Document:

Unassociated Document

    Exhibit 10.18

     

    
      SERVICE
AGREEMENT

      

      This
Service Agreement (hereinafter the “Agreement”) is entered into this 15th day of
October 2007 between Lodemo y Asociados S.C.P., a Mexican Corporation with its
primary place of business located at Calle 18, # 201-B x 23 y 25, Colonias
Garcia Gineres, C.P. 97070, Merida, Yucatan, Mexico (hereinafter “Lodemo”); and
Medical Discoveries, Inc., a Utah Corporation dba Global Clean Energy Holdings,
with its primary place of business located at 6033 W. Century Blvd, Suite 1090,
Los Angeles, CA 90045, USA (hereinafter “Global”).  The terms of this
Agreement shall be binding upon the parties.

      

      WITNESSETH:

      

      WHEREAS, Global intends to
secure land and establish and operate farming operations within the Republic of
Mexico (hereinafter “Mexico”) for the purpose of growing Jatropha Curcas (hereinafter
“Jatropha”), a non-edible agricultural product; and

      

      WHEREAS, Global intends to
harvest Jatropha seeds from its farming operations in Mexico and extract oil
from the seeds for the purpose of selling the oil inside and outside Mexico as
an energy source and biodiesel feedstock; and

      

      WHEREAS, Global intends to
construct and operate seed oil extraction facilities, and, in connection
therewith, desires to set up logistics and transportation systems to transport
production feedstocks, supplies, seed oil, biodiesel, and other end products;
and

      

      WHEREAS, Global intends to
acquire professional services from Lodemo to support its activities and
objectives as described in this Agreement; and

      

      WHEREAS, the parties desire to
set forth their specific understanding of their respective responsibilities and
obligations associated with delivery of the services to be provided by Lodemo
hereunder.

      

      NOW, THEREFORE, in
consideration of the mutual promises and covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Global and Lodemo agree as follows:

      

      
        	
                1.

              	
                DEFINITIONS

              

      

      

      For
purposes of this Agreement, the following terms and phrases have the following
definitions:

      

      “Facilities” means all
physical assets purchased or intended for purchase by Global necessary to
deliver the products and services defined in this Agreement; including
structures, seeds, plants, fertilizer, planting materials and supplies, tools,
machinery, equipment, and vehicles. For purposes of this Agreement, the
Facilities shall not include any land.

       

      
        
          
          

        

        
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      “Project Operations & Capital
Expenditure Budget” means a detailed and itemized estimate of projected
yearly expenditures necessary for construction and operation of the Project
based on anticipated progress and activity by the parties, as revised and
amended from time to time in accordance with the terms hereof.

      

      “Facility Manager” means
Lodemo’s management representative with day-to-day operating responsibility for
the Project.

      

      “Farm” means the land owned or
leased by Global in Mexico and all equipment necessary for the propagation,
cultivation, and harvesting of Jatropha on such land.

      

       “Logistics” means those assets
and services that are necessary for the transportation of labor, materials,
products, by-product or waste to or from the operations of the Project, Farms
and Facilities.

      

      “Oil Extraction Facility”
means the assets and services required for the removal of oil from the Jatropha
seeds produced from the Farms and  for the storage of the seeds or
oil.  Global shall acquire or construct, and thereafter own, the Oil
Extraction Facility.  The construction or acquisition of the Oil
Extraction Facility is not covered by this Agreement.  The operation
of the Oil Extraction Facility, however, is included in this Agreement as part
of the Project, and the operation of the Oil Extraction Facility shall be
included as part of the Services.

      

      “Product” means the amount of
Jatropha seed oil and the amount of biomass byproduct produced as part of the
Project.

      

      “Project” means establishment,
development, and operation of Global’s business to grow Jatropha in Mexico, to
extract the oil from the Jatropha seeds, and the deliver of such oil to a buyer,
including the purchase or lease of land in the name of Global, the establishment
and operation of one or more Jatropha nurseries, the clearing, planting and
cultivation of the Jatropha fields, the harvesting of the Jatropha seeds, the
operation of Global’s oil extraction facilities, and the logistics associated
with the foregoing.  The Project does not include the Joint Venture or
the Biodiesel Refinery, which activities will be subject to one or more separate
agreements between the parties hereto or their respective
affiliates.

      

      “Prudent Operating Practice”
means any of the practices, methods and acts which, in the exercise of
reasonable judgment in the light of the facts known at the time that a decision
was made, could reasonably have been expected to accomplish the desired result
at the lower reasonable cost, consistent with licensing and regulatory
considerations, environmental considerations, reliability, safety and
expedition.

       

      
        
          
          

        

        
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      “Construction & Operating
Plan” means a forecast established by the parties for each year
describing on a calendar month basis the requested level of production of
Product from the Project for the following calendar year.

      

      “Scheduled Output” means the
designed capacity of the Project on a month to month basis as set forth in the
Construction & Operating Plan.

      

      “Services”  means
the services to be provided by Lodemo under this Agreement required to
accomplish the goals of the Project.

      

      “Service Standards” has the
meaning set forth in Section 3.2(a).

      

       “Utilities” means,
collectively, those utilities which are utilized or required in connection with
the Project, including electricity, fuel, water, wastewater, and temporary
portable lavatories, applied or consumed in the operation of the Project and the
supply or performance of Services.

      

      “Joint Venture” means business
arrangement the parties intend to establish for the purpose of designing,
constructing, and operating a biodiesel manufacturing facility to be located in
Yucatan, Mexico (hereinafter the “Biodiesel
Refinery”).  The parties currently anticipate that any Joint
Venture established by them shall be equally owned by them and will be financed,
constructed,  and operated  on terms to be negotiated by
them.

      

      
        	
                2.

              	
                SCOPE OF
      SERVICES

              

      

      

      
        	
                2.1. 

              	
                General Scope of
      Services

              

      

      

      Subject
to Global’s payment obligations as more fully set forth in Section 6, Lodemo’s
Services will include the following:

      

      
        	
              	
                2.1.1.

              	
                Project
      Management.  Lodemo will provide Project Management
      services, which services, subject to the rights of the Global Project
      Manager to the extent granted herein, shall consist of implementing the
      Construction & Operating Plan, including the overall management and
      supervision of all aspects of the Project and the responsibility for
      ensuring the proper and timely performance of all Services to
      Global.  Project Management provided by Lodemo will be provided
      by senior Lodemo staff and include participation in meetings with Global,
      planning, reporting, scheduling, budgeting, and day-to-day direction of
      all staff and activities.

              

      

      
        	
              	
                2.1.2.

              	
                Acquisition of Land
      Parcels.  In cooperation with and on Global’s behalf,
      Lodemo will identify potential land parcels suitable for nursery and
      Jatropha farming operations.  Lodemo will negotiate with land
      owners the terms for the long-term use of the land, either by sale or by
      lease, for the purpose of Jatropha farming.  Lodemo will assist
      Global by all necessary means to negotiate and consummate land sales
      and/or lease agreements.  Notwithstanding the foregoing, Lodemo
      shall not have the right to enter into any land agreements (lease or
      purchase) on behalf of Global, and Lodemo shall not have the right to bind
      or obligate Global in any such land agreements.  Nothing set
      forth in this Agreement obligates Global to enter into any land sales or
      lease Agreement, and Global shall have the sole right to determine whether
      to acquire land and the terms of such acquisition.  The land
      contracts shall be entered into by an affiliate of Global, organized in
      Mexico.

              

      

       

      
        
          
          

        

        
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                2.1.3.

              	
                Clearing of
      Land.  Lodemo will prepare all nursery and farming land
      parcels as required to allow for efficient planting, irrigation, drainage,
      and propagation of Jatropha.  Lodemo will clear trees, shrubs,
      structures, large rocks, and other foreign objects from the land as
      required.

              

      

      
        	
              	
                2.1.4.

              	
                Nursery Construction
      and Operation.  Lodemo will set up and construct a
      Jatropha plant nursery at a site location approved by
      Global.  The nursery will be for the staging operations and
      storage and care of Jatropha seeds, seedlings, stem cuttings, and other
      materials and supplies necessary for nursery operations.  Global
      will be responsible for providing all Jatropha seeds, seedlings, stem
      cuttings, and other materials and supplies necessary for nursery
      operations.  Lodemo will provide staff for ongoing daily
      operations of the nursery.

              

      

      
        	
              	
                2.1.5.

              	
                Planting and
      Cultivation of Jatropha.  Lodemo will plant and cultivate
      Jatropha on the land owned or leased by Global.  Planting will
      include transfer of seeds, seedlings, and/or established stem cuttings
      supplied by and through the nursery. Lodemo will provide high quality
      long-term care of the Jatropha to include irrigation, removal of weeds,
      and seasonal pruning.

              

      

      
        	
              	
                2.1.6.

