Document:

Stock Option Agreement between Kim Johnson and the Company

    

    H2DIESEL
      HOLDINGS, INC.

     

    Stock
      Option Agreement

     

     1. Grant
      of Option.
      In
      accordance with and subject to the terms and conditions of this Stock Option
      Agreement (the “Agreement”),
      H2Diesel Holdings, Inc., a Florida corporation (the “Corporation”
which
      term shall include any entity which acquires, through merger, share exchange,
      purchase of assets or otherwise, substantially all of the capital stock or
      assets of the Corporation), grants to the person identified on Schedule
      1
      attached
      hereto (the “Optionee”)
      a
      nonqualified stock option (the “Option”)
      to
      purchase the number of shares (the “Option
      Shares”)
      of its
      Common Stock, par value $.001 per share (“Common
      Stock”),
      set
      forth on Schedule
      1,
      at the
      initial option exercise price set forth in Schedule
      1
      (such
      price, as it may be adjusted hereunder from time to time, the “Exercise
      Price”). 

     

    2. Acceptance
      by Optionee.
      The
      exercise of the Option or any portion thereof is conditioned upon acceptance
      by
      the Optionee of the terms and conditions of this Agreement, as evidenced by
      the
      Optionee’s execution of Schedule
      1
      to this
      Agreement and the delivery of an executed copy of this Agreement to the
      Corporation.

     

    3. Vesting
      of Option.
      The
      Option shall vest and be exercisable as set forth in Schedule
      1.

    

    (A)
      Pursuant to a Consulting Services Agreement executed simultaneously with this
      Agreement (the “Consulting Agreement”) the Corporation has entered into
      arrangements with the firm eBarton, LLC, which is controlled by the Optionee.
      Except as specifically herein provided, the Consulting Agreement is deemed
      incorporated herein and the Definitions therein shall be referenced for purposes
      of interpretation hereof. The Consulting Agreement contains as Exhibit A a
      list
      of firms that are designated as Potential Customers (“Potential Customers”) for
      the purpose of vesting under Schedule 1. Corporation and eBarton have agreed
      pursuant to the Consulting Agreement that additional firms may be added to
      Exhibit A as Potential Customers, and that nominees of eBarton shall not be
      unreasonably excluded from Exhibit A. The termination of the Consulting
      Agreement shall not be deemed to terminate the designation of Persons as
      Potential Customers under this Agreement so long as an introduction has been
      made.

     

    (B)
      The
      Corporation shall specifically require any person with whom it enters any of
      the
      transaction contemplated by Sections 6(c)(iii), Section 8 hereof, or similar
      transactions (“Successors”) to provide, as a condition of the closing of such
      transactions, specific assurances to Optionee that, notwithstanding any prior
      contacts of any type Such Successor has had or subsequent with Potential
      Customers, whether with respect to the proprietary biofuel; or otherwise, that
      the vesting and exercise provisions of this Option Agreement shall continue
      to
      apply in full force and effect to the vesting of Optionee’s shares in accordance
      with the terms of Schedule 1 hereof.

     

    4. Expiration
      of Option.
      The
      Option shall expire on the expiration date set forth in
      Schedule 1
      (the
“Expiration
      Date”)
      and
      may not be exercised after such date.

     

    

      EXHIBIT
        A
        - Page 1

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    5. Conditions
      to Exercise of Option.
      The
      Optionee may exercise the Option or any portion thereof to the extent then
      vested at any time or from time to time during the period commencing on the
      Grant Date set forth on Schedule
      1
      and
      ending on the Expiration Date (the “Option
      Term”).
      The
      Option may be exercised only by the Optionee or, in the event of his death
      or
      incompetence, his personal representative or heirs, as the case may
      be.

     

    6. Procedure
      for Exercise.
      (a) The
      vested portion of the Option may be exercised for the number of Option Shares
      specified in a written notice delivered to the Corporation at least five days
      prior to the date on which purchase is requested (such notice, an “Exercise
      Notice”),
      accompanied by full payment in cash of the aggregate Exercise Price in respect
      of such Option Shares. If specified in the Exercise Notice, payment of such
      Exercise Price may also be made by means of the Corporation retaining from
      the
      Option Shares to be delivered upon exercise of the Option, or portion thereof,
      that number of Option Shares having an aggregate Fair Market Value (as defined
      below) on the date that the Exercise Notice is delivered to the Corporation
      (the
      date that the Exercise Notice is delivered to the Corporation being referred
      to
      as the “Valuation
      Date”;
      provided, however
      , that
      if such date is not a day on which securities markets are open for trading,
      then
      the Valuation Date shall be the first succeeding date that such markets are
      open) equal to the aggregate Exercise Price of the total number of Option Shares
      with respect to which the Optionee shall then be exercising the Option. If
      upon
      exercise of all or a portion of the Option there shall be payable by the
      Corporation or a subsidiary any amount for withholding taxes, then, at the
      Corporation’s election and as a condition to such exercise, either (i) the
      Corporation shall reduce the number of Option Shares to be issued to the
      Optionee by a number of Option Shares of Common Stock having an aggregate Fair
      Market Value on the Valuation Date equal to the amount of such withholding
      tax
      or (ii) the Optionee shall pay such amount to the Corporation or its subsidiary,
      as applicable.

     

    (b)
      If
      any applicable law requires the Corporation to take any action with respect
      to
      the Option Shares specified in the Exercise Notice, or if any action remains
      to
      be taken under the Certificate of Incorporation or Bylaws of the Corporation,
      as
      in effect at the time, to effect due issuance of Option Shares, then the
      Corporation shall take such action and the day for delivery of such Option
      Shares shall be extended for the period necessary to take such action. The
      Optionee shall not have any of the rights of a shareholder of the Corporation
      under the Option.

     

    (c)
      As
      used herein, the phrase “Fair Market Value” shall mean (i) if the Common
      Stock is listed or admitted for trading on a national securities exchange,
      an
      automated quotation system or the Over-the-Counter Bulletin Board, the last
      reported sale price per share of the Common Stock on the Valuation Date, or,
      in
      case no such reported sale takes place on such day or is reported, then the
      average of the last reported per share bid and ask prices for shares of the
      Common Stock on such date (or if such bid and ask prices are not available
      on
      such date, the most recent preceding date), in either case as officially
      reported by such securities exchange, quotation system or Bulletin Board on
      which the Common Stock is listed or admitted to trading, (ii) if not so
      listed or admitted for trading, the fair market value of a share of the Common
      Stock as determined by the Corporation’s board of directors in good faith, or
      (iii) if such exercise is in connection with a merger or consolidation of the
      Corporation in which the Corporation is not the survivor or in which the Common
      Stock is exchanged for cash or other securities or a sale of all or
      substantially all of the assets of the Corporation (collectively, a
“Sale”),
      the
      implied price per share of the Common Stock resulting from such
      Sale.

