEC prior to or on the
      Shelf Filing Deadline;

     

    (ii) except
      as
      provided in Section
      3(b)(i)
      hereof,
      the Shelf Registration Statement has not been declared effective by the SEC
      prior to or on the Effectiveness Target Date;

     

    (iii) except
      as
      provided in Section
      3(b)(i)
      hereof,
      the Shelf Registration Statement is filed and declared effective but, during
      the
      Effectiveness Period, shall thereafter cease to be effective or fail to be
      usable for its intended purpose without such disability being cured within
      10
      Business Days by an effective post-effective amendment to the Shelf Registration
      Statement, a supplement to the Prospectus or a report filed with the SEC
      pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures
      such failure; or

     

    (iv) (A)
      prior
      to or on the 45th
      or
      60th
      day, as
      may be permitted under Section 3(b),
      of any
      Suspension Period (as such term is defined herein), such suspension has not
      been
      terminated or (B) Suspension Periods exceed an aggregate of 180 days in any
      360-day period, (each such event referred to in foregoing clauses (i) through
      (iv), a “Registration
      Default”);

     

    the
      Company hereby agrees to pay to each Holder, at the Company’s election, an
      amount equal to 1.0% of
      the
      aggregate purchase price of the Preferred Stock purchased by the Holder in
      the
      Offering in
      either
      cash (the “Penalty
      Amount”)
      or
      additional shares of Common Stock (the “Penalty
      Shares”)
      based
      on the closing price of the Common Stock on the primary trading market on which
      the Common Stock is listed or traded on the date of the closing of the Offering,
      for
      each
      full 30 day period (each, a “Penalty
      Period”)
      that
      elapses during the period beginning on
      and
      including the day following the Registration Default and ending on but excluding
      the day on which the Registration Default(s) have been cured; provided,
      however,
      that in
      no event shall the maximum amount payable for all Registration Defaults
      collectively exceed an aggregate of 6.0% of the aggregate purchase price of
      the
      Preferred Stock purchased by the Holder in the Offering (the “Maximum
      Penalty”),
      and,
      provided further, a Holder will not be entitled to the Penalty Amount or the
      Penalty Shares unless it has provided all information requested by the
      Questionnaire prior to the deadline specified therein.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (f) The
      Maximum Penalty shall constitute the maximum aggregate amount of penalties
      available to each Holder for any and all penalties contained in this Agreement
      (including, but not limited to, any penalties as a result of a Registration
      Defaults).

     

    (g)
       The
      Penalty Amount to be paid and the Penalty Shares to be issued pursuant to this
      Section
      2
      shall be
      the exclusive remedy available to Holders for such Registration
      Defaults.

     

    3. Registration
      Procedures.

     

    (a) In
      connection with the Shelf Registration Statement, the Company shall use its
      reasonable best efforts to effect such registration to permit the sale of the
      Registrable Securities being sold in accordance with the intended method or
      methods of distribution thereof, and pursuant thereto, shall expeditiously
      prepare and file with the SEC a Shelf Registration Statement relating to the
      registration on any appropriate form under the Securities Act.

     

    (b) In
      connection with the Shelf Registration Statement and any Prospectus required
      by
      this Agreement to permit the sale or resale of Registrable Securities, the
      Company shall:

     

    (i) Use
      its
      best efforts to keep the Shelf Registration Statement continuously effective
      during the Effectiveness Period; upon the occurrence of any event that would
      cause the Shelf Registration Statement or the Prospectus contained
      therein (A) to contain a material misstatement or omission or (B) not be
      effective and usable for
      the
      resale of Registrable Securities during the Effectiveness Period, the Company
      shall file promptly an appropriate amendment to the Shelf Registration
      Statement, a supplement to the Prospectus or a report filed with the SEC
      pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case
      of clause (A), correcting any such misstatement or omission, and, in the case
      of
      either clause (A) or (B), use its best efforts to cause any such amendment
      to be
      declared effective and the Shelf Registration Statement and the related
      Prospectus to become usable for their intended purposes as soon as practicable
      thereafter. Notwithstanding anything to the contrary contained herein, the
      Company may delay the filing or declaration of effectiveness, and/or suspend
      the
      effectiveness, of the Shelf Registration Statement by written notice to the
      Holders for a period (each such period, a “Suspension
      Period”)
      not to
      exceed an aggregate of 45 days in any 90-day period, and not to exceed an
      aggregate of 180 days in any 360-day period, if:

     

    (x) an
      event
      occurs and is continuing as a result of which the Shelf Registration Statement
      would, in the Company’s reasonable judgment, contain an untrue statement of a
      material fact or omit to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading; and

     

    (y) the
      Company reasonably determines that the disclosure of such event at such time
      would be seriously detrimental to the Company or its business;

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    provided,
      that in
      the event that the disclosure relates to a previously undisclosed proposed
      or
      pending material business transaction, the disclosure of which would impede
      the
      Company’s ability to consummate such transaction, the Company may extend a
      Suspension Period from 45 days to 60 days during any 90-day period.

     

    (ii) Notify
      each selling Holder of the effectiveness of the Shelf Registration Statement
      and
      prepare and file with the SEC such amendments and post-effective amendments
      to
      the Shelf Registration Statement as may be necessary to keep the Shelf
      Registration Statement continuously effective during the Effectiveness Period;
      cause the Prospectus to be supplemented by any required prospectus supplement,
      and as so supplemented to be filed pursuant to Rule 424 under the Securities
      Act, and to comply fully with the applicable provisions of Rules 424 and 430A
      under the Securities Act in a timely manner; and comply with the provisions
      of
      the Securities Act with respect to the disposition of all securities covered
      by
      the Shelf Registration Statement during the applicable period in accordance
      with
      the intended method or methods of distribution by the sellers thereof set forth
      in the Shelf Registration Statement or supplement to the
      Prospectus.

