Document:

Valcent Letter of Agreement

    
      

    

    Exhibit 10.17

    
      

    

    

      VALCENT
        PRODUCTS INC.

      420-475
        Howe Street

      Vancouver,
        BC

      V6C
        2B3

      Tel:
        604-606-7977

        

      October
        2, 2006

       

      GLOBAL
        GREEN SOLUTIONS INC.
        (“GGS”)

      880-609
        Granville Street

      PO
        Box
        10321

      Vancouver,
        BC V7Y 1G5

      

      Pagic
        LP
        (“PAGIC”)

      (Formerly
        MK Enterprises LLC) 

      1057
        Doniphan Park Circle

      Suite
        H
        El Paso Texas 79922

       

      WEST
        PEAK
        VENTURES OF CANADA LIMITED (“WPK”)

      420-475
        Howe Street

      Vancouver
        BC V6C 2B3 

       

      Dear
        Sirs:

       

      Re:
        Development and commercial exploitation of a BIO MASS PRODUCTION
        SYSTEM

       

      The
        purpose of this letter is to establish a Letter of Agreement between our
        respective companies pursuant to which we will jointly participate in the
        development of the intellectual property, know-how, confidential processes,
        modifications and derivative works (the “Licensed Item”) arising out of a patent
        pending for the development of a Bio Mass System employed to produce
        hydrocarbons while sequestering CO2 from the environment by growing certain
        algae. The Bio Mass System and certain modifications and derivative works
        related thereto are herein sometimes referred to as the “Licensed Items”.

       

      This
        Letter of Agreement will be the basis for a contract between Valcent Products
        Inc.(Licensor) and Global Green Solutions Inc., (Licensee) which shall be
        the
        governing document for their joint participation in the Venture. The contract
        will be signed by the Licensor and Licensee on or before the last day of
        June
        2007 which shall include amongst other things, the basic terms of this Letter
        of
        Agreement.

      

      Valcent
        represents to you the following:

       

      
        	 	
                1)

              	
                It
                  has conditionally received an exclusive world wide license known
                  as the
                  PAGIC/WPK License to develop the Licensed Items and to manufacture,
                  market, promote, develop and distribute the Licensed Item on a
                  world wide
                  basis subject to a royalty of 4.5% of gross revenues due and payable
                  to
                  PAGIC and WPK as detailed in the attached Schedule “A”.
                  

              

      

       

      
        	 	
                2)

              	
                The
                  Licensee is required to complete the following in order for Valcent
                  to
                  maintain its License in good
                  standing:

              

      

       

      
        	 	
                a)

              	
                Use
                  its best efforts in the research and development of the Technology
                  in
                  order to deliver a working prototype of the Invention on or before
                  July 1,
                  2007 ; and

              

      

       

      
        	 	
                b)

              	
                Use
                  its best efforts to achieve the commercial exploitation of the
                  Technology
                  on or before December 31, 2007; and

              

      

       

      
        	 	
                3)

              	
                The
                  Licensor has agreed to provide product support, Research and Development
                  personnel, know how, office, warehouse, and lands during the initial
                  R&D phase at its cost and when required, provide similar services
                  during the future commercial exploitation
                  phase. 

              

      

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      GGS
        as
        evidenced by this Letter of Agreement has agreed to enter into a commercial
        venture with Valcent for the purpose of completing the research and development
        of the Licensed Item, to construct a working prototype of the Bio Mass System
        and to develop the Licensed Item to the commercial exploitation stage by
        providing capital of up to US$3,000,000 conditional upon GGS receiving an
        exclusive sublicense (with the exception of Nevada, Ghana, and Malawi) to
        the
        Licensed Items and the additional rights provided for herein. The sublicense
        shall be known as the GGS License. 

       

      Formation
        of Venture

       

      Valcent
        and GGS hereby agree to establish a venture (the “Venture”) for the purpose of
        developing, promoting, licensing, marketing, manufacturing, distributing
        and
        selling and exploiting the Licensed Item, the Bio Mass System and the Licensed
        Items.

       

      Term

       

      The
        term
        of the Venture shall be for as long as the Licensee deems it to be a commercial
        venture with revenues in excess of the minimum revenues required to keep
        the
        PAGIC/WPK License in good standing.

       

      Funding
        of Venture

       

      All
        funds
        required to complete the research and development related to the Bio Mass
        System
        to a working prototype stage, the construction of a pilot plant utilizing
        the
        Bio Mass System and the construction and delivery of Licensed Items embodying
        the Bio Mass System for exploitation purposes shall be paid for by
        GGS.

      

      Contributions
        by Valcent

      

      Valcent
        shall contribute to the Venture the following:

       

      
        	 	
                1)

              	
                the
                  GGS License; 

              

      

       

      
        	 	
                2)

              	
                the
                  non-exclusive services of Malcolm Glen Kertz as the inventor and
                  conceiver
                  of the Licensed Items for support and to provide know-how and technical
                  expertise as a research consultant to the Venture but on a basis
                  sufficient to meet the R&D and commercial project exploitation
                  schedules;

              

      

       

      
        	 	
                3)

              	
                the
                  non-exclusive use of the warehouse and laboratory space currently
                  maintained by Valcent in El Paso, Texas; but on a prioritized basis
                  to
                  meet the R&D and commercial project exploitation schedules;
                  

              

      

       

      
        	 	
                4)

              	
                non-exclusive
                  use of a parcel of land located in the County of El Paso consisting
                  of
                  approximately 6.2 acres of land on which a working prototype of
                  the
                  Invention can be constructed but on a prioritized basis to meet
                  the
                  R&D and commercial project exploitation schedules;
                  

              

      

      

      
        	 	
                5)

              	
                other
                  Valcent personnel and office services to be charged to the venture
                  on a
                  cost basis 

              

      

      

      Participating
        Interests

      

      Before
        payout of the Licensee’s capital account and acceptable third party expenses,
        the Venture interests shall be 80% in favor of the Licensee and 20% in favor
        of
        the Licensor whereby both interests in total shall be subject to a 0.9% royalty
        payable to PAGIC and WPK as detailed in the attached Schedule “A”. The 20%
        venture interest held by the Licensor shall be a carried interest.

      

      After
        payout of the Licensee’s capital account and acceptable third party expenses,
        the venture interest shall be 70% in favor of the Licensee and 30% in favor
        of
        the Licensor whereby both interests in total shall be subject to a 4.5% royalty
        payable to PAGIC and WPK as detailed in the attached Schedule “A”. At the end of
        the R&D and pilot plant phase, Valcent will have the option to purchase an
        additional 10% interest for 40% of GGS’s investment. 

       

      Additional
        facilities constructed to exploit the Licensed Item shall be accounted for
        as
        separate and distinct Ventures (the “Sub-Ventures”) and any distributions made
        shall be subject to the same distribution terms as stated above.

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      The
        parties anticipate that Venture income will be derived from the
        following:

       

      
        	 	
                1)

              	
                the
                  sale or lease of plants employing the Licensed Item and the Bio
                  Mass
                  System;

              

      

      
        	 	
                2)

              	
                the
                  sub-licensing of the Licensed Item;

              

      

      
        	 	
                3)

              	
                the
                  sale of capital assets;

              

      

      
        	 	
                4)

              	
                the
                  harvesting of by-products derived from the application of the Licensed
                  Item; 

              

      

      
        	 	
                5)

              	
                green
                  credits

              

      

       

      Note:
        Any
        government grants shall be treated as cost offsets.

       

      Income
        derived from the above events, less cost of sales and selling, general and
        administrative costs shall be included for distribution purposes. A capital
        account shall be established for the Licensee which reflects the amount of
        money
        contributed to the venture or sub venture(s) decreased by any reimbursement(s)
        made. 

