Document:

THIS
      WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THESE SECURITIES HAVE
      BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
      THE
      DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR
      TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT
      AS TO
      THESE SECURITIES OR (2) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE
      CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE.

     

    H2DIESEL
      HOLDINGS, INC.

    WARRANT

    TO
      PURCHASE COMMON STOCK

     

    Issue
      Date:   __,
      2007

     

    THIS
      WARRANT IS TO CERTIFY THAT, _______________ (the
      “Purchaser”),
      is
      entitled to purchase from H2Diesel Holdings, Inc., a Florida
      corporation

    (the
      “Company”), 
      _______________ shares
      [NOTE:
      NUMBER OF SHARES SHALL EQUAL 50% OF THE NUMBER OF SHARES OF COMMON STOCK INTO
      WHICH THE PREFERRED SHARES PURCHASED ARE INITIALLY CONVERTIBLE]
of
      the
      Company’s common stock, par value $.001 per share (the “Common
      Stock”),
      at the
      Exercise Price.

     

    Section
      1. Certain
      Definitions.

     

    As
      used
      in this Warrant, unless the context otherwise requires:

     

    “Exercise
      Price”
      shall
      mean $6.00 per share, as adjusted from time to time pursuant to Section
      3 hereof.

     

    “Securities
      Act”
      shall
      mean the Securities Act of 1933, as amended.

     

    “Warrant”
      shall
      mean this Warrant and all additional or new warrants issued upon division or
      combination of, or in substitution for, this Warrant. All such additional or
      new
warrants
      shall at all times be identical as to terms and conditions and date, except
      as
      to the number of shares of Warrant Stock for which they may be
      exercised.

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Warrantholder”
      shall
      mean the Purchaser, as the initial holder of this Warrant, and
      its
      nominees, successors or assigns, including any subsequent holder of this
      Warrant
      to whom
      it has been legally transferred.

     

    “Warrant
      Stock”
      shall
      mean the shares of the Company’s Common Stock
      purchasable by the holder of this Warrant upon the exercise of this
      Warrant.

     

    Section
      2. Exercise
      of Warrant.

     

    (a)  At
      any
      time after the Is sue Date but prior to the fifth anniversary of the Is sue
      Date
      (the “Expiration
      Date”),
      the
      Purchaser may at any time and from time to time exercise this Warrant, in whole
      or in part.

     

    (b)  (i)The
      Warrantholder shall exercise this Warrant by means of delivering to the Company
      at its office identified in Section
      14
      hereof
      (i) a written notice of exercise, including the number of shares of Warrant
      Stock to be delivered pursuant to such exercise, (ii) this Warrant and (iii)
      payment equal to the Exercise Price in accordance with Section
      2(b)(ii).
      In the
      event that any exercise shall not be for all shares of Warrant Stock purchasable
      hereunder, a new Warrant registered in the name of the Warrantholder, of like
      tenor to this Warrant and for the remaining shares of Warrant Stock purchasable
      hereunder, shall be delivered to the Warrantholder within ten (10) days after
      any such exercise. Such notice of exercise shall be in the Subscription Form
      set
      out at the end of this Warrant.

     

    (ii) The
      Warrantholder shall pay the Exercise Price to the Company either by cash,
      certified check to the order of the Company or wire transfer to an account
      specified by the Company. At any time following the first anniversary of the
      Issue Date and provided that the Warrant Stock is not then registered for resale
      pursuant to an effective registration statement under the Securities Act, then,
      in addition to the method of payment set forth in the immediately
      preceding sentence and in lieu of any cash payment required thereby,
      this
      Warrant may also be exercised at such time by means of a “cashless exercise”
in
      which
      the Warrantholder shall be entitled to receive a certificate for the
      number
      of
      Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    
      	(A)  	
              =
                the Market Price (as defined
                below);

            

    

     

    
      	(B)  	
              =
                the Exercise Price of this Warrant, as adjusted from time to time;
                and

            

    

     

    
      	(X)  	
               =
                the number of shares of Warrant Stock issuable upon exercise of this
                Warrant in accordance with the terms of this Warrant by means of
                a cash
                exercise rather than a cashless
                exercise.