     

    (iii) Advise
      the underwriter(s), if any, and selling Holders:

     

    (A) of
      the
      issuance by the SEC of any stop order suspending the effectiveness of the Shelf
      Registration Statement under the Securities Act or of the suspension by any
      state securities commission of the qualification of the Registrable Securities
      for offering or sale in any jurisdiction, or the initiation of any proceeding
      for any of the preceding purposes, or

     

    (B) of
      the
      existence of any fact or the happening of any event, during the Effectiveness
      Period, that makes any statement of a material fact made in the Shelf
      Registration Statement, the Prospectus, any amendment or supplement thereto,
      or
      any document incorporated by reference therein, untrue, or that requires the
      making of any additions to or changes in the Shelf Registration Statement or
      the
      Prospectus in order to make the statements therein not misleading. Each Holder
      of Registrable Securities, by accepting the same, agrees to hold any
      communication from the Company pursuant to this Section
      3(b)(iii)
      in
      confidence.

     

    If
      at any
      time the SEC shall issue any stop order suspending the effectiveness of the
      Shelf Registration Statement,
      or any state securities commission or other regulatory authority shall issue
      an
      order suspending
      the
      qualification or exemption from qualification of the Registrable Securities
      under state securities or “blue sky” laws, the Company shall use its best
      efforts to obtain the withdrawal or lifting of such order at the earliest
      possible time and will provide to the each Holder who is named in the Shelf
      Registration Statement prompt notice of the withdrawal of any such
      order.

     

    (iv) Furnish
      to each selling Holder and to each of the underwriter(s), if any, and
      their
      respective counsel, if any, before filing with the SEC, a copy of the Shelf
      Registration Statement
      (including any amendments thereto) and copies of any Prospectus (including
      any
      supplements thereto) included therein or any amendments or supplements to the
      Shelf Registration Statement or Prospectus (other than documents incorporated
      by
      reference after the initial filing of the Shelf Registration Statement), which
      documents shall reflect such comments as the Holders (and their counsel) may
      reasonably and timely propose. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (v) Make
      reasonably available for inspection by one or more representatives of the
      selling Holders designated in writing by a Majority of Holders whose Registrable
      Securities are included in the Shelf Registration Statement, any underwriter
      participating in any distribution pursuant to the Shelf Registration Statement,
      and any attorney or accountant retained by such selling
      Holders or any of the underwriter(s), all relevant financial and other records,
      pertinent corporate documents
      and
      properties of the Company, and cause the Company’s officers, directors and
      employees to supply all information reasonably requested by any such
      representative or representatives of the selling Holders, underwriter, attorney
      or accountant in connection with the Shelf Registration Statement as shall
      be
      reasonably necessary to enable them to exercise any applicable due diligence
      responsibilities, provided,
      however,
      that
      any information designated by the Company as confidential at the time of
      delivery of such information shall be kept confidential by the recipient
      thereof; and provided,
      further,
      that in
      no event shall the Company be required to furnish any material nonpublic
      information pursuant to this subsection (v).

     

    (vi) If
      requested by any selling Holders or the underwriter(s), if any, promptly
      incorporate in the Shelf Registration Statement or Prospectus, pursuant to
      a
      supplement or post-effective amendment if necessary, such information as such
      selling Holders and underwriter(s), if any, may
      reasonably request to have included therein and
      to
      which the Company does not reasonably object,
      including, without limitation: (A) information relating to
      the
“Plan of Distribution” of the Registrable Securities, (B) information with
      respect to the number of Registrable Securities being sold, (C) the purchase
      price being paid therefor and (D) any other terms of the offering of the
      Registrable Securities to be sold in such offering; provided,
      however,
      that
      with respect to any information requested for inclusion by a selling Holder,
      this clause (vi) shall apply only to such information that relates to the
      Registrable Securities to be sold by such selling Holder; and make all required
      filings of such prospectus supplement or post-effective amendment as soon as
      reasonably practicable after the Company is notified of the matters to be
      incorporated in such prospectus supplement or post-effective
      amendment.

     

    (vii) If
      an
      underwriting agreement is entered into in connection with the registration,
      the
      Company shall:

     

    (A) upon
      reasonable request, furnish to each selling Holder and each underwriter, in
      such
      substance and scope as are customarily made by issuers to underwriters in
      primary underwritten offerings for selling security holders, upon the date
      of
      closing of any sale of Registrable Securities in an Underwritten
      Offering:

     

    (1) opinions,
      each dated the date of such closing, of counsel to the Company covering such
      of
      the matters as are customarily covered in legal opinions to underwriters in
      connection with underwritten offerings of securities; and

     

    (2) customary
      comfort letters, dated the date of such closing, from the Company’s independent
      accountants, in the customary form and covering matters of the type customarily
      covered in comfort letters to underwriters in connection with primary
      underwritten offerings of securities;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (B) set
      forth
      in full in the underwriting agreement, if any, indemnification provisions and
      procedures which provide rights no less protective than those set forth in
      Section
      5
      hereof
      with respect to all parties to be indemnified; and

     

    (C) deliver
      such other documents and certificates as may be reasonably requested by such
      parties to evidence compliance with clause (A) above and with any customary
      conditions contained in the underwriting agreement or other agreement entered
      into by the selling Holders pursuant to this clause (vii).

     

    (viii) Before
      any public offering of Registrable Securities, use its best efforts to register
      or qualify the Registrable Securities under the securities or Blue Sky laws
      of
      such jurisdictions in the United States as the selling Holders or
      underwriter(s), if any, may reasonably request and do any and all other acts
      or
      things necessary or advisable to enable the disposition in such jurisdictions
      of
      the Registrable Securities covered by the Shelf Registration Statement;
provided,
      however,
      that
      the Company shall not be required (A) to register or qualify as a foreign
      corporation or a dealer of securities where it is not
      now
      so qualified or to take any action that would subject it to the service of
      process in any jurisdiction
      where it
      is not now so subject or (B) to subject itself to taxation in any such
      jurisdiction if it is not now so subject.

     

    (ix) Cooperate
      with the selling Holders and the underwriter(s), if any, to facilitate the
      timely preparation and delivery of certificates representing Registrable
      Securities to be sold and not bearing any restrictive legends (unless required
      by applicable securities laws) and enable such Registrable Securities to be
      in
      such denominations and registered in such names as the Holders or the
      underwriter(s), if any, may request at least three Business Days before any
      sale
      of Registrable Securities.