     

    EXHIBIT
      A - Page 2

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7. Adjustment
      of Exercise Price and Option Shares. (a)
      If,
      at any time prior to the Expiration Date, the number of outstanding shares
      of
      Common Stock is (i) increased by a stock dividend payable in shares of Common
      Stock or by a subdivision or split-up of shares of Common Stock, or (ii)
      decreased by a combination of shares of Common Stock, then, following the record
      date fixed for the determination of holders of Common Stock entitled to receive
      the benefits of such stock dividend, subdivision, split-up, or combination,
      the
      Exercise Price shall be adjusted to a new amount equal to the product of (A)
      the
      Exercise Price in effect on such record date, and (B) the quotient obtained
      by
      dividing (x) the number of Option Shares for which the Option was exercisable
      on
      such record date without giving effect to the event referred to in the foregoing
      clause (i) or (ii) (such number of Option Shares, the “Record
      Date Option Shares”),
      by
      (y) the aggregate number of shares to which the Record Date Option Shares would
      have been increased or decreased immediately after and as a result of the event
      referred to in the foregoing clause (i) or (ii) had the Record Date Option
      Shares been issued immediately prior to such record date.

     

    (b) Upon
      each adjustment of the Exercise Price as provided in
      Section 8(a),
      the
      Optionee shall thereafter be entitled to subscribe for and purchase, at the
      Exercise Price resulting from such adjustment, the number of Option Shares
      equal
      to the product of (i) the number of Record Date Option Shares and (ii) the
      quotient obtained by dividing (A) the Exercise Price existing prior to such
      adjustment by (B) the new Exercise Price resulting from such
      adjustment.

     

    8. Reclassification,
      Etc. In
      case
      of any reclassification or change of the outstanding Common Stock of the
      Corporation (other than as a result of a subdivision, combination or stock
      dividend), or in case of any consolidation of the Corporation with, or merger
      of
      the Corporation into, another corporation or other business organization (other
      than a consolidation or merger in which the Corporation is the continuing
      corporation and which does not result in any reclassification or change of
      the
      outstanding Common Stock of the Corporation) at any time prior to the Expiration
      Date, then, as a condition of such reclassification, reorganization, change,
      consolidation or merger, lawful provision shall be made, and duly executed
      documents evidencing the same from the Corporation or its successor shall be
      delivered to the Optionee, so that the Optionee shall have the right prior
      to
      the Expiration Date to purchase, at a total price not to exceed that payable
      upon the exercise of this Option as to the number of Option Shares is then
      exercisable, the kind and amount of shares of stock and other securities and
      property receivable upon such reclassification, reorganization, change,
      consolidation or merger by a holder of the number of Option Shares which might
      have been purchased by the Optionee immediately prior to such reclassification,
      reorganization, change, consolidation or merger, and in any such case
      appropriate provisions shall be made with respect to the rights and interest
      of
      the Optionee to the end that the provisions hereof (including provisions for
      the
      adjustment of the Exercise Price and of the number of shares purchasable upon
      exercise of the Option) shall thereafter be applicable in relation to any shares
      of stock and other securities and property thereafter deliverable upon exercise
      of the Option.

     

    9. Non-Transferability
      of Option.
      The
      Option granted hereunder to the Optionee shall not be transferable by the
      Optionee otherwise than by will, or by the laws of descent and
      distribution.

     

    EXHIBIT
      A - Page 3

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    10. Compliance
      With Applicable Law.
      The
      issuance of the Option Shares pursuant to the exercise of the Option is subject
      to compliance with all applicable laws, including without limitation laws
      governing withholding from employees and nonresident aliens for income tax
      purposes. 

     

    11. Representations
      and Warranties of Optionee. 

    

    (a) The
      Optionee acknowledges his understanding that the grant of the Option 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 Optionee represents and warrants to the Company as
      follows:

    

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

     

    (ii)  The
      Optionee is acquiring the Option solely for the Optionee’s own account and not
      with view to, or resale in connection with, any distribution of the Option
      or
      the Option Shares.

     

    (iii)  The
      Optionee has the financial ability to bear the economic risk of the Option,
      has
      adequate means for providing for his current needs and contingencies, and has
      no
      need for liquidity with respect to the Option or the Option Shares.

     

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

     

    (v)  The
      Optionee (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 Option and the Option Shares. If other than an
      individual, the Optionee also represents it has not been organized solely for
      the purpose of acquiring the Option or the Option Shares.

     

    (b)  The
      Optionee is an “accredited investor,” as that term is defined in Rule 501(a) of
      Regulation D.

     

    (c)  The
      Optionee acknowledges that each of the Company and H2Diesel, Inc., its wholly
      owned subsidiary (“Subsidiary”,
      and
      together with the Company, the “H2Diesel
      Companies”),
      is a
      development stage company with no or a limited operating history or revenues,
      and no or few employees. The Optionee further acknowledges that the Company
      has
      not made any representations to the Optionee regarding its or Subsidiary’s
      business prospects or the Company’s or Subsidiary’s ability to generate revenues
      in the future. 

     

    EXHIBIT
      A
      - Page 4

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d)  The
      Optionee represents, warrants and agrees that he, she or it will not sell or
      otherwise transfer the Option or any Option Shares without registration under
      the Securities Act or an exemption therefrom, and fully understands and agrees
      that the Optionee must bear the economic risk of his, her or its purchase
      because, among other reasons, the Option and the Option Shares 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 Optionee is aware that the Option
      is and any Option Shares will be “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 Optionee also understands that the Company is under no
      obligation to register the Option or any Option Shares 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 Optionee understands
      that any sales or transfers of the Option and any Option Shares are further
      restricted by state securities laws and the provisions of this
      Agreement.

