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                                                                   Exhibit 10.12

             COLLABORATIVE COMMERCIALIZATION AND LICENSE AGREEMENT

                                     among

                     CATALYTICA COMBUSTION SYSTEMS, INC.,

                                      and

                          GENXON POWER SYSTEMS, LLC.,

                                      and

                           GENERAL ELECTRIC COMPANY,

                         dated as of November 19, 1998

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COLLABORATIVE COMMERCIALIZATION AND LICENSE AGREEMENT

THIS COLLABORATIVE COMMERCIALIZATION AND LICENSE AGREEMENT dated as of November
19, 1998 (this "Agreement"), is entered into among CATALYTICA COMBUSTION
SYSTEMS, INC., a Delaware corporation ("CCSI"), having a place of business
located at 430 Ferguson Drive, Mountain View, California 94043, including its
affiliate, GENXON POWER SYSTEMS LLC., a Delaware limited liability company
("GPS"), also with offices at 430 Ferguson Drive, Mountain View, California
94043, and GENERAL ELECTRIC COMPANY, a New York corporation ("GE"), having a
place of business located at 1 River Road, Schenectady, New York 12345.

                             W I T N E S S E T H:

WHEREAS, CCSI has developed expertise and technology directed to its proprietary
XONON(TM) Combustion System in the field of catalytic combustion; and

WHEREAS, GE manufactures and sells heavy duty industrial gas turbines, and has
developed technology relating thereto; and

WHEREAS, CCSI and GE desire to design, develop and commercialize heavy duty
industrial gas turbine components employing catalytic combustion through the use
of various elements of the XONON Combustion System; and

WHEREAS, in addition to collaborating in the development and commercialization
of such components, GE, with CCSI's cooperation and assistance, will lead an
effort to obtain funding for such development and commercialization, in exchange
for certain considerations as more particularly described in this Agreement;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained in this Agreement, CCSI, GPS and GE hereby agree as follows:

                                   ARTICLE 1

                                  DEFINITIONS

For purposes of this Agreement, the terms defined in this Article 1 shall have
the respective meanings set forth below:

1.1.     "Additional Period" shall mean the time period commencing upon the date
         of expiration or earlier termination of the Incentive Term relating to
         Gas Turbines (as

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         such Incentive Term may be modified pursuant to Sections 7.3, 7.4, 7.5
         or 6.2.2 below), and ending on the fifth (5th) anniversary of such
         expiration date.

1.2.     "Affiliate" shall mean, with respect to any Person, any other Person
         which directly or indirectly controls, is controlled by, or is under
         common control with, such Person. A Person shall be regarded as in
         control of another Person if it owns, or directly or indirectly
         controls, at least fifty percent (50%) of the voting stock or other
         ownership interest of the other Person, or if it directly or indirectly
         possesses the power to direct or cause the direction of the management
         and policies of the other Person by any means whatsoever.

1.3.     "Background" shall mean, with respect to Patents, Technical Information
         and Technology, that as to which a party has acquired or acquires prior
         to the Effective Date or otherwise not (i) in connection with its work
         under this Agreement, or (ii) from the other party.

1.4.     [*]

1.5.     "CCSI" shall mean Catalytica Combustion Systems, Inc. and/or its
         affiliate, GENXON Power Systems, LLC.

1.6.     "CCSI Technology" shall mean all Technology relating to the XONON
         Combustion System, including Background and Commercialization Program
         Technology which is now or hereafter may be owned by CCSI and/or
         possessed by CCSI with rights to sublicense.

1.7.     "Commercialization" shall mean the offering to sell, and/or the actual
         sale, of an item.

1.8.     "Commercialization Phase" shall mean the second phase of the
         Commercialization Program, during which the parties shall pursue
         Commercialization of the Products, as more particularly described in
         Article 7 below.

1.9.     "Commercialization Plan" shall mean a plan in accordance with the
         outline attached to this Agreement as Exhibit B for the
         Commercialization of the Products during the Commercialization Phase,
         including estimated funding amounts and dates for certain milestones,
         as such plan may be modified pursuant to the provisions of Section
         5.1.3 below.

1.10.    "Commercialization Program" shall mean the collaborative program of
         research, development and Commercialization, to develop and adapt the
         XONON Combustion System and/or XONON Modules to Gas Turbines, and to
         supply GE

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         with XONON Combustion System units and/or XONON Modules, for
         incorporation into Gas Turbines to be sold to GE's customers, all as
         more particularly described in the Development Workplan and the
         Commercialization Plan. The Commercialization Program shall be divided
         into a Technology Development Phase and a Commercialization Phase.

1.11.    "Commercialization Program Technology" shall mean Technology conceived
         during the Commercialization Program.

1.12.    "Development Costs" shall mean the costs to GE or CCSI of performing
         its development obligations during the Technology Development Phase in
         accordance with the Development Workplan, including without limitation
         all costs of direct labor and benefits, raw materials, overhead, and
         all other direct and indirect costs, fees and out-of-pocket and other
         expenses incurred, paid or accrued by GE or CCSI, all as determined in
         accordance with generally accepted accounting principles, consistent
         with such party's internal cost accounting practices, allocated on a
         reasonable and consistent basis and charged for the performance of such
         activities.

1.13.    "Development Funds" shall mean any and all amounts raised by the
         parties under Section 4.1 below or expended by GE under Section 4.2
         below, for the purpose of funding Development Costs.

1.14.    "Development Workplan" shall mean the detailed work plan for the
         technological development of the Products during the Technology
         Development Phase, which shall be (i) based on the Program Schedule and
         Milestones attached as Exhibit A, and (ii) agreed upon by the parties
         on or before December 15, 1998 and modified or updated by the parties
         on at least an annual basis by mutual agreement on or before December
         15th preceding the year in question.

1.15.    "Effective Date" shall mean the date of this Agreement as first set
         forth above.

1.16.    "Executive Committee" shall mean the joint committee composed of one
         representative of GE and one representative of CCSI as described in
         Section 5.2 below.

1.17.    "Gas Turbine(s)" shall mean the heavy duty industrial gas turbines
         rated at greater than or equal to 70MW, both new and retrofit (that is,
         installed).

1.18.    "GE" shall mean General Electric Company acting through its GE Power
         Systems business, including its Affiliates.

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1.19.    "GE Components" shall mean the fuel/air mixer package, the preburner
         and other elements (excluding the XONON Module) supplied by GE that
         have performance acceptable to operate with the XONON Module and
         equivalent to performance offered by XONON Components.

1.20.    "Incentive Term" shall mean (a) with respect to the Commercialization
         of the Products in the 7E Market Segment and the 7F Market Segment, the
         period commencing on the Effective Date and ending on December 31, [*],
         subject to modification as provided in Sections 7.3, 7.4, 7.5 and 6.2.2
         below, and (b) with respect to the Commercialization of the Products in
         the [*] Market Segment, the period commencing on the Effective Date and
         ending on December 31, [*].

1.21.    "Initial Term" shall mean the period commencing on the Effective Date
         and ending with either the first Gas Turbine test, or upon the first
         anniversary of the Effective Date, whichever occurs first.

1.22.    "Management Committee" shall mean the joint committee composed of two
         representatives of GE and two representatives of CCSI as described in
         Section 5.1 below.

1.23.    "Market Segments" shall mean all, and "Market Segment" shall mean any
         one of, the following: the 7E Market Segment, the 7F Market Segment,
         and the [*] Market Segment.

1.24.    "Maximum GE Required Expenditure" shall mean, for each Market Segment,
         the maximum dollar amount that GE shall be required to expend under
         Section 4.2 for the funding of the Technology Development Phase due to
         a failure of the parties to raise sufficient funds from Third Parties
         with respect to such Market Segment.

1.25.    "Patents" shall mean patents (including patents of importation, patents
         of confirmation, patents of improvements, patents and certificates of
         addition and utility models, as well as divisions, reissues,
         continuations, continuations-in-part, renewals and extensions of any of
         the foregoing) and applications therefore, and patents which may be
         issued on such applications covering inventions with respect to which
         the first application for patent anywhere was filed prior to the date
         of any termination of the Agreement.

1.26.    "Person" shall mean an individual, corporation, partnership, trust,
         business trust, association, joint stock company, joint venture, pool,
         syndicate, sole proprietorship, unincorporated organization,
         governmental authority or any other form of entity not specifically
         listed herein.

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1.27.    "Pre-Commercial Activities" shall mean activities with a Person
         regarding an item, where such activity does not involve the sale or
         field testing of the item.

1.28.    "Products" shall mean the XONON Module, the XONON Components, and/or
         the XONON Combustion System.

1.29.    "Program Schedule and Milestones" shall mean the schedule for the
         development milestones (GE "Tollgates")leading up to and including the
         first gas turbine firing date at a customer site for each Market
         Segment as set forth in Exhibit A which is attached to this Agreement.

1.30.    "7E Market Segment" shall mean the worldwide market for the Products
         for GE Frame 7E Gas Turbines.

1.31.    "7F Market Segment" shall mean the worldwide market for the Products
         for GE Frame 7F Gas Turbines.

1.32.    [*]

1.33.    "[*] Market Segment" shall mean the worldwide market for the Products
         where the Products will be incorporated into a gas turbine (including,
         but not limited to, GE's Frame 7E and Frame 7F Gas Turbines) utilized
         in the [*]

1.34.    [*]

1.35.    "Target Funding Amount" shall mean, for each Market Segment, the amount
         that the parties must raise, either from Third Parties or expended by
         GE (totaling up to the Maximum GE Required Expenditure), in order to
         fund the Technology Development Phase expenses with respect to such
         Market Segment, as estimated in the Yearly Development Budgets for each
         Market Segment.

1.36.    "Technical Information" shall mean all technical information, know-how,
         manufacturing techniques, software and other copyrightable works,
         engineering and other data, drawings, material and process
         specifications, whether patented or unpatented, whether in written,
         printed, oral or other form, relating to, in the case of GE, heavy duty
         industrial gas turbines, and, in the case of CCSI, the XONON Combustion
         System.

1.37.    "Technology" shall mean Patents and Technical Information.

1.38.    "Technology Development Phase" shall mean the first phase of the
         Commercialization Program, during which the parties shall cooperate
         in the

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         development of the Products in accordance with the Development
         Workplan, as more particularly described in Article 3 below.

1.39.    "Third Party" shall mean any Person other than CCSI, GE and their
         respective Affiliates.

1.40.    "Yearly Development Budget(s)" shall mean the budgets prepared by the
         Management Committee and approved by the parties, concurrent with the
         Development Workplan or updates thereof, pursuant to the provisions of
         Section 3.1.1 below for each year during the term of the Technology
         Development Phase, as the same may be modified pursuant to the
         provisions of Section 5.1.3 below. The Yearly Development Budgets shall
         be approved on or before each December 15 for the following year
         (except that the Yearly Development Budget for calendar year 1999 shall
         include any expenditures during 1998).

1.41.    "XONON Combustion System" shall mean the XONON Module and XONON
         Components.

1.42.    "XONON Components" shall mean the fuel/air mixer package, the
         preburner, and other elements supplied by CCSI to be agreed upon by the
         Parties, such as combustor hardware components, which are necessary
         combustion system modifications to enable optimum operation of the
         XONON Module.

1.43.    "XONON Control Algorithm(s)" shall mean the logic developed by or on
         behalf of CCSI (outside of the scope of work done pursuant to the
         Agreement) as of the Effective Date hereof to provide necessary control
         of the start up, operation, management and protection of the XONON
         Combustion System or XONON Module in a Gas Turbine.

1.44.    "XONON Module" shall mean the CCSI catalyst structure as used in Gas
         Turbines, including its container and supporting structure for fixing
         the catalyst structure in the container, and replacement XONON Modules.

                                   ARTICLE 2

                        REPRESENTATIONS AND WARRANTIES

2.1.     Representations and Warranties.  Each party hereby represents and
         warrants to the other Party except to the extent that a deviation from
         a representation or warranty would not have a material adverse effect
         on the properties, business, financial, technological or other
         condition of such party and would not materially adversely affect

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         such party's ability to perform its obligations under this Agreement,
         as follows:

         2.1.1    Corporate Existence and Power.  Such party (a) is a
                  corporation duly organized, validly existing and in good
                  standing under the laws of the state in which it is
                  incorporated; (b) has the corporate power and authority and
                  the legal right to own and operate its property and assets, to
                  lease the property and assets it operates under lease, and to
                  carry on its business as it is now being conducted and (c) is
                  in compliance with all requirements of applicable law.

         2.1.2    Authorization and Enforcement of Obligations.  Such party
                  (a) has the corporate power and authority and the legal right
                  to enter into this Agreement and to perform its obligations
                  hereunder and (b) has taken all necessary corporate action on
                  its part to authorize the execution and delivery of this
                  Agreement and the performance of its obligations hereunder.
                  This Agreement has been duly executed and delivered on behalf
                  of such party, and constitutes a legal, valid, binding
                  obligation, enforceable against such party in accordance with
                  its terms.

         2.1.3    Consents.  All necessary consents, approvals and
                  authorizations of all governmental authorities and other
                  Persons required to be obtained by such party in connection
                  with this Agreement have been obtained.

         2.1.4    No Conflict.  The execution and delivery of this Agreement
                  and the performance of such party's obligations hereunder (a)
                  do not conflict with or violate any requirement of applicable
                  laws or regulations and (b) do not conflict with, or
                  constitute a default under, any contractual obligation of such
                  party.

         2.2.     Representations and Warranties of CCSI. CCSI hereby represents
                  and warrants to GE, as of the Effective Date, except to the
                  extent that a deviation from a representation or warranty
                  would not materially adversely affect either party's ability
                  to perform its obligations under this Agreement, as follows:

         2.2.1    CCSI is the owner or co-owner of record of all patents,
                  copyrights, trademarks, service marks, logos, slogans, and
                  trade names (collectively, "Intellectual Property") for which
                  registrations have been issued to CCSI by the United States
                  Patent and Trademark Office or any similar office of a foreign
                  country with respect to the CCSI Intellectual Property.

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         2.2.2    CCSI (i) owns on an exclusive basis, or has the exclusive
                  right to use, all of the Products and the Technology relating
                  to the Products necessary to perform its obligations under
                  this Agreement, and (ii) has the exclusive right to sell and
                  commercialize, and license the sale and commercialization of,
                  the Products to the extent required to perform its obligations
                  under this Agreement, in each case without any limitations or
                  restrictions of any kind, and without known conflict or
                  asserted conflict with intellectual property rights of others.

         2.2.3    Neither the execution and delivery of this Agreement nor the
                  consummation of the transactions contemplated by this
                  Agreement will conflict in any way with, result in a breach
                  of, constitute a default under, or create in any party the
                  right to terminate, modify or cancel any agreement, contract,
                  license, instrument or other arrangement relating to the CCSI
                  Intellectual Property.

         2.2.4    CCSI has sufficient rights under the CCSI Intellectual
                  Property to permit CCSI to perform its obligations under the
                  Agreement.

         2.2.5    CCSI has not given or received any notice of any pending
                  conflict with, or infringement of, the rights of others with
                  respect to any CCSI Intellectual Property or with respect to
                  any license of CCSI Intellectual Property under which CCSI is
                  licensor or licensee.