            

    

     

    Solely
      for the purposes of this paragraph, Market Price shall be calculated
      as of
      the Trading Day (defined for this purpose as any day on which the equity
securities
      markets are generally open for trading) immediately preceding the date which
      the
      subscription form attached hereto is deemed to have been sent to the Company
      pursuant to Section
      14
      hereof
      (such preceding date, the “Valuation Date”).
      As used
      herein, the phrase “Market
      Price”
      shall
      mean (i) if the Warrant Stock is listed or admitted for trading on a national
      securities exchange, an automated quotation system or the Over the Counter
      Bulletin Board, the last reported sale price per share of the Warrant Stock
      on
      the Valuation Date, or, in case no such reported sale takes place on such day
      or
      is reported, then the average of
      the
      last reported per share bid and ask prices for shares of the Warrant Stock
      on
      such
      date (or if such bid and ask prices ore not available on such date, the most
      recent preceding date), in either case as officially reported by such securities
      exchange, quotation system or Bulletin Board on which the Common Stock is listed
      or admitted to trading, (ii) if not so listed or admitted for trading, the
      fair
      market value of a share of the Warrant Stock as determined by the Company’s
      board of directors in good faith, or (iii) if such exercise is in connection
      with a merger or consolidation of the Company in which the Company is not the
      survivor or in which the Warrant Stock is exchanged for cash or other securities
      or a sale of all or substantially all of the assets of the Company
      (collectively, a “Sale”), the implied price per share of the Warrant Stock
      resulting from such Sale.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)  Upon
      exercise of this Warrant and delivery of the Subscription Form with proper
      payment relating thereto, the Company shall cause to be executed and delivered
      to the Warrantholder a certificate or certificates representing the aggregate
      number of fully-paid and nonassessable shares of Warrant Stock issuable upon
      such exercise.

     

    (d)  The
      stock
      certificate or certificates for Warrant Stock to be delivered
      in accordance with this Section
      2
      shall be
      in such denominations as may
      be
      specified in said notice of exercise and shall be registered in the name of
      the
      Warrantholder or such other name or names as shall be designated in said notice.
      Such certificate or certificates shall be deemed to have been issued and the
      Warrantholder or any other person so designated to be named therein shall be
      deemed to have become the holder of record of such shares, including to the
      extent permitted by law the right to vote such shares or to consent or to
      receive notice as stockholders, as of the time said notice is delivered to
      the
      Company as aforesaid.

     

    (e)  The
      Company shall pay all expenses payable in connection with the preparation,
      issue
      and delivery of stock certificates under this Section
      2; provided, however,
      that the
      Warrantholder shall be responsible for all transfer taxes
      resulting from the fact that any certificate issued in respect of Warrant
      Stock
      is not
      in the name of the Warrantholder.

     

    (f)  All
      shares of Warrant Stock issuable upon the exercise of this Warrant
      in accordance with the terms hereof shall be validly issued, fully paid
      and
      nonassessable, and free from all liens and other encumbrances thereon, other
      than liens
      or
      other encumbrances created by the Warrantholder or restrictions upon
      transfer
      under federal or state securities laws.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) In
      no
      event shall any fractional share of Warrant Stock of the Company be issued
      upon
      any exercise of this Warrant. If, upon any exercise of this Warrant, the
      Warrantholder would, except as provided in this paragraph, be entitled to
      receive a fractional share of Warrant Stock, then the Company shall either
      (a)
      deliver in cash to such holder an amount equal to such fractional interest,
      or
      (b) issue a full share in lieu of such fractional share.

     

    Section
      3. Adjustment
      of Exercise Price and Warrant Stock.

     

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

     

    (b)  Upon
      each
      adjustment of the Exercise Price as provided in Section 3(a),
      the
      Warrantholder shall thereafter be entitled to subscribe for and purchase, at
      the
      Exercise Price resulting from such adjustment, the number of shares of Warrant
      Stock equal to the product of (i) the number of shares of Warrant Stock into
      which this Warrant would be exercisable prior to such adjustment and (ii) the
      quotient obtained by dividing (A) the Exercise Price existing prior to such
      adjustment by (B) the new Exercise Price resulting from such
      adjustment.

     

    Section
      4. Division
      and Combination.

     

    This
      Warrant may be divided or combined with other Warrants upon presentation at
      the
      aforesaid office of the Company, together with a written notice specifying
      the
      names and denominations in which new Warrants are to be issued, signed by the
      Warrantholder or its agent or attorney. The Company shall pay all expenses
      in
      connection with the preparation, issue and delivery of Warrants under this
      Section
      4.
      The
      Company agrees to maintain at its aforesaid office books for the registration
      of
      the Warrants.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      5. Reclassification,
      Etc.

     

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

     

    Section
      6. Reservation
      and Authorization of Capital Stock.

     

    The
      Company shall, at all times on and after the date hereof, reserve and keep
      available for issuance such number of its authorized but unissued shares of
      Common Stock as will be sufficient to permit the exercise in full of all
      outstanding Warrants.