     

    (e)  No
      representations or warranties have been made to the Optionee by any of the
      H2Diesel Companies, or any of their respective officers, employees, agents,
      sub-agents, affiliates or subsidiaries, other than any representations of the
      Company contained herein, and in accepting the Option the Optionee is not
      relying upon any representations other than those contained herein.

     

    (f)  The
      Optionee understands and acknowledges that the Option and the value of the
      Option Shares is speculative and may ultimately become worthless and has
      carefully read and considered the matters set forth in the public reports filed
      with the Securities and Exchange Commission, and, in particular, acknowledges
      that the Company has a limited operating history and is engaged in a highly
      competitive business. 

     

    (g)  The
      Optionee’s overall commitment to investments that are not readily marketable is
      not disproportionate to the Optionee’s net worth, and the Option and the Option
      Shares will not cause such overall commitment to become excessive.

     

    (h)  The
      Optionee 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 Option and the Option Shares 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 Optionee and his, her or its Advisors, if any.

     

    (i)  The
      Optionee 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.

     

    EXHIBIT
      A
      - Page 5

    
      
        
        

      

      
         

        
          

        

      

      
         

      

    

    
 

    12.
      Restrictions on Option Shares.
      Unless a
      current registration statement under the Securities Act shall be in effect
      with
      respect to the Option Shares to be issued upon exercise of the Option, the
      Optionee, by accepting the Option, covenants and agrees that, at the time of
      exercise the Option, the Optionee will deliver to the Corporation such written
      representations that the Company may deem necessary or appropriate to ensure
      that the Option Shares are not required to be registered under the Securities
      Act or applicable state securities laws. The Optionee agrees that certificates
      representing Option Shares may bear a legend substantially as
      follows:

    

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.
      THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR TRANSFERRED UNTIL THE
      HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE
      DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO
      THE
      ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
      VIOLATE APPLICABLE FEDERAL OR STATE LAWS.

     

    13. Notices
      Generally. Any
      notice, request, consent, other communication or delivery pursuant to the
      provisions hereof shall be in writing and shall be sent by one of the following
      means: (i) by registered or certified first class mail, postage prepaid, return
      receipt requested; (ii) by facsimile transmission with confirmation of receipt;
      (iii) by overnight courier service; or (iv) by personal delivery, and shall
      be
      properly addressed to the Optionee at the last known address or facsimile number
      appearing on the books of the Corporation, or, except as herein otherwise
      expressly provided, to the Corporation at its principal executive office
      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.

     

    14. Miscellaneous.

     

    (a) This
      Agreement has been duly authorized on behalf of the Corporation by the Board.
      The Optionee represents that he is free to enter into this Agreement and that
      his entering into this Agreement does not violate any obligation that he has
      to
      any other person or legal entity.

     

    (b) In
      the event that any provision of this Agreement would be held to be invalid
      or
      unenforceable for any reason unless narrowed by construction, this Agreement
      shall be construed as if such invalid or unenforceable provision had been more
      narrowly drawn so as not to be invalid or unenforceable. If, notwithstanding
      the
      foregoing, any provision of this Agreement shall be held to be invalid or
      unenforceable for any reason, such invalidity or unenforceability shall attach
      only to such provision and shall not affect or render invalid or unenforceable
      any other provision of this Agreement.

     

    
      EXHIBIT
        A
        - Page 6

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    (c)
      This
      Agreement sets forth the entire understanding of the Corporation and the
      Optionee with respect to the subject matter hereof and cannot be amended or
      modified except by a writing signed by both parties.

     

    (d) Except
      as otherwise expressly provided herein, this Agreement shall be binding upon
      and
      inure to the benefit of the parties hereto, and their respective permitted
      successors and assigns, heirs and personal representatives.

     

    (d) This
      Agreement shall be interpreted, construed and administered in accordance with
      the laws of the State of Florida without regard to its choice of law provisions
      that would cause the laws of another jurisdiction to apply.

     

    (e) This
      Agreement may be executed in counterparts which, taken together, shall
      constitute a single original document.

     

    IN
      WITNESS WHEREOF,
      the
      Corporation has caused this Agreement to be executed as of the Date of Grant
      set
      forth in Schedule 1.

     

    

    H2DIESEL
      HOLDINGS, INC.

    

    

    

    By:

    ___/s/
      David A. Gillespie_______

    Name:
      David A. Gillespie 

    Title: Chief
      Executive Officer

     

     

    
      EXHIBIT
        A
        - Page 7

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

    

    Schedule
      1

    Stock
      Option Agreement

    

    
      	
              1.
                Name of Optionee:

            	
              Kim
                Loreen Johnson

            
	
              2.
                Number of Option Shares:

            	
              1,500,000
                shares of Common Stock

            
	
              3.
                Option Exercise Price Per Share:

            	
              $6.00

            
	
              4.
                Date of Grant:

            	
              April
                24, 2007

            
	
              5.
                Expiration Date:

            	
              April
                23, 2012

            
	
              6.
                Vesting Schedule:

            	
              Options
                will vest as follows:

              25,000
                shares on execution by the company of each Test Burn Agreement with
                a
                counter party introduced to the Company by the Optionee.

              25,000
                shares on completion of the physical testing included in such Test
                Burn
                Agreement.

              50,000
                shares for each 10,000,000 gallons per year of biofuel delivered
                to
                customers that have completed such Test Burns, or have been otherwise
                introduced to the Company by the Optionee. 50,000 shares for each
                10,000,000 gallon per year increment above the initial annual volumes
                for
                each such customer. Any unvested portion of the Option on April 23,
                2010
                will expire.

            

    

    

    

    

    

    

    Accepted
      and agreed to as of the date first above written:

    

    

    

    

    /s/
      Kim L. Johnson

    Kim
      L.
      Johnson

    

      EXHIBIT
        A
        - Page 8Test Burn Agreement dated May 1, 2007 between Dynegy Oakland, LLC and the Company

    TEST
      BURN AGREEMENT

     

    THIS
      TEST BURN AGREEMENT
      (the
“Agreement”)
      is
      entered into this ____ day of May 2007 (the “Effective
      Date”)
      by and
      between H2DIESEL, INC. (the “Supplier”),
      a
      Delaware corporation with its primary place of business at 11111 Katy Freeway,
      Houston Texas and Dynegy Oakland, LLC (the “Owner”)
      a
      Delaware limited liability company (each a “Party”)
      and
      collectively, the “Parties”).