       

      Valcent
        has the right to develop a sub-venture to commercialize the Licensed Items
        for
        retail/consumer (non-industrial) applications of this technology/apparatus.
        For
        such a sub-venture, Valcent will be the operator, and shall fund all of the
        sub-venture investments. GGS shall also have a capital account for a deemed
        expenditure reflecting R&D expenditures incurred by GGS that are applicable
        to the consumer version of the Invention and until such time as the GGS capital
        account for the consumer version is paid out, both Valcent and GGS shall
        have an
        equal interest in the distributions. Thereafter, Valcent shall have a capital
        account on the same terms as defined above to calculate before and after
        payout
        interests with the intent of Valcent having an 80% interest before payout
        and
        60% interest after payout with the same royalty provisions as stated above.
        For
        the purpose of making distributions from this sub-venture, Valcent may engage
        GGS employees in similar fashion to that in which Valcent employees are engaged
        and compensated in the industrial venture/sub-ventures.  

       

      Management
        Committee

       

      The
        overall management and control of the Venture shall be vested in the Operator.
        The Operator shall conduct the operations in accordance with directions received
        from a committee (the “Committee”) which will be formed following execution of
        this Letter of Agreement. The Committee shall consist of four members. Valcent
        shall appoint two members to the Committee and GGS shall appoint two members
        to
        the Committee. Each member of the Committee shall have one vote. The members
        appointed by GGS shall have a deciding vote on any issues placed before the
        Committee which involves financial matters, budget controls, project and
        contract management, sales and marketing and the members appointed by Valcent
        shall have a deciding vote with respect to any issues involving the intellectual
        property. Save and except for the deciding votes provided to each of the
        parties
        under certain circumstances, all decisions of the Committee shall be made
        by a
        majority vote. The management committee will be chaired by a GGS representative
        as the Operator.

       

      Programs
        and Budgets

       

      The
        initial programs and budgets shall cover two preliminary phases being the
        completion of the research and development phase and the construction of
        a pilot
        plant equipped with the Bio Mass System.

       

      The
        Operator shall prepare an initial budget for approval by the Committee which
        will cover total anticipated R&D phase expenditures with the first 3 months
        specified in detail. Thereafter, at least 45 days prior to the expiration
        of the
        previously approved program, Operator shall prepare and submit to the Committee
        a proposed program and budget for the succeeding 3-month period. The proposed
        program and budgets shall be in the form and degree of detail sufficient
        to
        allow members of the Committee to make a reasonably informed determination
        concerning the program and the budget. Within 15 days after submission of
        a
        proposed program and budget the Committee shall approve or disapprove a proposed
        program and budget, and GGS as Operator shall provide funding as required..
        

       

      Termination
        of Venture 

       

      The
        Venture shall terminate in the following events: 

       

      
        	 	
                1)

              	
                the
                  insolvency or bankruptcy of either Venture participant;
                  

              

      

      

      
        	 	
                2)

              	
                GGS’s
                  failure to fund the Venture in an amount of up to
                  $3,000,000;

              

      

      

      
        	 	
                3)

              	
                Valcents
                  failure to deliver the technology as required for commercial
                  exploitation

              

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
              	4)	
                Upon
                  the expiration of the term, which is defined as revenues less than
                  the
                  minimum required by the PAGIC/WPK
                  License;

              

      

      

      
        	 	
                5)

              	
                Failure
                  of the Venture to distribute royalty payments as specified above
                  under
                  Participating Interests, within six months of their due date;
                  

              

      

      

      
        	 	
                6)

              	
                Upon
                  the voluntary winding up of the Venture under the direction of
                  the
                  Committee.

              

      

       

      The
        parties agree to develop the detailed terms for termination of the venture
        prior
        to commercialization.

       

      Research
        and Development Program

       

      The
        research and development program provided for in the GGS License shall be
        undertaken by the Venture under the direction of a Committee as defined above.
        The program shall set tasks and sub tasks to achieve defined milestones with
        expenditures to be incurred in accordance with the pre-approved budgets approved
        by the Committee. 

       

      All
        parties involved in the research and development program shall perform their
        duties to the Venture under confidentiality agreements establishing that
        the
        results of the programs are for the direct benefit of the Licensor and the
        Venture. 

       

      As
        part
        of the research and development program, the Operator shall provide monthly
        reports on the progress achieved and a financial accounting of all funds
        spent.

       

      All
        right, title and interest in and to the technology derived from research
        and
        development program shall be the sole and exclusive property of the Licensor
        and
        the Venture and shall not be deemed to be works made for hire. The rights
        of the
        Licensor and the Venture shall extend to any and all notes, data, sketches,
        drawings, research, formulas, trade secrets, processes, laboratory notebooks,
        research memoranda, reference materials, prototypes, know-how and any other
        item
        of whatever form that in any way embodies the research program and technology
        contemplated hereby. The Operator shall provide notice to Valcent when the
        Venture has completed the research and development program. Following the
        research and development program, the Venture shall commence a second phase
        involving the construction of a pilot plant on the lands to be contributed
        by
        Valcent as earlier provided for herein.

       

      The
        intellectual property provided by Valcent and the inventor of the technology
        and
        conceiver (Malcolm Glen Kertz) will be made available to the Venture in event
        of
        the illness or death of the inventor, to enable the business of the Venture
        to
        continue.

      

      Operator

       

      The
        Operator of the Venture appointed for the purpose of accomplishing the defined
        objectives of the Venture as from time to time established by the Committee
        contemplated herein shall be GGS. As Operator, GGS shall inter alia be
        responsible for the following:

       

      
        	
              	a)	
                the
                  research and development program;

              

      

       

      
        	 	
                b)

              	
                the
                  management and supervision of the business and affairs of the Venture
                  with
                  authority to act on behalf of the Venture
                  to:

              

      

       

      i) execute
        any debt instruments;

       

      ii) pay
        all
        amounts due and payable by the Venture to any person;

       

      iii) enter
        into any contracts or agreement with or employ such agents, employees, managers,
        accountants, attorneys, consultants and other persons, firms, corporations
        or
        other entities whatsoever, including the Operator or any person affiliated
        with
        the Operator, necessary or appropriate and to pay such fees and
        expenses;

       

      iv) acquire
        insurance;

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      v) enter
        into, execute, acknowledge and deliver any and all contract, agreements or
        other
        instruments that are appropriate to carry on the business of the
        Venture;

       

      vi) pay
        costs
        to be paid on all taxes that may be levied or imposed on any
        assets;

       

      vii) open
        accounts, invest, deposit and maintain the funds in the name of the Venture
        in
        banks, savings and loan associations;

       

      viii) execute,
        acknowledge and deliver all documents and payment of the fees required to
        qualify the Venture to do business in any other State or Country;

       

      ix) otherwise
        perform normal administrative acts;

       

      x) sublicense
        the Licensed Item; and

       

      xi) collect
        and market by-products derived from the application of the Licensed Item
        and the
        operation of the Licensed Items by the Venture.

      

      Arbitration

       

      All
        disputes in connection with this agreement or the formal contract shall be
        decided finally by the American Arbitration Association, in an arbitration
        proceeding in accordance with its then prevailing rules applicable to commercial
        arbitrations. The arbitration shall take place in the Houston area of the
        State
        of Texas, and the decision of the arbitrator(s) shall be binding and final
        upon
        the parties, and its decision shall be enforceable as a judgment in a court
        of
        competent jurisdiction. The cost of such arbitration shall be shared equally
        between the parties hereto, except that each party shall pay its own attorney
        and witness fees unless the arbitrator determines that a party has acted
        in bad
        faith, in which event the entire cost of the arbitration, including the
        reasonable attorney fees of the prevailing party, shall be borne by the party
        determined by a majority of the arbitrators to have acted in bad
        faith.