     

    Section
      7. Rights
      of
      Stockholders.

     

    Nothing
      contained herein be construed to confer upon the holder of this Warrant, as
      such, any of the rights of a stockholder of the Company or any right
to
      vote
      for the election of directors or upon any matter submitted to
      stockholders
      at any
      meeting thereof, or to give or withhold consent to any corporate action (whether
      upon any recapitalization, issuance of stock, reclassification of stock, change
      of par value or change of stock to no par value, consolidation, merger,
      conveyance, or otherwise) or to receive notice of meetings, or to receive
      dividends or subscription rights or otherwise until the Warrant shall have
      been
      exercised and the certificates representing the Warrant Stock shall have been
      issued, as provided herein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      8. Stock
      and
      Warrant Books.

     

    The
      Company will not at any time, except upon dissolution, liquidation
      or winding
      up, close its stock books or warrant books so as to result in preventing
      or
      delaying
      the exercise of any Warrant.

     

    Section
      9. Limitation
      of Liability.

     

    No
      provisions hereof, in the absence of affirmative action by the Warrantholder
      to
      purchase Warrant Stock hereunder, shall give rise to any liability
      of the Warrantholder to pay the Exercise Price or as a stockholder of
      the
      Company
      (whether such liability is asserted by the Company or creditors of the
      Company).

     

    Section
      10. Transfer

     

    This
      Warrant may be transferred only upon the written consent of the Company, which
      approval shall not be unreasonably withheld or delayed. Any Warrants issued
      upon
      the transfer of this Warrant shall be numbered and shall be registered
      in a Warrant Register as they are issued. The Company shall be
      entitled to
      treat
      the registered holder of any Warrant on the Warrant Register as the
      owner
      in fact
      thereof for all purposes and shall not be bound to recognize any equitable
      or
      other
      claim to, or interest in, such Warrant on the part of any other person,
      and shall
      not
      be liable for any registration of transfer of Warrants that are registered
      or
      to be
      registered in the name of a fiduciary or the nominee of a fiduciary unless
      made
      with the actual knowledge that a fiduciary or nominee is committing a breach
      of
      trust in requesting such registration or transfer, or with the knowledge
of
      such
      facts that its participation therein amounts to bad faith. This Warrant
      shall
      be
      transferable only on the books of the Company upon delivery thereof duly
      endorsed by the Holder or by his duly authorized attorney or representative,
      or
      accompanied by proper evidence of succession, assignment, or authority to
      transfer. In all cases of transfer by an attorney, executor, administrator,
      guardian, or other legal representative, duly authenticated evidence of his
      or
      its authority shall be produced. Upon any registration of transfer, the Company
      shall deliver a new Warrant or Warrants to the person entitled thereto. This
      Warrant may be exchanged, at the option of the Holder thereof, for another
      Warrant, or other Warrants of different denominations, of like tenor and
      representing in the aggregate a like amount, upon surrender to the Company
      or
      its duly authorized agent. Notwithstanding the foregoing, the Company shall
      have
      no obligation to cause Warrants to be transferred on its books to any person
      if,
      in the opinion of counsel
      to the Company, such transfer does not comply with the provisions of
      the
      Securities Act and the rules and regulations thereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      11. Investment
      Representations; Restrictions on Warrant Stock.

     

    Unless
      a
      current registration statement under the Securities Act shall be in
      effect
      with respect to the Warrant Stock to be issued upon exercise of this
Warrant,
      the Warrantholder, by accepting this Warrant, covenants and agrees
      that,
      at the
      time of exercise hereof, and at the time of any proposed transfer of Warrant
      Stock acquired upon exercise hereof, such Warrantholder will deliver to the
      Company a written statement that the securities acquired by the Warrantholder
      upon
      exercise hereof are for the account of the Warrantholder or are being held
      by
      the
      Warrantholder as trustee, investment manager, investment advisor or as any
      other
      fiduciary for the account of the beneficial owner or owners for investment
      and
      are not acquired with a view to, or for sale in connection with, any
      distribution thereof (or any portion thereof) and with no present intention
      (at
      any such time) of offering and distributing such securities (or any portion
      thereof). The Warrantholder agrees that certificates representing Warrant Stock
      may bear a legend substantially as follows:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THESE SECURITIES
HAVE
      BEEN ACQUIRED FOR INVESTMENT AND NOT
      WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE
      SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR TRANSFERRED UNLESS (1) A
      REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR
      (2)
      THERE IS AN OPINION OF COUNSEL, SATISFACTORY
      TO THE CORPORATION, THAT AN
      EXEMPTION THEREFROM IS AVAILABLE.