     

    (x) Subject
      to Section
      3(b)(i)
      hereof,
      if any fact or event contemplated by Section
      3(b)(iii)(B)
      hereof
      shall exist or have occurred, use its reasonable best efforts to prepare a
      supplement or post-effective amendment to the Shelf Registration Statement
      or
      related Prospectus or any document incorporated therein by reference or file
      any
      other required document so that, as thereafter delivered to the purchasers
      of
      Registrable Securities, the Prospectus will not contain an untrue statement
      of a
      material fact or omit to state any material fact required to be stated therein
      or necessary to make the statements therein, in light of the circumstances
      in
      which they were made, not misleading.

     

    (xi) Provide
      a
      transfer agent and registrar for all such Registrable Securities not later
      than
      the effective date of the Shelf Registration Statement.

     

    (xii) Cooperate
      and assist in any filings required to be made with the NASD and in the
      performance of any due diligence investigation that is required to be retained
      in accordance with the rules and regulations of the NASD.

     

    (xiii) Otherwise
      use its commercially reasonable efforts to comply with all applicable rules
      and
      regulations of the SEC and all reporting requirements of the Exchange
      Act.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (xiv) Enter
      into such customary agreements (including underwriting agreements in customary
      form) and take all such other lawful actions as a Majority of Holders or the
      underwriters, if any, reasonably request in order to expedite or facilitate
      the
      disposition of Registrable Securities (including effecting a stock split or
      combination of shares).

     

    (xv) Cause
      all
      Registrable Securities covered by the Shelf Registration Statement to be listed
      or quoted, as the case may be, on each securities exchange or automated
      quotation system on which similar securities issued by the Company are then
      listed or quoted.

     

    (c) Each
      Holder agrees that, upon receipt of any notice (a “Suspension
      Notice”)
      from the
      Company of the existence of any fact of the kind described in Section
      4(b)(x)
      or
Section
      4(b)(iii)(B)
      hereof,
      such Holder will, and will use its reasonable efforts to cause any
      underwriter(s) in an Underwritten Offering to, forthwith discontinue disposition
      of Registrable Securities pursuant to the Shelf Registration Statement
      until:

     

    (i) such
      Holder has received copies of the supplemented or amended Prospectus
      contemplated by Section
      4(b)(xiii)
      hereof;
      or

     

    (ii) such
      Holder is advised in writing by the Company that the use of the Prospectus
      may
      be resumed, and has received copies of any additional or supplemental filings
      that are incorporated by reference in the Prospectus.

     

    If
      so
      directed by the Company, each Holder will deliver to the Company all
copies,
      other than permanent file copies then in such Holder’s possession, of the
      Prospectus covering such
      Registrable Securities that was current at the time of receipt of such notice
      of
      suspension.

     

    (d) If
      a
      Holder is identified in the Shelf Registration Statement as an “underwriter”
(any such Holder, an “Identified
      Holder”),
      then at
      the request of such Identified Holder the Company shall
      furnish to such Identified Holder, on the date of the effectiveness of the
      Shelf
      Registration Statement
      and
      thereafter from time to time on such dates as such Identified Holder may
      reasonably request, (i) a letter, dated such date, from the Company’s
      independent certified public accountants in form and substance as is customarily
      given by independent certified public accountants to underwriters in an
      underwritten public offering, addressed to such Identified Holder, and (ii)
      an
      opinion, dated as of such date, of counsel representing the Company for purposes
      of the Shelf Registration Statement, in form, scope and substance as is
      customarily given in an underwritten public offering, addressed to such
      Identified Holder.

     

    4. Registration
      Expenses.

     

    (a) The
      Company shall pay all Registration Expenses incident to the Company’s
      performance of or compliance with this Agreement. The Company shall bear its
      internal expenses (including, without limitation, all salaries and expenses
      of
      its officers and employees performing legal, accounting or other duties), the
      expenses of any annual audit or quarterly review, the expense of any liability
      insurance and the fees and expenses of any Person, including special experts,
      retained by the Company.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (b) In
      connection with the Shelf Registration Statement required by this Agreement,
      including any amendment or supplement thereto, and any other documents delivered
      to any Holders, the Company shall reimburse the Holders of Registrable
      Securities being registered pursuant to the Shelf Registration Statement, as
      applicable, for the reasonable fees and disbursements of not more than one
      counsel (including local counsel), which shall be chosen by a Majority of
      Holders for whose benefit the Shelf Registration Statement is being prepared.
      The Company shall not be required to pay any underwriting discount, commission
      or similar fee related to the sale of any securities.

     

    (c) Each
      Holder shall bear its Selling Expenses.

     

    5. Indemnification
      and Contribution.

     

    (a) The
      Company shall indemnify and hold harmless, to the fullest extent permitted
      by
      law, each Holder, such Holder’s officers, directors, members, agents, partners
      and employees and each person, if any, who controls such Holder within the
      meaning of the Securities Act (each, an “Indemnified Holder”),
      from and
      against any loss, claim, damage, liability or expense, joint or several, or
      any
      action in respect
      thereof (including, but not limited to, any loss, claim, damage, liability,
      expense, or action relating
      to
      resales of the Registrable Securities), together with reasonable costs and
      expenses (including reasonable attorney’s fees) to which such Indemnified Holder
      may become subject, insofar as any such loss, claim, damage, liability, expense
      or action arises out of, or is based upon:

     

    (i) any
      untrue statement or alleged untrue statement of a material fact contained in
      (A)
      the Shelf Registration Statement or Prospectus or any amendment or supplement
      thereto or (B) any blue sky application or other document or any amendment
      or
      supplement thereto prepared or executed by the Company (or based upon written
      information furnished by or on behalf of the Company expressly for use in such
      blue sky application or other document or amendment on supplement) filed in
      any
      jurisdiction specifically for the purpose of qualifying any or all of the
      Registrable Securities under the
      securities law of any state or other jurisdiction (such application or document
      being hereinafter called a “Blue
      Sky Application”);
      or

     