     

    WHEREAS,
      Owner
      owns a combustion turbine power plant in Oakland, California (the “Plant”);
      and

     

    WHEREAS,
      Owner
      has an interest in exploring the technical and commercial viability of applying
      renewable fuel technology at the Plant; and 

     

    WHEREAS,
      the
      Supplier is a manufacturer of certain renewable fuels called “Bioemulsion”;
      and

     

    WHEREAS,
      Supplier has an interest in demonstrating the capabilities of its Bioemulsion
      in
      utility scale gas turbine applications; and

     

    WHEREAS,
      the
      Parties both desire to conduct Bioemulsion testing (the “Testing”)
      at the
      Plant in 2007.

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual promises set forth below and other valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      Parties agree as follows:

     

    SECTION
      1:

     

    Bioemulsion
      Testing

     

    1.1     Testing.
      Owner
      and Supplier agree to burn Supplier’s Bioemulsion provided by Supplier, at the
      Plant in accordance with this Agreement and the Test Protocol (as defined
      below). The Parties contemplate conducting full and partial load test burns
      trial that may consume approximately 10,000 gallons of Supplier’s Bioemulsion.
      The exact quantity of Supplier’s Bioemulsion needed for the Testing shall be
      determined by the Parties.

     

    1.2     Additional
      Testing.
      The
      Parties may, by mutual written agreement, agree to conduct additional tests
      using Supplier’s Bioemulsion and such additional tests shall be performed in
      accordance with, and governed by, this Agreement.

     

    SECTION
      2:

     

    Rights,
      Duties and Obligations of the Parties Before Testing
      Commences

     

    2.1     Owner
      Pre-Test Rights, Duties and Obligations.
      Prior
      to the commencement of any Testing:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    (a) Baseline
      Data.
      The
      Owner will provide to the Supplier historical emissions and other operating
      data
      for the Plant collected when firing distillate fuel oil equivalent to the data
      being gathered in the Testing (the “Baseline
      Data”).
      The
      Baseline Data shall at all times be subject to the terms of this Agreement,
      including, without limitation, the terms of Section
      5.

     

    (b) Test
      Protocol.
      Owner
      shall, at its sole cost and expense, develop a test protocol applicable to
      the
      Testing (the “Test
      Protocol”).
      In
      the Test Protocol Owner shall specify which of the Plant’s CTs will be used for
      the Testing.

     

    (c) Permits.
      Owner
      shall obtain, at its sole cost and expense, all federal, state and local permits
      and approvals required in connection with this Agreement, the Test Protocol
      and
      the Testing. If requested by Owner, the Supplier will accompany and assist
      Owner
      in discussions regarding the Testing with regulatory agencies and/or public
      officials.

     

    (d) Turbine
      Connection Facilities.
      Owner
      shall, at its sole cost and expense, provide a connection suitable for the
      Supplier to connect the Supplier’s Bioemulsion delivery and storage truck to the
      CT fuel delivery system (the “CT
      Connection Facilities”).
      Unless otherwise agreed by the Parties, the Owner shall provide hoses and
      connections that will connect to a standard 3” cam lock truck fitting on the
      Supplier’s delivery and storage truck.

     

    (e) Engage
      Environmental Testing Firm.
      Owner
      shall engage an environmental testing firm to conduct air-emissions testing
      and
      analyze the Testing (“Emissions
      Testing”).
      The
      Parties shall jointly develop a scope of work for the Emissions Testing. All
      costs of the Emissions Testing shall be divided evenly between the Parties;
      provided,
      that
      the
      total costs payable for the Emissions Testing shall not exceed $300,000. Upon
      receipt of the final report of the results of the Emissions Testing, Owner
      shall
      provide the Supplier with a copy of such report. Supplier shall pay its portion
      of the Emissions Testing costs within thirty (30) days after it has received
      the
      Emissions Testing results from Owner. The results of the Emissions Testing
      and
      each portion of the report describing such results shall be subject to the
      terms
      of this Agreement, including, without limitation, the terms of Section
      5.

     

    2.2     Supplier
      Pre-Test Rights, Duties and Obligations.
      Prior
      to the commencement of any Testing:

     

    (a) Permits.
      The
      Supplier shall obtain, at its sole cost and expense, all federal, state and
      local permits and approvals required in connection with the production and
      transport of Supplier’s Bioemulsion to and from the Plant.

     

    (b) Review
      Test Protocol.
      The
      Supplier shall review the Test Protocol prior to its completion and provide
      Owner with comments and suggested changes.

     

    (c) Supplemental
      Disclosures.
      If not
      included in the Disclosure Materials (as defined below) delivered to Owner
      within thirty (30) days of the Effective Date in accordance with Section
      4.1(a),
      as to
      each blend of Supplier’s Bioemulsion tested under this Agreement or brought onto
      the Plant site the Supplier shall deliver to Owner no fewer than seven (7)
      days
      before the arrival of such Bioemulsion at the Plant true, correct and complete
      copies of the following items: the MSDS Sheet, quality specifications, special
      handling instructions, any information related to worker safety in connection
      with such blend, applicable information related to the environment, health
      and
      safety, the results of other testing, and such other materials and information
      available to the Supplier that may be relevant to the Testing (collectively,
      the
“Disclosure
      Materials”).

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    SECTION
      3:

     

    Bioemulsion
      Testing

     

    3.1     Owner
      Test Rights, Duties and Obligations:
      Owner
      shall have the following rights, duties and obligations related to the
      Testing:

     

    (a) Notification
      of Fuel Quantity and Required Delivery Date.
      Owner
      shall provide the Supplier written notice thirty (30) days in advance of the
      Testing date (the “Notice”)
      of (a)
      the expected quantity of Supplier’s Bioemulsion needed for the Testing, and (b)
      the Testing date(s).

     

    (b) Revenue
      and Loss from Sale of Electricity Generated with Supplier’s
      Bioemulsion.
      Owner
      shall be entitled to all revenue, receipts and profits from sales of electricity
      generated during the Testing, and Supplier acknowledges that it has no right,
      title or interest in any such revenue, receipts and profits. Moreover, if
      revenue from the sale of electricity generated during the Testing is less than
      the cost of production, Owner shall not hold the Supplier responsible for any
      portion of such cost of production other than the supply of Supplier’s
      Bioemulsion, as provided in Section
      3.2(a).