      
Confidentiality

       

      The
        terms
        and provisions of this Letter of Agreement and all information obtained in
        connection with the performance of this Agreement not otherwise generally
        available to the public (“Confidential Information”) shall be maintained on a
        confidential basis by the Parties. A Party shall not make any disclosure
        to any
        Person or to the public of, or give or provide for, any publicity, press
        release
        or written material containing Confidential Information without the prior
        written consent of the other Party, which consent shall not be unreasonably
        withheld, delayed or conditioned. The requirement for consent shall not apply
        to
        a disclosure:

       

      
        	 	
                1)

              	
                to
                  an affiliate, attorney, accountants or consultant that has a bona
                  fide
                  need to be informed;

              

      

       

      
        	 	
                2)

              	
                to
                  a governmental agency or to the public when the disclosing party
                  believes
                  in good faith such disclosure is required by applicable law, rules
                  or
                  regulations; or

              

      

       

      
        	 	
                3)

              	
                of
                  information which now or at the time of disclosure is part of the
                  public
                  domain through no fault of the disclosing
                  Party.

              

      

       

      Any
        disclosure pursuant to subsection (1) or (2) above shall include only such
        Confidential Information as such person shall have a legitimate business
        need to
        know and such person shall first agree in writing to protect the Confidential
        Information from further disclosure to the same extent as the parties are
        obligated under this section. 

       

      The
        parties agree that this Letter of Agreement will constitute the basis of
        the
        working arrangement that the parties will commence effective as of the date
        this
        Agreement is signed by each of the parties and that the terms of the agreement
        between the parties will be subject to more definitive legal agreements to
        be
        settled by and between the parties in a definitive form by June 30, 2007
        unless
        the time for completing the definitive version of the agreement is by mutual
        agreement extended.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      If
        you
        are in agreement with the basic terms of this Letter of Agreement, would
        you
        please indicate your acceptance of the terms by signing this Agreement in
        the
        space provided and forwarding a copy of the accepted document to us at the
        address set out above.

       

      We
        look
        forward to hearing from you.

       

      Yours
        truly,

        

      VALCENT
        PRODUCTS INC.

      
        	 	 	 
	 	 
	 
 	 
 	 
 
	Per:
                Douglas E.
                Ford (Director)	 	 
	 	
              
	 	 

      

       

       

      We,
        the
        undersigned do hereby accept the foregoing terms this _____ day of September,
        2006.

       

       

      GLOBAL
        GREEN SOLUTIONS INC.

      
        
          	 	 	 
	 	 
	 
 	 
 	 
 
	Per:
                  James Douglas
                  Frater (President)	 	 
	 	
                
	 	 

        

      

       

       

      PAGIC
        LP

      
        
          	 	 	 
	 	 
	 
 	 
 	 
 
	Per:
                  Malcolm Glen
                  Kertz (President)	 	 
	 	
                
	 

        

         

      

       

      WEST
        PEAK VENTURES OF CANADA LIMITED

      
        
          	 	 	 
	 	 
	 
 	 
 	 
 
	Per:
                  Tim Brock
                  (President)	 	 
	 	
                
	 

      

       

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      

        “Schedule
          A to the Letter of Agreement
          between Global Green Solutions Inc, Pagic
          LP (formerly MK Enterprises LLC), West Peak Ventures of Canada Limited,
          and
          Valcent Products Inc. dated October 2, 2006”

        

        PRODUCT
          DEVELOPMENT AGREEMENT

         

        THIS
          PRODUCT DEVELOPMENT AGREEMENT (“Agreement”) is made and entered into by and
          between MK ENTERPRISES LLC, a Nevada corporation having a place of business
          at
          1300 Clay Street, Winfield, Louisiana 71483 (hereinafter referred to as
“MK”),
          and VALCENT PRODUCTS, INC., an Alberta Canada corporation, having a place
          of
          business at Suite 420, 475 Howe Street, Vancouver, British Columbia, Canada
          (hereinafter referred to as “VPI”):

         

        A.    MK
          is now and has been engaged in the development of New Products. 

         

        B.    VPI
          wishes to evaluate the New Products developed by MK to determine the commercial
          potential of such New Products.

         

        C.    VPI
          wishes to have the option to elect certain ones of the New Products for
          licensing from MK (“Licensed New Product”) whereby VPI will develop and
          commercialize the Licensed New Product.

         

        D.    MK
          is willing to perform the product development desired by VPI on the terms
          set
          forth herein, and VPI is willing to engage MK to perform the development
          services on such terms.

         

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

         

        1.    Definitions. As
          used herein, the following terms shall have the following meanings:

         

        1.1    “New
          Products” shall mean and include any goods and services developed by MK in the
          past or future, with the exception of the products listed on Exhibit “A”,
          attached hereto and made a part hereof, and with the exception of the products
          listed on Exhibit “B”, attached hereto and made a part hereof, which are the
          subject of the Master License Agreement executed concurrently
          herewith.

         

        1.2    “Development
          Program” shall mean the individual tasks to be performed by MK for the
          development of a New Product. The Development Program shall include the
          schedule
          for completion of the individual tasks to be performed pursuant to the
          Development Program, including an estimated budget therefore, such Development
          Program to be agreed upon by the parties hereto.

         

        1.3    “MK
          Intellectual Property” shall mean and include MK Patent Rights and MK Technology
          owned by MK or licensed by MK from Malcolm Glen Kertz as of the Effective
          Date
          hereof and MK Patent Rights and MK Technology developed or licensed in
          the
          future during the term of this Product Development Agreement, all relating
          to
          the New Products; provided, however, MK Intellectual Property shall not
          include
          any product covered by the patents and applications listed on Exhibit
“A”.

         

        1.4    “MK
          Technology” shall mean the Technology owned by MK or licensed by MK from Malcolm
          Glen Kertz and any future Technology developed solely by MK or jointly
          with
          VPI.

         

        1.5    “VPI
          Technology” shall mean the Technology developed independently of MK and Malcolm
          Glen Kertz and owned by VPI.

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

        
          
            1.6    “Technology”
              shall mean all trade secrets, know-how, copyrights, and, to the extent
              not
              included therein, all general and specific knowledge, experience and
              information
              and rights with respect thereto, including, without limitation, all
              concepts, ideas, developments, plans, technical data, processes, procedures,
              methods, formulae, designs, inventions, discoveries, machines, compositions
              of
              matter, specifications, characteristics, raw materials, material data,
              statistical theory and data, hardware design data, processing techniques,
              software, algorithms, computer programs, design features, experimental
              tests,
              schematics, manufacturing procedures, test procedures, all physical
              manifestations or embodiments of such knowledge, experience and information,
              including without limitation all pilot and prototype models and all
              original
              works of authorship, interim work product, modifications and derivative
              works,
              documents and writings and all copies thereof developed or made by
              MK including,
              without limitation, all chemical and manufacturing information, schematics,
              lay-out drawings, assembly drawings, specifications, parts lists, inspection
              procedures and test procedures, and other technical information or rights,
              whether patentable or unpatentable, discovered, developed, or acquired
              during
              the term of this Product Development Agreement by MK or VPI and related
              to New
              Products.

          

        

         

        1.7    “MK
          Patent Rights” shall mean and include any patents and patent applications on
          inventions included in the MK Technology invented or licensed by MK or
          jointly
          invented with VPI relating to MK Technology and/or any divisions,
          continuations-in-part, applications or reissues thereof, and all United
          States
          and foreign patents issued upon any such applications.

         

        1.8    “Licensed
          New Product” shall mean a New Product elected by VPI pursuant to Paragraph 11
          which embodies, employs, includes or incorporates any of the MK Patent
          Rights
          and/or MK Technology.

         

        1.9    “Ancillary
          Products” shall have the meaning set forth in the attached Product License
          Agreement. 

         

        1.10    “Net
          Sales”shall have the meaning set forth in the attached Product License
          Agreement. 

         

        1.11    “Territory”
          shall have the meaning set forth in the attached Product License Agreement.
          