              	
                Jatropha Seed
      Harvesting and Transportation.  Upon proper plant
      maturity, Lodemo will harvest and clean all mature Jatropha seeds from all
      of Global’s planted land parcels described above in this Agreement on a
      periodic basis as required.  All Global Jatropha seeds harvested
      by Lodemo will be cleaned (removal of seed casings, stems, and leaves) and
      transferred by Lodemo to the Oil Extraction Facility or to another Yucatan
      oil extraction facility designated by
Global.

              

      

      
        	
              	
                2.1.7.

              	
                Operation of Oil
      Extraction Facilities.  Lodemo will assist Global in
      identifying suitable locations for one or more Oil Extraction
      Facilities.  Lodemo will provide all operations and logistics
      services for the management and operations of a Global Oil Extraction
      Facility.  The Oil Extraction Facility will be designed,
      constructed, and owned by Global.  Lodemo will be responsible
      for all operations and site logistics, including transfer and disposal of
      seed meal and transfer of seed oil to buyers and local Global biodiesel
      manufacturing facilities.

              

      

      

      
        	
                2.2. 

              	
                Other
      Services

              

      

      

      The
parties understand that in the process of executing its Services, Global and
Lodemo may from time to time hire or cause to be hired contractors and
subcontractors to complete certain tasks.  If during the process of
reviewing contractor and subcontractor proposals, Lodemo determines it can and
desires to provide the same services for an equal or lower price and at an equal
or better quality; Global will provide Lodemo the opportunity to enter into
agreement and perform said services for its proposed price and under similar
terms.

      

      
        	
                2.3. 

              	
                Construction of
      Facilities

              

      

       

      
        
          
          

        

        
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                2.3.1.

              	
                Global
      Responsibilities.  Global will fund the Project’s costs
      and the fees and expenses set forth in this Agreement in the manner as
      specified in the Project Operations & Capital Expenditure
      Budget.  Global shall also provide the necessary technology,
      including plant and soil science expertise, for the setup and construction
      of one or more nurseries and for Farm operations as necessary for the bulk
      production of Jatropha seeds.  Global will provide all necessary
      funds, technology, engineering, procurement, and construction for the Oil
      Extraction Facilities.

              

      

      

      
        	
                2.4. 

              	
                Operation of
      Facilities

              

      

      

      
        	
              	
                2.4.1.

              	
                Services on Behalf of
      Global.  Subject to (a) Global’s right to exercise
      managerial control in accordance with default provisions as outlined in
      this Agreement, (b) Global’s other rights hereunder, and (c) the other
      provisions of this Agreement, Lodemo will provide its Services on behalf
      of and for the account of Global, will have full authority and
      responsibility for executing its Services, and will perform its Services
      according to expectations and at such times as directed by
      Global.

              

      

      

      
        	
                2.5. 

              	
                Service
      Standards

              

      

      

      
        	
              	
                2.5.1.

              	
                Standard of
      Quality.  Lodemo shall adhere to commercially reasonable
      standards in performing the Services in accordance with Global’s direction
      and expectations as communicated in writing and through Project meetings
      with Global from time to time and shall perform or cause to be performed
      the Services in all material respects in accordance with (i) Prudent
      Operating Practice, (ii) Lodemo’s standard practices for such services
      consistent with the scope and quality of similar services provided by
      Lodemo for itself in its other business activities,  and (iii)
      all reasonable instructions of Global (collectively, the “Service
      Standard”).

              

      

      

      
        	
              	
                2.5.2.

              	
                Compliance/No
      Violations. Lodemo shall perform its Services in accordance with
      applicable laws, rules, regulations, permits and licenses and orders of
      governmental authorities as in effect from time to time (collectively
      referred to as “Applicable Law”).  Lodemo, in rendering its
      Services, shall have no obligation to take any action or otherwise to
      perform to the extent it reasonably believes such action or performance is
      or may be in violation of any Applicable Law or may involve any material
      risk to the Project, Facilities or Farm, or any part thereof, or any
      persons or property.

              

      

       

      
        	
                2.6. 

              	
                Personnel

              

      

      

      
        	
              	
                2.6.1.

              	
                Formation of Labor
      Management Company.  The parties understand and agree
      that Lodemo may create a new Mexican corporation (herein referred to as
      “NEW Co.”) to perform the functions of hiring in its name and managing
      personnel required for executing its Services under this agreement. In its
      function, NEW Co. will be responsible for all labor-related management
      functions, including all payroll operations and payment of social security
      and health and welfare contribution obligations.  Lodemo agrees
      that, notwithstanding the formation of New Co, Lodemo will be responsible
      for the supervising and managing NEW Co. and that Lodemo shall be
      responsible to Global under the terms of this Agreement for the actions or
      omissions of NEW Co.  Even though personnel required for
      execution of the Services may be employees of NEW Co., such personnel will
      remain under the sole and exclusive supervision and control
      of  Lodemo.  All Lodemo and NEW Co. employees will be
      properly classified, qualified, trained and supervised by Lodemo for the
      execution of the Services.

              

      

       

      
        
          
          

        

        
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                2.6.2.

              	
                Use of Employment
      Agencies.  In order to hire appropriate personnel and
      fulfill the staffing obligations under this Agreement, Lodemo is
      authorized to hire personnel through an employment agency or labor
      outsourcing company.  Additional fees required to hire personnel
      through an employment agency are considered Allowable Costs under the
      terms of this Agreement.  All employees acquired through any
      employment agency will remain under the sole and exclusive responsibility,
      supervision, and control of Lodemo.

              

      

      

      
        	
              	
                2.6.3.

              	
                Right to Remove
      Personnel.  If Global determines in good faith that the
      continued assignment of any person, subcontractor, or employment agency
      performing or providing Services is not in accordance with the
      requirements and standards set forth in this Agreement, Global may deliver
      a notice to Lodemo stating its complaint and requesting removal and/or
      replacement of such person(s), subcontractor, or employment
      agency.  Promptly after its receipt of such complaint and
      request by Global, Lodemo will investigate the matters stated in the
      complaint and request and discuss its own findings with
      Global.  If Global still, in good faith, requests removal and/or
      replacement of such person(s), subcontractor, or employment agency, Lodemo
      will promptly remove and/or replace that person(s), subcontractor, or
      employment agency with one of suitable ability and qualifications
      reasonably acceptable to Global.  In such cases, all costs
      incurred for the removal and replacement of such person(s), subcontractor,
      or employment agency, as well as any damages or repairs caused, will be
      considered as Non-Allowable Costs.

              

      

      

      
        	
                2.7. 

              	
                Utilities

              

      

      

      Lodemo
will arrange for all necessary temporary and permanent Utilities to be provided
to the nursery, any Farm, and any Oil Extraction Facility.  In
providing such Utilities, Lodemo will use such Utilities prudently and provide
such services as economically as possible for such operation in connection with
the Services.

      

      
        	
                2.8. 

              	
                Raw Materials,
      Supplies and Packaging
Material.

              

      

       

      
        
          
          

        

        
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      Lodemo
may acquire on behalf of Global all minor raw materials and supplies reasonably
necessary for the Project, including maintenance, repair and operating supplies,
spare parts, packaging materials, and utilities services and facilities required
by Global and for execution of the Services.  Such reasonably
necessary minor raw materials and supplies are subject to periodic review by
Global, but shall be considered as Allowable Costs.

      

      
        	
                2.9. 

              	
                Maintenance and
      Repairs

              

      

      

      In the
course of conducting operations and performing its Services, Lodemo may provide
maintenance and repairs which may or may not involve capital expenditures, in
accordance with Global’s quality standards and standard Lodemo
practice.  If, in the reasonable opinion of Lodemo, capital
expenditures are required with respect to proper operation and maintenance of
the Project, Lodemo may make such capital expenditures directly and consider
them as Allowable Costs provided that such capital expenditures are planned and
included in the Project Operations & Capital Expenditure
Budget.   If such capital expenditures are not planned and
included in the Project Operations & Capital Expenditure Budget or exceed
the amounts included in the Project Operations & Capital Expenditure Budget,
Lodemo may make such capital expenditures directly and consider them as
Allowable Costs provided that Lodemo will not proceed without Global’s written
consent, which shall not be unreasonably withheld, prior to approving any
capital project in excess of $5,000 for any one expenditure or collectively for
all related expenditures.

      

      
        	
                2.10. 

              	
                Global’s Presence at
      Site

              

      

      

      During
all of Lodemo’s activities and for the purpose of reviewing Lodemo’s progress
and performance, Global will have total unrestricted access to all Project
locations, including the nursery, farms, Oil Extraction Facility, and any other
sites where Global’s materials are stored or work under this Agreement is being
conducted.

      

      
        	
                2.11. 