         2.2.6    There are no pending causes of action, claims, actions,
                  suits, judgments, orders, decrees, rulings, charges, hearings
                  or investigations involving CCSI or the CCSI Intellectual
                  Property (collectively, "Legal Proceedings") or threatened
                  Legal Proceedings of, in, or before any court or quasi-
                  judicial or administrative agency of any federal, state,
                  local, or foreign jurisdiction or any arbitrator which could
                  impair CCSI's ability to perform its obligations under this
                  Agreement. There are no interference, opposition or
                  cancellation proceedings or infringement suits pending, or to
                  the knowledge of CCSI, threatened with respect to the CCSI
                  Intellectual Property. CCSI is not subject to any judgment,
                  order, writ, injunction or decree of any governmental
                  authority, and has not entered into or become a party to any
                  contract, which restricts or impairs its use of the CCSI
                  Intellectual Property or right to sell or commercialize, and
                  license the sale and commercialization of, the Products, as
                  contemplate by the Agreement.

         2.2.7    CCSI has not entered into any consent or settlement
                  agreement with respect to any CCSI Intellectual Property and
                  no claim has been asserted and, to

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                  CCSI's knowledge, no claim is threatened or contemplated by
                  any person with respect to the validity of, or CCSI' s
                  ownership of or right to use, the CCSI Intellectual Property,
                  or any of the Patents relating to the CCSI Intellectual
                  Property.

         2.2.8    CCSI has complied with its contractual obligations relating
                  to the protection of the CCSI Intellectual Property used
                  pursuant to licenses whereby CCSI has licensed CCSI
                  Intellectual Property or portions thereof to or from Third
                  Parties.

         2.2.9    None of the licenses or other rights granted by, contemplated
                  to be granted by, or claimed to have been granted by CCSI to
                  any person or entity conflict in any way with the licenses and
                  other rights granted by CCSI to GE under the terms of this
                  Agreement and the performance by CCSI of the transactions
                  contemplated by this Agreement.

         2.2.10   CCSI has delivered to its legal counsel, Wilson Sonsini
                  Goodrich & Rosati ("CCSI Counsel"), true and correct copies of
                  all the agreements of CCSI which relate to the CCSI
                  Intellectual Property, and redacted versions of such
                  agreements are attached as exhibits to the copy of CCSI
                  Counsel's legal opinion of even date herewith delivered to
                  counsel for GE (provided that such redacted versions shall not
                  be delivered to GE).

         2.2.11   Upon execution, this Agreement will be enforceable against
                  CCSI in accordance with its terms.

                                   ARTICLE 3

                           COMMERCIALIZATION PROGRAM

3.1.     Technology Development Phase.  The first phase of the Commercialization
         Program shall be the Technology Development Phase, during which GE and
         CCSI will pursue the technological development of the Products so as to
         enable their Commercialization. GE and CCSI will conduct their
         respective development efforts in accordance with the Program Schedule
         and Milestones attached hereto as Exhibit A, the Development Workplan
         and the Yearly Development Budgets approved by the Management
         Committee, as such Development Workplan and Yearly Development Budgets
         may be modified by the Management Committee under Section 5.1.3 below.

         3.1.1    Preparation of Yearly Development Budgets and Development
                  Workplans. Within sixty (60) days from the Effective Date and
                  each
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                  October 1 thereafter during the Technology Development Phase,
                  the Management Committee shall jointly prepare the Yearly
                  Development Budget and Development Workplan for the next
                  calendar year. CCSI and GE shall approve such Yearly
                  Development Budget and Development Workplan with such changes
                  as CCSI and GE mutually deem necessary, prior to December 15,
                  1999 and each December 15 thereafter.

         3.1.2    Technology Development Phase Activities.  Consistent with
                  the Development Workplan, the Yearly Development Budgets, and
                  any directives issued by the Management Committee:

                  3.2.1.1. Conduct of Commercialization Program Activities.
                           CCSI and GE each shall conduct the Commercialization
                           Program in a sound scientific manner, and in
                           compliance in all material respects with all
                           requirements of applicable laws and regulations and
                           all applicable good research and manufacturing
                           practices to attempt to achieve the Development
                           Workplan objectives efficiently and expeditiously.
                           CCSI and GE each shall proceed diligently with the
                           work set out in the Development Workplan by using
                           their respective good faith efforts to provide, among
                           others, the following resources: (a) allocation of
                           sufficient time, effort, equipment and facilities to
                           the Commercialization Program as each reasonably
                           believes is necessary carry out its obligations under
                           the Development Workplan and to accomplish the
                           objectives thereof; and (b) use of personnel with
                           sufficient skills and experience as are required to
                           carry out its obligations under the Development
                           Workplan and to accomplish the objectives thereof.

                  3.2.1.2. Subcontracts.  CCSI and GE each may subcontract
                           portions of the Commercialization Program to be
                           performed by it in the normal course of its business
                           without the prior consent of the other; provided,
                           however, that every subcontracted party shall enter
                           into a confidentiality agreement with the
                           subcontracting party in accordance with Article 10
                           below and each party shall be fully responsible for
                           any activities of its subcontractors under this
                           Agreement.

         3.1.3    Project Leaders.  CCSI and GE each shall appoint a person
                  (a "Project Leader") to coordinate its part of the
                  Commercialization Program. The Project Leaders shall be the
                  primary contacts between the parties with respect to the
                  Commercialization Program. Each party shall notify the

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                  other within thirty (30) days after the date of this Agreement
                  of the appointment of its Project Leader and shall notify the
                  other party as soon as practicable upon changing this
                  appointment. A Project Leader may be, but shall not be
                  required to be, a member of the Management Committee.

         3.1.4    Availability of Employees.  Each party shall make its
                  employees and relevant reports of nonemployee consultants
                  available, upon reasonable notice during normal business
                  hours, at each party's respective places of employment to
                  consult with the other party on issues arising during the
                  Commercialization Program and in connection with any request
                  from any regulatory agency, including regulatory, scientific,
                  and technical testing issues.

         3.1.5    Quarterly Reports.  GE and CCSI each shall keep the other
                  informed of the progress of such party's research and
                  development activities under the Development Workplan during
                  the Technology Development Phase. Within thirty (30) days
                  following the end of each quarter during the term of the
                  Commercialization Program, GE and CCSI shall each prepare, and
                  provide to the Management Committee, a written summary report
                  which shall describe the development activities performed for
                  by such party during such quarter. In addition, each party
                  shall respond informally to any reasonable inquiry from the
                  other party as to such progress and any other matters relevant
                  to the Commercialization Program.

3.2.     Commercialization Phase.  The second phase of the Commercialization
         Program shall be the Commercialization Phase, during which GE and CCSI
         will jointly pursue the Commercialization of the Products as developed
         during the Technology Development Phase. GE and CCSI will conduct their
         respective efforts in accordance with the Commercialization Plan
         attached hereto as Exhibit B, as such Commercialization Plan may be
         modified by the Management Committee under Section 5.1.3 below, Article
         7, and any other relevant terms of this Agreement.

                                   ARTICLE 4

                  FUNDING OF THE TECHNOLOGY DEVELOPMENT PHASE

4.1.     Joint Efforts to Obtain Funding.  GE and CCSI shall use best efforts
         to obtain, with respect to each Market Segment, funding from Third
         Parties equal to or greater than the Target Funding Amount established
         in the Yearly Development Budgets. GE shall determine from which Third
         Parties such funding shall be accepted, and upon what terms; provided
         any material adverse impact on CCSI is agreed to in advance by CCSI.

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4.2.     GE Required Expenditures.  If the parties are unable to obtain, with
         respect to any Market Segment, funding equal to or greater than the
         Target Funding Amount for such Market Segment on or before the date set
         forth in the applicable Yearly Development Budget, then GE will fund
         the Development Workplan in an amount equal to the difference between
         the Target Funding Amount and the funding actually obtained from Third
         Parties, not to exceed the following amounts (each, a "Maximum GE
         Required Expenditure") with respect to each Market Segment:

         Market Segment            Maximum GE Required Expenditure
         --------------            -------------------------------
         7E Market Segment         [*] in any 12-month period, each such 12
                                   month period starting on the annual
                                   anniversary of the Effective Date, not to
                                   exceed [*] in the aggregate over the term
                                   of this Agreement.

         7F Market Segment         [*] in any 12 month period, each such 12
                                   month period starting on the annual
                                   anniversary of the Effective Date, not to
                                   exceed [*] in the aggregate over the term
                                   of this Agreement.

         [*]                       [*]

4.3.     Failure to Obtain Target Funding.  In the event the aggregate amount
         raised by the parties from Third Parties and expended by GE pursuant to
         Sections 4.1 and 4.2 above with respect to any Market Segment is less
         than the Target Funding Amount for such Market Segment, then the
         Parties shall consider, in good faith, alternative funding arrangements
         which would provide an equitable sharing of risks and benefits in view
         of any Development Cost overruns, and shall in good faith pursue such
         alternative funding. In the event the parties are unable to obtain or
         agree on alternative funding, then each will have its termination
         rights under Section 13.2 below.

         In the event of a funding shortfall with respect to the [*] Market
         Segment, in addition to triggering termination rights under Section
         13.2 below, [*] Market Segment only.

4.4.     Funding Contributions by Customers of GE.  The parties acknowledge that
         the ability of the parties to obtain Commercialization Program funding
         from customers of GE stems from the existing relationship between such
         customers and GE and such customers' confidence in GE's ability to
         successfully pursue the Commercialization Program. Accordingly, any
         funding obtained from customers

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         of GE shall be deemed to be funding provided by GE (except that such
         customer funding shall not be counted toward the Maximum GE Required
         Contribution), and shall constitute a material part of the
         consideration being provided by GE for the performance of CCSI's
         obligations under this Agreement.

                                   ARTICLE 5

                  MANAGEMENT OF THE COMMERCIALIZATION PROGRAM

5.1.     Management Committee.

         5.1.1    Composition of the Management Committee.  The
                  Commercialization Program shall be conducted under the
                  direction of the Management Committee composed of two (2)
                  named representatives of CCSI and two (2) named
                  representatives of GE. The CCSI representatives to the
                  Management Committee shall consist of the CCSI Project Leader
                  and a Vice President of CCSI. The GE representatives to the
                  Management Committee shall consist of the GE Project Leader
                  and a General Manager of GE. Each party shall appoint its
                  respective representatives to the Management Committee from
                  time to time, and may substitute one or more of its
                  representatives, in its sole discretion, effective upon notice
                  to the other party of such change, provided the replacements
                  hold positions with the parties which are consistent with the
                  functional roles set forth above.

         5.1.2    Meetings.  The Management Committee shall meet at least
                  semiannually during the term of this Agreement, on such dates
                  and at such times and places as agreed to by CCSI and GE,
                  alternating between Mountain View, California and Schenectady,
                  New York, or such other locations as the parties shall agree.

         5.1.3    Committee Responsibilities.  The Management Committee is
                  responsible for ensuring efficient and effective management of
                  the Commercialization Program, including the establishment and
                  approval of the Development Workplan, the Yearly Development
                  Budgets and the Commercialization Plan. Any approval,
                  determination or other action agreed to by a majority of the
                  members of the Management Committee shall be the approval,
                  determination or other action of the Management Committee.

5.2.     Disagreements: Executive Committee.  Within thirty (30) days after any
         acknowledged deadlock, all disagreements within the Management
         Committee shall be submitted to the Executive Committee for resolution.
         GE's representative

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         to the Executive Committee shall be a functional vice president. CCSI's
         representative to the Executive Committee shall be the President of
         CCSI. Each party shall appoint its respective representatives to the
         Executive Committee from time to time, and may substitute its
         representatives, in its sole discretion, effective upon notice to the
         other party of such change, provided the replacement holds a position
         and title with the replacing party which is consistent with the
         functional role set forth above.

5.3.     Management Committee Reports.  Within thirty (30) days following each
         Management Committee meeting during the term of this Agreement, the
         Management Committee shall prepare and provide minutes to each party
         which shall include a reasonably detailed written summary report
         describing collaboration activities and plans as well as any committee
         decisions.

5.4.     Day-to-Day Control.  Each party shall have day-to-day control over its
         development and Commercialization activities, subject to compliance
         with the Development Workplan and the Commercialization Plan.

                                   ARTICLE 6

                 CONTRIBUTION OF TECHNOLOGY AND LICENSE RIGHTS

6.1.     Technology Transfer.  Promptly following the Effective Date and
         thereafter as such information becomes available, GE and CCSI each
         shall disclose to the other party all Technical Information in its
         possession that is relevant to the Commercialization Program, to the
         extent deemed necessary by the disclosing party, in its reasonable
         discretion, to enable the other party to perform its obligations and to
         conduct its activities contemplated by this Agreement.

6.2.     Licenses.

         6.2.1    License Under CCSI Technology.  As partial consideration for
                  GE's contribution to the Commercialization Program, CCSI
                  hereby grants to GE for the term of this Agreement a paid up,
                  worldwide license under all CCSI Technology:

                  (a)  to purchase the Products from CCSI for application to Gas
                       Turbines and the [*] and

                  (b)  To use, sell and offer to sell the Products for Gas
                       Turbines and the [*].

                  [*]

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         6.2.2    [*]

                  Furthermore, and in the alternative, GE may, in its sole
                  discretion (after giving due regard to CCSI's concerns), elect
                  to terminate the Incentive Term prior to its expiration date
                  by written notice to CCSI setting forth such expiration date,
                  and in such event, the length of the Additional Period shall
                  be increased on an equivalent basis to compensate GE for any
                  such reduction in the Incentive Term (such that the Additional
                  Period shall commence on the date of termination of the
                  Incentive Term and expire on the same date it would have
                  expired if the Incentive Term (including any modifications
                  pursuant to Sections 7.3, 7.4 and 7.5) had not been terminated
                  early). In addition, in a timely fashion after the Effective
                  Date, or from time to time thereafter as appropriate, CCSI and
                  GE shall consider in good faith other modifications of the
                  Incentive Term, including elimination of all or any part of
                  the Incentive Term in exchange for appropriate compensating
                  expansions of the Additional Term and a reconsideration of the
                  continuing existence or structure of Section 8.1 hereof.

                  [*]

         6.2.3    License Under XONON Trademark. CCSI hereby grants to GE for
                  the term of this Agreement, a royalty-free, non-exclusive,
                  worldwide license under CCSI's XONON trademark for GE's
                  marketing and sales activities related to the Products. In
                  this regard, GE agrees to market the XONON Modules and/or
                  XONON Components under CCSI's XONON trademark. This agreement
                  on the part of GE to use the XONON trademark does not require
                  GE to use the trademark directly on any gas turbine. In
                  connection with this trademark license, GE agrees that it will
                  submit samples of all XONON trademark usage to CCSI for
                  approval prior to use in GE advertising, promotion and/or
                  sales activities and that GE will promptly discontinue any
                  usage of the XONON trademark which CCSI specifically objects
                  to and so informs GE in writing in a timely manner.

         6.2.4    License for XONON Control Algorithms. CCSI hereby grants to GE
                  for the term of this Agreement, a non-exclusive, royalty-
                  bearing worldwide license (with rights to sub-license) to
                  copy, have copied, use, sublicense and offer to sub-license
                  the XONON Control Algorithm(s) for use with the Products
                  applied to Gas Turbines (including any gas turbines employed
                  in the [*] Market Segment), at a royalty of [*] for a paid up
                  license for each gas turbine sold incorporating a XONON
                  Control Algorithm, not to exceed total royalty payments of [*]
                  for a fully paid up,

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                  irrevocable, perpetual worldwide license (with right to
                  sublicense) for the XONON Algorithms.