         

        1.12    “Confidential
          Information” shall mean all MK Technology, except any information
          which:

         

        (1)    is
          or shall have been in the possession of VPI prior to disclosure thereof
          to VPI
          by MK;

         

        (2)    is,
          or through no fault of VPI becomes published or otherwise available to
          others or
          the public under circumstances such that such others or the public may
          utilize
          the information without any direct or indirect obligation to MK;

         

        (3)    is,
          or at any time may be, acquired by VPI from any third party rightfully
          possessed
          of the information and having no direct or indirect obligation to MK with
          respect to same; or

         

        (4)    is
          independently invented by an employee or consultant of VPI who has not
          had
          access to the information by virtue of this Agreement.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

        Further
          and without limitation on any particular obligation of confidence recited
          herein, VPI shall not be permitted to justify disregarding the obligations
          of
          confidence herein by using the information to guide a search by VPI for
          publications or other publicly available information, selecting individual
          pieces of public information, and fitting them together by use of integrated
          disclosure to contend the information is in the public domain.

         

        1.13    “Effective
          Date” shall mean the date of execution of this License Agreement, which is the
          day on which this Product Development Agreement shall begin effect.

         

        2.    Engagement
          of MK.
          VPI
          hereby engages MK to develop New Products and agrees to supply MK with
          the personnel, materials, equipment and facilities required for the
          performance thereof, and MK hereby accepts such engagement.

         

        3.    Scope
          of Engagement.
          Pursuant
          to its engagement hereunder, MK shall use its best efforts to develop New
          Products and to develop New Products in accordance with Development Programs
          agreed upon by the parties hereto. 

         

        4.    MK
          Consultant.
          MK
          agrees to employ Malcolm Glen Kertz as a consultant for the development
          of New
          Products and for performing the Development Programs. 

         

        5.    Facilities,
          Personnel, Equipment and Materials.
          VPI
          agrees to provide the facilities, personnel, and all equipment, materials,
          and
          other tangible property required to perform the Development Programs. All
          equipment, materials, and other tangible property acquired and used for
          the
          development of New Products by MK under this Product Development Agreement
          shall
          be the property of VPI unless otherwise agreed in writing by the
          parties. Should MK purchase any such equipment, materials, or other
          tangible property, MK shall be reimbursed for such property and all such
          property shall become the property of VPI unless otherwise agreed in writing
          by
          the parties. When MK is reimbursed for such property, it shall immediately
          deliver to the VPI a bill of sale, financing statement and any other documents
          reasonably requested by VPI and at VPI’s cost to evidence its ownership therein.

         

        6.    Development
          Costs.
          VPI
          shall pay all development costs on a cost basis for the development of
          New
          Products pursuant to Paragraph 5 of this Agreement, such costs including
          rent,
          utilities, maintenance and repair and non-personal related miscellaneous
          overhead costs, and shall further pay MK for the following
          expenditures of MK:

         

        6.1    The
          actual costs of all expenditures made for telephone, travel and contract
          services rendered by MK for the development of New Products.

         

        6..2    A
          pro rata share of all wages of MK personnel, other than Mr. Kertz, utilized
          in
          the Development Program, determined monthly on an employee-by-employee
          basis
          based on the percentage of time such employee spent on the Development
          Program
          (net of all payroll taxes and other benefits payable to such employee)
          plus
          20%. The rate of payment payable as wages to personnel utilized in the
          Development Program shall not exceed the rate of payment payable by or
          through
          MK to such personnel during the term of this Agreement for their work on
          any other project.

        

        

        

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

        7.    Timing
          of Payments. 

         

        VPI
          shall
          pay all amounts owing to MK pursuant to Paragraphs 5, and 6 within twenty
          (20)
          days after the receipt of a Statement, as described in Paragraph 8, from
          MK
          itemizing the amounts due.

         

        8.    Accounting,
          Inspections and Reports.

         

        8.1    Within
          twenty (20) days after the last day of each month of the term hereof commencing
          on the month of the Effective Date, MK shall deliver to VPI a detailed,
          itemized
          Statement (“Statement”) specifying the number of hours expended by each staff
          member on the Development Program on a category-by-category and task-by-task
          basis, the amount billed for such time, a description of all purchases
          made by
          MK in connection with the Development Program within such period and the
          cost of
          each item purchased by MK, and a detailed list of all other expenditures
          or
          items for which payment is requested pursuant to Paragraphs 6, and 7. MK
          shall
          retain for the benefit of VPI for three years following the termination
          of this
          Agreement, all invoices, purchase orders, receipts, time cards and other
          documentary evidence supporting such charges, and shall supply VPI with
          copies of any or all such items on request.

        

              8.2    VPI
          shall have the right during normal business hours to inspect the facilities
          of
          MK and the records, papers and other data related to the activities of
          MK
          hereunder.

         

        8.3    Within
          fifteen (15) days after the earlier of (a) the completion of each task
          and
          subtask identified in the Development Plan, or (b) the end of each sixty
          day
          period beginning on the Effective Date of this Agreement, MK shall deliver
          to
          the VPI a Status Report (“Status Report”) containing the following.

         

        8.3.1    On
          a subtask-by-subtask basis, a summary of the progress made in the Development
          Program as of the end of the reporting period including a discussion of
          the
          significant results of the research and development and an accounting of
          the
          manhours and supplies expended for the period.

         

        8.3.2    An
          assessment of whether the progress on the Development Program is on budget
          pursuant to the estimated costs set forth in the Development Program and
          on
          Schedule as set forth in the Development Program and, if not, an estimate
          of the
          extent to which the Development Program is ahead of or behind budget and
          Schedule on a task-by-task basis.

         

        9.    Completion
          of Development Program.
          The
          agreed completion of a Development Program shall occur upon the earliest
          of one
          of the following events (“Completion Date”):

         

        9.1    The
          delivery of both (i) a working prototype pursuant to the Development
          Program sufficient to permit the use or sale of one or more
          Products; and (ii) a Status Report from MK stating that all tasks set forth
          in the Development Program have been completed.

         

        9.2    A
          Status Report from MK stating that the tasks set forth in the Development
          Program have been pursued in a diligent manner and that MK has determined
          in
          good faith that the continuation of the Development Program is unlikely
          to
          produce a working prototype or a commercially marketable
          Product.

         

        9.3    Twenty-four
          (24) months after the date of the initiation of the Development Program.
          

         

        10.    Right
          to License. In
          consideration of the consideration paid pursuant to Paragraphs 4, 5, and
          6, VPI
          shall have the right to license any New Product developed pursuant to a
          Development Program or developed by Malcolm Glen Kertz. Such license shall
          be
          pursuant to the terms and conditions set forth in the attached Product
          License
          Agreement, Exhibit “D”, unless amended pursuant to mutual agreement of the
          parties. Should there be any disagreement concerning the license, such
          matter
          shall be submitted to mediation and arbitration as set forth in Paragraph
          19.
          The parties agree that any Product License

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        Agreement
          for the Plant Stimulator, described in Exhibit “C” hereto, shall not require the
          payment of a License Fee, such set forth in Paragraph 3.1 of the Product
          License
          Agreement, Exhibit “D”.

         

        11.    Disclosure
          and Patents.

         

        11.1    Disclosure. MK
          shall disclose in writing in the Status Reports pursuant to Paragraph 8.3,
          all
          MK Technology that is conceived or developed or reduced to practice, alone
          or jointly with others, pursuant to a Development Program from the date of
          initiation of the Development Program through its Completion Date.