     

    (c) Personnel.
      Owner
      shall provide operating personnel and personnel to conduct emission data
      collection during all Testing.

     

    (d) Right
      to Stop Testing; Cost Reimbursement.
      At any
      time before commencement of any Testing Owner may, in its sole discretion,
      elect
      not to conduct such Testing. If Owner elects not to conduct Testing after
      providing the Notice required by Section
      3.1(a),
      Owner
      shall reimburse Supplier for all out of pocket costs associated with producing,
      transporting, and disposing of the amount of Bioemulsion stated in the Notice.
      After commencement of and during any Testing, Owner may, in its sole discretion,
      elect to terminate such Testing immediately and Owner shall not be responsible
      for reimbursing any of Supplier’s out of pocket costs associated with producing,
      transporting, and disposing of the Bioemulsion required for such terminated
      Testing.

     

    2.3     Supplier
      Test Rights, Duties and Obligations:
      The
      Supplier shall have the following rights, duties and obligations related to
      the
      Testing.

     

    (a) Supply
      Bioemulsion.
      The
      Supplier shall, at its sole cost and expense, produce, provide and deliver
      to
      the Plant the Supplier’s Bioemulsion necessary for the Testing. All of
      Supplier’s Bioemulsion provided to Owner for use in the testing shall meet the
      specification set forth in Exhibit
      A.

     

    (b) Delivery
      Vehicle.
      The
      Supplier understands and agrees that it shall provide the delivery vehicle
      used
      to transport Supplier’s Bioemulsion to the Plant and that such vehicle shall be
      used as and for on-site storage of Supplier’s Bioemulsion. The Supplier shall
      remove all Bioemulsion delivery/storage vehicles from the Plant (together with
      any remaining Supplier’s Bioemulsion) within fourteen (14) days of Owner’s
      request.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    (c) Rights
      to be Present During Testing.
      The
      Supplier may have representatives present during the Testing provided such
      representatives adhere to all applicable Owner safety programs and Plant on-site
      rules and regulations that are made known to the Supplier in advance.

     

    SECTION
      4:

     

    Representations
      and Warranties

     

    4.1     Supplier
      Representations and Warranties.
      The
      Supplier hereby represents and warrants to Owner:

     

    (a) Disclosure
      Materials.
      For
      each blend of Supplier’s Bioemulsion that the Parties contemplate testing under
      this Agreement, the Supplier will provide within thirty (30) days of the
      Effective Date true, correct and complete copies of the Disclosure
      Materials.

     

    (b) Clear
      Title to Bioemulsion Supplied.
      The
      Supplier has full, clear, and unrestricted title to all Bioemulsion to be
      furnished by the Supplier in the performance of this Agreement, free and clear
      of any and all liens, restrictions, reservations, security interests, and
      encumbrances. All Bioemulsion furnished by the Supplier shall become the
      property of Owner upon the transfer of such Bioemulsion at the CT Connection
      Facilities. Any Bioemulsion brought to the Plant for Testing and not used shall
      be retained by Supplier and remove from the Plant site as provided in
Section
      3.2(b).

     

    (c) Intellectual
      Property.
      To the
      Supplier’s knowledge, any Bioemulsion, apparatus, process, technology, know-how
      and the like used by the Supplier or delivered to Owner pursuant to or in
      connection with this Agreement does not and will not violate or infringe any
      copyright, trademark, service mark, patent or invention, trade secret or other
      intellectual property or proprietary right of any third party. The Supplier
      shall pay all royalties and license fees which may be payable to third parties
      on account of the sale or use of the Bioemulsion or in connection with any
      such
      apparatus, process, technology, know-how or the like used by the Supplier or
      delivered to Owner pursuant to or in connection with this
      Agreement.

     

    (d) Agreement
      Duly Authorized, Executed and Delivered.
      This
      Agreement has been duly and validly authorized, executed and delivered by the
      Supplier. This Agreement constitutes the legal, valid and binding obligation
      of
      the Supplier enforceable against the Supplier in accordance with its terms,
      except as limited by the effect of bankruptcy, insolvency, reorganization,
      moratorium or other similar laws relating to or affecting the rights of
      creditors and general principles of equity (regardless of whether such
      enforceability is considered in a proceeding in equity or at law).

     

    (e) Consents
      and Approvals.
      Neither
      the execution and delivery by Supplier of this Agreement, nor the performance
      by
      Supplier of its obligations hereunder require the consent, approval or
      authorization of, the giving of notice to, or the filing, registration,
      qualification, licensure, permitting or taking of any other action with, any
      federal, state, or foreign government authority or agency that will not be
      obtained or done prior to commencement of any Testing hereunder.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    4.2     Owner
      Representations and Warranties.
      Owner
      hereby represents and warrants to the Supplier:

     

    (a) Agreement
      duly Authorized, Executed and Delivered.
      This
      Agreement has been duly and validly authorized, executed and delivered by Owner.
      This Agreement constitutes the legal, valid and binding obligation of Owner
      enforceable against Owner in accordance with its terms, except as limited by
      the
      effect of bankruptcy, insolvency, reorganization, moratorium or other similar
      laws relating to or affecting the rights of creditors and general principles
      of
      equity (regardless of whether such enforceability is considered in a proceeding
      in equity or at law).

     

    (b) Compliance
      with Laws.
      In the
      execution, delivery and performance of this Agreement, Owner shall at all times
      and at its sole expense be responsible for all applicable governmental laws,
      statutes, ordinances, rules, regulations, orders and other
      requirements.

     

    (c) Consents
      and Approvals.
      Neither
      the execution and delivery by Owner of this Agreement, nor the performance
      by
      Owner of its obligations hereunder require the consent, approval or
      authorization of, the giving of notice to, or the filing, registration,
      qualification, licensure, permitting or taking of any other action with, any
      federal, state, or foreign government authority or agency that will not be
      obtained or done prior to commencement of any Testing hereunder.

     

    (d) Intellectual
      Property.
      The
      Testing, Test Protocol and other facilities, equipment and materials and methods
      used in connection with the 

     

    Emissions
      Testing do not and shall not infringe or misappropriate any patents, copyrights,
      trademarks, trade secrets or other intellectual property rights, privacy or
      similar rights of any third party, nor has any claim (whether or not embodied
      in
      an action, past or present) of such infringement been threatened or asserted,
      or
      is such a claim pending against Owner.