              	
                Permits and
      Licenses

              

      

      

      Lodemo
shall be responsible for obtaining and maintaining in Global’s name any and all
permits or licenses required by Applicable Law relating to the construction,
operation, and ownership of the Project, Farm, Facilities or Logistics (but not
relating to employees or other labor hired by Lodemo or New Co.).  In
the event that under Applicable Law Lodemo is required to be a party to such
permits or licenses, Lodemo shall hold those permits and licenses on behalf of
Global and for Global’s account.  Lodemo or New Co. shall obtain and
maintain all permits and licenses required by Applicable Law to hire the
employees and laborers used in the Project, including persons working on the
Farms, in the nursery, and in the Oil Extraction Facility.  All direct
costs associated with obtaining and maintaining permits are considered Allowable
Costs.  Lodemo shall be responsible for obtaining and maintaining such
permits and licenses.

       

      
        
          
          

        

        
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                3.

              	
                BUDGETING

              

      

      

      
        	
                3.1. 

              	
                The Budgeting
      Process

              

      

      

      Lodemo
shall, for each calendar year, provide Global with Lodemo’s proposed annual (i)
Construction & Operating Plan and (ii) Project Operations & Capital
Expenditure Budget (hereinafter the “Budget”).  The draft Construction
& Operating Plan and Budget is attached hereto as Exhibits D and E, which
Construction & Operating Plan and Budget will be updated and submitted for
approval by Global; all subsequent annual Construction & Operating Plans and
Budget’s will be delivered to Global at least 90 days prior to the beginning of
each subsequent calendar year.  Global shall provide prompt review and
comments to Lodemo as soon as reasonably practicable, but no later than forty
five (45) days after receipt of the proposed Construction & Operating Plan
and Budget.  Global’s comments may include questions, comments,
objections or suggested modifications which Global may have with respect to such
proposed plan and budget, and the parties shall cooperate with each other in
developing a mutually acceptable Construction & Operating Plan and Budget.
Global must approve the Construction & Operating Plan and Budget in writing
before they may be considered valid and before costs associated with the
Construction & Operating Plan and Budget may be considered as Allowable
Costs.  If Global does not approve the annual Construction &
Operating Plan and Budget by December 15 of the applicable calendar year, Lodemo
will continue to perform the Services and continue operations in accordance with
the previous year’s Construction & Operating Plan and Budget, until such
time as a new Construction & Operating Plan and Budget may be established
through negotiation or according to dispute resolution methodology described in
Section 15.  Lodemo will provide Global with a monthly reconciliation
of actual expenditures compared to the Budget, and Global and Lodemo will review
annual Construction & Operating Plans and Budgets jointly on a monthly
basis.  The annual Construction & Operating Plan and Budget may be
revised with the written consent of both parties during monthly reviews to
reflect revisions necessitated by changed circumstances, including changes in
law, scope, emergencies, and force majeure events.

      

      
        	
                3.2. 

              	
                Budget Detail and
      Format

              

      

      

      Information
included in the annual Construction & Operating Plan and Budget, as well as
all supporting data, formulas, calculations, and back-up information will be
available for review at any time by either party and will be shared upon request
by the parties.  Annual Construction & Operating Plans and Budgets
will be provided by Lodemo in significant detail consistent with common
professional practice and in a form that Global may request in order for it to
adequately provide review and make prudent business decisions.

      

      
        	
                4.

              	
                MANAGEMENT AND
      CONTROL

              

      

      

      
        	
                4.1. 

              	
                Responsibility of
      Personnel

              

      

      

      Except as
otherwise provided in this Agreement, Lodemo shall have exclusive managerial
control over and responsibility for its personnel (and any personnel hired by
New Co.), any subcontractors, and suppliers in the execution of its
Services.  Such control shall include decision making authority over
coordination and scheduling of labor, logistics, and operations; provided, however,
that such control shall be effected in a manner which does not adversely affect
the quality of service, result in delays, or violate or contradict any labor
laws, rules, or moral obligations applicable to employees under the
responsibility, supervision and control of  either Lodemo, its
subcontractors or suppliers, NEW Co., or any employment agency performing
services hereunder, and such employees shall not be required to report to any
person who is not ultimately reporting up through Lodemo.

       

      
        
          
          

        

        
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                4.2. 

              	
                Global Right to
      Review

              

      

      

      Global
reserves the right to review the management practices of Lodemo, its
subcontractors and suppliers, NEW Co., and any employment agency performing
services hereunder to determine and ensure that the Services are managed using
methods that are not detrimental to safety and health of any employed person, or
are not in violation of applicable standards or laws.

      

      
        	
                4.3. 

              	
                Global Project
      Manager

              

      

      

      Global
shall have the right at any time to appoint a Global representative as the
person responsible for overall strategic planning and management of the Project
and who may be located at any given time at any of the Facilities (the “Global
Project Manager”).  The Global Project Manager may also be assisted in
his work by other Global staff.  The Global Project Manager’s function
shall be to provide overall direction regarding the Project, including (i) the
purchasing/leasing land, (ii) approving changes to the Budget, (iii)
establishing overall practices and procedures for planting and harvesting
Jatropha plants and seeds, and (iv) monitoring Lodemo’s progress in carrying out
the Construction & Operating Plan.  The Global Project Manager and
his staff, if any, will not provide supervision of Lodemo construction,
operations, or logistics personnel and will not otherwise be responsible for, or
involved in, the day-to-day operations of the Project.  Global shall
bear all costs and expense associate with its Global Project Manager and related
staff.  The Global Project Manager and staff will be provided access
to all Facilities and financial and operating records of the Project, and at the
Global Project Manager’s request, will have the right to participate in Lodemo’s
planning, scheduling, and budgeting activities and meetings convened concerning
operations or the execution of its Services (“Management
Meetings”).

      

      
        	
                4.4. 

              	
                Project Management
      Meetings

              

      

      

      Lodemo
will plan and arrange for monthly project management meetings to occur on or
about the 20th day of
every calendar month during the term of the Agreement (Management
Meetings”).  Through the Management Meetings, the parties shall
perform progress and budget reviews and coordinate any shutdowns, curtailments,
service outages, and changes to operations.

       

      
        
          
          

        

        
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                5.

              	
                ENVIRONMENTAL
      POLICIES

              

      

      

      
        	
                5.1. 

              	
                Environmental
      Plan

              

      

      

      As a part
of its Services, Lodemo shall provide Global with a project environmental plan,
which will include a description of its waste collection and disposal strategy,
land clearing and biomass disposal strategy, site drainage plans, and its plan
for providing any other services in accordance with local and national
environmental laws and Global’s corporate polices and practices.

      

      
        	
                5.2. 

              	
                Environmental
      Permits

              

      

      

      On behalf
of Global, Lodemo will apply for and bear responsibility for acquiring any
required environmental permits and/or licenses, and will maintain and administer
said permits and/or licenses for the Project and Facilities.

      

      
        	
                6.

              	
                COMPENSATION FOR
      SERVICES

              

      

      

      As
compensation for Lodemo providing the Services herein, Global shall make
payments to Lodemo as follows:

      

      
        	
                6.1. 

              	
                Allowable and
      Non-Allowable Costs

              

      

      

      Allowable
and Non-Allowable Costs for the Project shall be determined as
follows.

       

      
        	
              	
                6.1.1.

              	
                Allowable
      Costs

              

      

      

      "Allowable
Costs" shall mean the actual costs described in this Subsection that are paid or
payable by Lodemo and necessarily incurred during performance of the
Services.  Allowable Costs are subject to additions or deductions
which may be made in accordance with this Agreement.  Allowable Costs
shall only include the following items:

      

      
        6.1.1.1.
Direct costs of salaries and wages actually paid to Lodemo's full-time employees
listed in Exhibit "B".  Other personnel who are specifically named in
Exhibit "B" may also be charged to the Project to the extent that use of such
personnel is included in the Budget or otherwise approved by
Global.  Any changes to such chargeable personnel during the course of
the Project must be approved in writing by Global.

        

        6.1.1.2.
A factor of fifteen percent (15%) (Lodemo's "Labor Burden Rate") of the actual
salaries and wages described in Subsection 6.1.1 above to compensate Lodemo for
the cost of all statutory payroll taxes levied or assessed by any governmental
body during the performance of the Services, including but not limited to
retirement, unemployment taxes and unemployment insurance, and worker's
compensation costs; and for the cost of any and all company paid employee
benefits, including but not limited to holiday pay, vacation pay, sick leave,
retirement plans, group medical and life insurance benefits.  The
Labor Burden Rate shall be applied to all hours at the salaries or wages listed
in Exhibit “B”.

         

        
          
            
            

          

          
            Page 10
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        6.1.1.3.
Actual direct cost to Lodemo of non-employee agency personnel in accordance with
the amounts paid pursuant to the applicable agency hire agreements plus an
allowance of five percent (5%) to compensate Lodemo for its overhead costs
pertaining to such personnel.