    (ii)
      the
      omission or alleged omission to state therein any material fact required to
      be
      stated therein or necessary to make the statements therein, in the light of
      the
      circumstances under which they were made, not misleading, and shall promptly
      reimburse each Indemnified Holder promptly upon demand for any legal or other
      expenses reasonably incurred by such Indemnified Holder in connection with
      investigating or defending or preparing to defend against any such loss, claim,
      damage, liability, expense or action as such expenses are incurred; provided,
      however,
      that
      the Company shall not be liable in any such case to the extent that any such
      loss, claim, damage, liability, expense or action arises out of, or is based
      upon, (A) any untrue statement or alleged untrue statement or omission or
      alleged omission made in the Shelf Registration Statement or Prospectus or
      amendment or supplement thereto or Blue Sky Application or other document
      referred to in Section
      5(a)(i)
      hereof
      in reliance upon and in conformity with written information furnished to the
      Company by or on behalf of any Holder (or its related Indemnified Holder)
      specifically for use therein or (B) the failure by the Holder or Indemnified
      Holder to deliver to any purchaser of its Registrable Securities the Prospectus
      and any supplement or amendment thereto after the Company has furnished such
      Holder or Indemnified Holder with a sufficient number of copies of the same.
      The
      foregoing indemnity agreement is in addition to any liability that the Company
      may otherwise have to any Indemnified Holder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (b) Each
      Holder, severally and not jointly, shall indemnify and hold harmless, to the
      fullest extent permitted by law, the Company, each other Holder, their
      respective officers, directors, agents and employees and each person, if any,
      who controls the Company or such other Holder within the meaning of the
      Securities Act, from and against any loss, claim, damage, liability or expense,
      joint or several, or any action in respect thereof, to which the Company, such
      other Holder or any such officer, director, agent, employee or controlling
      person may become subject, insofar as any such loss, claim, damage, liability,
      expense or action arises out of, or is based upon:

     

    (i) any
      untrue statement or alleged untrue statement of any material fact contained
      in
      the Shelf Registration Statement or Prospectus or any amendment or supplement
      thereto or any Blue Sky Application or other document referred to in
Section
      5(a)(i)
      hereof;
      or

     

    (ii) the
      omission or the alleged omission to state therein any material fact required
      to
      be stated therein or necessary to make the statements therein, in light of
      the
      circumstances under which they were made, not misleading, but in each case
      only
      to the extent that such untrue statement or alleged untrue statement or omission
      or alleged omission was made in reliance upon and in conformity with written
      information prepared and furnished to the Company by or on behalf of such Holder
      (or its related Indemnified Holder) specifically for use therein, and shall
      reimburse the Company and any such officer, employee or controlling person
      promptly upon demand for any legal or other expenses reasonably incurred by
      the
      Company or any such officer, employee or controlling person in connection with
      investigating or defending or preparing to defend against any such loss, claim,
      damage, liability, expense or action as such expenses are incurred, provided
      that the obligation to indemnify will be individual, not joint and several,
      for
      each Holder and shall be limited to the net amount of proceeds received by
      such
      Holder from the sale of Registrable Securities pursuant to the Shelf
      Registration Statement.

     

    (c) Promptly
      after receipt by an indemnified party under this Section
      5
      of
      notice of any claim or the commencement of any action, the indemnified party
      shall, if a claim in respect thereof is to be made against the indemnifying
      party under this Section
      5,
      notify
      the indemnifying party in writing of the claim or the commencement of that
      action; provided,
      however,
      that
      the failure to notify the indemnifying party shall not relieve the indemnifying
      party from any liability which it may have under this Section
      5
      except
      to the extent the indemnifying party has been prejudiced by such failure. If
      any
      such claim or action shall be brought against an indemnified party, and it
      shall
      notify the indemnifying party thereof, the indemnifying party shall be entitled
      to participate therein and, to the extent that it wishes, jointly with any
      other
      similarly notified indemnifying party, to assume the defense thereof with
      counsel satisfactory to the indemnified party. After notice from the
      indemnifying party to the indemnified party of its election to assume the
      defense of such claim or action, the indemnifying party shall not be liable
      to
      the indemnified party under this Section
      5
      for any
      legal or other expenses subsequently incurred by the indemnified party in
      connection with the defense thereof other than reasonable costs of
      investigation; provided,
      however,
      that a
      Majority of Holders shall have the right to employ at the expense of such
      Holders a single counsel to represent jointly the Holders and their respective
      directors, officers, members, agents, partners, employees and controlling
      persons who may be subject to liability arising out of any claim in respect
      of
      which indemnity may be sought by Holders against the Company under this
Section
      5;
      and
      provided, further, that if a Majority of Holders shall have reasonably concluded
      that there may be one or more legal defenses available to them and their
      respective officers, employees and controlling persons that are different from
      or additional to those available to the Company and its officers, directors,
      employees and controlling persons, then the fees and expenses of such single
      separate counsel shall be paid for by the indemnifying party. No indemnifying
      party shall:

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (i) without
      the prior written consent of the indemnified parties (which consent shall not
      be
      unreasonably withheld or delayed) settle or compromise or consent to the entry
      of any judgment with respect to any pending or threatened claim, action, suit
      or
      proceeding in respect of which indemnification or contribution may be sought
      hereunder (whether or not the indemnified parties are actual or potential
      parties to such claim or action) unless such settlement, compromise or consent
      includes an unconditional release of each indemnified party from all liability
      arising out of such claim, action, suit or proceeding, or

     

    (ii) be
      liable
      for any settlement of any such action effected without its written consent
      (which consent shall not be unreasonably withheld or delayed), but if settled
      with its written consent or if there be a final judgment for the plaintiff
      in
      any such action, the indemnifying party agrees to indemnify and hold harmless
      any indemnified party from and against any loss or liability by reason of such
      settlement or judgment.