     

    (e) Standards
      of Performance.
      All
      Emissions Testing and other work by Owner personnel and contractors pursuant
      to
      this Agreement shall be performed in a workmanlike manner and with professional
      diligence and skill, by individuals having sufficient professional knowledge
      and
      experience and all necessary licenses and qualifications to perform Emissions
      Testing in a competent and accurate manner in compliance with all applicable
      laws, regulations, ordinances or other legal requirements, consistent with
      generally accepted industry practices. All CT’s, facilities and other equipment
      used in the Emissions Testing shall be in proper working order at the
      commencement of Testing and the Emissions Testing shall comply and conform
      in
      all material respects with the Test Protocol.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    SECTION
      5:

     

    Intellectual
      Property; Confidentiality

     

    5.1     Confidential
      Information.
      In
      connection with this Agreement the Parties will make available in each other
      certain confidential information. As a condition to furnishing such information
      to each other, the Parties agree to treat all information concerning this
      Agreement (whether prepared by either Party, and irrespective of the form of
      communication) that has been or will be furnished in connection with the
      Agreement in accordance with the provisions of this Agreement, and to take
      or
      abstain from taking certain other actions hereinafter set forth.

     

    5.2     Supplier’s
      Confidential Information.

     

    (a) Any
      and
      all information, data and test results furnished by Supplier to Owner, including
      the formulation, manufacturing methods and all other aspects of the Supplier’s
      Bioemulsion, including any enhancements made as a result of information gathered
      as a result of the Testing (the “Supplier’s
      Intellectual Property”)
      are
      and will remain the sole property of the Supplier. Owner will have no claim
      or
      rights whatsoever related to the Supplier’s Intellectual Property regardless of
      whether or not such Supplier’s Intellectual Property derived directly from the
      Testing, the Baseline Data or the Emissions Data. Owner shall not use such
      information for any purpose other than for the work to be performed under this
      Agreement and as otherwise approved or authorized hereunder. Specifically,
      but
      without limitation, Owner shall not attempt to reverse-engineer or derive the
      formulation or other trade secrets embodied in Supplier’s Bioemulsion or such
      information, or use any of same in furtherance or otherwise in connection with
      development of any product, process or service other than Supplier’s
      Bioemulsion. Upon termination of this Agreement, Owner shall return or, at
      Supplier’s instruction, destroy (providing written certification of return of
      all copies of materials or destruction, as applicable) and erase from its
      electronic systems and devices all such Supplier Intellectual Property,
      retaining only one or more copies as required under applicable law and/or for
      archival purposes.

     

    (b) Owner
      acknowledges and agrees that: (i) it does not and shall not acquire any license
      or any other interest whatsoever in any of the Disclosure Materials or any
      other
      information provided by Supplier pursuant to Section
      4.1(a)
      regarding the Bioemulsion or otherwise acquired by Owner as a result of this
      Agreement, (ii) such Disclosure Materials and other information are and shall
      remain the sole property of Supplier, (iii) such Disclosure materials include
      proprietary trade secrets and other intellectual property owned by Supplier,
      and
      (iv) Owner shall take all reasonable measures to preserve the confidentiality
      of
      same. Owner shall keep all of the Disclosure Materials and other information
      in
      a secure location with access provided only to Owner personnel that must have
      access to same. Neither Owner nor any of its affiliates shall contest, attack
      or
      otherwise challenge Supplier’s rights with respect to Supplier’s Bioemulsion or
      any of its Disclosure Materials provided to Owner by Supplier pursuant to this
      Agreement.

     

    5.3     Owner’s
      Confidential Information.
      Any and
      all information, data and test results furnished by Owner to Supplier, including
      the Baseline Data, and the Testing Protocol (the “Owner’s
      Intellectual Property”)
      shall
      remain Owner’s exclusive property. The Supplier shall not use any such
      information, data or test results for any purpose other than for the work to
      be
      performed under this Agreement. 

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    The
      Owner’s Intellectual Property, including any enhancements made as a result of
      information gathered as a result of the Testing, is and will remain the sole
      property of the Owner and other _______ as set forth herein, Supplier shall
      have
      no claim or rights whatsoever related to the Owner’s Intellectual Property. Upon
      termination of this Agreement, Supplier shall return or, at Owner’s instruction,
      destroy (providing written certification of return of all copies of materials
      or
      destruction, as applicable) and erase from its electronic systems and devices
      all such Owner’s Intellectual Property, retaining only one or more copies as
      required under applicable law and/or for archival purposes.

     

    5.4     Use
      of
      Data.
      The
      Supplier shall have only limited rights to access and use the data gathered
      during the Emissions Testing, other data gathered during the Testing, and the
      Baseline Data. Supplier shall only use such data for its marketing purposes
      and
      in using such data shall not identify the Plant or Owner by name or other
      distinctive identifying characteristics. Supplier may generally describe the
      Plant and its general location in its marketing materials. Notwithstanding
      anything to the contrary contained herein, nothing in this Section
      5
      will be
      construed to limit the Owner’s use of the data gathered during the Emissions
      Testing, the Baseline Data, or any other data collected as part of the Testing
      for any purpose whatsoever.

     

    5.5.     Communications.
      Except
      pursuant to the Securities and Exchange Commission (the “SEC”)
      disclosure requirements, or as otherwise required by applicable law or by an
      order of a court of competent jurisdiction the Parties shall cooperatively
      manage all communications to third parties regarding the Testing or this
      Agreement, as set forth below:

     

    (a) General
      Announcement/Press Releases by one Party with No Mention by Name of the Other
      Party.
      Prior
      to a Party issuing any public announcements, public written communications
      and/or press releases to third parties regarding the Testing, this Agreement,
      or
      the scope, type of work or actual work contemplated or agreed upon in this
      Agreement, where the other Party is not explicitly mentioned or referenced,
      the
      issuing Party shall submit to the other Party for informational purposes and
      for
      comment, all draft press releases or other such public written communications
      and public announcements.

     

    (b) General
      Announcement/Press Releases by One Party with Mention of the Other
      Party.
      A Party
      shall not issue any communications, announcements and/or press release to third
      parties regarding the Testing, this Agreement, or the scope, type of work or
      actual work contemplated or agreed upon in this Agreement, where the other
      Party
      is explicitly mentioned or referenced, unless the issuing Party shall have
      first
      submitted to the other Party, and receive written approval and authorization
      of,
      the draft press releases or other such communication or announcement. Such
      approval and authorization will not be unreasonably withheld, conditioned,
      or
      delayed.