     

    The
      Company agrees to include the Warrant Stock in the Company’s registration
      statement to be filed with the Securities and Exchange Commission pursuant
      to,
      and subject to the terms and conditions of, the Registration Rights Agreement
      dated ,
      2007,
      among the Company, Purchaser and the other stockholders of the Company named
      therein (the “Registration
      Rights Agreement”).

     

    Section
      12. Loss,
      Destruction of Warrant Certificates.

     

    Upon
      receipt of evidence satisfactory to the Company of the loss, theft, destruction
      or mutilation of any warrant and, in the case of any such loss, theft or
      destruction, upon receipt of indemnity and/or security satisfactory to the
      Company or, in the case of any such mutilation, upon surrender and cancellation
      of such Warrant, the Company will make and deliver, in lieu of such lost,
      stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
      representing the right to purchase the same aggregate number of shares of
      Warrant Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      13. Amendments.

     

    The
      terms
      of this Warrant may be amended, and the observance of any term
      herein may be waived, but only with the written consent of the Company
      and
      the
      Warrantholder.

     

    Section
      14. Notices
      Generally.

     

    Any
      notice, request, consent, other communication or delivery pursuant to the
      provisions hereof shall be in writing and shall be sent by one of the following
      means:
      (i) by registered or certified first class mail, postage prepaid, return
      receipt
      requested; (ii) by facsimile transmission with confirmation of receipt; (iii)
      by
      overnight courier service; or (iv) by personal delivery, and shall be properly
      addressed to the Warrantholder at the last known address or facsimile number
      appearing on the books of the Company, or, except as herein otherwise expressly
      provided, to the Company at its principal executive office at H2Diesel Holdings,
      Inc., 11111 Katy Freeway, Suite 910, Houston, Texas 77079, (Fax: (713)
      973-5777), Attention: Chief Executive Officer and an additional copy to Ira
      N.
      Rosner, Greenberg Traurig, P.A., 1221 Brickell Avenue, Miami, Florida 33131
      (fax: (305) 579-0717), or such other address or facsimile number as shall have
      been furnished to the party giving or making such notice, demand or
      delivery.

     

    Section
      15. Successors
      and Assigns.

     

    This
      Warrant shall bind and inure to the benefit of and be enforceable by the parties
      hereto and their respective permitted successors and assigns.

     

    Section
      16. Governing
      Law.

     

    In
      all
      respects, including all matters of construction, validity and performance,
      this Warrant and the obligations arising hereunder shall be governed
      by, and
      construed and enforced in accordance with, the laws of the State of Florida
      applicable to contracts made and performed in such State.

     

    IN
      WITNESS WHEREOF, the
      Company has caused this Warrant to be
      signed
      in its name by its duly authorized officer.

     

    
      	 	 	 
	 	
              H2DIESEL
                HOLDINGS, INC.

            
	 
 	 
 	 
 
	
              Dated: 

            	By:  	
            
	 	
              

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SUBSCRIPTION
      FORM

    (to
      be
      executed only upon exercise of Warrant)

     

    To:        H2Diesel
      Holdings, Inc.

    11111
      Katy Freeway, Suite 910
      Houston,
      Texas 77079

    Attn:
      David A. Gillespie

     

    or
      such
      other address notified by the Company to the Holder.

     

    (1)  The
      undersigned hereby elects to purchase
      shares
      of Warrant
      Stock of the Company pursuant to the terms of the attached Warrant, and
      tenders
      herewith
      payment of the exercise price in full, together with all applicable transfer
      taxes, if any.

     

    (2)  Payment
      shall take the form of (check applicable box): 

     

    [ 
]
      in
      lawful
      money of the United States; or

     

    [
      ] the
      cancellation of such number of shares of Warrant Stock as is
      necessary, in accordance with the formula set forth in subsection
      2(b), to
      exercise this Warrant with respect to the shares of Warrant Stock set forth
      above pursuant to the cashless exercise procedure set forth in subsection
      2(b).

     

    (3)  Please
      issue a certificate or certificates representing said shares of Warrant Stock
      in
      the name of the undersigned or in such other name as is specified
      below:

     

    _______________________________

     

    The
      shares of Warrant Stock shall be delivered to the following:

     

    _______________________________

     

    _______________________________

     

    (4)  Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:

    
       

        
          

        

      

    

    Signature
      of Authorized Signatory of Investing Entity:

     

    
      

    

    Name
      of
      Authorized Signatory:

     

    
      

    

    Title
      of
      Authorized Signatory:

     

    
      

    

     

    Date:FORM
      OF WARRANT

    (Common
      Stock Offering)

     

    THIS
      WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THESE SECURITIES HAVE
      BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
      THE
      DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR
      TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT
      AS TO
      THESE SECURITIES OR (2) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE
      CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE.