         6.2.5    License for Sale of GE Components. CCSI hereby grants to GE
                  for the term of this Agreement, a non-exclusive, worldwide
                  license to make, have made, use, and sell and offer to sell GE
                  Components employing or otherwise based upon CCSI Background
                  Technology for incorporation into GE gas turbines and GE shall
                  pay CCSI a royalty of [*] per MW (ISO natural gas rating) for
                  each gas turbine sold by GE incorporating a XONON module and
                  GE Components irrespective of whether CCSI Background
                  Technology is actually used in such GE Components, [*] for any
                  individual gas turbine and a fully paid-up irrevocable,
                  perpetual worldwide license with a [*] for such license. In
                  connection with such license, CCSI shall provide to GE any and
                  all CCSI Background Technology in CCSI's possession relevant
                  to and useful in the design, manufacture and use of GE
                  Components, including, without limitation, the following: (i)
                  Computational Fluid Dynamics (CFD) models for analyzing and
                  designing aerodynamic mixers and preburners, flow fields and
                  flow paths to preclude recirculation zones; (ii) performance
                  test data on fuel/air mixers and preburners; (iii) fuel/air
                  mixers and preburner designs; and (iv) technical information,
                  art, knowledge and training to use CCSI Background Technology.

6.3.     GE Audit Rights. In the event CCSI elects to compensate GE under option
         (b) set forth in paragraph 6.2.2 [*] during the term of this Agreement.
         Such books and records shall be subject to inspection by an independent
         auditor acceptable to CCSI at reasonable times, but not more frequently
         than once every twelve months, for the purpose of verifying the
         accuracy of [*] under the aforesaid Section 6.2.2. The fees and
         expenses of the auditor performing such an examination shall be borne
         by GE. These books and records shall be preserved for at least two (2)
         years from [*] Further, if the independent audit reveals to GE that
         CCSI has [*] as required in Section 6.2.2 then CCSI shall promptly [*]
         or, b) if CCSI in good faith disagrees with the independent auditor's
         report, immediately request binding arbitration solely on the issue of
         [*] as reported by GE's independent auditor. Within thirty (30) days
         after any written request by CCSI for arbitration on the [*], CCSI and
         GE shall agree on an independent expert arbitrator to review all of the
         relevant evidence including the GE auditor's report and render a
         decision on the correctness of [*] reported by the independent auditor.
         The site of arbitration shall be New York, NY, unless otherwise agreed.
         Both parties shall use all reasonable efforts to select the independent
         arbitrator and complete the arbitration within sixty (60) days after
         GE's written notice of [*] as set forth above. The decision of the
         independent expert arbitrator shall be final and binding, and the party
         found to

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         be in error shall pay all of the costs of the independent arbitrator in
         reaching his/her decision. In the event CCSI is found to be in error
         and CCSI does not immediately compensate GE for [*] as set forth above,
         or if CCSI does not immediately [*] GE shall have the immediate right
         to terminate for cause as set forth in Sections 13.1 and 13.4 below [*]

                                   ARTICLE 7

                               COMMERCIALIZATION

The Commercialization of the Products shall be subject to the Commercialization
Plan attached hereto as Exhibit B and the provisions of this Article 7.

7.1.     Supply Agreement. During the Incentive Term and during the Additional
         Period provided in this Article 7, CCSI shall supply all of GE's
         requirements for the Products for incorporation into Gas Turbines,
         provided that CCSI can meet GE's quality, quantity and schedule
         requirements, pursuant to the Purchase Terms and Conditions set forth
         in Exhibit C. During this period, GE reserves the right to engage in
         Pre-commercial Activities with Third Parties regarding catalytic
         combustion systems for use on any GE gas turbine, provided CCSI shall
         have the right to treat any purchase or accepted written offer to
         purchase by GE of catalytic combustion systems for heavy duty gas
         turbines from a Third Party or other obtaining by GE, through license
         or otherwise, of catalytic combustion systems for such heavy duty gas
         turbines during the Incentive Term, as a material breach of this
         Agreement, triggering CCSI's rights under Sections 8.1, 13.1.3 and 13.3
         hereof.

7.2.     Purchase Terms. All GE purchases from CCSI of the Products shall be
         subject to the Purchase Terms and Conditions as set forth on Exhibit C.

         7.2.1    [*]

         7.2.2    In any event and as further consideration for GE's
                  contribution to the Commercialization Program, to the extent
                  GE procures all of its requirements for Gas Turbine catalytic
                  combustion systems from CCSI, [*]

         7.2.3    To assist CCSI in planning its manufacturing activities, GE
                  shall promptly provide CCSI with its best estimate of its
                  requirements for goods over the next annualized or consecutive
                  twelve (12) month period broken down by one (1) month periods.
                  Further GE shall update this twelve (12) month estimate on a
                  calendar quarter basis, such that CCSI

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                  receives a revised estimate of GE's requirements for the goods
                  for the next four (4) calendar quarters. If GE places any firm
                  orders which exceeds by more than fifty percent (50%) the
                  rolling twelve (12) month estimates, CCSI shall use all
                  reasonable efforts to fill such order but shall not be in
                  breach for failure to do so unless GE gives CCSI at least six
                  months written notice of the revised estimate.

         7.2.4    For the purposes of Article 7 of Exhibit C, Terms & Conditions
                  of Purchase, GE and CCSI shall agree upon CCSI's process and
                  control system and such agreed upon system shall be deemed
                  acceptable to GE for purposes of Article 7 of Exhibit C, Terms
                  & Conditions of Purchase.

7.3.     Extension of the Incentive Term - Year 2003 Deliveries. If, on or
         before January 1, 2002, GE commits in writing to purchase XONON Modules
         for delivery in calendar year 2003 in the following quantities, the
         Incentive Term for Gas Turbines only shall be extended as follows:

         (a)      A commitment to purchase XONON Modules for at least [*] of the
                  Gas Turbines shipped by GE during calendar year [*] (excluding
                  Gas Turbines shipped during such time period for which the
                  customers do not require a Selective Catalytic Reduction Unit
                  (SCR) or equivalent NOx control systems) shall result in an
                  extension of the Incentive Term through December 31, [*].

         (b)      A commitment to purchase XONON Modules for either:

                  (1)      at least [*] of the Gas Turbines shipped by GE during
                           calendar year [*] (excluding Gas Turbines shipped
                           during such period for which the customers do not
                           require SCR or equivalent NOx control systems); or

                  (2)      at least [*] of all Gas Turbines shipped by GE during
                           calendar year [*]; shall result in an extension of
                           the Incentive Term through December 31, [*]

7.4.     Extension of the Incentive Term - Year [*] Deliveries. If GE commits in
         writing on or before January 1, [*] to purchase XONON Modules for
         delivery in calendar year [*] of the Gas Turbines shipped by GE during
         the calendar year [*] (excluding Gas Turbines shipped for which the
         customers do not require SCR or equivalent NOx control systems), or six
         (6) such Gas Turbines (whichever is greater), then the Incentive Term
         shall be extended by one (1) year, over and above any extension
         provided for in Section 7.3 above.

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OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

7.5.     Reduction of Incentive Term. If GE fails, through no fault of CCSI, to
         [*] as set forth in the Commercialization Plan attached hereto as
         Exhibit B, then the Incentive Term for each Market Segment (excluding
         the [*] Market Segment, if funding from [*] or other Third Party
         funding to fully fund the [*] Program cannot be obtained in timely
         fashion) shall be reduced as follows:

         Delay in Meeting Target Dates:         Reduction in the Incentive Term:

         [*]                                    [*]
         [*]                                    [*]
         [*]                                    [*]
         [*]                                    [*]

         On the other hand, if the target dates for first Gas Turbine firings
         are not met because of CCSI's fault, or if CCSI is unable to commit to
         the deliveries contemplated by Sections 7.3 and 7.4 in quantities that
         would extend the Incentive Term due to XONON Module technical, quality
         or delivery reasons, then GE and CCSI will consider in good faith a
         revised schedule for extension of the Incentive Term that would provide
         GE with the benefits contemplated in Sections 7.3 and 7.4.

7.6.     Purchase of Products for Application to Smaller Turbines. As further
         consideration for GE's contribution to the Commercialization Program,
         GE shall have the right to purchase from CCSI, on a non-exclusive basis
         (but exclusive as to GE designed gas turbines), Products for
         application to GE designed and manufactured gas turbines in the 2 to
         70MW size range, and to use, sell and offer to sell Products for such
         applications, subject to reasonable purchase terms and conditions to be
         negotiated at the time, but in any event at [*].

7.7.     Alternative Products Source. If CCSI is unable to consistently meet
         GE's requirements for Products from a quality, quantity or delivery
         standpoint, CCSI shall promptly establish a second source of supply (as
         a vendor to CCSI) with a Third Party manufacturer designated by CCSI
         and approved by GE (which approval shall not be unreasonably withheld),
         solely for the purpose of satisfying CCSI's obligations to supply
         Products to GE under this Agreement.

                                   ARTICLE 8

                                   ROYALTIES

8.1.     Royalties Upon Certain Terminations. In the event of a termination of
         this Agreement by CCSI under Section 13.1, or 13.2 subparagraph
         b)including, in each case, any termination by individual Market Segment
         under Section 13.6, and

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         subject to any surviving terms of this Agreement, if GE elects
         thereafter to continue to sell and offer to sell Products to new
         customers, with respect to any such Market Segment, then CCSI shall
         grant to GE a non-exclusive, royalty-bearing, irrevocable, worldwide
         license under CCSI's Commercialization Program Technology, CCSI's
         Background Technology and XONON Control Algorithms to sell and offer to
         sell Products and sublicense XONON Control Algorithms, and GE shall pay
         to CCSI fees and royalties with respect to such Market Segment, payable
         in the form of (a) a one-time fee in the amount set forth below,
         payable upon the first sale of a gas turbine incorporating such Product
         in such Market Segment; and (b) a royalty in the amount set forth below
         for each subsequent sale of a gas turbine incorporating such Product
         [*].

         Market Segment        [*]            One-Time Fee      Royalty Per Sale

         7F                    [*]                 [*]                 [*]
         7E                    [*]                 [*]                 [*]
         [*]                   [*]                 [*]                 [*]

8.2.     Royalties on XONON Control Algorithms. If GE sublicenses the XONON
         Control Algorithms in connection with its sales of Gas Turbines
         incorporating the Products, then GE shall pay to CCSI the royalty
         provided in Section 6.2.4.

8.3.     Royalties on Sale of GE Components Employing CCSI Technology. If GE
         sells or leases GE gas turbines incorporating a XONON Module and GE
         Components, GE shall pay to CCSI the royalty provided in Section 6.2.5.

8.4.     Royalty Accrual. For purposes of royalty payments hereunder, GE Gas
         Turbines or GE Components shall be considered sold when title is
         transferred to a Third Party, or upon lease execution if leased to a
         Third Party.

8.5.     Royalty Payment. Any and all royalties accruing to CCSI under this
         Agreement, shall be paid by GE within forty-five (45) days following
         the end of each quarter year period of the calendar year during which
         the royalties have accrued. In this regard, all monies due as royalty
         payments under this Agreement shall be payable in the United States
         funds collectible at par in San Francisco, California.

8.6.     Royalty Accounting. GE shall within forty-five (45) days after the end
         of each quarter year during which royalties are due under this
         Agreement forward to CCSI a written statement showing the quantities of
         royalty bearing GE Gas Turbine(s) or GE Components which have been sold
         (in U.S. dollars) during each quarter year of this Agreement and a
         computation of royalties payable thereon and shall accompany each
         statement by payment of the amount due. If no sales of such

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         royalty bearing Gas Turbines or Component has been made during any
         reporting period, a statement to this effect shall be required.

8.7.     Royalty Records & Audits. GE shall use its best efforts to keep books
         and records accurately showing all GE gas turbines and/or GE Components
         sold or leased by it and subject to royalties under the terms of this
         Agreement. Such books and records shall be open to inspection by an
         independent auditor acceptable to GE at reasonable times, but not more
         frequently than once every twelve months, for the purpose of verifying
         the accuracy of the quarterly reports and the royalties due. The fees
         and expenses of the auditor performing such an examination shall be
         borne by CCSI. These books and records shall be preserved for at least
         two (2) years from the date of the royalty payment to which they
         pertain.

                                   ARTICLE 9

                            PATENT INFRINGEMENT AND
                     TECHNOLOGY RIGHTS ENFORCEMENT ACTIONS

9.1.     CCSI Indemnification. CCSI shall indemnify and hold GE, its Affiliates,
         customers and sublicensees harmless, and hereby forever releases and
         discharges GE, its Affiliates, customers, and sublicensees, from and
         against all liabilities, damages and expenses, including attorneys' and
         experts' fees and costs, arising out of any claim of patent or
         copyright infringement brought by a Third Party because of the
         manufacture, use or sale of, or offer to sell, any Product supplied by
         CCSI to GE, its Affiliates, customers or sublicensees, provided such
         use is in accordance with Product or XONON Control Algorithm
         specifications and CCSI is notified promptly of receipt of the Third
         Party claim and CCSI is given full control of any defense against such
         claim. If as a result of the claim, the use by GE of the Product or
         XONON Control Algorithm is enjoined, then CCSI shall at its option (i)
         obtain the appropriate license from the Third Party claimant to enable
         GE and its customers to continue such Product or XONON Control
         Algorithm use, (ii) modify the Product or XONON Control Algorithm so
         that it no longer is infringing, but still satisfies agreed upon
         performance specifications, or (iii) replace the Product or XONON
         Control Algorithm with a non-infringing Product or XONON Control
         Algorithm which satisfies agreed upon performance specifications. In
         the event CCSI is unable to eliminate the infringement by any of the
         aforementioned measures, then CCSI and GE shall meet and agree on
         possible alternatives which, as a last resort, shall include CCSI
         taking back any infringing Product or XONON Control Algorithm and
         refunding the purchase price for such Product or XONON Control
         Algorithm, subject to GE's agreement which shall not be unreasonably
         withheld.

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OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

9.2.     GE Patent Indemnification. GE shall indemnify and hold CCSI and its
         Affiliates harmless and forever releases and discharges CCSI and its
         Affiliates from and against all liabilities, damages and expenses,
         including attorney's and experts fees and costs arising out of any
         claim of patent infringement brought by a Third Party because of the
         manufacture, use or sale of, or offer to sell, any GE Components
         incorporating Technology licensed by CCSI to GE under Section 6.2.5
         hereof (other than claims based solely on Products supplied by CCSI) by
         GE, its Affiliates, customers or sublicensees, provided CCSI notifies
         GE promptly of receipt of the Third Party claim and GE is given full
         control of any defense against such claim.

9.3.     Enforcement of Patents and Other Technology Rights. CCSI shall, at its
         sole expense, use its best efforts to enforce CCSI owned Patents and
         other Technology rights relating to any Products purchased by GE
         against any infringement of such Patents or unauthorized use or
         misappropriation of such Technology rights by a Third Party of which
         CCSI becomes aware. GE shall promptly notify CCSI if GE becomes aware
         of any such infringement or Technology misappropriation. In the event
         such action includes the bringing of a suit against such Third Party,
         GE shall provide such assistance as CCSI shall reasonably request,
         provided that CCSI shall reimburse GE for all reasonable expenses
         thereby incurred. All costs and expenses, including attorney's fees of
         any lawsuit instituted by CCSI shall be born by CCSI. The amount of
         recovery paid to CCSI shall belong to and be the sole property of CCSI.