     

    (d) If
      the
      indemnification provided for in this Section
      5
      shall
      for any reason be unavailable or insufficient to hold harmless an indemnified
      party under Section
      5(a)
      or
5(b)
      in
      respect of any loss, claim, damage, liability or expense (or action in respect
      thereof) referred to therein, each indemnifying party shall, in lieu of
      indemnifying such indemnified party, contribute to the amount paid or payable
      by
      such indemnified party as a result of such loss, claim, damage or liability
      (or
      action in respect thereof):

     

    (i) in
      such
      proportion as is appropriate to reflect the relative fault of the Company on
      the
      one hand and the Holders on the other, or

     

    (ii) if
      the
      allocation provided by clause
      5(d)(i)
      is not
      permitted by applicable law, in such proportion as is appropriate to reflect
      not
      only the relative fault referred to in clause
      5(d)(i)
      but also
      the relative benefits received by the Company from the offering and sale of
      the
      Registrable Securities on the one hand and a Holder with respect to the sale
      by
      such Holder of the Registrable Securities on the other in connection with the
      statements or omissions or alleged statements or alleged omissions that resulted
      in such loss, claim, damage or liability (or action in respect thereof), as
      well
      as any other relevant equitable considerations.

     

    The
      relative benefits received by the Company on the one hand and a Holder on the
      other with respect to such offering and such sale shall be deemed to be in
      the
      same proportion as the total net proceeds from the offering of the Registrable
      Securities (before deducting expenses) received by the Company, on the one
      hand,
      bear to the total proceeds received by such Holder (before deducting expenses)
      with respect to its sale of Registrable Securities on the other. The relative
      fault of the parties shall be determined by reference to, among other things,
      whether the untrue or alleged untrue statement of a material fact or the
      omission or alleged omission to state a material fact relates to information
      supplied by the Company on the one hand or the Holders on the other, the intent
      of the parties and their relative knowledge, access to information and
      opportunity to correct or prevent such statement or omission. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    The
      Company and each Holder agree that it would not be just and equitable if the
      amount of contribution pursuant to this Section
      5(d)
      were
      determined by pro
      rata allocation
      (even if the selling Holders were treated as one entity
      for such
      purpose) or by any other method of allocation that does not take into account
      the equitable considerations referred to in the first sentence of this paragraph
      (d). The amount paid or payable by an indemnified party as a result of the
      loss,
      claim, damage, liability or expense, or action in respect thereof, referred
      to above in this Section
      5
      shall be
      deemed to include, for purposes of this Section
      5
      and
      subject to
      the
      limitations set forth above, any legal or other expenses reasonably incurred
      by
      such indemnified party in connection with investigating or defending or
      preparing to defend any such action or claim. 

     

    Notwithstanding
      the provisions of this Section
      5,
      no
      Holder shall be required to contribute any amount in excess of the amount by
      which net proceeds received by such Holder from the sale of Registrable
      Securities covered by the Shelf Registration Statement exceeds the amount of
      any
      damages which such Holder has otherwise been required to pay by reason of any
      untrue or alleged untrue statement or omission or alleged omission. No person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any person who was
      not guilty of such fraudulent misrepresentation. The Holders’ obligations to
      contribute as provided in this Section
      5(d) are
      several and not joint.

     

    6. Participation
      in Underwritten Offerings.

     

    No
      Holder
      may participate in any Underwritten Offering hereunder unless such
      Holder:

     

    (a) agrees
      to
      sell such Holder’s Registrable Securities on the basis provided in any
underwriting
      arrangements approved by the Persons entitled hereunder to approve such
      arrangements; and

     

    (b) completes
      and executes all reasonable and customary questionnaires, powers of attorney,
      custody agreements, indemnities, underwriting agreements, lock-up letters and
      other documents required under the terms of such underwriting arrangements,
      provided that no Holder shall be required to make any representations or
      warranties to the Company or the underwriters (other than representations and
      warranties regarding such Holder and such Holder’s intended method of
      distribution) or to undertake any indemnification obligations to the Company
      or
      the underwriters with respect thereto, except as otherwise provided in
Section
      5
      hereof.

     

    7. Selection
      of Underwriters.

     

    The
      Holders of Registrable Securities covered by the Shelf Registration Statement
      who desire to do so may sell such Registrable Securities in an Underwritten
      Offering. In any such Underwritten Offering, the investment banking firm or
      firms and manager or managers that will administer the offering will be selected
      by a Majority of Holders whose Registrable Securities are
      included
      in such offering; provided,
      that
      such investment banking firms must be reasonably satisfactory to
      the
      Company.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    8. Miscellaneous.

     

    (a) Amendments
      and Waivers.
      This
      Agreement may not be amended, modified or supplemented, and waivers or consents
      to or departures from the provisions hereof may not be given, unless the Company
      has obtained the written consent of a Majority of Holders.

     

    (b) Notices.
      All
      notices and other communications provided for or permitted hereunder
      shall be made in writing by hand-delivery, first-class mail (registered or
      certified, return receipt
      requested), telex, telecopier, or air courier guaranteeing overnight
      delivery:

     

    (i) if
      to a
      Holder, at the address set forth on the records Company of or the transfer
      agent
      of the Registrable Securities, as the case may be; and

    

      
        	 	
                (ii)

              	
                if
                  to the Company:

              	
                H2Diesel
                  Holdings, Inc.

              
	 	 	 	
                11111
                  Katy Freeway, Suite 910

              
	 	 	 	
                Houston,
                  Texas 77079

              
	 	 	 	
                Phone:
                  (713) 973-5720

              
	 	 	 	
                Fax:
                  (713) 973-5777

              
	 	 	 	
                Attn:
                  Chief Executive Officer

              

      

    

     

    All
      such
      notices and communications shall be deemed to have been duly given at: the
      time
      delivered by hand, if personally delivered; five Business Days after being
      deposited in the mail, postage prepaid, if mailed; when answered back, if
      telexed; when receipt acknowledged, if transmitted by facsimile; and on the
      next
      Business Day, if timely delivered to an air courier guaranteeing overnight
      delivery.

     

    (d) Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      assigns of each of the parties, including without limitation subsequent
Holders
      of Registrable Securities; provided,
      however,
      that
      (i) this Agreement shall not inure to the benefit
      of or be
      binding upon a successor or assign of a Holder unless and to the extent such
      successor or assign acquired Registrable Securities from such Holder and agreed
      in writing to be bound by the terms of this Agreement and (ii) nothing contained
      herein shall be deemed to permit any assignment, transfer or other disposition
      of Registrable Securities in violation of any Subscription Agreement or other
      agreement with the Company which restricts the sale or disposition of
      Registrable Securities. If any transferee of any Holder shall acquire
      Registrable Securities, in any manner, whether by operation of law or otherwise,
      such Registrable Securities shall be held subject to all of the terms of this
      Agreement, and by taking and holding such Registrable Securities such person
      shall be conclusively deemed to have agreed to be bound by and to perform all
      of
      the terms and provisions of this Agreement.