     

    H2DIESEL
      HOLDINGS, INC.

    WARRANT

    TO
      PURCHASE COMMON STOCK

     

    Issue
      Date: __________,
      2007

     

    THIS
      WARRANT IS TO CERTIFY THAT,
      (the
“Purchaser”), is entitled to purchase from H2Diesel Holdings, Inc., a Florida
      corporation (the “Company”), ________ shares of the Company’s common stock, par
      value $.001 per share (the “Common
      Stock”),
      at
      the Exercise Price (as defined below). 

     

    Section
      1.  Certain
      Definitions.

     

    As
      used
      in this Warrant, unless the context otherwise requires:

     

    “Exercise
      Price”
shall
      mean $5.25 per share, as adjusted from time to time pursuant to Section
      3
      hereof.

     

    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended.

     

    “Warrant”
shall
      mean this Warrant and all additional or new warrants issued upon division or
      combination of, or in substitution for, this Warrant. All such additional or
      new
      warrants shall at all times be identical as to terms and conditions and date,
      except as to the number of shares of Warrant Stock for which they may be
      exercised.

     

    “Warrantholder”
shall
      mean the Purchaser, as the initial holder of this Warrant, and its nominees,
      successors or assigns, including any subsequent holder of this Warrant to whom
      it has been legally transferred.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Warrant
      Stock”
shall
      mean the shares of the Company’s Common Stock purchasable by the holder of this
      Warrant upon the exercise of this Warrant.

     

    Section
      2.  Exercise
      of Warrant.

     

    (a)  At
      any
      time after the six month anniversary of the Issue Date but prior to the fifth
      anniversary of the Issue Date (the “Expiration
      Date”),
      the
      Purchaser may at any time and from time to time exercise this Warrant, in whole
      or in part.

     

    (b)  (i)
      The
      Warrantholder shall exercise this Warrant by means of delivering to the Company
      at its office identified in Section
      14
      hereof
      (i) a written notice of exercise, including the number of shares of Warrant
      Stock to be delivered pursuant to such exercise, (ii) this Warrant and (iii)
      payment equal to the Exercise Price in accordance with Section
      2(b)(ii).
      In the
      event that any exercise shall not be for all shares of Warrant Stock purchasable
      hereunder, a new Warrant registered in the name of the Warrantholder, of like
      tenor to this Warrant and for the remaining shares of Warrant Stock purchasable
      hereunder, shall be delivered to the Warrantholder within ten (10) days after
      any such exercise. Such notice of exercise shall be in the Subscription Form
      set
      out at the end of this Warrant.

     

    (ii) The
      Warrantholder shall pay the Exercise Price to the Company either by cash,
      certified check to the order of the Company or wire transfer to an account
      specified by the Company. At any time following the first anniversary of the
      Issue Date and provided that the Warrant Stock is not then registered for resale
      pursuant to an effective registration statement under the Securities Act, then,
      in addition to the method of payment set forth in the immediately preceding
      sentence and in lieu of any cash payment required thereby, this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the
      Warrantholder shall be entitled to receive a certificate for the number of
      shares of Warrant Stock computed using the following formula:

     

    X
      =
Y
      (A-B)

    A

    

    
      	 	
              Where

            	
              (X)
                = 

            	
              the
                number of shares of Warrant Stock to be issued to the
                Warrantholder;

            

    

     

    
      	 	 	
              (Y)
                =

            	
              the
                number of shares of Warrant Stock issuable upon exercise of this
                Warrant
                in accordance with the terms of this Warrant by means of a cash exercise
                rather than a cashless exercise;

            

    

     

    
      	
            	(A)=	
                the
                Market Price (as defined below);
                and

            

    

     

    
      	 	 	