                                  ARTICLE 10

                                CONFIDENTIALITY

10.1.    Nondisclosure and Use Obligations. Except as otherwise provided in this
         Article 10, during the term of this Agreement and for a period of ten
         (10) years thereafter, all information of a confidential nature
         disclosed pursuant to this Agreement by one party to another and, in
         the case of documents, designated by the disclosing party by an
         appropriate stemp, marking or legend as being confidential to the
         disclosing party shall be used by the receiving party only for the
         purposes of this Agreement and shall be maintained as confidential by
         the receiving party, using the same safeguards as it uses to protect
         its own confidential information of a similar character. The receiving
         party will not publish or disclose to Third Parties any such received
         information of a confidential nature without the prior express written
         consent of the disclosing party. The foregoing obligations on use and
         disclosure of confidential information shall not apply to any
         information which:

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         (a)      is shown by objective evidence to be already in the possession
                  of the receiving party at the time of first receipt from the
                  disclosing party; or

         (b)      is shown by objective evidence to be developed independently
                  by employees of the receiving party who had not had access to
                  the confidential information; or

         (c)      is or becomes part of the public domain without breach of this
                  Agreement by the receiving party; or

         (d)      is made available by the disclosing party to a third party
                  without like obligations on disclosure; or

         (e)      is rightfully obtained by the receiving party from third
                  person without restriction or breach of this Agreement by the
                  receiving party; or

         (f)      in the case of documents, is not designated by an appropriate
                  stamp, marking or legend as being confidential to the
                  disclosing party at the time of disclosure.

         Oral information disclosed by one party to the other shall be confirmed
         as confidential by a written summary to be submitted by the disclosing
         party to the receiving party within ten (10) days after the oral
         transmission thereof. For purposes of this Article 10, information and
         data described above shall be referred to as "Information".

10.2.    Permitted Disclosures. To the extent it is reasonably necessary or
         appropriate to fulfill its obligations or exercise its rights under
         this Agreement, (a) a party may disclose Information it is otherwise
         obligated under this Article 10 not to disclose to its directors,
         officers, employees, attorneys, accountants, consultants and
         sublicensees, on a need-to-know basis on the condition that such
         Persons agree to keep the Information confidential for the same time
         periods and to the same extent as such party is required to keep the
         Information confidential; (b) a party may disclose Information,
         described in Section 10.1 above, that it is otherwise obligated under
         this Article 10 not to disclose to its Affiliates and outside
         contractors, on a need-to-know basis on the condition that such Persons
         agree to keep the Information confidential for the same time periods
         and to the same extent as such party is required to keep the
         information confidential; and (c) a party may disclose such Information
         to government or other regulatory authorities to the extent that such
         disclosure is required by applicable law, regulation or court order, or
         is reasonably necessary to obtain patents and to commercially market
         the Products, provided that the disclosing party shall provide written
         notice to the

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         other party and sufficient opportunity to object to such disclosure or
         to request confidential treatment thereof.

10.3.    Terms of this Agreement. CCSI and GE shall not disclose any terms or
         conditions of this Agreement to any Third Party without the prior
         consent of the other party, except as required by applicable law.

                                  ARTICLE 11

                                  PUBLICATION

11.1.    Notice of Publication. During the term of this Agreement, CCSI and GE
         each acknowledge the other party's interest in publishing certain of
         its results to obtain recognition within the scientific and investment
         communities and to advance the state of scientific knowledge. Each
         party also recognizes the mutual interest in obtaining valid patent
         protection and protecting business interests. Consequently, either
         party, its employees or consultants wishing to make a publication
         (including any oral disclosure made without obligation of
         confidentiality) relating to work performed by such party as part of
         the Commercialization Program (the "Publishing Party") shall transmit
         to the other party (the "Reviewing Party") a copy of the proposed
         written publication at least forty-five (45) days prior to submission
         for publication, or an outline of such oral disclosure at least fifteen
         (15) days prior to presentation. The Reviewing Party shall have the
         right (a) to propose modifications to the publication for patent
         reasons or to protect or delete proprietary information, and (b) to
         request a reasonable delay in publication in order to protect
         patentable or proprietary information.

11.2.    Timing of Publication. If the Reviewing Party requests such a delay,
         the Publishing Party shall delay submission or presentation of the
         publication for a period of ninety (90) days to enable patent
         applications protecting each party's rights in such information to be
         filed. Upon the expiry of forty-five (45) days, in the case of proposed
         written disclosures, or fifteen (15) days, in the case of proposed oral
         disclosures, from transmission to the Reviewing Party, the Publishing
         Party shall be free to proceed with the written publication or the
         presentation, respectively, unless the Reviewing Party has requested
         the delay described above.

11.3.    Disclosure Regarding Agreement. Neither party shall make a press
         release or other public disclosure of the fact that this Agreement has
         been entered into or any details of its terms without the other party's
         prior consent, unless such disclosure is required, on the advice of
         counsel, to comply with any local, state or federal law

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         or regulation, in which case disclosure can be made upon prior written
         notice to the other party.

                                  ARTICLE 12

                         TECHNOLOGY AND PATENT RIGHTS

12.1.    Ownership of Background Technology. The entire right, title and
         interest in all Background Technology shall be retained by the party
         owning it. To the extent a party is granted any right to use Background
         Technology under this Agreement, the use of such Background Technology
         shall be limited to the express purposes of this Agreement.

12.2.    Ownership of Commercialization Program Technology. The entire right,
         title and interest in all Commercialization Program Technology (a)
         conceived by employees or others acting solely on behalf of CCSI or its
         Affiliates shall be owned solely by CCSI, (b) conceived by employees or
         others acting solely on behalf of GE or its Affiliates shall be owned
         solely by GE. Inventions conceived during the term of this Agreement by
         employees of CCSI and GE, or their respective Affiliates, shall be
         owned jointly by CCSI and GE based on employees or agents of both
         parties being named as inventors in accordance with laws of
         inventorship of the United States (the "Jointly Owned Technology").
         Such ownership rights of each party with respect to the Technology are
         subject to the licenses granted under Article 6 above and this Article
         12. CCSI and GE each hereby represents that all employees performing
         its obligations under this Agreement shall be obligated under a binding
         written agreement to assign to it, or as it shall direct, all
         Technology conceived by such employees.

12.3.    Commercialization Program Technology Cross-Licenses.

         12.3.1   GE License. In the event GE conceives inventions or exchanges
                  Technical Information comprising improvements and/or
                  modifications to the XONON Module during the period of ten
                  (10) years following the Effective Date of this Agreement
                  and/or if GE conceives, by means of GE employees who had
                  access to CCSI Technology, any invention comprising an
                  improvement or modification to the XONON Module or develops
                  Technology which is derived from CCSI owned Technology, during
                  such period, then GE shall grant to CCSI a non-exclusive
                  royalty-free, perpetual, world-wide, irrevocable license (with
                  unrestricted rights to sublicense) to make, have made, use,
                  sell, lease and/or export Products under both the aforesaid
                  Technical Information and any Patents which result from the
                  aforesaid inventions; said non-exclusive license being

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                  restricted in field-of-use to Products for gas turbines
                  employing catalytic combustion, other than aircraft gas
                  turbines of the type manufactured by GE Aircraft Engines.

         12.3.2   CCSI License. In the event CCSI conceives inventions or
                  exchanges Technical Information comprising improvements and/or
                  modifications to the XONON Components or GE Components or any
                  other portion of the combustion system (excluding the XONON
                  Module) during the period of ten (10) years following the
                  Effective Date of this Agreement and/or if CCSI conceives, by
                  means of CCSI employees who had access to GE Technology, any
                  invention relating to the aforesaid XONON Components or GE
                  Components or any other portion of the combustion system or
                  develops Technology which is derived from GE owned Technology,
                  during such period, then CCSI shall grant to GE a non-
                  exclusive royalty-free, perpetual, world-wide, irrevocable
                  license (with unrestricted right to sublicense) to make, have,
                  made, use, sell, lease and/or export XONON Components, GE
                  Components, and any other portion of the combustion system
                  (excluding the XONON Module) under both the aforesaid
                  Technical Information and any Patents which result from the
                  aforesaid inventions, said non-exclusive license being
                  restricted in field-of-use to gas turbines employing catalytic
                  combustion.

12.4.    Patent Filing Procedure. In all cases, the inventing party shall retain
         the sole right to determine whether or not Patent applications will be
         filed, and whether Patents and Patent applications will be maintained,
         on any such inventions which are conceived by its employees. With
         regard to inventions conceived jointly by both parties during work
         under this Agreement and Patents arising from such joint inventions
         which shall be the joint property of GE and CCSI, each party shall be
         free to utilize the same and to license third parties of its own
         choosing thereunder without consultation with the other party, and
         without an accounting or sharing of licensing income thereby received,
         if any. The parties agree to select mutually acceptable Patent
         attorneys to file and prosecute Patent applications based on such joint
         patentable inventions and to share equally the cost of such services
         and expenses reasonably incurred by such attorneys, including the
         payment of Patent maintenance fees, and without further compensation,
         to give such attorneys all reasonable assistance, to cause all
         necessary papers to be executed and do all things that may reasonably
         be required to obtain and maintain Patents on such joint inventions.
         Each party shall be kept fully advised of the status of the prosecution
         of each such Patent application and shall be consulted in advance with
         respect to the advisability of continuing said prosecution in the event
         of any final rejection, appeal, interference, or the like, and each
         party may, at any time by ten (10) days' notice to the other party,
         elect not to continue to pays its share of such

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         services and expenses incurred after the date of said election with
         respect to any such Patent or Patent application; provided, however,
         that the party making such election shall, at the time of so notifying
         the other party, immediately assign to the other party all rights to
         the Patent or Patent application with respect to which the election is
         being made. Neither party hereto shall be obligated to make any
         payments for or on account of proceedings before any court or any other
         tribunal or agency in connection with the maintenance or assertion of
         any Patents based on joint inventions.

12.5.    No Other Technology Rights. Except as otherwise provided in this
         Agreement, under no circumstances shall a party, as a result of this
         Agreement, obtain any ownership interest or other right in any
         technology, know-how, patents, pending patent applications or products
         of the other party, including items owned, controlled or developed by
         the other, or transferred by the other to such party at any time
         pursuant to this Agreement.

                                  ARTICLE 13

                                  TERMINATION

13.1.    Termination for Cause. Either party may terminate this Agreement for
         cause upon the occurrence of any of the following:

         13.1.1   The other party shall (a) seek the liquidation,
                  reorganization, dissolution or winding up of itself (other
                  than dissolution or winding up for the purposes of
                  reconstruction or amalgamation) or the composition or
                  readjustment of all or substantially all of its debts, (b)
                  apply for or consent to the appointment of, or the taking of
                  possession by, a receiver, custodian, trustee or liquidator of
                  itself or substantially all of its assets, (c) make a general
                  assignment for the benefit of its creditors, (d) commence a
                  voluntary case under the Bankruptcy Code, (e) file a petition
                  seeking to take advantage of any other law relating to
                  bankruptcy, insolvency, reorganization, winding-up or
                  composition or readjustment of debts, or (f) adopt any
                  resolution of its Board of Directors or stockholders for the
                  purpose of effecting any of the foregoing; or

         13.1.2   A proceeding or case shall be commenced without the
                  application or consent of the other party and such proceeding
                  or case shall continue undismissed, or an order, judgment or
                  decree approving or ordering any of the following shall be
                  entered and continue unstayed in effect, for a period of
                  ninety (90) days from and after the date service of process is
                  effected upon the other party, seeking (a) its liquidation,
                  reorganization,

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                  dissolution or winding up, or the composition or readjustment
                  of all or substantially all of its debts, (b) the appointment
                  of a trustee, receiver, custodian, liquidator or the like of
                  itself or of all or substantially all of its assets, or (c)
                  similar relief under any law relating to bankruptcy,
                  insolvency, reorganization, winding up or composition or
                  readjustment of debts; or

         13.1.3   Except as otherwise provided in Article 15 below, upon or
                  after the breach of any material provision of this Agreement,
                  if the breaching party has not cured such breach within ninety
                  (90) days after notice thereof from the other party, this
                  Agreement shall terminate for cause, at the option of the
                  other party, upon the expiration of such ninety (90) day cure
                  period. Notwithstanding the foregoing, GE shall have the right
                  to terminate this Agreement for cause upon thirty (30) days
                  notice if GE has terminated any three (3) purchase orders due
                  to CCSI material default in performing those purchase orders
                  during any twelve (12) month period.

                  In addition, GE may terminate this Agreement for cause in
                  accordance with Article 16 due to an assignment of this
                  Agreement, or a transfer of control of CCSI, to a Competing
                  Manufacturer.

         13.1.4   In the event that either GE or CCSI elects to terminate this
                  Agreement under the provisions of this Section 13.1 or Section
                  13.2, the other party shall have the right, within thirty (30)
                  days of receipt of a termination notice, to request binding
                  arbitration on the issue. In such event, CCSI and GE shall
                  agree on an independent arbitrator to review the relevant
                  evidence and render a decision on whether termination is
                  justified under the circumstances. The site of arbitration
                  shall be New York, NY if requested by CCSI and in San
                  Francisco, CA if requested by GE, unless otherwise agreed.
                  Both parties shall use all reasonable efforts to select the
                  independent arbitrator and complete the arbitration within
                  sixty (60) days after the notice of request for arbitration.
                  The decision of the arbitrator shall be final and binding, and
                  the non-prevailing party shall pay all of the costs of the
                  arbitrator. If arbitration is requested hereunder, in no event
                  shall any remedies provided in this Agreement and triggered by
                  default under this Section 13.1 be implemented until after the
                  decision of the arbitrator has been rendered.

13.2.    Termination Without Cause. Either party shall have the unilateral right
         to terminate this Agreement by giving written notice to the other party
         (a) at any time, if the parties are unable, after best efforts, to
         raise funds from Third Parties within a Market Segment in at least an
         amount equal to the difference between

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         (i) the Target Funding Amount for such Market Segment, and (ii) the
         Maximum GE Required Contribution for such Market Segment, excluding the
         Syntroleum Market Segment, or (b) after the end of the Initial Term,
         upon the terminating party's written notice to the other party of
         significant technical issues which indicate that the technical
         objectives of the Commercialization Program are not achievable or
         cannot be achieved within the timetable established in the Development
         Workplan or any extension thereof agreed to by the parties; with GE
         having the right to terminate under (b) above only if the technical
         issues relate to the XONON Module or XONON Components, and CCSI having
         the right to terminate under (b) above only if the technical issues
         relate to the GE Components.

13.3.    Consequences of Termination -- CCSI Not in Default. In the event this
         Agreement is terminated by GE under Section 13.2, or by CCSI under
         Section 13.1: (a) CCSI shall have no obligation to make improvements to
         the XONON Combustion System available to GE beyond those developed in
         the Commercialization Program prior to such termination; (b) GE's
         licenses under CCSI Technology pursuant to Section 6.2.1 shall [*], and
         (e) if GE elects to pursue its options under Section 8.1, GE shall pay
         CCSI the predetermined royalty or fee as provided therein.

13.4.    Consequences of Termination -- GE Not in Default. In the event this
         Agreement is terminated by CCSI under Section 13.2, or by GE under
         Section 13.1: (a) GE's licenses under CCSI Technology pursuant to
         Article 6 shall continue in effect and CCSI shall promptly arrange with
         GE for a Third Party source of supply (as a vendor to CCSI) of the
         XONON Combustion System using the procedure set forth in Section 7.7
         above which assures GE of a continuing and uninterrupted source of
         supply for the XONON Modules and/or XONON Components, and [*]. Further,
         if GE terminates under Section 6.3 above because of failure on the part
         of CCSI to pay [*], CCSI shall immediately set up and license, at
         CCSI's cost, a Third Party source of Product under the procedure set
         forth in Section 7.7 above except in this case the Third Party shall be
         a vendor to GE, provided the Third Party license is limited to
         manufacture and sale of Products solely to GE at the Discount Price and
         not to Third Parties. In the event the Third Party source of supply
         established above under clause (a) as a vendor to CCSI fails to supply
         GE with Product in a timely fashion pursuant to this Agreement, then GE
         shall, upon written notice to CCSI, also have the right to have a Third
         Party Product vendor to GE established pursuant to the procedure set
         forth in the preceding sentence.