         

        11.2    VPI
          shall have the right to apply for either patent or copyright protection
          on the
          MK Technology developed pursuant to the Development Program. VPI shall
          bear the expense of obtaining patent or copyright protection and each
          party hereto shall have the right to monitor the preparation and prosecution
          of
          any patent or copyright applications. MK shall have the right to request
          patent
          protection in certain foreign countries. Should VPI decline to seek
          patent protection in such a foreign country, then MK shall have the right,
          at
          its expense, to apply for protection in such a foreign country and become
          the
          owner of any resulting Patent Rights; provided, however, that nothing contained
          herein shall preclude one party from granting a license to use such MK
          Technology to the other party on such terms as then seem
          appropriate.

          

        11.3    VPI
          agrees to cause such United States and foreign patent applications filed
          by VPI
          and relating to the MK Technology to be owned exclusively by Malcolm Glen
          Kertz who has licensed all of his Patent Rights in past and future MK Technology
          to MK. VPI further agrees to perform all acts and to execute, acknowledge
          and
          deliver all instruments or writings reasonably requested and necessary
          for Mr.
          Kertz to perfect his title to the MK Patent Rights and to secure and to
          obtain
          the record title to such Patents Rights whenever possible. VPI shall bear
          all
          costs incurred in the preparation and prosecution of all domestic and foreign
          patent applications.

         

        12.    Confidentiality.
          MK and
          VPI shall comply with the restrictions on disclosure of Confidential Information
          as set forth below:

         

        12.1    VPI
          agrees that all Confidential Information relating to MK Technology
          shall for all purposes be regarded by MK as strictly confidential
          and held by VPI in confidence and solely for the MK’s benefit and use. Such
          Confidential Information shall not be used by VPI or directly or indirectly
          disclosed by VPI to any person other than MK except with MK’s written
          permission except as provided in Paragraph 10. The obligation of VPI under
          this
          Paragraph shall survive any termination or expiration of this Agreement
          except a
          termination caused by an uncured material breach by VPI in its
          performance under this Agreement which results in MK engaging another
          entity to conclude the Development Program.

         

        12.2    MK
          agrees that all Confidential Information relating to VPI Technology shall
          for
          all purposes be regarded by MK as strictly confidential and held by MK
          in
          confidence and solely for VPI’s benefit and use. Such knowledge and
          information shall not be used by MK or directly or
          indirectly disclosed by MK to any person other than VPI except with
          VPI’s written permission. The obligation of MK under this Paragraph shall
          survive any termination or expiration of this Agreement except a termination
          caused by an uncured material breach by MK in its performance under
          this Agreement which results in VPI engaging another entity to conclude the
          Development Program.

         

        12.3    MK
          agrees that it shall cause all of its employees, independent contractors
          and
          other agents to keep all Confidential Information confidential and agrees
          that
          before disclosing such Confidential Information to any such person, it
          shall cause such person to execute a written nondisclosure agreement agreeing
          to
          keep such Confidential Information confidential.

         

        

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

        13.    Term
          and Termination.

         

        13.1    Term.
          The
          term
          of this Agreement shall be for a period of five years beginning on the
          Effective
          Date hereof, subject to Paragraphs 13.2-13.6 below. Upon the expiration
          of the
          initial five-year term, this Agreement may be extended upon the mutual
          agreement
          of the parties. 

         

        13.2    This
          Agreement shall terminate upon the termination of the Master License Agreement
          between the parties dated _______, 2005.

         

        13.3    This
          Agreement may be terminated by VPI at any time upon written notice of at
          least
          thirty (30) days. During the period between the date of the termination
          notice
          and the termination date (the “Termination Period”), MK shall not hire
          additional personnel or add personnel to work on the Development Program,
          nor
          shall MK purchase additional equipment or make any other substantial
          expenditures toward the Development Program inasmuch as the parties acknowledge
          that the Termination Period is intended to be a time for an orderly wind-down
          of
          this Product Development Agreement. MK shall be entitled to payment for
          all work
          performed through the end of the Termination Period and shall not be entitled
          to
          other damages or payments as a result of the termination. 

         

        13.4    MK
          shall not be entitled to terminate this Agreement except upon the breach
          or
          default of VPI of the terms and conditions of this Agreement after its
          failure to cure pursuant to Section 13.6 hereof.

         

        13.5    In
          the event that Mr. Kertz no longer consults with MK, VPI shall have the
          right to
          terminate this Agreement.

         

        13.6    In
          the event that either party hereto shall commit any breach of or default
          in any
          of the terms or conditions of this Agreement, and also shall fail to remedy
          such
          default or breach within sixty (60) days after receipt of written notice
          thereof
          from the other party hereto, the party giving notice may, at its option
          in
          addition to any other remedies which it may have at law or in equity, terminate
          this Agreement by sending notice of termination in writing to the other
          party to
          such effect, and such termination shall be effective as of the date of
          the
          receipt of such notice.

         

        13.7    Within
          thirty (30) days after the Completion Date of the Development Program or
          within thirty (30) days of termination of this Agreement for any reason,
          MK
          shall reduce to tangible form all MK Technology relating to the Development
          Program to the extent possible and shall deliver to VPI all property described
          in Paragraph 5 held by or under the control of MK relating to Development
          Programs.

         

        14.    Exclusive
          Rights.
          During
          the term of this Agreement, neither MK nor VPI shall enter into any agreement
          or
          arrangement with any other person, firm, corporation or entity to conduct
          any
          research of any kind within the scope and definition of the Development
          Program
          or which otherwise relates to New Products under consideration for a Development
          Program.

         

        15.    Representations
          and Warranties of MK. MK
          hereby
          makes the following representations and warranties:

         

        15.1    MK
          hereby represents and warrants that to the best of its knowledge, the
          performance of the Development Programs or the New Products resulting therefrom
          will not infringe upon any known patents.

         

        15.2    MK
          hereby represents and warrants that it reasonably believes that it will
          be able
          to develop the New Products through the performance of the Development
          Programs
          and that it will use its best efforts to do so.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         15.3    Nothing
          in this Agreement shall be construed as a warranty or representation by
          MK that
          the research and development in connection with the Development Programs
          will
          lead to the successful completion of a commercial or otherwise marketable
          Product.

         

        15.4    MK
          represents and warrants that Malcolm Glen Kertz will personally participate
          extensively in all phases of the Development Programs during the period
          of his
          consulting relationship with VPI.

         

        15.5    MK
          represents and warrants that it has no prior commitments, arrangements
          or
          agreements with other parties which might interfere with or preclude the
          performance of its obligations under this Agreement. 

         

        16.    Representations
          and Warranties of VPI.

         

        16.1    VPI
          represents and warrants that, as of the Effective Date, it is a company,
          duly
          organized under the laws of Canada, and is in good standing and qualified
          to do
          business in any state where the nature of its business and properties so
          require.

         

        16.2    VPI
          represents and warrants that the execution of this Agreement has been duly
          authorized by all necessary corporate or VPI action, and VPI has the full
          power
          and authority to enter into and carry out its obligations under this
          Agreement.

         

        16.3    VPI
          covenants that it will not make any representations or warranties on behalf
          of
          MK with respect to the subjects of this Agreement in the offering for sale
          of
          any interests in VPI or in the raising of funds for VPI.

         

        16.4    VPI
          agrees to indemnify and hold MK harmless from any liabilities, costs and
          expenses (including attorneys’ fees and expenses), obligations and causes of
          action arising out of or related to any breach of the representations and
          warranties made by VPI herein.

         

        17.    Independent
          Contractor.
          The
          parties agree that the activities of MK hereunder are in the capacity of
          an
          independent contractor and that MK has the authority to contract and direct
          the
          performance of the Development Programs. The number of employees used by MK
          in conducting operations hereunder, their selection, and the hours of labor
          and
          compensation for services performed shall be determined by MK. MK may
          subcontract with other persons in order to fulfill its obligations hereunder
          with the prior advance approval in writing by VPI; however, the employment
          of
          any subcontractor shall not release MK from its obligations under the terms
          of
          this Agreement.