     

    (e) Counterparts.
      This
      Agreement may be executed in any number of counterparts and by the parties
      hereto in separate counterparts, each of which when so executed shall be deemed
      to be an original and all of which taken together shall constitute one and
      the
      same agreement.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (f) Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (g) Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Florida without regard to its principles of conflict of laws that
      would
      cause the laws of another jurisdiction to apply.

     

    (h) Severability.
      If any
      one or more of the provisions contained herein, or the application thereof
      in
      any circumstance, is held invalid, illegal or unenforceable, the validity,
      legality and enforceability of any such provision in every other respect and
      of
      the remaining provisions contained herein shall not be affected or impaired
      thereby.

     

    (i) Entire
      Agreement.
      This
      Agreement is intended by the parties as a final expression
      of their agreement and intended to be a complete and exclusive statement of
      the
      agreement and
      understanding of the parties hereto in respect of the subject matter contained
      herein. There are no restrictions, promises, warranties or undertakings, other
      than those set forth or referred to herein, with respect to the registration
      rights granted by the Company with respect to the Registrable Securities. This
      Agreement supersedes all prior agreements and understandings between the parties
      with respect to such subject matter.

     

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the
      parties have executed this Agreement as of the date first written
      above.

    

      
        	
                H2DIESEL
                  HOLDINGS,
                  INC.

              
	 
	 
	
                By:

              	 
	 	
                Name:

              
	 	
                Title:

              

      

    

     

    [Holder
      Signature Page Follows]

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    The
      foregoing Agreement is hereby confirmed and accepted as of the date first
      written above.

    
      

        
          	 
	
                  Name
                    of Holder

                
	 
	
                  By:

                	 
	 	
                  Name:

                
	 	
                  Title:

                

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

    EXHIBIT
      A

    

    HOLDERS

     

    [Names
      of
      each Holder shall be inserted upon the Closing]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    NOTICE
      AND QUESTIONNAIRE

     

    (TIME
      SENSITIVE MATERIAL)

     

    THIS
      NOTICE AND QUESTIONNAIRE MUST BE RETURNED TO H2DIESEL HOLDINGS, INC. (AT THE
      ADDRESS LISTED BELOW) ON OR BEFORE THE 15TH BUSINESS DAY FOLLOWING DELIVERY
      OF
      THE NOTICE AND QUESTIONNAIRE BY H2DIESEL TO THE REGISTERED
      HOLDER.

     

    Capitalized
      terms used but not defined herein shall have the respective meanings set forth
      in the Registration Rights Agreement, dated as of _____
      ___,
      2008
      (the “Registration
      Rights Agreement”),
      between the Company and Holders named therein.

     

    Form
      of Selling Securityholder Notice and Questionnaire

     

    The
      undersigned Holder of the Registrable Securities of the Company understands
      that
      the Company has filed, or intends to file, with the SEC a Shelf Registration
      Statement for the registration and
      resale under Rule 415 of the Securities Act, Registrable Securities in
      accordance with the terms of the
      Registration Rights Agreement. A copy of the Registration Rights Agreement
      is
      available from the Company upon request at the address set forth
      below.

     

    Each
      beneficial owner of Registrable Securities that has agreed in writing to be
      bound by the Registration Rights Agreement is entitled to the benefits of the
      Registration Rights Agreement. In order to sell or otherwise dispose of any
      Registrable Securities pursuant to the Shelf Registration Statement, a
      beneficial owner of Registrable Securities generally will be required to be
      named as a selling securityholder
      in the related Prospectus, deliver a Prospectus either to purchasers of
      Registrable Securities
      or, if
      relying on Rule 172 of the Securities Act, confirm that a current prospectus
      is
      deemed delivered in connection with the sale of Registrable Securities, and
      be
      bound by those provisions of the Registration Rights Agreement applicable to
      such beneficial owner (including certain indemnification provisions, as
      described below). Beneficial owners are encouraged to complete and deliver
      this
      Notice and Questionnaire prior to the effectiveness of the Shelf Registration
      Statement so that such beneficial owners may be named as selling securityholders
      in the related prospectus.

     

    Certain
      legal consequences arise from being named as a selling securityholder in the
      Shelf Registration Statement and the related Prospectus. Accordingly, holders
      and beneficial owners of Registrable Securities are advised to consult their
      own
      securities law counsel regarding the consequences of being named or not being
      named as a selling securityholder in the Shelf Registration Statement and the
      related Prospectus.

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    NOTICE

     

    The
      undersigned Holder (the “Selling
      Securityholder”)
      of
      Registrable Securities hereby gives notice to the Company of its intention
      to
      sell or otherwise dispose of Registrable Securities beneficially owned by it
      and
      listed below in Item 3 (unless otherwise specified under Item 3) pursuant to
      the
      Shelf Registration Statement. The undersigned, by signing and returning this
      Notice and Questionnaire, understands that it will be bound by the terms and
      conditions of this Notice and Questionnaire and the Registration Rights
      Agreement.

     

    Pursuant
      to Section 5(b) of the Registration Rights Agreement, the undersigned has agreed
      to indemnify and hold harmless the Company and certain other persons, from
      and
      against certain losses arising in connection with statements concerning the
      undersigned made in the Shelf Registration Statement or the related Prospectus
      in reliance upon the information provided in this Notice and
      Questionnaire.