13.5.    Effect of Termination. Termination of this Agreement shall not relieve
         the parties of any obligation accruing prior to such termination. The
         provisions of Sections 9.1, 9.2 and this 13.5, and Articles 10
         [Confidentiality], 11 [Publication],

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         12 [Technology and Patent Rights] and 14 [Indemnity], in addition to
         those rights and obligations specifically noted in Section 13.3 or
         13.4, to the extent applicable, shall survive the termination of this
         Agreement. Each party shall bear its own termination costs. There will
         be no liquidated damages.

13.6.    Termination by Market Segment. Any right to terminate this Agreement
         under this Article 13 may, at the election of the party seeking to
         terminate, be exercised as to one or more individual Market Segments as
         specified in such party's written notice of termination. In such event,
         this Agreement shall continue in full force an effect with respect to
         the remaining Market Segments.

                                  ARTICLE 14

                                   INDEMNITY

14.1.    Direct Indemnity. Each party shall indemnify and hold the other party,
         its Affiliates and sublicensees harmless, and hereby forever releases
         and discharges the other party, its Affiliates and sublicensees, from
         and against all claims demands, liabilities, damages and expenses,
         including attorneys fees and costs (all "Liabilities") arising out of
         any breach of a representation or warranty contained in Section 2
         hereof, negligence, recklessness or intentional wrongful acts or
         omissions of the indemnifying party, its Affiliates or sublicensees in
         connection with the work performed by such party during the term of
         this Agreement except in each case to the extent such Liabilities
         resulted from negligence, recklessness or intentional wrongful acts or
         omissions of the other party. Neither party shall be liable to the
         other for any indirect, incidental or consequential damages arising out
         of any terms or conditions in this Agreement or with respect to the
         performance thereof.

14.2.    Procedure. A party (the "Indemnitee") that intends to claim
         indemnification under this Article 14 shall promptly notify the other
         party (the "Indemnitor") of any Liability or action in respect of which
         the Indemnitor or any of its Affiliates intend to claim such
         indemnification, and the Indemnitor shall have the right to participate
         in, and, to the extent the Indemnitor so desires, jointly with any
         other Indemnitor similarly noticed, to assume the defense thereof with
         counsel selected by the Indemnitor. The indemnity obligations under
         this Article 14 shall not apply to amounts paid in settlement of any
         loss, claim, damage, liability or action if such settlement is effected
         without the consent of the Indemnitor, which consent shall not be
         withheld unreasonably. The failure to deliver notice to the Indemnitor
         within a reasonable time after the commencement of any such action, if
         materially prejudicial to its ability to defend such action, shall
         relieve such Indemnitor of any liability to the Indemnitee under this
         Article 14, but the omission so to deliver

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         notice to the Indemnitor will not relieve it of any liability that it
         may have to any Indemnitee otherwise than under this Article 14. The
         Indemnitor may not settle the action or otherwise consent to an adverse
         judgment in such action that diminishes the rights or interests of the
         Indemnitee without the express written consent of the Indemnitee. The
         Indemnitee, its employees and agents, shall cooperate fully with the
         Indemnitor and its legal representatives in the investigation of any
         action, claim or liability covered by this indemnification at
         Indemnitor' s expense.

                                  ARTICLE 15

                                EXCUSABLE DELAY

Neither party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached this Agreement for failure or delay
in fulfilling or performing any term of this Agreement to the extent, and for so
long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including but not limited to fire,
floods, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party. The foregoing shall be subject to the
delayed party using reasonable efforts to mitigate the adverse consequences of
such delay.

                                  ARTICLE 16

                                  ASSIGNMENT

This Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligations be assigned or
transferred by either party without the consent of the other party; provided
further, however that (i) each party may assign its rights and interests, and
delegate its obligations, hereunder, effective upon written notice thereof, to
any Affiliate, and (ii) either party may assign its rights and interests, and
delegate its obligations, hereunder, effective upon written notice thereof, to
any Third Party which acquires all or substantially all of the assets of CCSI or
GE, as the case may be, or which is the surviving third party in a merger or
consolidation with CCSI or GE as the case may be, if such Third Party assumes
all of the obligations of CCSI or GE, as the case may be, hereunder. Subject to
the foregoing, any reference to CCSI or GE hereunder shall be deemed to include
the successors thereto and assigns thereof. Notwithstanding anything to the
contrary contained in this Article 16, if, without GE's prior written consent,
either (a) CCSI assigns or otherwise transfers its rights and interests under
this Agreement to any Competing Manufacturer (defined below) including any
transfer by merger or asset sale; or (b) any Competing Manufacturer purchases or

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

otherwise obtains a controlling ownership interest (defined as 50% or more
ownership interest) in CCSI; then this Agreement shall terminate upon GE's
election and written notice thereof to CCSI, and such termination shall be
deemed a termination for cause under Section 13.1, resulting in the consequences
to the parties described in Section 13.4. For the purposes of this Agreement,
"Competing Manufacturers" shall mean only companies that design, manufacture and
sell gas turbines of greater than 2 MW for power generation or mechanical drive
applications. Further, in the event the assignment or transfer of rights under
clause a) above or the sale or transfer of controlling interest under clause b)
above are to a company (other than a Competing Manufacturer) that designs,
manufactures and sells gas turbines of greater than 2 but less than 70MW for
power generation or mechanical drive applications (herein "Other Turbine
Manufacturer") then the Parties hereby agree that GE has the right after good
faith consideration of any CCSI concerns, to Terminate under Section 13.1 with
consequences set forth in Section 13.4. Notwithstanding the foregoing, GE may
assign its rights and obligations with respect to intellectual property to GE
Power Systems Licensing, Inc., a wholly-owned subsidiary of GE.

                                  ARTICLE 17

                                 SEVERABILITY

Each party hereby acknowledges that it does not intend to violate any public
policy, statutory or common laws, rules, regulations, treaty or decision of any
government agency or executive body thereof of any country or community or
association of countries. Should one or more provisions of this Agreement be or
become invalid, the parties shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their economic
effect are sufficiently similar to the invalid provisions that it can be
reasonably assumed that the parties would have entered into this Agreement with
such provisions. In case such provisions cannot be agreed upon, the invalidity
of one or several provisions of this Agreement shall not affect the validity of
this Agreement as a whole, unless the invalid provisions are of such essential
importance to this Agreement that it is to be reasonably assumed that the
parties would not have entered into this Agreement without the invalid
provisions.

                                  ARTICLE 18

                                 MISCELLANEOUS

18.1.    Notices. Any consent, notice or report required or permitted to be
         given or made under this Agreement by one of the parties to the other
         shall be in writing, delivered personally or by facsimile (and promptly
         confirmed by personal delivery, U.S. First class mail or courier), U.S.
         first class mail or courier, postage

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

         prepaid (where applicable), addressed to such other party at its
         address indicated below, or to such other address as the addressee
         shall have last furnished in writing to the addressor and (except as
         otherwise provided in this Agreement) shall be effective upon receipt
         by the addressee.

                  If to CCSI:         Catalytica Combustion Systems, Inc.
                                      430 Ferguson Drive
                                      Mountain View, CA 94043
                                      Attention:  President

                  If to GPS:          GENXON Power Systems, LLC
                                      430 Ferguson Drive
                                      Mountain View, CA 94043
                                      Attention:  President

                  If to GE:           GE Power Systems
                                      1 River Road
                                      Schenectady, New York 12345
                                      Attention:  VP, Power Plants

18.2.    Applicable Law.  This Agreement shall be governed by and construed in
         accordance with the laws of the State of New York, without regard to
         the conflicts of law principles thereof.

18.3.    Agreement Limited to Express Terms.  Except as otherwise expressly
         provided in this Agreement, the parties agree that the
         Commercialization Program contemplated herein, and any discussions or
         communications between the parties relating thereto, shall not restrict
         either party's right to take whatever future actions such party
         unilaterally determines to be in its best interest, including the right
         to undertake similar programs or relationships with Third Parties
         covering subjects related to the matters covered herein and neither the
         holding of any discussions between the parties, nor the exchange of any
         information shall diminish or restrict in any way the right that any
         party has to market, lease, sell or otherwise make available its
         products and services to any customer or Third Party.

18.4.    Entire Agreement.  This Agreement contains the entire understanding of
         the parties with respect to the subject matter hereof. All express or
         implied agreements and understandings, either oral or written,
         heretofore made are expressly superseded by this Agreement. This
         Agreement may be amended, or any term hereof modified, only by a
         written instrument duly executed by both parties.

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

18.5.    Headings.  The captions to the Articles and Sections hereof are not a
         part of the terms but are merely guides or labels to assist in locating
         and reading the Articles and Sections hereof.

18.6.    Independent Contractors.  It is expressly agreed that CCSI and GE shall
         be independent contractors and that the relationship between the two
         parties shall not constitute a partnership, joint venture or agency.
         Neither CCSI nor GE shall have the authority to make any statements,
         representations or commitments of any kind, or to take any action or
         undertake any obligation, which shall be binding on the other party,
         without the prior consent of the other party.

18.7.    Waiver.  The waiver by either party of any right hereunder or the
         failure to perform or of a breach by the other party shall not be
         deemed a waiver of any other right hereunder or of any other breach or
         failure by said other party whether of a similar nature or otherwise.

18.8.    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.

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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

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

AGREED FOR AND ON BEHALF OF           AGREED FOR AND ON BEHALF OF
GENERAL ELECTRIC COMPANY              CATALYTICA COMBUSTION
                                      SYSTEMS, INC.

By:      /s/ Mark M. Little           By:    /s/ Dennis A. Orwig
         -------------------------           -------------------------
Name:    Mark M. Little               Name:  Dennis A. Orwig
         -------------------------           -------------------------
Title:   VP Power Plants              Title: Chief Executive Officer
         -------------------------           -------------------------

AGREED FOR AND ON BEHALF OF
GENXON

By:      /s/ Patrick T. Conroy
         -------------------------
Name:    Patrick T. Conroy
         -------------------------
Title:   President
         -------------------------

Witness: /s/ Stanley S. Smith
         -------------------------
Name:    Stanley S. Smith
         -------------------------
Title:   GM-GT Product Management
         -------------------------

Witness: /s/ Joseph Cusson
         -------------------------
Name:    Joseph Cusson
         -------------------------
Title:   Director, Marketing CCSI
         -------------------------

                                    - 36 -
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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                     - 37 -
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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                   EXHIBIT A

                        PROGRAM SCHEDULE AND MILESTONES

         [*]

                                    - 38 -
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THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                   EXHIBIT B

                             COMMERCIALIZATION PLAN

               Time to Market Focus of Commercialization Program

Basic Principles

     Customer requirements drives market timing
     Development compatible with GE's NPI Tollgate process

Program Targets

<TABLE>
<CAPTION>
[*]         Market                         [*]          Estimated
          Segments/        Incentive                Program Budgets (3)
           Turbines           Term                      ($ million)
        --------------    ------------              -------------------
<S>     <C>               <C>              <C>      <C>
[*]     PGT10 or Other    [*]              [*]      GE         [*]
                                                    CCSI       [*]
                                                    Total      [*]

[*]     7E                [*]              [*]      GE         [*]
                                                    CCSI       [*]
                                                    Total      [*]

[*]     7F                [*]              [*]      GE         [*]
                                                    CCSI       [*]
                                                    Total      [*]
</TABLE>

______________________
[*]

(2)  To first engine firing which includes 2 full size test combustors and 1
     full combustor set (10 combustors for a 7E and 14 combustors for a 7F), but
     excludes costs for installation and appropriate field testing.  The cost
     will be site specific - very preliminary estimate of [*].  Field testing is
     estimated at 2 months.

(3)  Assumes that both GE and CCSI will pursue parallel "Component" paths
     through the Preliminary Design Phase (includes prototype test hardware),
     and GE will select a "Component" path to go forward to Final Design Phase.

                                     - 39 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                   EXHIBIT C

                         TERMS & CONDITIONS OF PURCHASE

1.   APPLICABLE TERMS AND CONDITIONS.  Purchaser and Seller agree that the
following statement shall be printed on the front of any Purchase Order or
Contract for the sale of XONON Modules or XONON Components (herein referred to
individually or collectively as the "Product" or "Products" or "Goods"): "The
purchase and sale of the Products set forth in this Purchase Order shall be
subject to the Terms and Conditions of Purchase attached as Exhibit C to the
Collaborative Commercialization and License Agreement (the "CCLA"), dated
November 19, 1998, between Catalytica Combustion Systems, Inc., (the "Seller")
and General Electric Company (the "Purchaser").  Any other terms and conditions
included in this Purchase Order or in any acknowledgment of this Purchase Order
shall not be applicable to this purchase and sale of Products.

2.   PRICES AND PAYMENTS.  Unless otherwise stated on the face of this Purchase
Order, Seller shall invoice Purchaser for one hundred percent (100%) of the
purchase price within thirty (30) days after delivery.  Purchaser shall remit
full payment of the purchase price to Seller by wire transfer within forty five
(45) days of receipt of Seller's invoice.  All prices specified here in are firm
and shall not be subject to change, and includes all federal and state income
taxes and payroll taxes.  Seller's invoice shall separately state any local
sales, use, VAT or other types of local taxes and duties applicable to the goods
furnished to the Purchaser.  No extra charges of any kind will be allowed unless
specifically agreed to in writing by the Purchaser.  Purchaser shall be entitled
at all time to set-off any amount owing, excluding disputed claims, at any time
from Seller to Purchaser against any amount payable at any time by Purchaser in
connections with this between Purchaser and Seller.

3.   DELIVERY, RISK OF LOSS, TITLE TRANSFER, DELAY.  Products manufactured in
the United States shall be delivered to Purchaser FOB Seller's factory. Unless
otherwise stated on the face of this Purchase Order, Purchaser shall be
responsible for risk of loss and all transportation and insurance costs after
delivery. Unless otherwise stated on the face of this Purchase Order title shall
pass to Purchaser upon placement of the goods on the trucks or other transit of
Purchaser's designated carriers. Goods delivered to Purchaser in advance of the
delivery schedule may be returned to Seller at Seller's expense.

Seller shall use all reasonable efforts to meet any delivery schedule specified
by Purchaser, provided Purchase Orders are placed in a timely fashion and
contain all necessary information including but not limited to a full
description of the goods ordered, the quantity ordered and requested delivery
dates.  All Purchase Orders shall be placed as

                                     - 40 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

firm orders for goods setting forth the quantities of goods required and the
requested delivery date(s). Purchaser shall endeavor to place purchase orders
not later than one hundred and twenty (120) days prior to the requested delivery
date. Provided Purchaser has complied with the foregoing one hundred and twenty
(120) day prior notification, and except to the extent caused by an Excusable
Delay as defined in Article 15 of the CCLA, Seller shall be liable for
liquidated damages for failure to achieve delivery on or prior to Purchaser's
designated delivery date at the rate of 0.5% of the purchase price allocable to
the delayed goods per day (beginning with the fifteenth (15) day after the
delivery date). Seller's liquidated damages shall not exceed ten percent 10% of
Purchase Order purchase price. Purchaser shall waive such liquidated damages if
Purchaser's contract with its customer does not include a provision for delay
liquidated damages between Purchaser and its customer or if Seller is able to
remedy its delay at its sole cost such that Purchaser does not incur any delay
liquidated damages to its customer arising out of the delay of the Products. If
Seller is more than sixty (60) days late, Purchaser shall have the right to
terminate this Purchase Order.