              (B)
                =

            	
              the
                Exercise Price of this Warrant, as adjusted from time to
                time.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    Solely
      for the purposes of this paragraph, Market Price shall be calculated as of
      the
      Trading Day (defined for this purpose as any day on which the equity securities
      markets are generally open for trading) immediately preceding the date which
      the
      subscription form attached hereto is deemed to have been sent to the Company
      pursuant to Section
      14
      hereof
      (such preceding date, the “Valuation
      Date”).
      As
      used herein, the phrase “Market
      Price”
shall
      mean (i) if the Warrant Stock is listed or admitted for trading on a national
      securities exchange, an automated quotation system or the Over the Counter
      Bulletin Board, the last reported sale price per share of the Warrant Stock
      on
      the Valuation Date, or, in case no such reported sale takes place on such day
      or
      is reported, then the average of the last reported per share bid and ask prices
      for shares of the Warrant Stock on such date (or if such bid and ask prices
      are
      not available on such date, the most recent preceding date), in either case
      as
      officially reported by such securities exchange, quotation system or Bulletin
      Board on which the Common Stock is listed or admitted to trading, (ii) if not
      so
      listed or admitted for trading, the fair market value of a share of the Warrant
      Stock as determined by the Company’s board of directors in good faith, or (iii)
      if such exercise is in connection with a merger or consolidation of the Company
      in which the Company is not the survivor or in which the Warrant Stock is
      exchanged for cash or other securities or a sale of all or substantially all
      of
      the assets of the Company (collectively, a “Sale”),
      the
      implied price per share of the Warrant Stock resulting from such
      Sale.

     

    (c)  Upon
      exercise of this Warrant and delivery of the Subscription Form with proper
      payment relating thereto, the Company shall cause to be executed and delivered
      to the Warrantholder a certificate or certificates representing the aggregate
      number of fully-paid and nonassessable shares of Warrant Stock issuable upon
      such exercise.

     

    (d)  The
      stock
      certificate or certificates for Warrant Stock to be delivered in accordance
      with
      this Section
      2
      shall be
      in such denominations as may be specified in said notice of exercise and shall
      be registered in the name of the Warrantholder or such other name or names
      as
      shall be designated in said notice. Such certificate or certificates shall
      be
      deemed to have been issued and the Warrantholder or any other person so
      designated to be named therein shall be deemed to have become the holder of
      record of such shares, including to the extent permitted by law the right to
      vote such shares or to consent or to receive notice as stockholders, as of
      the
      time said notice is delivered to the Company as aforesaid.

     

    (e)  The
      Company shall pay all expenses payable in connection with the preparation,
      issue
      and delivery of stock certificates under this Section
      2;
      provided,
      however,
      that
      the Warrantholder shall be responsible for all transfer taxes resulting from
      the
      fact that any certificate issued in respect of Warrant Stock is not in the
      name
      of the Warrantholder.

     

    (f)  All
      shares of Warrant Stock issuable upon the exercise of this Warrant in accordance
      with the terms hereof shall be validly issued, fully paid and nonassessable,
      and
      free from all liens and other encumbrances thereon, other than liens or other
      encumbrances created by the Warrantholder or restrictions upon transfer under
      federal or state securities laws.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (g)  In
      no
      event shall any fractional share of Warrant Stock of the Company be issued
      upon
      any exercise of this Warrant. If, upon any exercise of this Warrant, the
      Warrantholder would, except as provided in this paragraph, be entitled to
      receive a fractional share of Warrant Stock, then the Company shall either
      (a)
      deliver in cash to such holder an amount equal to such fractional interest,
      or
      (b) issue a full share in lieu of such fractional share.

     

    Section
      3.  Adjustment
      of Exercise Price and Warrant Stock.

     

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

     

    (b)  Upon
      each
      adjustment of the Exercise Price as provided in Section 3(a),
      the
      Warrantholder shall thereafter be entitled to subscribe for and purchase, at
      the
      Exercise Price resulting from such adjustment, the number of shares of Warrant
      Stock equal to the product of (i) the number of shares of Warrant Stock into
      which this Warrant would be exercisable prior to such adjustment and (ii) the
      quotient obtained by dividing (A) the Exercise Price existing prior to such
      adjustment by (B) the new Exercise Price resulting from such
      adjustment.

     

    Section
      4.  Division
      and Combination.

     

    This
      Warrant may be divided or combined with other Warrants upon presentation at
      the
      aforesaid office of the Company, together with a written notice specifying
      the
      names and denominations in which new Warrants are to be issued, signed by the
      Warrantholder or its agent or attorney. The Company shall pay all expenses
      in
      connection with the preparation, issue and delivery of Warrants under this
      Section
      4.
      The
      Company agrees to maintain at its aforesaid office books for the registration
      of
      the Warrants.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      5.  Reclassification,
      Etc.

     

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

     

    Section
      6.  Reservation
      and Authorization of Capital Stock.