        

        6.1.1.4.
Actual cost of amounts paid or payable by Lodemo to its subcontractors and
vendors for services performed pursuant to subcontracts and purchase orders
which have been reviewed and approved by Global.

        

        6.1.1.5.
Actual direct cost to Lodemo of all materials and equipment incorporated into
the Services by Lodemo including the direct costs of transportation
thereof.  Said costs shall be invoiced at actual trade and quantity
discount prices, when applicable.  Any salvage value actually realized
by Lodemo at the end of the Project for any excess items paid for by Global
shall be a credit for Global's account.

        

        6.1.1.6.
Actual direct costs to Lodemo of rental charges for all necessary construction
machinery and equipment utilized in the Services, exclusive of small tools,
including the direct costs of installation, dismantling, removal, maintenance,
oil and grease; insurance; transportation and delivery.  Such rental
charges shall not exceed the prevailing rates in the area of the
Project.

        

        6.1.1.7.
Actual and reasonable travel and subsistence expenses of Lodemo’s Site Personnel
listed in Exhibit "B" hereto while traveling in the discharge of duties in
connection with the Services.  Lodemo shall use its best efforts to
obtain the lowest cost for such travel and expenses.

        

        6.1.1.8.
Actual direct costs of sales and use taxes directly relating to the Services
that are imposed by governmental authorities and paid by Lodemo on behalf of
Global.

        

        6.1.1.9.
Costs of clean-up and removal of debris.

        

        6.1.1.10.
Costs incurred due to an emergency affecting the safety of persons and
property.

        

        6.1.1.11.
Costs of site security services for protection of the Services and Project
unless provided by Global.

        

        6.1.1.12.
Project-related license fees required by statute.

        

        6.1.1.13.
Construction, building, or environmental permit fees paid by Lodemo when
approved in advance and in writing by Global.

         

        
          
            
            

          

          
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        6.1.1.14.
Other actual direct costs incurred in the performance of the Services if and to
the extent such costs are incurred in the course of Lodemo’s execution of the
Plan and are contemplated in the Budget as approved in accordance with this
Agreement.

        

        6.1.1.15.
Costs of claims, remedial actions, fines and damages resulting from Global’s
refusal or failure to implement plans and courses of actions specified in the
annual Plan and Budget, including any labor termination and subcontractor
termination cost.

         

        
          	
                	
                  6.1.2.

                	
                  Non-Allowable
      Costs

                

        

        

        "Non-Allowable
Costs" shall mean the direct and/or indirect costs described in this Subsection
6.1.2.  All such Non-Allowable Costs are included in Lodemo's
Management Fee set forth in Section 6.4 and/or as provided by mutual written
agreements, including Change Orders, as provided for in this
Agreement.  Lodemo shall not be entitled to receive any additional
reimbursement for any of the items described as follows:

        

        6.1.2.1.
All direct and indirect operating, maintenance and overhead costs of any kind
relating to Lodemo's principal and branch offices which is not dedicated to or
reserved for use on the Project, including but not limited to office space,
furniture and equipment; rent; maintenance; local telephone; utilities;
depreciation; security; furniture; office equipment; office supplies; property
taxes; the development of construction manuals, standards or computer programs;
personnel training other than for safety training; and janitorial
services.  The parties agree that Global shall only pay or reimburse
Lodemo for any expenses related to its offices that are dedicated to or reserved
for the use of the Project is Global has approved such offices in
writing.

        

        6.1.2.2.
Any expenses relating to Lodemo's operating capital, including interest on
Lodemo's capital employed in support of the Services.

        

        6.1.2.3.
All costs arising out of grossly negligent acts or omissions by Lodemo, any
subcontractor, vendor or anyone directly or indirectly employed by any of them,
or for whose acts any of them may be liable, for: (a) all costs including
defense costs, losses and damages arising out of Lodemo's indemnity obligations
to the extent defined in Article 8 hereof; and (b) the cost of all deductibles
and losses not covered by any of the insurance policies required to be provided
pursuant to Article 8 hereof.

        

        6.1.2.4.
All costs incurred, at any time during the course of executing the Services by
Lodemo, any subcontractor, vendor or anyone directly or indirectly employed by
any of them, or for whose acts any of them may be liable, for correction,
removal, replacement and disposal of any non-conforming work, materials or
equipment to the extent defined in this Agreement.

         

        
          
            
            

          

          
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        6.1.2.5.
All costs incurred by Lodemo for bonuses, stocks options, profits sharing
arrangements and similar incentive programs.

         

        
          	
                  6.2.

                	
                  Reimbursement for
      Allowable Direct Costs

                

        

        

        Lodemo
will maintain complete and detailed records of all of its direct and actual
out-of-pocket costs and expenses related to the Project or otherwise subject to
this Agreement.  On or about the 20th day of
each month during the term of this Agreement, Lodemo will submit its monthly
application for payment (“Monthly Invoice”).  Lodemo’s Monthly Invoice
will include a detailed record of the previous month’s direct and actual costs
including employee man-hours and costs, agency personnel man-hours and costs,
subcontractor costs, material costs, and equipment costs.  All direct
costs must be supported as Allowable Costs by verifiable documentation including
timesheets and receipts.  Undocumented or Non-Allowable Costs costs
will not be reimbursed.

        

        
          	
                  6.3.

                	
                  Operating
      Account

                

        

         

        
          	
                	
                  6.3.1.

                	
                  Establishment of
      Operating Account

                

        

        

        Lodemo
and Global shall establish a local depository account at a bank or other
institution approved in writing by Global (the "Operating
Account").  If requested by Global, all funds in the Operating Account
shall be invested in a cash management program approved by Global ("Cash
Management Account").  Lodemo will be authorized to make deposits and
withdrawals from the Operating Account and Cash Management Account in accordance
with this Agreement and within the guidelines of the then current
Budget.  Project funds shall not be commingled with Lodemo's other
funds and only Project funds shall be deposited in the Operating Account and in
no other account.  Lodemo shall pay all of its direct costs authorized
to be paid under this Agreement out of the Operating Account or Cash Management
Account.

         

        
          	
                	
                  6.3.2.

                	
                  Funding of Operating
      Account

                

        

        

        On or
before the 1st day of each month, Global agrees to deposit into the Operating
Account or Cash Management Account funds in an amount sufficient to maintain the
Minimum Balance.  The term “Minimum Balance” when used herein shall
mean an amount equal to the projected operating and capital expenses of the
Project projected for the following two months, as forecasted in the Budget,
less any existing balances in the Operating Account.  If, upon review
of Lodemo’s Monthly Invoice it is determined that Lodemo has expended funds from
the Operating Account or Cash Management Account determined by Global to be
Non-Allowable Costs, either Lodemo will replace these funds directly or credit
Global by the same amount in the following month’s Monthly
Invoice.  If the Non-Allowable costs are not replaced or credited, the
Minimum Balance will be reduced by the same amount invoiced as a Non-Allowable
Cost.

         

        
          
            
            

          

          
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                  6.4.

                	
                  Management
      Fees

                

        

         

        
          	
                	
                  6.4.1.

                	
                  Basic
      Fee

                

        

        

        On a
monthly basis, Global shall pay to Lodemo for the duration of this Agreement, a
Management Fee equal to the greater of (i) $60 per hectare per year ($5 per
hectare per month) for every full hectare planted and under cultivation in
Jatropha, and (ii) the monthly fee shown by schedule in Exhibit A (hereinafter
the “Minimum Fee”).  Notwithstanding the foregoing, if at the time the
Management Fee is determined the number of hectares planted and under
cultivation is less than the amount set forth on Exhibit A solely as a result of
Lodemo’s failure to comply with its obligations under this Agreement, including
its obligations to provide land aggregation, nursery and planting Services in a
timely manner, the Minimum Fee shall be readjusted to reflect the number of
hectares not planted as a result of Lodemo’s failure to comply.

         

        
          	
                	
                  6.4.2.

                	
                  Performance
      Payment

                

        

        

        Global
will pay to Lodemo an incentive to reduce costs of operation of the Project,
Farm and Facilities.  Lodemo will be paid 20% of the reduction in
actual direct costs (Allowable Costs) below the approved annual Budget for each
year it reduces said costs.  This cost reduction applies to all costs
including land leases and other direct costs.  This reduction may not
in any way adversely impact quality of Product, worker treatment, safety or long
term viability of the Farm or Project or violate any law or environmental rule
or policy.

         

        
          	
                	
                  6.4.3.