     

    The
      undersigned hereby provides the following information to the Company and
      represents and warrants that such information is accurate and
      complete:

     

    QUESTIONNAIRE

     

    
      	1.	
              Information
                Regarding Selling
                Securityholder

            

    

     

    
      	 	
              (a)

            	
              Full
                legal name of Selling
                Securityholder:

            

    

    ______________________________________________________________________________________________________________

     

    
      	 	
              (b)

            	
              Full
                legal name of registered holder (if not the same as (a) above) through
                which Registrable Securities listed in Item (3) below are
                held:

            

    

    ______________________________________________________________________________________________________________

     

    
      	 	
              (c)

            	
              Full
                legal name of Natural Control Person (which means a natural person
                who
                directly or indirectly alone or with others has power to vote or
                dispose
                of the securities covered by the
                questionnaire):

            

    

    ______________________________________________________________________________________________________________

     

    
      	 	
              (d)

            	
              Is
                the Selling Securityholder an SEC-reporting company? If the Selling
                Securityholder is not an SEC-reporting company, list below the individual
                or individuals who exercise the voting and/or dispositive powers
                with
                respect to the Securities:

            

    

    ______________________________________________________________________________________________________________

     

    
      	 	
              (e)

            	
              Are
                you a broker-dealer registered pursuant to Section 15 of the Exchange
                Act?

            

    

     

    q
      Yes.

     

    
      
        
        

      

      
        B-2

        
          

        

      

      
        
        

      

    

     

    q
      No.

     

    Note:
      If
      yes,
      the SEC’s staff has indicated that you should be identified as an underwriter in
      the Shelf Registration Statement.

     

    
      	 	
              (f)

            	
              If
                your response to Item 1(e) above is “no,” are you an “affiliate” of a
                broker-dealer registered pursuant to Section 15 of the Exchange
                Act?

            

    

     

    q
      Yes.

     

    q
      No.

     

    For
      purposes of this Item 1(f), an “affiliate” of a registered broker-dealer shall
      include any company that directly, or indirectly through one or more
      intermediaries, controls, or is controlled by, or is under common control with,
      such broker-dealer, and does not include any individuals employed by such
      broker-dealer or its affiliates.

     

    
      	 	
              (g)

            	
              If
                you are an affiliate of a broker-dealer, do you certify that you
                bought
                the Registrable Securities to be resold, and at the time of the purchase
                of the Registrable Securities to be resold, you had no agreements
                or
                understandings, directly or indirectly, with any person to distribute
                the
                Registrable Securities?

            

    

     

    q
      Yes.

     

    q
      No.

     

    Note:
      If
      no,
      the SEC’s staff has indicated that you should be identified as an underwriter in
      the Shelf Registration Statement.

     

    
      	 	
              (h)

            	
              Full
                legal name of person through which you hold the Registrable Securities
                -
                (i.e. name of your broker or the DTC participant, if applicable,
                through
                which your Registrable Securities are
                held):

            

    

     

    Name
      of
      broker:________________________________________________________________________

     

    DTC
      No:_____________________________________________________________________________

     

    Contact
      person:_______________________________________________________________________

     

    Telephone
      No. (including area
      code):_______________________________________________________

     

    E-mail
      address:________________________________________________________________________

     

    
      
        
        

      

      
        B-3

        
          

        

      

      
        
        

      

    

     

    
      	2.	
              Address
                for Notices to Selling
                Securityholder

            

    

     

    Telephone:___________________________________________________________________________

     

    Fax:_________________________________________________________________________________

     

    Contact
      Person:________________________________________________________________________

     

    Email
      address:________________________________________

     

    
      	3.	
              Beneficial
                Ownership of Registrable
                Securities

            

    

     

    Number
      of
      shares of Registrable Securities of the Company beneficially owned:

    ______________________________________________________________________________________________________________

     

    CUSIP
      No(s). of such Registrable Securities beneficially owned:

    ______________________________________________________________________________________________________________

     

    
      	4.	
              Nature
                of Beneficial Ownership

            

    

     

    
      	 	
              (a)

            	
              Check
                if the Selling Securityholder set forth in your response to Item
                1(a) is
                any of the below:

            

    

     

    (A) A
      reporting company under the Exchange Act. q

     

    (B) A
      majority owned subsidiary of a reporting company under the Exchange Act.
q

     

    (C) A
      registered investment fund under the Investment Company Act of 1940.q

     

    
      	 	
              (b)

            	
              If
                the Selling Securityholder set forth in your response to Item 1(a)
                above
                is a limited partnership, state the names of the general partners
                of such
                limited partnership:

            

    

    ______________________________________________________________________________________________________________

    ______________________________________________________________________________________________________________

     

    
      	 	
              (A)

            	
              With
                respect to each general partner listed in Item 4(b) above who is
                not a
                natural person, and is not publicly-held, name each shareholder (or
                holder
                of partnership interests, if applicable) of such general partner.
                If any
                of these named shareholders are not natural persons or publicly-held
                entities, please provide the same information. This process should
                be
                repeated until you reach natural persons or a publicly-held
                entity.

            

    

    ________________________________________________________________________________________________________

     

    
      
        
        

      

      
        B-4

        
          

        

      

      
        
        

      

    

    ______________________________________________________________________________________________________________

     

    
      	 	
              (c)

            	
              Name
                your controlling shareholder(s) (the “Controlling Entity”). If the
                Controlling Entity is not a natural person and is not a publicly-held
                entity, name each shareholder of such Controlling Entity. If any
                of these
                named shareholders are not natural persons or publicly-held entities,
                please provide the same information. This process should be repeated
                until
                you reach natural persons or a publicly-held
                entity.

            

    

     

    
      	
            	(A)	
              (i) Full
                legal name of Controlling Entity(ies) or natural person(s) who have
                sole
                or shared voting or dispositive power over the Registrable
                Securities:

            

    

    _________________________________________________________________________________________________________

    _________________________________________________________________________________________________________

     

    (ii) Business
      address (including street address) (or residence if no business address),
      telephone number and facsimile number of such person(s):

     

    Address:_____________________________________________________________________________

     

    Telephone
      No.:________________________________________________________________________

     

    Fax
      No.:______________________________________________________________________________

     

    
      	
            	(B)	
              (i) Full
                legal name of Controlling
                Entity(ies):

            

    

    _________________________________________________________________________________________________________

     

    (ii) Business
      address (including street address) (or residence if no business address),
      telephone number and facsimile number of such person(s):

     

    Address:_____________________________________________________________________________

     

    Telephone
      No.:________________________________________________________________________

     

    Fax
      No.:_________________________________________________________________________

     

    (iii) Name
      of
      shareholders: 

     

    
      	5.	
              Beneficial
                Ownership of the Company’s Securities Owned by the Selling
                Securityholder

            

    

     

    Except
      as
      set forth below in this Item (5), the undersigned is not the beneficial or
      registered owner of any securities of the Company other than the Registrable
      Securities listed above in Item (3) (“Other
      Securities”).