     

    The
      Company shall, at all times on and after the date hereof, reserve and keep
      available for issuance such number of its authorized but unissued shares of
      Common Stock as will be sufficient to permit the exercise in full of all
      outstanding Warrants.

     

    Section
      7.  Rights
      of Stockholders.

     

    Nothing
      contained herein be construed to confer upon the holder of this Warrant, as
      such, any of the rights of a stockholder of the Company or any right to vote
      for
      the election of directors or upon any matter submitted to stockholders at any
      meeting thereof, or to give or withhold consent to any corporate action (whether
      upon any recapitalization, issuance of stock, reclassification of stock, change
      of par value or change of stock to no par value, consolidation, merger,
      conveyance, or otherwise) or to receive notice of meetings, or to receive
      dividends or subscription rights or otherwise until the Warrant shall have
      been
      exercised and the certificates representing the Warrant Stock shall have been
      issued, as provided herein.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Section
      8.  Stock
      and Warrant Books.

     

    The
      Company will not at any time, except upon dissolution, liquidation or winding
      up, close its stock books or warrant books so as to result in preventing or
      delaying the exercise of any Warrant.

     

    Section
      9.  Limitation
      of Liability.

     

    No
      provisions hereof, in the absence of affirmative action by the Warrantholder
      to
      purchase Warrant Stock hereunder, shall give rise to any liability of the
      Warrantholder to pay the Exercise Price or as a stockholder of the Company
      (whether such liability is asserted by the Company or creditors of the
      Company).

     

    Section
      10.  Transfer

     

    This
      Warrant may be transferred only upon the written consent of the Company, which
      approval shall not be unreasonably withheld or delayed. Any Warrants issued
      upon
      the transfer of this Warrant shall be numbered and shall be registered in a
      Warrant Register as they are issued. The Company shall be entitled to treat
      the
      registered holder of any Warrant on the Warrant Register as the owner in fact
      thereof for all purposes and shall not be bound to recognize any equitable
      or
      other claim to, or interest in, such Warrant on the part of any other person,
      and shall not be liable for any registration of transfer of Warrants that are
      registered or to be registered in the name of a fiduciary or the nominee of
      a
      fiduciary unless made with the actual knowledge that a fiduciary or nominee
      is
      committing a breach of trust in requesting such registration or transfer, or
      with the knowledge of such facts that its participation therein amounts to
      bad
      faith. This Warrant shall be transferable only on the books of the Company
      upon
      delivery thereof duly endorsed by the Holder or by his duly authorized attorney
      or representative, or accompanied by proper evidence of succession, assignment,
      or authority to transfer. In all cases of transfer by an attorney, executor,
      administrator, guardian, or other legal representative, duly authenticated
      evidence of his or its authority shall be produced. Upon any registration of
      transfer, the Company shall deliver a new Warrant or Warrants to the person
      entitled thereto. This Warrant may be exchanged, at the option of the Holder
      thereof, for another Warrant, or other Warrants of different denominations,
      of
      like tenor and representing in the aggregate a like amount, upon surrender
      to
      the Company or its duly authorized agent. Notwithstanding the foregoing, the
      Company shall have no obligation to cause Warrants to be transferred on its
      books to any person if, in the opinion of counsel to the Company, such transfer
      does not comply with the provisions of the Securities Act and the rules and
      regulations thereunder.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Section
      11.  Investment
      Representations; Restrictions on Warrant Stock.

     

    The
      Warrantholder, by accepting this Warrant, covenants and agrees that, at the
      time
      of exercise hereof, and at the time of any proposed transfer of Warrant Stock
      acquired upon exercise hereof, unless a current registration statement under
      the
      Securities Act shall be in effect with respect to the Warrant Stock to be issued
      upon exercise of this Warrant, such Warrantholder will deliver to the Company
      a
      written statement that the securities acquired by the Warrantholder upon
      exercise hereof are for the account of the Warrantholder or are being held
      by
      the Warrantholder as trustee, investment manager, investment advisor or as
      any
      other fiduciary for the account of the beneficial owner or owners for investment
      and are not acquired with a view to, or for sale in connection with, any
      distribution thereof (or any portion thereof) and with no present intention
      (at
      any such time) of offering and distributing such securities (or any portion
      thereof). The Warrantholder agrees that certificates representing Warrant Stock
      may bear a legend substantially as follows:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES HAVE
      BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
      THE
      DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR
      TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS
      IN
      EFFECT AS TO THESE SECURITIES OR (2) THERE IS AN OPINION OF COUNSEL,
      SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS
      AVAILABLE.