4.   PURCHASER'S PROPERTY.  Unless otherwise agreed in writing, all tools,
equipment or material of every description furnished to Seller by Purchaser or
specially paid for by Purchase, and any replacement thereof, or any materials
affixed or attached thereto, shall be and remain the personal property of
Purchaser.  Such property and, whenever practical, each individual item thereof,
shall be plainly marked or otherwise adequately identified by Seller as the
property of the Purchaser and shall be safely stored separate and apart from
Seller's property.  Seller shall not substitute any property for Purchaser's
orders.  Such property, while in Seller's custody or control, shall be held at
Seller's risk, shall be kept insured by Seller at Seller's expense in an amount
equal to the replacement cost with loss payment to Purchaser and shall be
subject to removal at Purchaser's written request, in which event Seller shall
prepare such property for shipment and shall redeliver to Purchaser in the same
condition as originally received by Seller, reasonable wear and tear excepted,
all at Seller's expense.

5.   DRAWINGS.  Unless otherwise specifically agreed in writing by Purchaser,
any check or approval of drawings by Purchaser will be for Seller's convenience
and will not relieve Seller of its responsibility to meet all requirements of
this order.

6.   CHANGES.  Subject to the order scheduling requirements in Article 7.2.3 of
the CCLA and Article 3 above, the Purchaser may at any time, in writing, make
changes within the general scope of this Purchase Order in any one or more of
the following: (a) drawings, designs or specification where the goods to be
furnished are to be specially manufactured for the Purchaser in accordance
therewith, but not Seller's specifications which the parties have mutually
agreed upon under the CCLA as being applicable to this Purchase Order, or other
mutually agreed upon specifications; (b) method of packing; (c) time of
delivery; (d) the amount of Purchaser's furnished property; or (e) quality.  If

                                     - 41 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

any such changes causes an increase or decrease in the cost of, or the time
required for the performance of any work under this Contract, whether changed or
not changed, an equitable adjustment shall be made in the Contract Price or
delivery schedule, or both, and the Purchase Order shall be modified in writing
accordingly.  Notification to Purchaser of any Claim by the Seller for
adjustment under this clause must be asserted within thirty (30) days from the
date of receipt by the Seller of the notification of change.  Any change to this
order shall be authorized only by a duly executed Purchase Order amendment.

7.   INSPECTION.  (a) All goods (which term throughout this order includes
without limitation raw materials, components, intermediate assemblies, tools and
end products) shall be subject to inspection and test by the Purchaser and its
Customer, (where GE is required under its contracts with its Customers to
provide inspection rights at Seller's facility, then Seller's agreement will not
be required) at all reasonable times and places, including the place of
manufacture; (b) If any inspection or test is made on the premises of Seller or
its supplier, Seller, without additional charge, shall provide all reasonable
facilities and assistance for the safety and convenience of the inspectors in
the performance of their duties and Purchaser shall comply with Seller's
premises, security and safety rules; (c) acceptance or rejections of the goods
shall be made as promptly as practical after delivery, except as otherwise
provided in this order, but failure to inspect and accept or reject goods or
failure to detect defects by inspection, shall neither relieve Seller from
responsibility for such goods as are not in accordance with the order
requirements nor impose liabilities on Purchaser thereof; (d) Seller shall
provide and maintain an inspection and process control system mutually
acceptable to Purchaser and Seller covering the goods hereunder.  Records of all
inspection work by Seller shall be kept complete and available to Purchaser
during the performance of this order and for such longer periods as may be
specified in this order, not to exceed five (5) years after order date.  Seller
will allow representative of Purchaser and Purchaser's customers reasonable
access to the facilities involved in performing this order for purposes of
reviewing the status and progress of production, subject to compliance with
Seller's facility security and safety rules.  If during the course of any
inspection in Seller's factory, Purchaser finds that any of the goods are
defective or otherwise not in conformity with the requirements of this Purchase
Order or the CCLA, including any drawings or specifications, Seller shall remedy
such non conformity at its own expense by reperforming any nonconforming service
or replacing any non conforming goods.

8.   WARRANTIES.  Seller warrants that all goods sold will be free of any claims
of any nature and by any third person and that Seller shall convey clear title
to Purchaser.  Seller further warrants that the Products supplied by Seller to
Purchaser shall perform in accordance with agreed upon specifications and shall
be free from defects (a) in materials and workmanship, whatever the origin, (b)
in design having regard to the state of the art at the time of the order and
including defects arising from the choice of materials and / or

                                     - 42 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

parts; (c) in manufacturing process; and (d) arising from non-suitability for
the use for which it was intended. This warranty shall take effect from the date
of acceptance of the Products by Purchaser and shall remain in force until the
earliest of the following to occur: (i) the gas turbine in which the Products
have been installed achieve 8000 operating hours; (ii) forty eight months from
Start-Up; or (iii) sixty (60) months after the delivery of the Products to
Purchaser. Start-Up means the time when the equipment installation is complete
and the gas turbine in which the Product has been installed is first
synchronized to the grid. Purchaser's sole remedy in the event of any breach of
this warranty shall, at Seller's option, be the replacement or repair in a
timely fashion of the defective Product. Seller shall make replacement Products
available and pay transportation, taxes, custom duties and insurance to the site
where the gas turbine is located. Any repaired or replaced Product shall be
warranted for 8000 operating hours, provided that in no event shall Seller's
warranty obligation extend beyond seventy two (72) months from the delivery of
the initial Product.

Purchaser shall notify Seller of obvious defects within sixty (60) days of
delivery and of latent defects within thirty (30) days of discovery.

The warranties set forth in this section shall not apply to any claims, problems
or defects which are the result of normal wear and tear, mishandling, misuse,
neglect or improper testing and repair by other than CCSI or its authorized
representatives.

THE EXPRESS WARRANTIES PROVIDED HEREIN ARE IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ALL OTHER WARRANTIES
ARE HEREBY DISCLAIMED AND EXCLUDED BY SELLER.

9.   SUSPENSION; TERMINATION FOR CONVENIENCE.  Purchaser may, at any time, by
written notice to Seller and termination for convenience, suspend performance of
the work.  Said notice of suspension shall specify the date of suspension and
the estimated duration of the suspension.  Upon receiving any such notice of
suspension, Seller shall promptly suspend further performance of the work to the
extent specified, and during the period of such suspension shall properly care
for and protect all work in progress and materials, supplies, and equipment
Seller has on hand for performance of the work.  Purchaser may at any time
withdraw the suspension of performance of the work as to all or part of the
suspended work by written notice to Seller specifying the effective date and
scope of withdrawal, and Seller shall resume diligent performance of the work
for which the suspension is withdrawn on the specified effective date of
withdrawal, subject to then existing contracts and commitments.

                                     - 43 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Purchaser may terminate all or any part of this Purchase Order at any time by
providing written notice to Seller.

If this Purchase Order is canceled or terminated for the convenience of
Purchaser or suspended upon the direction of Purchaser for other than Seller
fault, in either case when there is less than 120 days until the scheduled
delivery date, Purchaser shall be responsible for, and shall pay Seller for
Product-in-process on a percent of completion basis, established on a
proportional basis, where fifty (50%) completion is assumed on day one hundred
and twenty (120) and one hundred (100%) completion is assumed on day thirty (30)
in each case prior to the scheduled delivery date as a result of such
cancellation, termination or suspension, plus any uncancelable commitments made
by Seller, but not to exceed the amount of the Purchase Price allocable to the
terminated portion of this Purchase Order.  Purchaser shall pay undisputed
amounts to Seller within thirty (30) days after Seller provides Purchaser with
an invoice.

10.  DEFAULT.  Except in instances of Excusable Delay as defined in Article 15
of the CCLA, Purchaser may by written notice of default to Seller, terminate
this Purchase Order, in whole or in part' (a) if Seller is greater than sixty
(60) days late in delivering the Products, at least twice in any given twelve
(12) month period, or (b) if Seller fails to comply with any of the material
terms and conditions of this Purchase Order and upon receipt of written notice
from Purchaser does not commence corrective action within ten (10) days and cure
such default within sixty (60) days.  Upon termination, Purchaser may procure
goods similar in function to the Products, such as SCR or DLN components, and,
subject to the Limitation of Liability set forth below, Seller shall reimburse
Purchaser such costs Purchaser incurs in excess of the Purchase Price.

As an alternative remedy, and in lieu of termination for default, Purchaser may
in its sole discretion, elect to extend the time for delivery and/or waive other
deficiencies in Seller's performance in which case an equitable adjustment in
the Purchase Price shall be negotiated.

11.  INDEMNITY AND INSURANCE - WORK ON SELLER'S PREMISES.  Each Party (the
"Indemnifying Party") shall indemnify and hold harmless the other party, its
affiliates, officers, directors, agents and employees (the "Indemnified
Parties") against any losses resulting from any third party claim for death or
personal injury or damage to third party tangible real or personal property to
the extent such claim arises from the Indemnifying Party's negligence, gross
negligence or willful misconduct."

Seller shall take all reasonable precautions to prevent the occurrence of any
injury to persons or to property during the progress of work, and, except to the
extent that any such injury or damage is due solely and directly to Purchaser,
shall defend and indemnify Purchaser against any claim which may result in any
way from any act or omission of the

                                     - 44 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Seller, its agents, employees, or subcontractors. Seller shall maintain
comprehensive general liability (including contractual liability coverage
insuring the liabilities assumed above). Automobile Liability and Employers and
Employers Liability insurance with limits as reasonably required by Purchaser,
as well as appropriate Workers Compensation Insurance as well protect Seller
from all claims under any applicable Workers Compensation and Occupational
Disease Act. Seller shall furnish to Purchaser, upon written request, a
Certificate of Insurance completed by its insurance carrier(s) certifying that
insurance coverages are in effect and will not be canceled or materially changed
until ten days after prior written notice has been delivered to the purchaser as
required by Purchaser.

12.  LIMITATION OF LIABILITY.  The total liability of Seller, on all claims of
any kind, whether in contract, warranty, indemnity, tort (including negligence),
strict liability, or otherwise, arising out of the performance or breach of this
Purchase Order shall not exceed two (2) times the Purchase Price.

In no event, whether as a result of breach of contract, warranty, indemnity,
tort (including negligence), strict liability, or otherwise, shall either party
or their respective subcontractors or suppliers be liable for loss of profit or
revenues or for any special, consequential, incidental, indirect or exemplary
damages.

13.  PROPER BUSINESS PRACTICES.  Seller shall comply with all laws dealing with
improper or illegal payments, gifts or gratuities, and Seller agrees not to pay,
promise to pay or authorize the payment of any money or anything of value,
directly or indirectly to any person for the purpose of illegally or improperly
inducing a decision or obtaining or retaining business in connection with this
Order.

14.  COMPLIANCE WITH LAWS  General.  Seller agrees to comply with the applicable
provisions of any federal, state, provincial or local law or ordinance and all
lawful orders, rules, and regulations issued thereunder.  In addition, Seller
shall comply with Good Industry Practices, including the exercise of that degree
of skill, diligence, prudence and foresight which can reasonably be expected
from a competent Seller who is engaged in the same type of manufacture under
similar circumstances in a manner consistent with all applicable requirements
and with all applicable general recognized international standards.  No forced
or prison labor may be used in manufacturing the products to be supplied under
this contract.  If forced or prison labor is determined to have been used in the
manufacture of the products supplied hereunder the Purchaser shall have the
right to immediately terminate the contract without further compensation to the
Seller.

Provisions applicable to orders for work to be performed, goods to be produced,
or services to be rendered within the United Stated.  (a) Seller shall comply
with any

                                     - 45 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

provisions, representations or agreements or contractual clauses required
thereby to be included or incorporated by reference or operation of law in the
contract resulting from acceptance of this order and dealing with: (I) Equal
Opportunity (Executive Order 11246 as amended by Executive Orders 113575 and
10286 and applicable regulations promulgated pursuant thereto); (ii) Employment
of Veterans (Executive Order 11701 and applicable regulations promulgated
pursuant thereto); (iii) Employment of the Handicapped (Executive Order 11758 as
amended by Executive Order 11867 and applicable regulations promulgated pursuant
thereto); (iv) Employment Discrimination Because of Age (Executive Order 11141
and applicable regulations promulgated pursuant thereto); and (v) Utilization of
Disadvantaged and Business Enterprises (Executive Order 11625. Public Law 95-507
and applicable regulations promulgated pursuant thereto). (b) Seller certifies
that with respect to orders which exceed $10,000 it is in compliance with the
requirements for nonsegregated facilities set forth in 41 CFR Chapter 60-1.8.
(c) Seller warrants that each chemical substance constituting or contained in
goods sold or otherwise transferred to Purchaser hereunder is on the list of
chemical substances compiled and published by the Administrator of the
Environmental Protection Administration pursuant to the Toxic Substances Control
Act (P.L. 92-573 as amended, and the Federal Hazardous Substances Act (P.L. 92-5
16) as amended and lawful standards and regulations thereunder. (d) In accepting
this order Seller represents that the goods to be furnished hereunder were or
will be produced in compliance with the requirements of the Fair Labor Standards
Act of 1938, as amended, including Section 12(a) and Seller shall insert a
certificate to that effect on all invoices submitted in connection with this
order.

Provisions applicable to orders for goods or materials, the destination of
which, final or intermediate, is in the United States.  Seller warrants that
each chemical substance constituting or contained in goods sold or otherwise
transferred to Purchaser hereunder is on the list of chemical substances
compiled and published by the United States Administrator of the Environmental
Protection Administration pursuant to the Toxic Substances Control Act (P.L. 92-
573) as amended, and the Federal Hazardous Substances Act (P.L. 92-516) as
amended and lawful standards and regulations thereunder.

Provisions applicable to orders for goods from outside the United States, to be
delivered DEQ, FAC or DAF (INCO TERMS 1990) at point of entry to the United
States.  Seller warrants that all sales made hereunder are or will be made at
not less than fair value under the United States Anti-dumping Law (19 U.S.C.
SEC.  160o ct set.), and Seller will indemnify, defend and hold Purchaser
harmless from and against any costs or expenses (including, but not limited to,
any anti-dumping duties which may be imposed) arising out of or in connection
with breach of this warranty.

Provisions applicable to orders for goods from outside the United States, to be
delivered within the United States.  Seller agreed that Purchaser will not be a
party to the

                                     - 46 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

importation of the goods, that the transaction(s) represented by this order will
be consummated subsequent to importation and that Seller will neither cause nor
permit Purchaser's name to be shown as "importer of record" on any customs
declaration. If Seller will be the importer of record to the United States,
Seller shall provide Purchaser with Customs Form 331 entitled "Certificate of
Delivery" properly executed as well as Customs Form 7501 "Entry Summary" and a
copy of Seller Invoice.

Provisions applicable to technical data provided to Seller from within the
United States.  Seller hereby assures the Purchaser that all technical data
received from Purchaser will not be exported from the United States or re-
exported from Seller's country without the express written concurrence to such
export by Purchaser.

15.  PACKING, PRESERVATION AND MARKING.  Packing, preservation and marking
requirements will be in accordance with the specification drawing or as
specified on the Purchaser Order.  If none specified, use the best commercially
accepted practice.

16.  GOVERNING LAW.  This order shall in all respects be governed by and
interpreted in accordance with the substantive law of the State of New York,
U.S.A.  excluding its conflicts of law provisions.  The Parties hereby exclude
the application of the United Nations Convention on Contracts for the
International Sale of Goods.