                	
                  Provision for Transfer
      of Oil to Mexico Joint
Venture

                

        

        

        As
additional compensation for Lodemo’s Services under this Agreement and its
agreement to enter into the Joint Venture, Global agrees to sell 10% of the net
Jatropha seed oil produced by the Project to the Joint Venture for exclusive use
as feedstock for the Biodiesel Refinery.  The price at which such
Jatropha seed oil will be sold to the Joint Venture shall equal Global’s actual
cost of production, including the allocated portion of the payments made by
Global to Lodemo under this Agreement (excluding this Subsection
6.4.3).

         

        
          	
                	
                  6.4.4.

                	
                  Improved Production
      Bonus

                

        

        

        Global
will provide to Lodemo an incentive for increased oil production from the
Project.  Twenty percent (20%) of all oil produced by Global as part
of the Project in excess of the projected baseline production shown in Exhibit C
(as amended with the mutual consent of the parties from time to time) will be
sold to the Joint Venture at the same average cost as other oil sold by Global
during any given month for exclusive use as feedstock to the Joint
Venture.

         

        
          
            
            

          

          
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                  6.4.5.

                	
                  Biomass Sales
      Incentive

                

        

        

        Global
will pay to Lodemo an incentive for all sales of the biomass byproduct produced
from the seed oil extracted at the Oil Extraction Facility (hereinafter the
“Biomass Incentive”).  The Biomass Incentive will be 50% of the net
price of the sale, which will be calculated by subtracting from the actual price
received the amount of the actual handling costs of the biomass, including
shipping, from the gross sales price.  The Biomass Incentive will be
paid within 30 days of receipt by Global of funds from the buyer.

        

        All
potential sales of biomass are subject to review by Global, and Global reserves
the right to either accept or reject any potential sale.  However, if
Global chooses to sell the biomass to a buyer for a lower price than an
alternate buyer, Global will pay to Lodemo its Biomass Incentive based on the
documented price of the alternate buyer.

         

        
          	
                	
                  6.4.6.

                	
                  Payment of Redundancy
      Costs in the Event of Suspension or
  Termination

                

        

        

        At any
time during the term of this Agreement, upon suspension or termination of this
Agreement or the supply or performance of Services hereunder, in whole or in
part, or upon cessation of production at the Project, or upon any major
reduction by Global in the quantity of Products to be produced at the Project
hereunder, in each case for any reason other than a breach by Lodemo of this
Agreement, Global shall reimburse Lodemo for all direct costs incurred in
separation and outplacement associated with any of Lodemo’s or it’s
subcontractor’s personnel or employees to the extent made redundant as a result
of any such suspension, termination, cessation, or permanent reduction or
shutdown, or major reduction. Any direct costs incurred and approved according
to terms described in this Section will be debited from any remaining balance of
funds previously advanced by Global to Lodemo through the Operating Account or
Cash Management Account.

         

        
          	
                  7. 

                	
                  INSURANCE

                

        

        

        Each
party shall purchase and maintain its own insurance in such amounts and covering
such risks as are usually carried by companies engaged in the same or similar
business and similarly situated, including insurance against public liability
and property damage.  Both parties will work together to minimize the
existence of non-required or redundant insurance coverages. Notwithstanding, the
parties agree to purchase appropriate insurance coverage for the risks related
to this Project.  These risks and insurance coverage may include heavy
rainfall, hurricanes, floods, fire and explosion damage.  Cost of
insurance is generally an Allowable Cost, but must be approved in advance in
writing by Global.

         

        
          	
                  8. 

                	
                  THIRD PARTY
      INDEMNIFICATION

                

        

         

        
          
            
            

          

          
            Page 15
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        To the
extent not covered by insurance, Lodemo agrees, to the fullest extent permitted
by law, to indemnify, defend, and hold Global and its officers, agents, and
employees of Global harmless from and against any and all third party claims,
demands, causes of action, damages, losses, and expenses of whatsoever nature,
character, or description, regardless of merit thereof, which are or may be
asserted against Global by any person or entity, and which arise out of or
result from, in whole or in part, (i) the negligent acts or omissions of Lodemo
in the performance of the Services under this Agreement, or (ii) the breach by
Lodemo of any terms of this Agreement. The acceptance of the Services by Global
shall not operate as a waiver of such right of indemnification.

        

        To the
extent not covered by insurance, Global agrees, to the fullest extent permitted
by law, to indemnify, defend, and hold Lodemo, its officers, directors,
employees, and subcontractors harmless from and against all third party claims,
demands, causes of action, damages, losses, and expenses of whatsoever nature,
character, or description, regardless of the merit thereof, which are or may be
asserted against Lodemo by any person or entity, and which arise out of or
result from, in whole or in part, (i) the negligent acts or omissions of Global
in the performance of Lodemo’s obligations under this Agreement, or (ii) the
breach by Global of any terms of this Agreement.

         

        
          	
                  9. 

                	
                  LIMITATION OF
      LIABILITY AND DISCLAIMER

                

        

        

        Each
party to this Agreement shall only be liable to the other party and its agents
and employees for losses sustained by the other party and its agents and
employees directly as a result of the first party’s lack of performance under
this Agreement and losses resulting from intentional misconduct or gross
negligence by the first party, its employees, it’s subcontractors (including the
employees of NEW Co.).  Neither party shall be liable for special,
incidental, indirect, punitive or consequential damages under this Agreement;
provided that this limitation shall not apply in the case of a party’s willful
acts.  Anything contained herein to the contrary notwithstanding,
Global acknowledges that Lodemo makes no representation or warranty of any kind
with respect to having past experience in the provision of the Services, the
financial viability of the Project, or the fitness of Jatropha oil for its
intended use as a feedstock.

         

        
          	
                  10. 

                	
                  TAXES

                

        

        

        Global
shall reimburse Lodemo on a current basis for all taxes, excises or other
charges which Lodemo may be required to pay to any government (federal, state,
or local) relating to the Project, whether current in nature or as the result of
any tax audit, by reason of any of its activities hereunder and not otherwise
provided for herein.  Notwithstanding the foregoing, Global shall not
be required to reimburse Lodemo for taxes on or measured by Lodemo’s fees, net
income or profit,

         

        
          	
                  11.

                	
                  OWNERSHIP

                

        

        

        Under the
terms of this Agreement, Lodemo shall not receive or acquire legal or equitable
ownership or possession rights in any part of the Project or to any of Global’s
assets.  Any ownership or equity interest Lodemo may ultimately
receive will be covered under a separate agreement.

         

        
          
            
            

          

          
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        Except
for the rights of access and operation granted in this Agreement, Lodemo shall
not receive or acquire any legal or equitable ownership or possession rights to
any part of the Project or any of Global’s personal or real property contained
or stored at the Project or the Facility.  This exclusion to access
and ownership includes seed oils and/or chemicals stored in tanks, trucks,
railcars, tanks or barges.

        

        The
following documents shall be collectively referred to in this Agreement as the
“Project Documents”:  all information, intellectual property, work
product, and all documents (each in whatever medium or format, including
computerized reports and information on disk) related to arising out of the
Project, and the performance of the Services, including, without limitation, all
land plans, maps, engineering studies, soil studies, geological studies, and
other engineering information, all documentation prepared or obtained by Lodemo
or Global in preparation for filings with or filed with a governmental or
quasi-governmental agency  plans and specifications and environmental
reports, and all other studies, tests, work product, analyses, development
plans, studies, drawings, designs, and sketches, memoranda, construction
documents, marketing plans, financial analyses, books, records, data, and
reports prepared or obtained by Lodemo or Global, their its employees, agents,
consultants or subcontractors relating in any manner to the
Project.  The Project Documents shall be and remain the sole and
exclusive property of Global, and Global shall have the right to use such for
any purpose without any additional compensation to Lodemo.  Lodemo
shall acquire no ownership rights in the Project Documents, but shall have the
right to use such Project Documents in performance of the Services
hereunder.  Lodemo acknowledges that it is acting as an agent of
Global, and all of the work product and Project Documents, and other
intellectual property created, produced, or procured by Lodemo or any consultant
or subcontractor, regardless of form of medium, are the sole property of Global,
and constitute a “Work Made for Hire”.  If any services or processes
or products are patentable, Global may, at its option, apply for a patent and
the patent, if issued, shall be in Global’s name and be the sole property of
Global.  All trademarks, trade names, logos, and other copyrightable
materials shall be owned by Globable and may be registered by
Global.

         

        
          	
                  12.

                	
                  CONFIDENTIALITY

                

        

        

        Neither
party shall, directly or indirectly, disclose, communicate, divulge, furnish or
make accessible or available, in whole or in part, to any person, firm, company,
corporation or other entity, other than to its employees and other
representatives to the extent necessary to discharge and perform its obligations
under this Agreement or as required by any law or regulation, any data,
know—how, drawings, plans, written instructions, or other writings, processes,
techniques, methods, designs, inventions, materials, formula, equipment,
machinery, devices and the like (whether or not patentable) of a secret and
confidential nature, and any other confidential information, material or matter,
or trade secrets, relating or pertaining to the business of the other party that
it learns of pursuant to this Agreement including, any such information relating
to the processes and equipment for the production of products by the process
used in the Project or by a similar process.