     

    (c) Discussions
      or Direct Communications with Regulatory/ Government Parties on
      Project.
      The
      Supplier shall not initiate or engage in any discussions regarding the Testing
      or the Agreement with any agents or representatives of any local, or state
      regulatory bodies or government agencies within the State of California without
      the prior, express, written consent of Owner, such consent to not be
      unreasonably withheld, conditioned, or delayed.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (d) General
      Announcements/Press Releases Regarding Similar Work as Project.
      Prior
      to a Party issuing any public announcements, public written communications
      and/or press releases to third parties regarding the general scope or general
      nature of the type of work as provided for in this Agreement, but which in
      no
      way mentions this Agreement or the Testing, the issuing Party agrees to promptly
      notify the other Party of such public announcements, public written
      communications and/or press releases, which would allow the other Party to
      prepare for any possible third party inquiries regarding such release of
      information by the issuing Party.

     

    5.5     Duration
      of Obligations.
      The
      Parties confidentiality obligations hereunder shall survive for a period of
      two
      (2) years after the Effective Date.

     

    SECTION
      5:

     

    Indemnities

     

    6.1     By
      Supplier.
      To the
      fullest extent permitted by applicable law, the Supplier waives any right of
      contribution and agrees to indemnify, hold harmless, and defend Owner, its
      parents, affiliates, sister entities, officers, directors, employees, agents,
      representatives, subsidiaries, successors, and assigns (collectively,
“Owner
      Indemnities”)
      from
      and against all claims, liability, damage, expenses, suits, demands or costs
      (including, without limitation, reasonable attorneys’ fees and court costs) for
      any losses, damages, injuries, or death to any persons including third parties,
      the Supplier’s employees or any subcontractor’s employees, or for damage or loss
      to any property, including the property of third parties, arising out of or
      in
      any manner related to, based upon, or in connection with (i) negligent or
      willful misconduct by Supplier and/or Supplier’s personnel in the performance of
      this Agreement, (ii) any activities of the Supplier and/or Supplier’s personnel
      or, the Plant premises, or in connection with any property of, Owner or its
      affiliates, (iii) failure of the Supplier and/or Supplier’s personnel to adhere
      to its obligations under this Agreement, (iv) any claim that the supply or
      use
      of Supplier’s Bioemulsion infringes, or is alleged to infringe any patents or
      inventions, copyrights, trade secrets, trademarks, or any other intellectual
      property or proprietary rights of any third party, or (v) any release or spill
      of Supplier’s Bioemulsion onto any property, including third party property, by
      Supplier except to the extent such release or spill is caused by a failure
      of
      the CT Connection Facilities or any other cause not attributable to conduct
      by
      the Supplier. The obligations of the Supplier under this Section
      6.1
      shall
      not extend to the liability of the Owner Indemnitees arising out of their own
      negligence or any claims or liability not attributable to wrongful or negligent
      conduct by the Supplier. The Supplier shall impose identical duties upon all
      subcontractors of the Supplier.

     

    6.2     By
      Owner.
      Notwithstanding Section
      6.1,
      Owner
      shall bear all liability for any damage to Owner’s CT as a result of burning
      Supplier’s Bioemulsion during the Testing or under this Agreement and Owner
      agrees that it will not hold the Supplier liable for any such damage, except
      to
      the extent caused by the Supplier’s breach or default under Section
      4.1.
      

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    To
      the
      fullest extent permitted by applicable law, Owner waives any right of
      contribution and agrees to indemnify, hold harmless, and defend the Supplier,
      its parents, affiliates, sister entities, officers, directors, employees,
      agents, representatives, subsidiaries, successors, and assigns (collectively,
      “Supplier
      Indemnitees”)
      from
      and against all claims, liability, damage, expenses, suits, demands or costs
      (including, without limitation, reasonable attorneys’ fees and court costs) for
      any losses, damage, injuries, or death to any persons including but not limited
      to Owner’s employees or any subcontractor’s employees, or for damage or loss to
      any property, arising out of or in any manner related to, based upon, or in
      connection with any release or spill of Supplier’s Bioemulsion onto the property
      of Owner or elsewhere to the extent such release or spill is caused by a failure
      of the CT Connection Facilities or otherwise attributable to acts or omissions
      of Owner or any of its personnel or contractors. The obligations of Owner under
      this Section
      6.2
      shall
      not extend to the liability of the Supplier Indemnitees arising out of their
      own
      negligence or any claims or liability not attributable to wrongful or negligent
      conduct by the Owner.

     

    SECTION
      7:

     

    Term;
      Termination

     

    7.1     Term;
      Termination; Survival.
      If not
      terminated earlier, this Agreement shall expire December 31, 2007. This
      Agreement may be terminated (i) by mutual written consent of the Parties,
      (ii) by either Party for any reason, upon five (5) days’ written notice to
      the other Party provided that
      Owner
      shall comply with Section
      3.1(d)
      or
      (iii) immediately, by either Party for the other Party’s breach of any of
      its representations, warranties or obligations under this Agreement.
      Notwithstanding anything in this Agreement to the contrary, the obligations
      of
      the Parties under Sections
      3.2(b),
      5,
      6,
      8.4
      and
8.7
      shall
      survive performance, expiration and/or termination of this
      Agreement.

     

    SECTION
      8:

     

    Miscellaneous

     

    8.1     Relationship
      of
      Parties; Future Commercial Relationship.
      The
      Parties shall not be deemed to be in a relationship of partners of joint
      venturers by virtue of this Agreement, nor shall any Party be an agent,
      representative, trustee or fiduciary of the other. No Party shall have any
      authority to bind the other. 