         

        18.    Right
          of First Offer.

         

        18.1    In
          the event MK desires to assign all or any part of its rights, privileges
          and
          interests under this Agreement, MK shall first offer (“Right of First Offer”)
          such assignment to VPI by notifying VPI in writing of the terms and conditions
          upon which MK would be willing to make such an assignment; and VPI shall
          have
          the right to acquire said rights, privileges and interests of MK by accepting
          the offer in accordance with said terms and conditions or equivalent cash.
          If
          within fifteen (15) days after receipt of MK’s notice, VPI advises MK of its
          acceptance of the offer as stated in the notice, MK agrees to promptly
          make the
          assignment to VPI on the stated terms and conditions and shall have an
          additional thirty (30) business days, if the assignment price is less than
          $1
          Million Dollars and sixty (60) days if the assignment price is over $1
          Million
          Dollars, to pay for the same with delivery against payment. 

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

        
          
            18.2    If
              within fifteen (15) days after receipt of MK’s notice, VPI does not indicate its
              acceptance of the offer as stated in the notice, MK shall thereafter
              have the
              right, subject to the prior written consent of VPI, to make the assignment
              to
              another person, firm or corporation on the same terms and conditions as
              stated in the notice. Should VPI not exercise its Right of First Offer
              and
              should the contemplated assignment not be completed within ninety (90)
              days from
              the date of MK’s notice, or should the terms and conditions thereof be altered
              in any way, this Right of First Offer shall be reinstated in any subsequent
              proposed assignment, or the altered terms and conditions for the current
              transaction, must again be offered by MK in accordance with the terms
              of
              Paragraph 18.1. 

          

        

         

        18.3    Immediately
          prior to MK going into bankruptcy, VPI shall have a Right of First Offer
          on any
          of MK’s assets at fair market value. 

         

        18.4    It
          is hereby agreed that prior to sale to a third party contemplated pursuant
          to
          Paragraphs 18.1 and 18.2 above, the purchaser shall agree to be bound by
          the
          terms of this Agreement and to assume all of MK’s obligations to VPI
          thereunder.

         

        18.5    VPI
          shall have the right to transfer and/or assign this Agreement by providing
          written notice to MK, provided that VPI is in good standing under this
          Agreement
          and the transferee or assignee assumes all obligations of VPI to MK under
          this
          Agreement.

         

        19.    Mediation
          and Arbitration.
          If a
          dispute arises between the parties regarding this Agreement, the parties
          agree
          to resolve the dispute in the following manner:

         

        (a)    Negotiation.

         

        (1)    The
          parties shall attempt in good faith to resolve any dispute arising out
          of or
          relating to this Agreement promptly by negotiation between executives of
          the
          parties who have authority to settle the controversy. Any party may give
          the
          other party written notice of any dispute not resolved in the normal course
          of
          business. Within 15 days after delivery of the notice, the receiving party
          will
          submit to the other a written response. The notice and the response will
          include
          (i) a statement of each party’s position and a summary of arguments supporting
          that position, and (ii) the name and title of the executive who will represent
          that party and of any other person who will accompany the executive. Within
          30
          days after delivery of the disputing party’s notice, the executives of both
          parties will meet at a mutually acceptable time and place, and thereafter
          as
          often as they reasonably deem necessary, to attempt to resolve the dispute.
          All
          reasonable requests for information made by one party to the other will
          be
          honored.

         

        (2)    All
          negotiations pursuant to this clause are confidential and will be treated
          as
          compromise and settlement negotiations for purposes of applicable rules
          of
          evidence.

         

        (b)    Non-binding
          Mediation.
          If the
          dispute has not been resolved by negotiation within 60 days of the disputing
          party’s notice, or if the parties failed to meet within 45 days, the parties
          will endeavor to settle the dispute by mediation under the presently effective
          Center for Public Resources (“CPR”) Model Procedure for Mediation of Business
          Disputes. The neutral third party will be selected from the CPR Panels
          of
          Distinguished Neutrals with the assistance of CPR.

         

        (c)    Arbitration.
          Any
          controversy or claim arising out of or relating to this Agreement, or the
          enforcement, breach, termination or validity thereof, that has not been
          resolved
          by mediation pursuant to the preceding paragraph within 90 days from the
          appointment of a neutral third party will be settled by arbitration in
          accordance with the CPR Rules for Non-Administered Arbitration of Business
          Disputes in effect on the date of this Agreement, by a sole arbitrator.
          If the
          parties cannot agree upon an arbitrator for a panel recommended by CPR,
          then CPR
          will select the arbitrator. Any other choice of law clause to the contrary
          in
          this Agreement notwithstanding, the arbitration will be governed by the
          United
          States Arbitration Act, 9 U.S.C. § 1-16, and judgment upon the award rendered by
          the Arbitrator may be entered by any court having jurisdiction thereof.
          The
          place of the arbitration will be Houston, Texas. Insofar as the proceeding
          relates to patents, it will also be governed by 35 U.S.C. § 294, to the extent
          applicable. The arbitrator is not empowered to award trebled, punitive
          or any
          other damages in excess of compensatory damages, and each party irrevocably
          waives any claim to recover any such damages. The arbitrator will make
          a
          reasoned award. If the result achieved in arbitration by the party instituting
          the arbitration is not more favorable to that party than the last offer
          made by
          the other party during the mediation, the former party will reimburse the
          legal
          fees, expert fees and other expenses reasonably incurred by the latter
          in the
          arbitration. 

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        20.    Applicable
          Law. The
          validity, interpretation, and performance of this Agreement shall be controlled
          by and construed under the laws of the State of Texas.

         

        21.    Addresses
          of the Parties for Notices and Payments.
          Notices
          and payments shall be delivered, postage and charges prepaid, personally,
          by
          Federal Express or by the U.S. Postal Service, return receipt requested
          to the
          address set forth below for each party or such other address or depository
          as
          may be designated from time to time.

         

        22.    Waiver.
          The
          failure of either party at any time to require performance by the other
          party of
          any provision hereof shall not affect in any way the full right to require
          such
          performance at any time thereafter, nor shall the waiver by either party
          of any
          breach of any provision hereof be taken or held to be a waiver of the provision
          itself.

         

        23.    Attorneys’
          Fees.
          Should
          an action be instituted to enforce any of the provisions of this Agreement,
          or
          by reason of breach or default in any of the covenants, representations,
          warranties, terms or conditions of this Agreement, the prevailing party
          shall be
          entitled to recover costs and attorneys’fees in such amount as the court in such
          action shall adjudge reasonable.

         

        24.    Complete
          Agreement.
          All
          documents and exhibits attached hereto or referred to herein constitute
          a part
          of this Agreement. This Agreement contains all representations, warranties
          and
          agreements made by the parties hereto relating to the subject matter hereof
          and
          supersedes any prior understandings, restrictions, representations, warranties
          and agreements between them with respect thereto other than those provided
          herein. It is the intention of the parties to incorporate into this Agreement
          their full and complete understanding, and no amendment, modification or
          addition hereto shall have effect or be binding unless it is in writing
          and
          signed by the parties hereto.

         

        25.    Titles.
          The
          titles to the sections of this Agreement are for convenience only and are
          not a part of this Agreement and shall have no effect upon the construction
          or
          interpretation of any part of this Agreement.

         

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

         

        27.    Authority
          for Execution.
          By his
          signature below, each of the undersigned individuals represents and warrants
          that he or she has executed this Agreement with the power and express authority
          of the entity on whose behalf he or she has signed. 

        

        IN
          WITNESS WHEREOF, this Agreement is executed on the dates set forth beside
          each
          signature below.

         

        
          	
                   

                	
                   

                	
                   

                
	
                   

                	
                  MK
                    ENTERPRISES LLC

                
	
                   

                   

                	
                   

                   

                	
                   

                   

                
	
                  WITNESS:_______________________________________

                	
                  By:  

                	
                  /s/ 

                
	
                   

                	
                   

                
	
                   

                	
                  Perry
                    A. Martin, President

                   

                  Date:_______________

                

        

        

         

        
          	
                   

                	
                   

                	
                   

                
	
                   

                	
                  VALCENT
                    PRODUCTS, INC.