         

        
          
            
            

          

          
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                  13.

                	
                  TERM

                

        

        

        Unless
terminated pursuant to Section 14, the term of this Agreement shall commence on
the date hereof and continue for 20 years from the date hereof. At
the expiration of the term, or upon termination pursuant to Section 14, Global
shall continue to own all rights to the contracts, land, agricultural output,
Facilities, Products, intellectual rights, and all other Project
assets.  Sections 8, 9, 11 and 12 shall survive the termination of
this Agreement.

         

        
          	
                  14.

                	
                  TERMINATION FOR
      DEFAULT; FORCE MAJEURE

                

        

         

        14.1 In
the event Lodemo is in default in the performance of any obligation under this
Agreement and shall fail to diligently proceed to correct such default within
thirty (30) calendar days following written notice from Global (or such longer
time period to the extent the cure of the default is of a nature so as to
require more time, provided that Lodemo commences the cure and continues the
prosecution of the cure until completed) , or if Lodemo dissolves, files a
petition in bankruptcy, or makes a general assignment for the benefit of its
creditors, or if a petition in bankruptcy is filed against Lodemo or a receiver
is appointed for reasons of insolvency; Global may, without prejudice to any
other rights or remedies Global may have, terminate this Agreement by written
notice.  In the event of termination for default, Global may take
possession of and finish the Services by whatever method Global deems expedient.
In such event, Lodemo shall be liable for all damages sustained by Global by
reason of such termination, whether at law or in equity.  Global's
right to require strict performance of any and all obligations in this Agreement
shall not be affected by any previous waiver, forbearance or course of dealing
prior to such termination.  Global shall be entitled to recover its
reasonable attorneys' fees, costs and disbursements in any action successfully
brought to enforce its rights under this Agreement.

         

        14.2
Global shall have the option, exercisable in good faith at its reasonable
judgment, to terminate this Agreement, upon 90 days’ prior written notice to
Lodemo, if both (i) an event of Infeasibility has occurred, and (ii) Global
thereafter ceases to independently pursue the Project.  For purposes
of this Agreement, “Infeasibility” shall mean the inability of the parties to
proceed with the Project or impracticality of the Project for reasons beyond
their reasonable control, including, without limitation:

         

        1.
Political actions of a governmental agency that makes the Project more costly or
time consuming or financially burdensome to undertake, including, without
limitation, restrictions on land ownership or use, restrictions on the processes
involved in the Project, nationalization of the Project, or enactment of laws
that significantly and adversely affect the Project.

         

        2.
Determination that the oil extraction process does not result in commercially
significant quantities of usable oil, or that the price for such oil makes the
Project commercially unsustainable.

         

        3.
Natural disaster that affects a material portion of the Project (including the
Jatropha plants, the distribution system, or the Oil Extraction Facility), and
is not able to be corrected within twelve months.

         

        
          
            
            

          

          
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        4.
Unexpectedly high costs of operations, provided that high costs shall not be
grounds for claiming Infeasibility unless the overall operating costs exceed
200% of the Budget.

         

        
          	
                  15.

                	
                  CLAIMS AND DISPUTE
      RESOLUTION

                

        

        

        All
claims and disputes and other matters in question arising out of or relating to
this Agreement or the breach thereof, shall be submitted first to voluntary
Mediation, and if Mediation is not successful, then to binding Arbitration, in
accordance with the then-current Model Procedure for Mediation of Business
Disputes of the Center for Public Resources.  Arbitrators and
Mediators shall be jointly selected by the parties, and have experience in
international dispute resolution involving business between Mexico and the
United States.  Judgment on any arbitration award may be entered in a
court of any competent jurisdiction.

        

        The
prevailing party shall be entitled to recover its reasonable attorneys’ fees,
costs and disbursements in any action brought to enforce or its rights under
this Agreement or to interpret the provisions of this Agreement.  The
existence of any claim, dispute or legal proceeding shall not relieve Lodemo
from its obligation to properly perform its Services during such Mediation or
Arbitration proceedings as set forth herein.

        

        Notwithstanding
the above, before either party pursues Mediation or Arbitration, the parties
agree to attempt to resolve any dispute amicably at a meeting to be attended by
persons with decision-making authority.  If, within thirty (30)
calendar days after such meeting, the parties have not succeeded in negotiating
a resolution of the dispute, they agree to resolve the dispute according to the
Mediation and Arbitration dispute resolution process described in this
Section.

         

        
          	
                  16.

                	
                  MISCELLANEOUS

                

        

        

        
          	
                  16.1.

                	
                  Successors and
      Assigns

                

        

        

        Except as
expressly provided below, neither this Agreement nor any right, interest or
obligation hereunder may be assigned by either party without the prior written
consent of the other, except that (i) either party may assign this Agreement to
an Affiliate of such party; provided that the
party assigning this Agreement shall remain liable notwithstanding such
assignment, (ii) Lodemo may assign this Agreement in whole to any purchaser of
its business and assets, but as a condition of any such assignment, shall
procure the written assumption of this Agreement, and (iii) Global may assign
this Agreement to any purchaser of all or substantially all of the assets of the
Project, provided that Global
shall, as a condition of any such assignment, procure the written assumption of
this Agreement by such assignee.  The terms, covenants and conditions
contained in this Agreement, including the obligations of indemnity contained
herein, are binding upon and inure to the benefit of Lodemo and Global and their
respective successors and permitted assigns and shall survive any transfer of
the ownership or control of Lodemo or Global.

         

        (The
remainder of this page is intentionally left blank)

         

        
          
            
            

          

          
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                  17.

                	
                  ENTIRETY OF
      AGREEMENT

                

        

         

        This
Agreement contains the full and complete understanding of the parties pertaining
to the Project and the Services and supersedes any and all prior
representations, negotiations, agreements or understandings between the parties,
whether written or oral.  This Agreement may not be modified except by
a subsequent writing executed by both parties.

         

        The
parties hereby execute this Agreement by their respective duly authorized
representatives as of the Effective Date stated in the preamble of this
Agreement.

         

        
          	
                  Medical
      Discoveries, Inc.

                	 	
                  Lodemo
      y Asociados S.C.P. (Lodemo)

                
	
                  dba
      Global Clean Energy Holdings (Global)

                	 	 
      

        

         

        
          	            
      	 	        
      
	 
      	 	 
      
	 
      	 	 
      
	       
      	 	        
      
	 
      	 	 
      
	 
      	 	 
      
	          
      	 	              
      

        

         

        
          
            
            

          

          
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        EXHIBIT
A

        

        MINIMUM
FEE SCHEDULE

         

        
          
            
            

          

          
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        EXHIBIT
B

        

        LODEMO
PERSONNEL

        

        
          
            
            

          

          
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        EXHIBIT
C

        

        BASELINE
PRODUCTION

         

        
          
            
            

          

          
            Page 23
of 23CREDIT
FACILITY AGREEMENT

     

    AGREEMENT by and between
Protalex, Inc., a Delaware corporation (the “Company”) and Niobe
Ventures, LLC, a Delaware limited liability company (“Niobe”), dated as of
December 2, 2009.

     

    WHEREAS, the Company is
seeking a credit facility of $2.0 million;

     

    WHEREAS, Niobe is the holder
of a Senior Secured Convertible Note made by the Company in the principal amount
of $1.0 million (the “Outstanding Note”);
and

     

    WHEREAS, Niobe wishes to make
a $2.0 million credit facility available to the Company;

     

    NOW THEREFORE, the parties
hereby agree as follows:

     

    1.      
     Credit
Facility.

     

    (a)           Niobe
hereby agrees that it will make available to the Company up to $2.0 million in
the form of secured loans at the request of the Company made at any time prior
to June 30, 2012 (the “Expiration Date”)
upon the occurrence of the following events (each a “Benchmark” and
collectively the “Benchmarks”):

     

    [(i)      
    up to 25% of the facility in the aggregate may be drawn
upon the occurrence of the commencement of the Phase 1B clinical trial of PRTX
100 in South Africa (the “RA
Trial”);

     

    (ii)           up
to 25% of the facility in the aggregate may be drawn upon six (6) months
following the commencement date of the RA Trial; and

     

    (iii)          up
to 50% of the facility in the aggregate may be drawn upon the results of the RA
Trial demonstrating the safety and efficacy of PRTX 100 in the RA Trial patients
following repeated dosing.

     

    (b)           Niobe
shall only be obligated to make loans to the Company hereunder to the extent
that the Benchmarks have been achieved and the other conditions set forth herein
are met.