     

    8.2     Future
      Purchases.
      Upon
      successful completion of the Testing, Owner shall negotiate with Supplier
      regarding (i) an agreement for the purchase of Bioemulsion by the Owner from
      the
      Supplier on terms and conditions mutually acceptable by the Parties; and (ii)
      any future testing that may be desirable to further demonstrate the commercial
      and technical viability of the Bioemulsion. Owner shall be under no obligation
      to enter into any purchase agreement with Supplier. In the event that Owner
      elects to purchase Supplier’s Bioemulsion in a quantity equal to or greater than
      20,000 barrels within 24 months of completion of the Testing, the Supplier
      agrees that the price applicable to such purchase shall be no less favorable
      to
      Owner than the price the Supplier charges for Supplier’s Bioemulsion to other
      commercial purchasers purchasing the same or reasonably similar quantities
      of
      Bioemulsion from Supplier on the same or reasonably similar terms.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    8.3     Compliance
      with Law; Governing Law.
      The
      Parties shall be subject to all applicable laws, including rules, regulations,
      and orders of any regulatory body having jurisdiction, including those federal,
      state, county, and/or local bodies or agencies implementing various
      environmental and/or safety and health laws and regulations, whether now in
      force or adopted or enacted after the date of this Agreement. This Agreement
      shall be governed and construed in accordance with the laws of the State of
      Texas.

     

    8.4.     Entire
      Agreement; Waiver of Consequential Damages.
      This
      Agreement represents the entire agreement between the Parties as to the subject
      matter contained in this Agreement and shall supersede any prior agreements
      between the Parties (whether written or oral). In no event, whether based on
      contract, indemnity, warranty, tort (including negligence), strict liability
      or
      otherwise, shall one party be liable to the other for indirect, incidental,
      punitive, special, exemplary or consequential damages whatsoever, including
      lost
      or prospective profits. Except for injury to third parties or third party
      property damages as described in Section
      6,
      in no
      event shall either Party’s total aggregate liability under this Agreement exceed
      the total out of pocket costs of the Emissions Testing.

     

    8.5     Warranties.
      SUPPLIER MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND DISCLAIMS
      ANY
      IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF
      MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT,
      WITH RESPECT TO SUPPLIER’S BIOEMULSION OR ANYTHING ELSE PROVIDED BY SUPPLIER
      HEREUNDER. SUPPLIER DOES NOT REPRESENT OR WARRANT THAT THE SUPPLIER’S
      BIOEMULSION IS COMMERCIALLY VIABLE OR THAT THE SUPPLIER’S BIOEMULSION WILL BE
      AVAILABLE FOR PURCHASE OR USE PRESENTLY OR IN THE FUTURE.

     

    8.5     Force
      Majeure.
      Neither
      Party shall be deemed in default or otherwise liable for any delay in or failure
      of its performance under this Agreement (other than the payment of money) by
      reason of any act of God, fire, natural disaster, accident, riot, terrorism,
      act
      of government, strike or labor dispute, shortage of materials or supplies,
      or
      any other cause beyond the reasonable control of such Party, and which cannot
      be
      reasonably circumvented by such Party, provided that the Party invoking force
      majeure (a) gives the other Party prompt notice of such cause, and (b) used
      its
      commercially reasonable best efforts to correct promptly such failure or delay
      in performance. In the event of a force majeure event which prevents performance
      permanently or for more than twelve (12) months in duration, either Party may
      terminate this Agreement without further obligation except with respect to
      those
      provisions that survive termination.

     

    8.7     Notices.
      Whenever under the provisions of this Agreement, notice is required or permitted
      to be given, it shall be in writing and shall be deemed given either when
      delivered personally, or by courier, or three (3) days after mailing, postage
      prepaid by registered or certified mail, return receipt requested, addressed
      to
      the Party for whom it is intended with copies provided to the address set forth
      in the first paragraph of this Agreement or to such other addresses as a Party
      shall hereinafter designate in writing to another Party.

     

    8.8     Amendment.
      No
      amendment, waiver, or modification (collectively, an “Amendment”)
      of
      this Agreement or any provision of this Agreement shall be valid unless in
      writing, stating with specifically the particular amendment or modification
      to
      be made, and duly executed by the Parties. 

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

    Upon
      mutual acceptance and execution of an Amendment, the terms of such Amendment
      shall be deemed incorporated into this Agreement. To the extent that an
      Amendment conflicts with the terms of this Agreement, the Amendment shall
      control.

     

    8.9     No
      Waiver.
      Nothing
      contained in this Agreement shall cause the failure of either Party to insist
      upon strict compliance with any covenant, obligation, condition or agreement
      contained in this Agreement to operate as a waiver of, or estoppel with respect
      to, any such covenant, obligation, condition or agreement. Waiver by any Party
      of any breach of any provision of this Agreement shall not be considered as,
      nor
      constitute a continuing waiver or waiver, or cancellation of any provision
      of
      this Agreement.

     

    8.10    Assignment.
      Neither
      Party may assign this Agreement and/or any rights and/or obligations hereunder,
      without the prior written consent of the other Party and any attempt to do
      so
      shall be void, provided,
      however,
      that
      either Party may, without such consent, upon written notice to the other Party
      assign this Agreement and/or any rights and/or obligations hereunder in
      connection with a merger, sale, transfer, conveyance, acquisition or other
      corporate reorganization or change in control or ownership relating to all
      or
      substantially all of such Party’s assets, operations or business relating to
      this Agreement. This Agreement is binding on the Parties and their respective
      successors and permitted assigns.

     

    8.11     Counterparts.
      The
      Parties may execute and deliver this Agreement in counterparts, each of which
      shall be deemed an original and all of which, when taken together, shall be
      deemed to be one agreement. Each party acknowledges and agrees that this
      Agreement is intended to be executed and transmitted to the other party via
      electronic means. Accordingly, a party may execute and deliver this Agreement
      electronically (e.g., by digital signature and/or electronic reproduction of
      a
      handwritten signature), and the receiving party shall be entitled to rely upon
      the apparent integrity and authenticity of such signature for all
      purposes.

     

    IN
      WITNESS WHEREOF,
      the
      Parties have caused this Agreement to be executed by their respective duly
      authorized representatives as of the date first written above.

     

    
      	
              Dynegy
                Oakland LLC

            	
              H2Diesel,
                Inc.

            
	 	 
	
              By: /s/
                [illegible]

            	
              By: /s/
                David A. Gillespie

            
	 	 
	
              Name: [illegible]

            	
              Name: David
                A. Gillespie

            
	 	 
	
              Title: Executive
                Vice President 

            	
              Title: Chief
                Executive Officer

            
	
              Commercial
                and Development

            	 
	 	
              Date: May
                1, 2007

            
	
              Date: May
                1, 2007

            	 

    

     

     

    
 

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    H2Diesel
      Fuel Specification

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