17.  DISPUTE RESOLUTION.  Purchaser and Seller shall attempt amicably to resolve
any controversy, dispute or difference arising out of this Order, failing which
either party may initiate litigation.  Litigation arising from this Order may be
brought only in the United States District Court for the Southern District of
New York or, if such court lacks subject matter jurisdiction, in the Supreme
Court of the State of New York in and for New York County.  The Parties hereby
submit to the jurisdiction of said courts, and waive any defense of forum non
conveniens.

18.  YEAR 2000 COMPLIANCE WITH DATE PROCESSING REQUIREMENTS.  In addition to any
other warranties and representations provided by Supplier to Purchaser, whether
pursuant to this purchase order, by law, equity, or otherwise, Seller
represents, warrants and covenants that Seller shall use all reasonable efforts
to insure that (a) any product(s) and/or service(s) provided by Seller hereunder
including, without limitation, each item of hardware, software, or firmware; any
system, equipment, or products consisting of or containing one or more thereof;
and any and all enhancements, upgrades, customizations, modifications,
maintenance and the like ("Products/Services") shall be Year 2000 Compliant at
the time of delivery and at all times thereafter and in all subsequent updates
or revisions of any kind, and (b) Seller's supply of the Products/Services to
Purchaser shall not be interrupted, delayed, decreased, or otherwise affected by
dates prior to, on, after or spanning January 1, 2000.  For purposes of this
purchase order, the term "Year 2000 Compliant" means that (1) the

                                     - 47 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Products/Services accurately process, provide and/or receive date data
(including without limitation calculating, comparing, and sequencing), within,
from, into, and between centuries (including without limitation, the twentieth
and twenty-first centuries, the last year of a century (e.g. 1999) and the first
year of the next century (e.g. 2000), and leap year calculations, and (2)
neither the performance nor the functionality nor Seller's supply to Purchaser
of the Products/Services will be affected by dates prior to, on, after, or
spanning January 1, 2000.  Moreover, Seller convenants and agrees all reasonable
steps shall be taken to insure that the design of said Product/Services to
ensure compliance with the foregoing warranties, representations and covenants
shall include, without limitation, date data century recognition, calculations
that accommodate same century and multi-century formulae and date values, and
date data interface values that reflect the century.  In particular, but without
limitation, (I) no value for current date will cause any error, interruption, or
decreased performance in the operation of such Products/Services, (ii) all
manipulations of date-related data including, but not limited to, calculating,
comparing, sequencing, processing and outputting) will produce correct results
for all valid dates, including when used in combination with other products,
(iii) date elements in interfaces and data storage will specify the correct
century to eliminate date ambiguity without human intervention, including leap
year calculations, (iv) where any date element is represented without a century,
the correct century will be unambiguous for all manipulations involving that
element, (v) authorization codes, passwords, and zaps (purge functions) should
function normally and in the same manner prior to, on, after and spanning
January 12, 2000, including, without limitation, the manner in which they
function with respect to expiration dates and CPU serial numbers.  No obligation
of Seller under this purchase order shall be excused by reason of the failure of
Seller's or any other person's Products/Services to be Year 2000 Compliant, nor
shall such occurrence(s) be deemed a force majeure event.  As used in this
purchase order, the words "date" and "dates" shall be deemed to include "time".

In the event of breach of this warranty, in addition to any other remedies
Purchaser may have, whether pursuant to this purchase order, by law, equity or
otherwise, Purchaser shall, at its option, be entitled to repair or replacement
of any non-compliant Products/Services, at no cost to Purchase, within sixty
(60) days after notice of breach from Purchaser to Seller.

Notwithstanding anything in this purchase order to the contrary, the period of
the representations, warranties and covenants set forth in this section shall
extend at least until January 31, 2001.  Any statute of limitations that might
be applicable to Seller's Year 2000 Compliant warranty and representation shall
not accrue or begin to run until the later of January 31, 2001 or the time when
such statute of limitations would otherwise accrue or begin to run, and, with
respect to any claim based on any failure of the Products/Services to be Year
2000 Compliant, Seller shall not assert any defense based

                                     - 48 -
<PAGE>

THE SYMBOL "[*]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

on or alleging the passage of time from the effective date of this purchase
order to January 31, 2001.

19.  WAIVER.  No claim or right arising out of a breach of this Contract can be
discharged in whole or in part by a waiver or renunciation of the claim or right
unless the waiver or renunciation is supported by consideration and is in
writing signed by the aggrieved party.  The failure of Purchaser to enforce at
any time or for any period of time any of the provisions hereof shall not be
construed to be a waiver of such provisions or of the right to Purchaser
thereafter to enforce each and every such provision.

20.  ENTIRE AGREEMENT.  This Purchase Order and the CCLA with such documents as
are expressly incorporated herein by reference, is intended by the parties as a
final expression of their Agreement with respect to such terms as are included
herein, and is intended also as complete and exclusive statement of the terms of
their Agreement.  No course of prior dealings between parties and no usage of
the trade shall be relevant to determine the meaning of this Agreement even
though the accepting or acquiescing party has knowledge of the performance and
opportunity for objection.  The invalidity, in whole or in part, of any of the
foregoing articles or paragraphs of this Purchase Order shall not affect the
remainder of such article or paragraphs or any other article or paragraphs of
this Purchase Order.

                                     - 49 -<PAGE>

                                                                   EXHIBIT 10.16

                          FORM OF INDEMNITY AGREEMENT

          This Indemnity Agreement (this "Agreement") is made and entered into
                                          ---------
this _____ day of ____, 2000, between Catalytica Energy Systems, Inc., a
Delaware corporation (the "Company"), and ______________________ ("Indemnitee").
                           -------                                 ----------

                                   RECITALS:
                                   --------

        A.      Indemnitee, as a member of the Company's Board of Directors
and/or an officer of the Company, performs valuable services for the Company.

        B.      The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for corporate directors, officers, employees,
controlling persons, agents and fiduciaries, the significant increases in the
cost of such insurance and the general reductions in the coverage of such
insurance.

        C.      The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, controlling persons, agents and fiduciaries to expensive litigation
risks at the same time as the availability and coverage of liability insurance
has been severely limited.

        D.      The stockholders of the Company have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors, agents
 ------
and employees of the Company to the maximum extent authorized by Section 145 of
the Delaware General Corporation Law, as amended ("DGCL").
                                                   ----

        E.      Indemnitee does not regard the current protection available for
the Company's directors, officers, employees, controlling persons, agents and
fiduciaries as adequate under the present circumstances, and Indemnitee and
other directors, officers, employees, controlling persons, agents and
fiduciaries of the Company may not be willing to serve or continue to serve in
such capacities without additional protection.

        F.      The Bylaws and the DGCL, by their non-exclusive nature, permit
contracts between the Company and its directors, officers, employees,
controlling persons, agents or fiduciaries with respect to indemnification of
such directors.

        G.      The Company (a) desires to attract and retain the involvement of
highly qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to be involved with the Company and (b)
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.

        H.      In view of the considerations set forth above, the Company
desires that Indemnitee be indemnified by the Company as set forth herein.
<PAGE>

                                  AGREEMENT:
                                  ---------

        Now, Therefore, in consideration of Indemnitee's service to the Company,
 the parties hereto agree as follows:

        1.      Indemnity of Indemnitee.  The Company hereby agrees to indemnify
                -----------------------
Indemnitee to the fullest extent permitted by law, even if such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation (the "Certificate"), the Company's Bylaws
                                             -----------
or by statute.  In the event of any change after the date of this Agreement in
any applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, controlling person, agent or fiduciary, it is the intent of the
parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits afforded by such change.  In the event of any change in any applicable
law, statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its Board of Directors or an officer, employee, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder except as set forth
in Section 9(a) hereof.

        2.      Additional Indemnity.  The Company hereby agrees to hold
               --------------------
harmless and indemnify the Indemnitee:

                (a)     Against any and all expenses incurred by Indemnitee,
    as set forth in Section 3(a) below; and

                (b)     Otherwise to the fullest extent not prohibited by the
    Certificate, the Bylaws or the DGCL.

        3.      Indemnification Rights.
                ----------------------
                (a)     Indemnification of Expenses.  The Company shall
                        ---------------------------
    indemnify and hold harmless Indemnitee, together with Indemnitee's partners,
    affiliates, employees, agents and spouse and each person who controls any of
    them or who may be liable within the meaning of Section 15 of the Securities
    Act of 1933, as amended (the "Securities Act"), or Section 20 of the
                                  --------------
    Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the
                                                      ------------
    fullest extent permitted by law if Indemnitee was or is or becomes a party
    to or witness or other participant in, or is threatened to be made a party
    to or witness or other participant in, any threatened, pending or completed
    action, suit, proceeding or alternative dispute resolution mechanism, or any
    hearing, inquiry or investigation that Indemnitee and the Company believe
    might lead to the institution of any such action, suit, proceeding or
    alternative dispute resolution mechanism, whether civil, criminal,
    administrative, investigative or other (hereinafter a "Claim") against (i)
                                                           -----
    any and all expenses (including attorneys' fees) and all other costs,
    expenses and obligations incurred in connection with investigating,
    defending, being a witness in or participating in (including on appeal), or
    preparing to defend, be a witness in or participate in, a Claim, (ii)
    judgments, fines, penalties and amounts paid in settlement (if such
    settlement is approved in advance by the Company, which approval shall not
    be unreasonably

                                       2
<PAGE>

    withheld) of a Claim and (iii) any federal, state, local or foreign taxes
    imposed on Indemnitee as a result of the actual or deemed receipt of any
    payments under this Agreement (collectively, hereinafter "Expenses"),
                                                              --------
    including all interest, assessments and other charges paid or payable in
    connection with or in respect of such Expenses, incurred by Indemnitee by
    reason of (or arising in part out of) any event or occurrence related to the
    fact that Indemnitee is or was a director, officer, employee, controlling
    person, agent or fiduciary of the Company or any subsidiary of the Company,
    or is or was serving at the request of the Company as a director, officer,
    employee, controlling person, agent or fiduciary of another corporation,
    partnership, joint venture, trust or other enterprise, or by reason of any
    action or inaction on the part of Indemnitee while serving in such capacity
    including, without limitation, any and all losses, claims, damages, expenses
    and liabilities, joint or several (including any investigation, legal and
    other expenses incurred in connection with, and any amount paid in
    settlement of, any action, suit, proceeding or any claim asserted) under the
    Securities Act, the Exchange Act or other federal or state statutory law or
    regulation, at common law or otherwise, which relate directly or indirectly
    to the registration, purchase, sale or ownership of any securities of the
    Company or to any fiduciary obligation owed with respect thereto
    (hereinafter an "Indemnification Event").  The Company shall make such
                     ---------------------
    payment of Expenses as soon as practicable but in any event no later than
    25 days after written demand by Indemnitee therefor is presented to the
    Company.

                (b)     Reviewing Party.  Notwithstanding the foregoing, (i) the
                        ---------------
     obligations of the Company under Section 2 shall be subject to the
     condition that the Reviewing Party (as described in Section 11(e) hereof)
     shall not have determined (in a written opinion, in any case in which the
     Independent Legal Counsel as defined in Section 11(d) hereof is involved)
     that Indemnitee would not be permitted to be indemnified under applicable
     law and (ii) and Indemnitee acknowledges and agrees that the obligation of
     the Company to make an advance payment of Expenses to Indemnitee pursuant
     to Section 4(a) (an "Expense Advance") shall be subject to the condition
                          ---------------
     that, if, when and to the extent that the Reviewing Party determines that
     Indemnitee would not be permitted to be so indemnified under applicable
     law, the Company shall be entitled to be reimbursed by Indemnitee (who
     hereby agrees to reimburse the Company) for all such amounts theretofore
     paid; provided, however, that if Indemnitee has commenced or thereafter
     commences legal proceedings in a court of competent jurisdiction to secure
     a determination that Indemnitee should be indemnified under applicable law,
     any determination made by the Reviewing Party that Indemnitee would not be
     permitted to be indemnified under applicable law shall not be binding and
     Indemnitee shall not be required to reimburse the Company for any Expense
     Advance until a final judicial determination is made with respect thereto
     (as to which all rights of appeal therefrom have been exhausted or lapsed).
     Indemnitee's obligation to reimburse the Company for any Expense Advance
     shall be unsecured and no interest shall be charged thereon.  If there has
     not been a Change in Control (as defined in Section 11(c) hereof), the
     Reviewing Party shall be selected by the Board of Directors, and if there
     has been such a Change in Control (other than a Change in Control which has
     been approved by a majority of the Company's Board of Directors who were
     directors immediately prior to such Change in Control), the Reviewing Party
     shall be the Independent Legal Counsel referred to in Section 3(e) hereof.
     If there has been no determination by the Reviewing

                                       3
<PAGE>

     Party or if the Reviewing Party determines that Indemnitee substantively
     would not be permitted to be indemnified in whole or in part under
     applicable law, Indemnitee shall have the right to commence litigation
     seeking an initial determination by the court or challenging any such
     determination by the Reviewing Party or any aspect thereof, including the
     legal or factual bases therefor, and the Company hereby consents to service
     of process and to appear in any such proceeding. Any determination by the
     Reviewing Party otherwise shall be conclusive and binding on the Company
     and Indemnitee.

                (c)     Contribution.  If the indemnification provided for in
                        ------------
     Section 3(a) above for any reason is held by a court of competent
     jurisdiction to be unavailable to an Indemnitee in respect of any losses,
     claims, damages, expenses or liabilities referred to therein, then the
     Company, in lieu of indemnifying Indemnitee thereunder, shall contribute to
     the amount paid or payable by Indemnitee as a result of such losses,
     claims, damages, expenses or liabilities (i) in such proportion as is
     appropriate to reflect the relative benefits received by the Company and
     Indemnitee or (ii) if the allocation provided by clause (i) above is not
     permitted by applicable law, in such proportion as is appropriate to
     reflect not only the relative benefits referred to in clause (i) above but
     also the relative fault of the Company and Indemnitee in connection with
     the action or inaction which resulted in such losses, claims, damages,
     expenses or liabilities, as well as any other relevant equitable
     considerations. In connection with the registration of the Company's
     securities, the relative benefits received by the Company and Indemnitee
     shall be deemed to be in the same respective proportions that the net
     proceeds from the offering (before deducting expenses) received by the
     Company and the Indemnitee, in each case as set forth in the table on the
     cover page of the applicable prospectus, bear to the aggregate public
     offering price of the securities so offered. The relative fault of the
     Company and Indemnitee 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 or Indemnitee and the parties' relative
     intent, knowledge, access to information and opportunity to correct or
     prevent such statement or omission.

                The Company and Indemnitee agree that it would not be just and
     equitable if contribution pursuant to this Section 3(c) were determined by
     pro rata or per capita allocation or by any other method of allocation
     which does not take account of the equitable considerations referred to in
     the immediately preceding paragraph.  In connection with the registration
     of the Company's securities, in no event shall an Indemnitee be required to
     contribute any amount under this Section 3(c) in excess of the lesser of
     (i) that proportion of the total of such losses, claims, damages or
     liabilities indemnified against equal to the proportion of the total
     securities sold under such registration statement which is being sold by
     Indemnitee or (ii) the proceeds received by Indemnitee from its sale of
     securities under such registration statement.  No person found guilty of
     fraudulent misrepresentation (within the meaning of Section 10(f) of the
     Securities Act) shall be entitled to contribution from any person who was
     not found guilty of such fraudulent misrepresentation.

                (d)     Survival Regardless of Investigation.  The
                        ------------------------------------
     indemnification and contribution provided for herein will remain in full
     force and effect regardless of any

                                       4
<PAGE>

     investigation made by or on behalf of Indemnitee or any officer, director,
     employee, agent or controlling person of Indemnitee.