     

    (c)           Notwithstanding
anything to the contrary that may be contained herein, in no event shall Niobe
be required to loan the Company more than $2.0 million hereunder, or to make any
loan at any time after the Expiration Date.

     

    2.         
  Request
for Loans.

     

    At any
time prior to the Expiration Date, the Company may request that Niobe make a
loan to the Company by submitting to Niobe a written request therefor (a “Loan Request”), which
Loan Request must contain: (i) the amount of the loan requested to be
made  (which must be a minimum of $250,000); (ii) those Benchmarks, if
any, that have been achieved; and (iii) the aggregate principal amount of all
loans made to the Company by Niobe pursuant to this Agreement prior to such
request.  Such Loan Request must be accompanied by a written
certification signed by an executive officer of the Company certifying that no
Event of Default has occurred and is continuing under the Outstanding
Note.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.     
      Loans.

     

    (a)           Within
ten (10) days of the receipt of such Loan Request, Niobe shall make a loan to
the Company in an amount equal to the lesser of (i) the amount sought in such
Loan Request, or (ii) (A) $2.0 million multiplied by (B) the percentage set
forth next to the greatest Benchmark that has been achieved by the Company as of
the date of such Loan Request, minus (ii) the aggregate amount of all loans
previously made to the Company by Niobe pursuant to this Agreement (the “Available
Amount”);

     

    (b)           If
the amount sought in such Loan Request is in excess of the Available Amount,
Niobe, in its sole and absolute discretion, may (but shall not be required to)
make a loan to the Company for all or any portion of such excess.

     

    (c)           Each
loan made to the Company by Niobe shall be represented by a Senior Secured
Convertible Promissory Note in the form of Exhibit A annexed
hereto (a “CF
Note”); provided that (i) Conversion Price in Section 3(b) of such CF
Note shall be equal to the Conversion Price that would be in effect pursuant to
the provisions of the Outstanding Note in effect on the day that such CF Note is
made (whether or not the Outstanding Note is then outstanding), and (ii) the
maturity date shall be the later of the fifteen month anniversary of the date
the loan is made or December 31, 2012.

     

    (d)           The
obligations of the Company pursuant to each CF Note shall be secured by a first
priority perfected security interest in all of the assets of the Company
pursuant to the Amended and Restated Security Agreement in the form of Exhibit B annexed
hereto.

     

    4.         
  Notices.

     

    All
notices or other communications which are required or permitted hereunder shall
be in writing and sufficient if delivered personally or sent by
nationally-recognized overnight courier or by registered or certified mail,
postage prepaid, return receipt requested or by facsimile, with confirmation as
provided above addressed as follows:

     

    If to
Company:

    

    Protalex,
Inc.

    145 Union
Square Drive

    New Hope,
PA 18938

    Attention:
Chief Financial Officer

    

    With
copies to

    

    Morse,
Zelnick, Rose & Lander LLP

    405 Park
Avenue, Suite 1401

    New York,
NY  10022

    Attention:  Kenneth
S. Rose, Esq.

    Fax:  212-838-5030

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    If to
Niobe:

    

    Niobe
Ventures, LLC

    c/o
Arnold P. Kling

    712 Fifth
Avenue, 11th
Floor

    New York,
NY 10019

    Attention:
Arnold P. Kling, Manager

    Fax:  212-713-1818

     

    5. 
          Governing
Law.

     

    All questions concerning the
construction, validity, enforcement and interpretation of this Agreement, and
any claim, controversy or dispute arising under or related to this Agreement,
the relationship of the parties, and/or the interpretation and enforcement of
the rights and duties of the parties hereunder shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state or federal
courts sitting in the City of New York, Borough of Manhattan (the “New York
Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Agreement,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorney’s fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

     

    6.        
   Waiver.

     

    Any waiver by the Company or Niobe of
a breach of any provision of this Agreement shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Agreement.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    7.         
  Severability.

     

    If any
provision of this Agreement is invalid, illegal or unenforceable, the balance of
this Agreement shall remain in effect, and if any provision is inapplicable to
any person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.

     

    
      
        
          
            	 
      	
                    PROTALEX,
      INC.

                  
	 
      	 
      
	 
      	
                    By:

                  	 
      
	 
      	 
      	
                      Kirk
      M. Warshaw

                  
	 
      	 
      	
                        Chief
      Financial Officer

                  
	 
      	 
      	 
      
	 
      	
                    NIOBE
      VENTURE, LLC

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	 
      
	 
      	 
      	
                     Arnold
      P. Kling

                  
	 
      	 
      	
                     Manager

                  

          

        

      

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
PLEDGED, OFFERED FOR SALE, ASSIGNED OR TRANSFERRED UNLESS (a) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT, AND ANY
APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (B) EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND THE REGISTRATION
OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS ARE
AVAILABLE.

    

    FORM OF SENIOR SECURED
CONVERTIBLE NOTE

    

    
      
        	
                $____________

              	
                __________,
      20__

              
	 
      	
                New
      York, New York

              

      

    

    

    FOR VALUE RECEIVED, Protalex,
Inc., a Delaware corporation (the “Company”), promises to pay to the order of
Niobe Ventures, LLC (“Holder”), at the offices of Morse, Zelnick, Rose &
Lander LLP, 405 Park Avenue, Suite 1401, New York, New York 10022, the principal
sum of ____________ (US$_____________) with interest thereon at the rate of
three percent (3%) per annum.  Any amounts that remain unpaid after
the Maturity Date shall thereafter bear interest at the rate of twelve percent
(12%) per annum.  Interest as aforesaid shall be calculated on the
basis of actual number of days elapsed over a year of 360 days.

    

    The
principal amount and all accrued interest of this Note is due on ___________,
20__] (the “Maturity Date”).

    

    This Note
is subject to the following additional provisions:

    

    Section
1.             Definitions. For the
purposes hereof, in addition to the terms defined elsewhere in this Note: (a)
capitalized terms not otherwise defined herein have the meanings given to such
terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:

    

    “Alternate
Consideration” shall have the meaning set forth in Section
4(d)(iii).

    

    “Business Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions in the State
of New York are authorized or required by law or other government action to
close.

    

    “Common Stock” means
the common stock, par value $0.00001 per share, of the Company and stock of any
other class into which such shares may hereafter have been reclassified or
changed.

    

    “Common Stock
Equivalents” means any option, warrant, convertible note, preferred stock
or other instrument exercisable for, or convertible into, Common
Stock.

    

    “Conversion Date”
shall have the meaning set forth in Section 3(a) hereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    “Conversion Price”
shall have the meaning set forth in Section 3(b).

    

    “Conversion Shares”
means the shares of Common Stock issuable upon conversion of this Note or as
payment of interest, all in accordance with the terms hereof.

    

    “Event of Default”
shall have the meaning set forth in Section 5.

    

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

    

    “Facility Agreement”
means the Credit Facility Agreement, dated as of December 1, 2009 to which the
Company and the Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.

    

    “Fundamental
Transaction” shall have the meaning set forth in Section 3(d)(ii)
hereof.

    

    “Original Issue Date”
means the date of the first issuance of this Note regardless of the number of
transfers of any Note and regardless of the number of instruments which may be
issued to evidence such Note.

    

    “Person” means a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.

    

    “Purchase Agreement”
means the Note and Common Stock Purchase Agreement, dated as of November 11,
2009 to which the Company and the Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.

    

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

    

    “Security Agreement”
means the Amended and Restated Security Agreement dated as of December 1, 2009
by and between the Company and the Holder.

    

    “Subsidiary” means any
Person in which the Company owns more than 50% of the outstanding
equity.

    

    “Transaction
Documents” means the Facility Agreement, the Security Agreement and this
Note.

    

    Section
2.             Registration of Transfers
and Exchanges.

    

    a)            Different
Denominations. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations as requested by the Holder
surrendering the same, No service charge will be made for such registration of
transfer or exchange.

    

    b)            Investment
Representations.  This Note has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement and applicable federal and state securities laws and
regulations.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    c)            Reliance on Note
Register. Prior to due presentment to the Company for transfer of this
Note, the Company and any agent of the Company may treat the Person in whose
name this Note is duly registered on the Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Note is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.

    

    Section
3.             Conversion.