     

    
      
        
        

      

      
        B-5

        
          

        

      

      
        
        

      

    

     

    Type
      and
      amount of Other Securities beneficially owned by the Selling
      Securityholder:

    _________________________________________________________________________________________________________

     

    CUSIP
      No(s). of such Other Securities beneficially owned:

     

    
      	
              6.

            	
              Relationship
                with the Company

            

    

     

    Except
      as
      set forth below, neither the undersigned nor any of its affiliates, officers,
      directors or principal equity holders (5% or more) has held any position or
      office or has had any other material relationship with the Company (or its
      predecessors or affiliates) during the past three years.

     

    State
      any
      exceptions here:

    __________________________________________________________________________________________________________

     

    
      	
              7.

            	
              Plan
                of Distribution

            

    

     

    Except
      as
      set forth below, the undersigned (including its donees or pledgees) intends
      to
      distribute the Registrable Securities listed above in Item (3) pursuant to
      the
      Shelf Registration Statement only as follows (if at all). Such Registrable
      Securities may be sold from time to time directly by the undersigned or,
      alternatively, through underwriters, broker-dealers or agents. If the
      Registrable Securities are sold through underwriters or broker-dealers, the
      Selling Securityholder will be responsible for underwriting discounts or
      commissions or agent’s commissions. Such Registrable Securities may be sold in
      one or more transactions at fixed prices, at prevailing market prices at the
      time of sale, at varying prices determined at the time of sale, or at negotiated
      prices. Such sales may be effected in transactions (which may involve crosses
      or
      block transactions):

     

    
      	 	
              (a)

            	
              on
                any national securities exchange or quotation service on which the
                Registrable Securities may be listed or quoted at the time of
                sale;

            

    

     

    
      	 	
              (b)

            	
              in
                the over-the-counter market;

            

    

     

    
      	 	
              (c)

            	
              in
                transactions otherwise than on such exchanges or services or in the
                over-the-counter market; or

            

    

     

    
      	 	
              (d)

            	
              through
                the writing of options.

            

    

     

    In
      connection with sales of the Registrable Securities or otherwise, the
      undersigned may enter into hedging transactions with broker-dealers, which
      may
      in turn engage in short sales of the Registrable Securities and deliver
      Registrable Securities to close out such short positions, or loan or pledge
      Registrable Securities to broker-dealers that in turn may sell such
      securities.

     

    
      
        
        

      

      
        B-6

        
          

        

      

      
        
        

      

    

     

    State
      any
      exceptions here:___________________________________________

    ______________________________________________

     

    Note:
      In no
      event will such method(s) of distribution take the form of an underwritten
      offering of the Registrable Securities without the prior agreement of the
      Company.

     

    
      	8.	
              Acknowledgments

            

    

     

    The
      undersigned acknowledges that it understands its obligation to comply with
      the
      provisions of the Exchange Act and the rules thereunder relating to stock
      manipulation, particularly Regulation M thereunder (or any successor rules
      or
      regulations), in connection with any offering of Registrable Securities pursuant
      to the Shelf Registration Statement. The undersigned agrees that neither it
      nor
      any person acting on its behalf will engage in any transaction in violation
      of
      such provisions.

     

    The
      Selling Securityholder hereby acknowledges its obligations under the
      Registration Rights Agreement to indemnify and hold harmless certain persons
      as
      set forth therein. Pursuant to the Registration Rights Agreement, the Company
      has agreed under certain circumstances to indemnify the Selling Securityholders
      against certain liabilities.

     

    In
      accordance with the undersigned’s obligation under the Registration Rights
      Agreement to provide such information as may be required by law for inclusion
      in
      the Shelf Registration Statement, the undersigned agrees to promptly notify
      the
      Company of any inaccuracies or changes in the information provided herein that
      may occur subsequent to the date hereof at any time while the Shelf Registration
      Statement remains effective. All notices hereunder and pursuant to the
      Registration Rights Agreement shall be made in writing at the address set forth
      below.

     

    By
      signing below, the undersigned consents to the disclosure of the information
      contained herein in its answers to items (1) through (7) above and the inclusion
      of such information in the Shelf Registration Statement and the related
      Prospectus. The undersigned understands that such information will be relied
      upon by the Company in connection with the preparation or amendment of the
      Shelf
      Registration Statement and the related Prospectus.

     

    Once
      this
      Notice and Questionnaire is executed by the undersigned and received by the
      Company, the terms of this Notice and Questionnaire, and the representations
      and
      warranties contained herein, shall be binding on, shall inure to the benefit
      of
      and shall be enforceable by the respective successors, heirs, personal
      representatives and assigns of the Company and the undersigned with respect
      to
      the Registrable Securities beneficially owned by the undersigned and listed
      in
      Item (3) above.

     

    This
      Notice and Questionnaire shall be governed in all respects by the laws of the
      State of Florida.

     

    
      
        
        

      

      
        B-7

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      undersigned, by authority duly given, has caused this Notice and Questionnaire
      to be executed and delivered either in person or by its duly authorized
      agent.

    
      

        
          	
                  Beneficial
                    Owner

                
	 
	
                  By:

                	 
	 	
                  Name:

                	 
	 	
                  Title:

                	 

        

      

      Dated:_____________

    

    

    PLEASE
      RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO H2DIESEL HOLDINGS,
      INC. NOT LATER THAN THE 15TH BUSINESS DAY AFTER THIS NOTICE AND QUESTIONNAIRE
      HAVE BEEN DELIVERED TO THE REGISTERED HOLDER AT:

    

    H2Diesel
      Holdings, Inc.

    11111
      Katy Freeway, Suite 910

    Houston,
      Texas 77079

    Phone:
      (713) 973-5720

    Fax:
      (713) 973-5777

    Attn:
      Chief Executive Officer

     

    
      
        
        

      

      
        B-8

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