                (e)     Change in Control.  After the date hereof, the Company
                        -----------------
     agrees that if there is a Change in Control of the Company (other than a
     Change in Control which has been approved by a majority of the Company's
     Board of Directors who were directors immediately prior to such Change in
     Control) then, with respect to all matters thereafter arising concerning
     the rights of Indemnitee to payments of Expenses under this Agreement or
     any other agreement or under the Company's Certificate or Bylaws as now or
     hereafter in effect, Independent Legal Counsel (as defined in Section 11(d)
     hereof) shall be selected by Indemnitee and approved by the Company (which
     approval shall not be unreasonably withheld). Such counsel, among other
     things, shall render its written opinion to the Company and Indemnitee as
     to whether and to what extent Indemnitee would be permitted to be
     indemnified under applicable law. The Company agrees to abide by such
     opinion and to pay the reasonable fees of the Independent Legal Counsel
     referred to above and to fully indemnify such counsel against any and all
     reasonable expenses (including attorneys' fees), claims, liabilities and
     damages arising out of or relating to this Agreement or its engagement
     pursuant hereto.

                (f)     Mandatory Payment of Expenses.  Notwithstanding any
                        -----------------------------
     other provision of this Agreement, to the extent that Indemnitee has been
     successful on the merits or otherwise, including, without limitation, the
     dismissal of an action without prejudice, in the defense of any action,
     suit, proceeding, inquiry or investigation referred to in Section 3(a)
     hereof or in the defense of any claim, issue or matter therein, Indemnitee
     shall be indemnified against all Expenses incurred by Indemnitee in
     connection herewith.

        4.      Expenses; Indemnification Procedure.
                -----------------------------------

                (a)     Advancement of Expenses.  The Company shall advance all
                        -----------------------
      Expenses incurred by Indemnitee. The advances to be made hereunder shall
     be paid by the Company to Indemnitee as soon as practicable but in any
     event no later than ten business days after written demand by Indemnitee
     therefor to the Company.

                (b)     Notice/Cooperation by Indemnitee.  Indemnitee shall
                        --------------------------------
     give the Company notice in writing in accordance with Section 15 of this
     Agreement as soon as practicable of any Claim made against Indemnitee for
     which indemnification will or could be sought under this Agreement.

                (c)     No Presumptions; Burden of Proof.  For purposes of this
                        --------------------------------
     Agreement, the termination of any Claim by judgment, order, settlement
     (whether with or without court approval) or conviction, or upon a plea of
     nolo contendere, or its equivalent, shall not create a presumption that
     Indemnitee did not meet any particular standard of conduct or have any
     particular belief or that a court has determined that indemnification is
     not permitted by applicable law. In addition, neither the failure of the
     Reviewing Party to have made a determination as to whether Indemnitee has
     met any particular standard of conduct or had any particular belief, nor an
     actual determination by

                                       5
<PAGE>

     the Reviewing Party that Indemnitee has not met such standard of conduct or
     did not have such belief, prior to the commencement of legal proceedings by
     Indemnitee to secure a judicial determination that Indemnitee should be
     indemnified under applicable law, shall be a defense to Indemnitee's claim
     or create a presumption that Indemnitee has not met any particular standard
     of conduct or did not have any particular belief. In connection with any
     determination by the Reviewing Party or otherwise as to whether Indemnitee
     is entitled to be indemnified hereunder, the burden of proof shall be on
     the Company to establish that Indemnitee is not so entitled.

                (d)     Notice to Insurers.  If, at the time of the receipt by
                        ------------------
     the Company of a notice of a Claim pursuant to Section 4(b) hereof, the
     Company has liability insurance in effect which may cover such Claim, the
     Company shall give prompt notice of the commencement of such Claim to the
     insurers in accordance with the procedures set forth in each of the
     Company's policies. The Company shall thereafter take all necessary or
     desirable action to cause such insurers to pay, on behalf of Indemnitee,
     all amounts payable as a result of such action, suit, proceeding, inquiry
     or investigation in accordance with the terms of such policies.

                (e)     Selection of Counsel.  In the event the Company shall
                        --------------------
     be obligated hereunder to pay the Expenses of any Claim, the Company shall
     be entitled to assume the defense of such Claim, with counsel approved by
     the Indemnitee (which approval shall not be unreasonably withheld) upon the
     delivery to Indemnitee of written notice of its election to do so. After
     delivery of such notice, approval of such counsel by Indemnitee and the
     retention of such counsel by the Company, the Company will not be liable to
     Indemnitee under this Agreement for any fees of counsel subsequently
     incurred by Indemnitee with respect to the same Claim; provided that (i)
     Indemnitee shall have the right to employ Indemnitee's counsel in any such
     Claim at Indemnitee's expense and (ii) if (A) the employment of counsel by
     Indemnitee has been previously authorized by the Company, (B) Indemnitee
     shall have reasonably concluded that there is a conflict of interest
     between the Company and Indemnitee in the conduct of any such defense or
     (C) the Company shall not continue to retain such counsel to defend such
     Claim, then the fees and expenses of Indemnitee's counsel shall be at the
     expense of the Company.

        5.      Nonexclusivity.  The indemnification provided by this Agreement
                --------------
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the DGCL, or otherwise. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action Indemnitee took or did not take while serving in an indemnified
capacity even though Indemnitee may have ceased to serve in such capacity.

        6.      No Duplication of Payments.  The Company shall not be liable
                --------------------------
under this Agreement to make any payment in connection with any Claim made
against any Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, Certificate of Incorporation, Bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.

                                       6
<PAGE>

        7.      Partial Indemnification.  If any Indemnitee is entitled under
                -----------------------
any provision of this Agreement to indemnification by the Company for any
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

        8.      Mutual Acknowledgement.  The Company and Indemnitee acknowledge
                ----------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, controlling
persons, agents or fiduciaries under this Agreement or otherwise.  Each
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's rights under public policy to
indemnify Indemnitee.

        9.      Exceptions.  Any other provision herein to the contrary
                ----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

                (a)     Claims Initiated by Indemnitee.  To indemnify or
                        ------------------------------
     advance expenses to any Indemnitee with respect to Claims initiated or
     brought voluntarily by Indemnitee and not by way of defense, except (i)
     with respect to actions or proceedings to establish or enforce a right to
     indemnify under this Agreement or any other agreement or insurance policy
     or under the Company's Certificate of Incorporation or Bylaws now or
     hereafter in effect relating to Claims for Indemnifiable Events, (ii) in
     specific cases if the Board of Directors has approved the initiation or
     bringing of such Claim or (iii) as otherwise required under Section 145 of
     the DGCL, regardless of whether Indemnitee ultimately is determined to be
     entitled to such indemnification, advance expense payment or insurance
     recovery, as the case may be;

                (b)     Claims Under Section 16(b).  To indemnify Indemnitee
                        --------------------------
     for expenses and the payment of profits arising from the purchase and sale
     by Indemnitee of securities in violation of Section 16(b) of the Exchange
     Act or any similar successor statute; or

                (c)     Claims Excluded Under Section 145 of the Delaware
                        -------------------------------------------------
     General Corporation Law.  To indemnify Indemnitee if (i) Indemnitee did not
     -----------------------
     act in good faith or in a manner reasonably believed by such Indemnitee to
     be in or not opposed to the best interests of the Company, (ii) with
     respect to any criminal action or proceeding, Indemnitee had reasonable
     cause to believe Indemnitee's conduct was unlawful or (iii) Indemnitee
     shall have been adjudged to be liable to the Company unless and only to the
     extent the court in which such action was brought shall permit
     indemnification as provided in Section 145(b) of the DGCL.

        10.     Period of Limitations.  No legal action shall be brought and no
                ---------------------
cause of action shall be asserted by or in the right of the Company against any
Indemnitee, any Indemnitee's estate, spouse, heirs, executors or personal or
legal representatives after the expiration of five years from the date of
accrual of such cause of action, and any claim or cause of action of the Company
shall be extinguished and deemed released unless asserted by the

                                       7
<PAGE>

timely filing of a legal action within such five-year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.

        11.     Construction of Certain Phrases.
                -------------------------------
                (a)     For purposes of this Agreement, references to the
     "Company" shall include, in addition to the resulting corporation, any
     constituent corporation (including any constituent of a constituent)
     absorbed in a consolidation or merger which, if its separate existence had
     continued, would have had power and authority to indemnify its directors,
     officers, employees, agents or fiduciaries, so that if Indemnitee is or was
     a director, officer, employee, agent, control person or fiduciary of such
     constituent corporation, or is or was serving at the request of such
     constituent corporation as a director, officer, employee, control person,
     agent or fiduciary of another corporation, partnership, joint venture,
     employee benefit plan, trust or other enterprise, Indemnitee shall stand in
     the same position under the provisions of this Agreement with respect to
     the resulting or surviving corporation as Indemnitee would have with
     respect to such constituent corporation if its separate existence had
     continued.

                (b)     For purposes of this Agreement, references to "other
     enterprises" shall include employee benefit plans; references to "fines"
     shall include any excise taxes assessed on any Indemnitee with respect to
     an employee benefit plan; and references to "serving at the request of the
     Company" shall include any service as a director, officer, employee, agent
     or fiduciary of the Company which imposes duties on, or involves services
     by, such director, officer, employee, agent or fiduciary with respect to an
     employee benefit plan, its participants or its beneficiaries; and if any
     Indemnitee acted in good faith and in a manner Indemnitee reasonably
     believed to be in the interests of the participants and beneficiaries of an
     employee benefit plan, Indemnitee shall be deemed to have acted in a manner
     "not opposed to the best interests of the Company" as referred to in this
     Agreement.

                (c)     For purposes of this Agreement a "Change in Control"
     shall be deemed to have occurred if (i) any "person" (as such term is used
     in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than a
     trustee or other fiduciary holding securities under an employee benefit
     plan of the Company or a corporation owned directly or indirectly by the
     stockholders of the Company in substantially the same proportions as their
     ownership of stock of the Company, (A) who is or becomes the beneficial
     owner, directly or indirectly, of securities of the Company representing
     10% or more of the combined voting power of the Company's then outstanding
     Voting Securities, increases his or her beneficial ownership of such
     securities by 5% or more over the percentage so owned by such person or (B)
     becomes the "beneficial owner" (as defined in Rule 13d-3 under said
     Exchange Act), directly or indirectly, of securities of the Company
     representing more than 20% of the total voting power represented by the
     Company's then outstanding Voting Securities, (ii) during any period of two
     consecutive years, individuals who at the beginning of such period
     constitute the Board of Directors of the Company and any new director whose
     election by the Board of Directors or nomination for election by the
     Company's stockholders was approved by a vote of at

                                       8
<PAGE>

     least two-thirds of the directors then still in office who either were
     directors at the beginning of the period or whose election or nomination
     for election was previously so approved, cease for any reason to constitute
     a majority thereof or (iii) the stockholders of the Company approve a
     merger or consolidation of the Company with any other corporation other
     than a merger or consolidation which would result in the Voting Securities
     of the Company outstanding immediately prior thereto continuing to
     represent (either by remaining outstanding or by being converted into
     Voting Securities of the surviving entity) at least 80% of the total voting
     power represented by the Voting Securities of the Company or such surviving
     entity outstanding immediately after such merger or consolidation, or the
     stockholders of the Company approve a plan of complete liquidation of the
     Company or an agreement for the sale or disposition by the Company of (in
     one transaction or a series of transactions) all or substantially all of
     the Company's assets.

                (d)     For purposes of this Agreement, "Independent Legal
     Counsel" shall mean an attorney or firm of attorneys, selected in
     accordance with the provisions of Section 3(d) hereof, who shall not have
     otherwise performed services for the Company or any Indemnitee within the
     last three years (other than with respect to matters concerning the right
     of any Indemnitee under this Agreement, or of other indemnitees under
     similar indemnity agreements).

                (e)     For purposes of this Agreement, a "Reviewing Party"
     shall mean any appropriate person or body consisting of a member or members
     of the Company's Board of Directors or any other person or body appointed
     by the Board of Directors who is not a party to the particular Claim for
     which Indemnitee are seeking indemnification, or Independent Legal Counsel.

                (f)     For purposes of this Agreement, "Voting Securities"
     shall mean any securities of the Company that vote generally in the
     election of directors.

        12.     Counterparts.  This Agreement may be executed in one or more
                ------------
counterparts, each of which shall constitute an original.

        13.     Binding Effect; Successors and Assigns.  This Agreement shall be
                --------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives.  The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place.  This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether any Indemnitee continues to serve as a director, officer,
employee, agent, controlling person or fiduciary of the Company or of any other
enterprise, including subsidiaries of the Company, at the Company's request.

                                       9
<PAGE>

        14.     Attorneys' Fees.  In the event that any action is instituted by
                ---------------
an Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, any Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action if Indemnitee is ultimately successful in
such action, and shall be entitled to the advancement of Expenses with respect
to such action, unless, as a part of such action, a court of competent
jurisdiction over such action determines that the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous.  In the event of an action instituted by or in the name of the
Company under this Agreement to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee in defense of such action (including costs and expenses incurred with
respect to Indemnitee counterclaims and cross-claims made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless, as a part of such action, a court having jurisdiction over such action
determines that the Indemnitee's material defenses to such action were made in
bad faith or were frivolous.

        15.     Notice.  All notices and other communications required or
                ------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given (a) five calendar days after deposit
with the U.S. Postal Service or other applicable postal service, if delivered by
first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c)
one business day after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid, or (d) one day after the business
day of delivery by facsimile transmission, if deliverable by facsimile
transmission, with copy by first class mail, postage prepaid, and shall be
addressed if to Indemnitee, at Indemnitee's address as set forth beneath
Indemnitee's signature to this Agreement and if to the Company at the address of
its principal corporate offices (attention:  Chief Executive Officer) or at such
other address as such party may designate by ten calendar days' advance written
notice to the other party hereto.

        16.     Consent to Jurisdiction.  The Company and Indemnitee each hereby
                -----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.

        17.     Severability.  The provisions of this Agreement shall be
                ------------
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law.  Furthermore, to the fullest extent possible, the provisions of this
Agreement (including, without limitations, each portion of this Agreement
containing any provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.

        18.     Choice of Law.  This Agreement shall be governed by and its
                -------------
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to

                                       10
<PAGE>

contracts between Delaware residents, entered into and to be performed entirely
within the State of Delaware, without regard to the conflict of laws principles
thereof.

        19.     Subrogation.  In the event of payment under this Agreement, the
                -----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

        20.     Amendment and Termination.  No amendment, modification,
                -------------------------
termination or cancellation of this Agreement shall be effective unless it is in
writing signed by all parties hereto.  No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.

        21.     Integration and Entire Agreement.  This Agreement sets forth the
                --------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.

        22.     No Construction as Employment Agreement.  Nothing contained in
                ---------------------------------------
this Agreement shall be construed as giving the Indemnitee any right to be
retained in the employ of the Company or any of its subsidiaries.

        23.     Corporate Authority.  The Board of Directors of the Company has
                -------------------
approved the terms of this Agreement.

                            [Signature Page Follows]

                                       11
<PAGE>

        In Witness Whereof, the parties hereto have executed this Agreement on
and as of the day and year first above written.

                                 COMPANY:
                                 -------

                                 CATALYTICA ENERGY SYSTEMS, INC.

                                 By:
                                     -------------------------------------
                                 Name:
                                       -----------------------------------
                                 Title:
                                        ----------------------------------

                                 INDEMNITEE:
                                 ----------

                                 -----------------------------------------
                                 Printed Name:
                                               ---------------------------
                                 Address:
                                          --------------------------------

                                          --------------------------------

                                          --------------------------------

                    [Signature Page to Indemnity Agreement]

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