    

    a)            Voluntary Conversion.
Subject to any shareholder approval that may be required to authorize enough
authorized but unissued common shares under the Company’s Certificate of
Incorporation, at any time after the Original Issue Date until this Note is no
longer outstanding, the principal and accrued interest due and payable under
this Note shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time, so long and only
to the extent that after taking into consideration all issued and outstanding
common stock shares and the maximum number of shares issuable under all issued
and outstanding convertible securities at the time of conversion, there remain
enough authorized but unissued shares under the Company’s Certificate of
Incorporation that are not previously reserved for issuance under such
convertible securities to effect conversion of this Note.. The Holder shall
effect conversions by delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a “Notice of Conversion”), specifying therein the
principal amount of Note to be converted and the date on which such conversion
is to be effected (a “Conversion Date”). If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of
Conversion is provided hereunder. To effect conversions hereunder, the Holder
shall not be required to physically surrender the Note to the Company unless the
entire principal amount of this Note plus all accrued and unpaid interest
thereon has been so converted. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and the Company shall maintain records showing
the principal amount converted and the date of such conversions. The Company
shall deliver any objection to any Notice of Conversion within 3 Business Days
of receipt of such notice. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note may be less than the amount stated on the face
hereof. However, at the Company’s request, the Holder shall surrender the Note
to the Company within five (5) Trading Days following such request so that a new
Note reflecting the correct principal amount may be issued to
Holder.

    

    b)            Conversion Price. The
conversion price in effect on any Conversion Date (subject to adjustment herein)
shall initially be equal to [$0.046] per share.

    

    c)            Mechanics of
Conversion

    

    i.           Conversion Shares Issuable
Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the amount of this Note
(whether principal or accrued but unpaid interest) to be converted by (y) the
Conversion Price.

    

    ii.           Delivery of Certificate Upon
Conversion. Not later than five Trading Days after any Conversion Date,
the Company will deliver to the Holder at an address in the United States (A) a
certificate or certificates representing the Conversion Shares representing the
number of shares of Common Stock being acquired upon the conversion of Notes
(including, if so timely elected by the Company, shares of Common Stock
representing the payment of accrued interest) and (B) a bank check or wire
transfer in the amount of accrued and unpaid interest (if the Company is
required to pay accrued interest in cash).

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    iii.           Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of this Note (after
taking into account all existing issued and outstanding shares of Common Stock
and all shares reserved for issuance under the Company’s issued and outstanding
convertible securities), free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder, not less than such
number of shares of the Common Stock as shall be issuable (taking into account
the adjustments and restrictions of Section 4) upon the conversion of the
outstanding principal amount and accrued interest under this Note. The Holder
acknowledges that on the issuance date of this Note, the Company does not have
adequate shares authorized to fulfill the foregoing obligation; however, the
Company covenants and agrees that it will use its commercially reasonable
efforts after the Closing to obtain stockholder approval to authorize an
amendment to its Certificate of Incorporation to provide for an adequate number
of authorized shares of Common Stock to meet the obligation set forth in this
subsection  The Company covenants that all shares of Common Stock that
are issuable upon conversion of this Note shall, upon issuance, be duly and
validly authorized, issued and fully paid and nonassessable.

    

    iv.           Fractional Shares.
Upon a conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the fair market value of a share at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Common Stock.

    

    v.           Transfer Taxes. The
issuance of certificates for shares of the Common Stock on conversion of this
Note shall be made without charge to the Holder for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Notes so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.

    

    d)           Mandatory
Conversion.  If, at any time while this Note is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, immediately prior to the occurrence of such Fundamental Transaction the
principal and accrued but unpaid interest payable hereunder shall automatically
be converted into shares of Common Stock in accordance with the provisions of
Section 3(c) hereof.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    Section
4.             Certain
Adjustments.

    

    a)            Stock Dividends and Stock
Splits. If the Company, at any time after the Issue Date while the Note
is outstanding: (A) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock to all stockholders of
the Company (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company pursuant to this Note, including as interest
thereon), (B) subdivide outstanding shares of Common Stock into a larger number
of shares, or (C) combine (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

    

    b)            Calculations. All
calculations under this Section 4 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares of Common
Stock outstanding at any given time shall not includes shares of Common Stock
owned or held by or for the account of the Company, and the description of any
such shares of Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section 4, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding treasury shares, if any)
issued and outstanding.

    

    c)            Notice to
Holder.

    

    i.           Adjustment to Conversion
Price. Whenever the Conversion Price is adjusted pursuant to any of this
Section 4, the Company shall promptly mail to each Holder a notice setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.

    

    ii.           Notice to Allow Conversion
by Holder. If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to mailed to the Holder at
its last address as it shall appear upon the stock books of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. The Holder shall be entitled to
convert this Note during the 20-day period commencing the date of such notice to
the effective date of the event triggering such notice.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    Section
5.             Events of Default.

    

    a)            Event of
Default.  Wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

    

    i.           any
default in the payment of (A) the principal, or (B) interest (including Late
Fees) on this Note as and when the same shall become due and payable (whether on
a Conversion Date or the Maturity Date or by acceleration or otherwise) which
default is not cured within ten (10) Trading Days after written notice from the
Holder;

    

    ii.           any
representation or warranty made herein, or in any other Transaction Document or
the Purchase Agreement or any certificate made or delivered to the Holder shall
be untrue or incorrect in any material respect as of the date when made or
deemed made; or

    

    iii.           (i)
there is commenced against the Company or any Subsidiary thereof a case under
any applicable bankruptcy or insolvency laws as now or hereafter in effect or
any successor thereto, or any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any Subsidiary thereof which remains
undismissed for a period of 60 days; or (ii) the Company or any Subsidiary
thereof is adjudicated by a court of competent jurisdiction insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iii) the Company or any Subsidiary thereof suffers
any appointment of any custodian or the like for it or any substantial part of
its property which continues undischarged or unstayed for a period of 60
days.

    

    b)            Remedies Upon Event of
Default. If any Event of Default occurs, the full principal amount of
this Note, together with interest and other amounts owing in respect thereof, to
the date of acceleration shall become, at the Holder’s election, immediately due
and payable in cash. The Holder need not provide and the Company hereby waives
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a Note
holder until such time, if any, as the full payment under this Section shall
have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent
thereon.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Section
6.             Miscellaneous.

    

    a)            Notices. Any and all
notices or other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Notice of Conversion, shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at 145 Union Square Drive,
New Hope, PA 18938, attention:  Chief Financial Officer, or such other
address or facsimile number as the Company may specify for such purposes by
notice to the Holder delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to the Holder at the
facsimile, telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.

    

    b)            Absolute Obligation.
Except as expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, interest and liquidated damages (if any) on, this Note at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Note is a direct debt obligation of the Company.

    

    c)            Lost or Mutilated
Note. If this Note shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution for a lost,
stolen or destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Note, and of the ownership hereof; and
indemnity, if requested, all reasonably satisfactory to the
Company.

    

    d)            Security Interest.
This Note is a direct debt obligation of the Company and, pursuant to the
Security Agreement all of the Company’s obligations hereunder are secured by a
first priority perfected security interest in all of the assets of the Company
for the benefit of the Holder.

    

    e)            Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Note, and any claim, controversy or dispute arising under or related to
this Note, the relationship of the parties, and/or the interpretation and
enforcement of the rights and duties of the parties hereunder shall be governed
by and construed and enforced in accordance with the internal laws of the State
of New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state or federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such
New York Courts are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Note and agrees that such service shall constitute good and sufficient service
of process and notice thereof Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Note or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this
Note, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorney’s fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    f)            
Waiver. Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note. The failure of
the Company or the Holder to insist upon strict adherence to any term of this
Note on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Note. Any waiver must be in writing.

    

    g)            Severability. If any
provision of this Note is invalid, illegal or unenforceable, the balance of this
Note shall remain in effect, and if any provision is inapplicable to any person
or circumstance, it shall nevertheless remain applicable to all other persons
and circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates applicable laws governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the
maximum permitted rate of interest. The Company covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Note as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and due
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, binder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.

    

    h)            Next Business Day.
Whenever any payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day.

    

    i)        
     Headings. The
headings contained herein are for convenience only, do not constitute a part of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.

    

    IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed by a duly authorized officer as
of the date first above indicated.

    

    
      
        
          
            
              
                	 
      	
                        PROTALEX,
      INC.

                      
	 
      	 
      	 
      
	 	      
                        By: 

                      	 
	 
      	 
      	
                        Kirk
      M. Warshaw, Chief Financial
Officer

                      

              

            

          

        

      

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    ANNEX
A

    

    NOTICE OF
CONVERSION

    

    The
undersigned hereby elects to convert principal under the Senior Secured
Convertible Note of Protalex, Inc., a Delaware corporation (the “Company”), due
on ___________, 20__, into shares of common stock, par value $0.00001 per share
(due “Common Stock”), of the Company according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by due Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.

    

    The
undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

    

    Conversion
calculations:

    Date to
Effect Conversion:

    

    Principal
Amount of Notes to be Converted:

    

    Payment
of Interest in Common Stock_ yes _  no

    If yes,
$______ of Interest Accrued on Account of

    Conversion
at Issue.

    

    Number of
shares of Common Stock to be issued:

     

    Signature:

    

    Name:

    

    Address:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    [INTENTIONALLY
OMITTED]

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