     

    The
      Company agrees to include the Warrant Stock in the Company’s registration
      statement to be filed with the Securities and Exchange Commission pursuant
      to,
      and subject to the terms and conditions of, the Registration Rights Agreement
      dated December 7 ,
      2007,
      among the Company, Purchaser and the other stockholders of the Company named
      therein (the “Registration
      Rights Agreement”).

     

    Section
      12.  Loss,
      Destruction of Warrant Certificates.

     

    Upon
      receipt of evidence satisfactory to the Company of the loss, theft, destruction
      or mutilation of any warrant and, in the case of any such loss, theft or
      destruction, upon receipt of indemnity and/or security satisfactory to the
      Company or, in the case of any such mutilation, upon surrender and cancellation
      of such Warrant, the Company will make and deliver, in lieu of such lost,
      stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
      representing the right to purchase the same aggregate number of shares of
      Warrant Stock.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Section
      13.  Amendments.

     

    The
      terms
      of this Warrant may be amended, and the observance of any term herein may be
      waived, but only with the written consent of the Company and the
      Warrantholder.

     

    Section
      14.  Notices
      Generally.

     

    Any
      notice, request, consent, other communication or delivery pursuant to the
      provisions hereof shall be in writing and shall be sent by one of the following
      means: (i) by registered or certified first class mail, postage prepaid, return
      receipt requested; (ii) by facsimile transmission with confirmation of receipt;
      (iii) by overnight courier service; or (iv) by personal delivery, and shall
      be
      properly addressed to the Warrantholder at the last known address or facsimile
      number appearing on the books of the Company, or, except as herein otherwise
      expressly provided, to the Company at its principal executive office at H2Diesel
      Holdings, Inc., 11111 Katy Freeway, Suite 910, Houston, Texas 77079, (Fax:
      (713)
      973-5777), Attention: David A. Gillespie, Chief Executive Officer, or such
      other
      address or facsimile number as shall have been furnished to the party giving
      or
      making such notice, demand or delivery.

     

    Section
      15.  Successors
      and Assigns.

     

    This
      Warrant shall bind and inure to the benefit of and be enforceable by the parties
      hereto and their respective permitted successors and assigns.

     

    Section
      16.  Governing
      Law.

     

    In
      all
      respects, including all matters of construction, validity and performance,
      this
      Warrant and the obligations arising hereunder shall be governed by, and
      construed and enforced in accordance with, the laws of the State of Florida
      applicable to contracts made and performed in such State.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to be signed in its name by its duly authorized
      officer as of the date first written above.

     

    
      	 	 	 
	 	H2DIESEL HOLDINGS,
              INC.
	 
 	 
 	 
 
	
            	By: 	
            
	 	
              

            

    

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    SUBSCRIPTION
      FORM

     

    (to
      be
      executed only upon exercise of Warrant)

    

    
      	To:	
              H2Diesel
                Holdings, Inc.

            

    

    11111
      Katy Freeway, Suite 910 

    Houston,
      Texas 77079

    Attn:
      David A. Gillespie, Chief Executive Officer

     

    or
      such
      other address notified by the Company to the Holder.

    

    (1)
      The
      undersigned hereby elects to purchase _______ shares of Warrant Stock of the
      Company pursuant to the terms of the attached Warrant, and tenders herewith
      payment of the exercise price in full, together with all applicable transfer
      taxes, if any.

    

    (2)
      Payment shall take the form of (check applicable box):

    

    [  
      ]in lawful money of the United States; or

    

    [  
      ] the cancellation of such number of shares of Warrant Stock as is necessary,
      in
      accordance with the formula set forth in subsection 2(b), to exercise this
      Warrant with respect to the shares of Warrant Stock set forth above pursuant
      to
      the cashless exercise procedure set forth in subsection 2(b).

    

    (3)
      Please issue a certificate or certificates representing said shares of Warrant
      Stock in the name of the undersigned or in such other name as is specified
      below:

    

    
      	 	 	 

    

     

    The
      shares of Warrant Stock shall be delivered to the following:

     

    
      	 	 	 

      	
               

               

            	 	 

      	
               

               

            	 	 

    

     

    (4)
      Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      OF HOLDER]

     

    
      	
              Name
                of Investing Entity:

            
	________________________________________________________________
	
              Signature
                of Authorized Signatory of Investing Entity:

            
	________________________________________________________________
	
              Name
                of Authorized Signatory:

            
	________________________________________________________________
	 
	Title
              of
              Authorized Signatory:
	________________________________________________________________
	 
	
              Date:
                __________________________

            
	 

    

     

    
      
        
        

      

      
        2

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