                
	
                   

                   

                	
                   

                   

                	
                   

                   

                
	
                  WITNESS:_______________________________________

                	
                  By:  

                	
                  /s/ 

                
	
                   

                	
                   

                
	
                   

                	
                  Name:

                  Title:

                  Date:_______________

                

        

        

         

         

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        

        EXHIBIT
          “A”

         

        U.S.
          Patent 6,122,861 Plant Growing Room

         

        

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

        

        

        EXHIBIT
          “B”

         

        

         

        DUST
          WOLF

         

        The
          duster is a simple device that fits on the end of most standard vacuum
          cleaners.
          It uses the negative pressure of the incoming air to drive a rotating brush
          that
          is covered with soft bristles. The alignment of the brush is such that
          upon each
          rotation of the brush, the bristles move across the air import vent that
          runs
          the length of the brush. Using the vacuum power, this cleans the brush
          on each
          rotation and prevents the spread of dust to surrounding areas. The brush
          is
          driven by an impeller mounted in the base of the Dust Wolf just above the
          connection port that goes to the vacuum cleaner hose. The incoming rush
          of air
          drives the impeller and thus turns the brush. The length of the brush is
          designed to allow the Dust Wolf to easily clean a large surface, specifically
          several mini-blind blades at a time.

        

        SONIQUE

         

        Sonique
          is a sonic skin care system with various attachments that facilitates personal
          hygiene. It utilizes specific ultrasonic frequencies to vibrate a cleaning
          head
          at the end of the device. This ultrasonic vibration has many beneficial
          effects
          on the skin’s surface that can be enhanced through the use of different
          attachments, i.e. deep-seated soil can be brought to the surface, dead
          skin can
          be exfoliated and the skin can be rejuvenated. The system is operated on
          a
          rechargeable battery that is built into the unit.

         

        TOMORROW
          GARDEN

         

        The
          Tomorrow Garden (TG) and associated Plant Tissue Culture (PTC) Process
          result in
          a kit designed to take advantage of PTC and offer, direct to the consumer,
          an
          easy to use kit featuring plants not readily available in the marketplace.
          These
          plants are of a guaranteed superior quality and have significantly improved
          “Fresh Life” span. PTC or ‘micro-propagation’ is a laboratory process that
          allows for the rapid production of mass quantities of genetically identical
          plants. This process removes the randomness of genetics by using the plant’s own
          cells that already exhibit the identified desirable traits. The Tomorrow
          Garden
          Kits are multi-plant packages (typically 6 packs) arranged in pre-selected
          themes i.e. Italian herbs, pet plants, African violets, etc. to suit the
          client’s preferences.

         

        

         

        

        

        

        

        

        

        

        

        

        

        

        

        

        

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

        EXHIBIT
          “C”

         

        

         

        ELECTRONIC
          PLANT STIMULATOR 

         

        The
          invention relates to the electronic stimulation of plant development. More
          particularly, it relates to the stimulation of plant development through
          electrifying the environment around a plant or part of a plant with an
          electrical field, preferably a pulsed field. The invention also relates
          to an
          electronic method of stimulating the active membrane transport systems
          of
          growing plants and harvested plant products in order to promote growth
          and
          extend the shelf life of harvested material. The invention is of particular
          interest as it relates to shipment and marketing of cut flowers, greens
          and
          trees and more particularly to methods and apparatus for handling, shipping,
          and
          marketing of cut flowers.

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

         

        

         

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

        

        EXHIBIT
          “D”

         

        PRODUCT
          LICENSE AGREEMENT

         

        

         

        THIS
          PRODUCT LICENSE AGREEMENT (hereinafter referred to as the “License Agreement”),
          by and between MK Enterprises LLC, a Nevada corporation, having a place
          of
          business at 1300 Clay Street, Winfield, Louisiana 71483 (hereinafter referred
          to
          as the “Licensor”), and Valcent Products, Inc., an Alberta Canada corporation,
          having a place of business at Suite 420, 475 Howe Street, Vancouver, British
          Columbia, Canada (hereinafter referred to as the “Licensee”). 

         

        W
          I T
          N E S S E T H:

         

        WHEREAS,
          Licensor is the exclusive licensee of certain Patent Rights and KnowHow,
          hereinafter defined, owned by Malcolm Glen Kertz and has developed a Licensed
          Product, hereinafter defined; which utilize the Patent Rights and Know-How;
          and

         

        WHEREAS,
          Licensee desires to license the Patent Rights and Know-How to commercialize
          the
          Licensed Product and to be the exclusive world-wide licensed manufacturer,
          marketer, and seller of the Licensed Products, all as set forth in this
          License
          Agreement; and

         

        WHEREAS,
          Licensor desires to grant to Licensee such rights and licenses, as set
          forth in
          this License Agreement;

         

        NOW,
          THEREFORE, in consideration of the mutual covenants and obligations hereinafter
          set forth and for other good and valuable consideration, the receipt and
          sufficiency of which are hereby acknowledged, the parties hereto agree
          as
          follows:

         

        ARTICLE
          I

         

        DEFINITIONS

         

        Each
          of
          the following terms shall, wherever found in this License Agreement, be
          used and
          understood in accordance with the corresponding definition below:

         

        1.1    “Territory”
          shall mean the entire world and each and every country, jurisdiction and/or
          sovereign nation therein.

         

        1.2    “Licensed
          Product” shall mean the product described on Exhibit “A”, attached hereto and
          made a part hereof, and any other goods that embody, employ, include or
          incorporate the Patent Rights and Know-How. Licensed Product shall also
          include
          Elected Improvements. The Licensed Product may also be referred to in the
          plural
          and termed Licensed Products.

         

        1.3    “Ancillary
          Products” shall mean any goods or services relating to the Licensed Product
          including goods and services sold as a part of the Licensed Product, goods
          sold
          as replacement parts for the Licensed Product, or goods and services sold
          to
          repair the Licensed Product. 

         

        1.4    “Patent
          Rights” shall mean and include the patents and applications set forth on Exhibit
          “A”, attached hereto and made a part hereof, and/or any divisions, continuations
          or reissues thereof, all foreign patent applications corresponding thereto,
          and
          all United States and foreign patents issued upon any such applications.
          The
          term Patent Rights shall further include any United States and foreign
          patents
          and patent applications covering the Elected Improvements but shall not
          include
          continuation-in-part applications unless the new matter in the
          continuation-in-part application is an Elected Improvement. 

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

        1.5    “Know-How”
          shall mean all of the technical know-how, trade secrets, technical information,
          and knowledge, directly or indirectly, relating to the manufacture and
          use of
          the Licensed Product, including, without limitation, configurations, formulas,
          engineering, materials, scientific and practical information and the disclosure
          in the Patent Rights, whether patentable or unpatentable, and all physical
          manifestations or embodiments of the Licensed Product including without
          limitation all data specifications, prototypes, drawings, schematics, notes,
          records and other writings; all such Know-How to be used or practiced or
          capable
          of being used or practiced in the manufacture and use of the Licensed
          Product.

         

        1.6    “Improvements”
          shall mean and include any improvements and modifications to the Licensed
          Product, including, without limitation, the materials and configuration
          of the
          Licensed Product; and any machinery or equipment for the manufacture or
          use of
          the Licensed Product, together with any improvements and modifications
          thereof,
          developed by Licensor during the term of this License Agreement.

         

        1.7    “Elected
          Improvements” shall mean those Improvements elected by Licensee pursuant to
          Paragraph 4.2 hereof.

         

        1.8    “Net
          Sales” of the Licensed Product or Ancillary Products for any given period shall
          mean monies actually received by Licensee during the said period in
          consideration for the Licensed Product and Ancillary Products, adjusted
          for
          exchanges and returns of the Licensed Product and Ancillary Products sold
          or
          delivered during a previous period. Net Sales shall not include any charges
          for
          freight, packing, or insurance if such charges are identified and billed
          separately and in addition to the list price for the Licensed Product and
          Ancillary Products; nor shall Net Sales include charges for tax or duty
          on sales
          or delivery of the Licensed Product and Ancillary Products.

         

        1.9    “License
          Year” shall mean each successive period of twelve months, commencing on March
          31
          in the year in which the License Agreement becomes effective.

         

        1.10    “Effective
          Date” shall mean ________, _____, which is the day on which this License
          Agreement shall begin effect.

         

        1.11    “Affiliate”
          shall mean a company, sole proprietorship, partnership, joint venture or
          corporation in which one of the parties hereto and/or their officers, directors
          or shareholders, owns or controls, directly or indirectly, at least twenty
          percent (20%) of the voting stock and/or equity, or a company, sole
          proprietorship, person, partnership, joint venture, or corporation which
          owns at
          least twenty percent (20%) of the voting stock and/or equity of one of
          the
          parties hereto.

         

        ARTICLE
          II

        GRANT
          OF LICENSES

         

        2.1    Licensor
          grants to Licensee the exclusive right and license throughout the Territory
          to
          use and employ the Patent Rights and Know-How to make, use and sell the
          Licensed
          Product and Ancillary Products for the term hereof and subject to the provisions
          of this License Agreement.

         

        2.2    The
          licenses granted pursuant to Paragraph 2.1 above shall specifically include
          the
          right of Licensee to grant sublicenses throughout the Territory. Any sublicense
          granted by Licensee shall be consistent with the terms of this License
          Agreement
          and shall grant to Licensor rights parallel to those contained herein including,
          but not limited to, the right to receive royalty payments from sublicensees
          in
          accordance with the Running Royalty set forth in Paragraph 3.1 below, attached
          hereto and made a part hereof. Any sublicense granted pursuant to this
          Paragraph
          2.2 that varies the terms of this License Agreement or does not grant to
          Licensor rights parallel to this License Agreement shall require the prior
          written approval of Licensor. Licensee shall provide Licensor with copies
          of all
          documents or contracts regarding any sublicense hereunder. 

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        2.3    Within
          ten (10) days after execution of this License Agreement, Licensor shall
          supply
          to Licensee, at a mutually agreeable location, without expense to Licensee,
          all
          Know-How, including materials and written information related to the Licensed
          Product and Ancillary Products not previously delivered.

         

        ARTICLE
          III

        CONSIDERATION
          - PAYMENT - REPORTING - RECORDS

         

        3.1    Licensee
          agrees to pay a one-time, non-refundable license fee (“License Fee”) in the
          amount of Fifty Thousand Dollars ($50,000) upon the execution of this License
          Agreement. Licensee agrees to pay a royalty (hereafter “Running Royalty”) to
          Licensor for the term of this License Agreement in the amount of Fiur and
          One
          Half Percent (4.5%) of Net Sales of the Licensed Product and Three Percent
          (3%)
          of Net Sales of any Ancillary Products of the Licensed Product. The License
          Fee
          is an advance payment of Running Royalties and the initial Fifty Thousand
          Dollars ($50,000) of Running Royalties shall be set off against the License
          Fee.

         

        3.2    The
          amount of the Running Royalties payable according to Paragraph 3.1 have
          been
          negotiated to include payment of the license for the Know-How and the Patent
          Rights without regard to the patentability of the Patent Rights. 

         

        3.3    Beginning
          in the second License Year, in the event that the total Running Royalty
          paid by
          Licensee to Licensor according to Paragraph 3.1 in a License Year for the
          Licensed Product and related Ancillary Products, does not exceed a Minimum
          Royalty in the amount Fifty Thousand Dollars ($50,000) for such License
          Year for
          the Licensed Product, then Licensee shall pay to Licensor an amount (hereafter
          “Adjustment Royalty”) equal to the Minimum Royalty for such License Year for the
          Licensed Product, less the total Running Royalty actually paid for the
          Licensed
          Product during such License Year.

         

        3.4    Notwithstanding
          anything to the contrary contained in this License Agreement and particularly
          Article IX, Licensor shall have the right to transfer or assign a portion
          of the
          Running Royalty to selected individuals upon written notice to Licensee
          prior to
          the execution of this License Agreement. Such future payment of Running
          Royalties shall be made directly to such selected individuals and rights
          to such
          shares and Running Royalties shall be governed by and be subject to this
          License
          Agreement.

         

        3.5    In
          the event that Licensee fails to pay the Adjustment Royalty pursuant to
          Paragraph 3.3, Licensor shall give Licensee written notice of such failure
          and
          request confirmation of Licensee’s intent not to pay such Adjustment Royalty. If
          Licensee responds that such failure was not intentional, then Licensee
          shall
          have 30 days after receiving said notice to pay the Adjustment
          Royalty.

         

        3.6    In
          the event Licensee intentionally fails to pay the Adjustment Royalty for
          a
          License Year, then Licensor shall have the right to terminate this License
          Agreement pursuant to the terms and conditions as stated in Article VIII.
          In the
          event of a dispute between the parties as to the Adjustment Royalty, the
          parties
          agree to submit the matter to binding mediation and arbitration pursuant
          to
          Article XII.

         

         

         

        

         

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

        3.7    For
          the purposes of computing and paying the Running Royalty and the Adjustment
          Royalty (“Royalties”) pursuant to this Article:

         

        (a)    The
          Licensed Product and Ancillary Products shall be deemed sold and Licensor’s
          Running Royalty thereon earned upon receipt by Licensee of amounts invoiced
          for
          the Licensed Product and Ancillary Products, and Licensor’s Running Royalty
          shall be due as set out in Paragraphs (c) and (d) below.  (b) Payment
          of the Royalties shall be in U.S. Dollars by certified check or wire transfer
          to
          a bank account specified by Licensor and the selling price, for purposes
          of
          computations of such Royalties, shall be converted to U.S. Dollars, when
          necessary, as of the date when the Licensed Product are deemed sold. (c) Payment
          of the Running Royalty shall be due and paid to Licensor within sixty (60)
          days
          of the close of each three (3) month period during each License Year of
          the term
          of this License Agreement. (d) Payment
          of the Adjustment Royalty shall be due and paid to Licensor within sixty
          (60)
          days of the close of each License Year.  (e) The
          Royalties due hereunder shall be calculated using U.S. Generally Accepted
          Accounting Principles.

         

        3.8    Together
          with each quarterly payment, Licensee shall render to Licensor a written
          report
          stating, for the preceding three-month period covered by such payment,
          the
          number of units of each of the Licensed Product sold by Licensee and
          sublicensees in such quarter, the Unit Sales of Licensee and sublicensees
          for
          the Licensed Product and Ancillary Products, the Net Sales of the Licensed
          Product and Ancillary Products sold by Licensee and sublicensees in such
          quarter, the royalties or other consideration received from sublicensees,
          the
          Running Royalty and any Adjustment Royalty due to Licensor, and the Running
          Royalty paid by Licensee and sublicensees for said three-month
          period.

         

        3.9    Licensee
          agrees to keep records of the Licensed Product and Ancillary Products sold
          in
          sufficient detail to enable the Running Royalty payable by it to Licensor
          to be
          determined and further agrees to permit its books and records pertinent
          to the
          Licensed Product and Ancillary Products to be examined from time to time,
          but
          not more often than twice a year, during normal business hours by providing
          at
          least five business days written notice, to the extent necessary to verify
          the
          amount of Royalties payable hereunder.

         

        3.10    Pursuant
          to Paragraph 3.9, Licensor shall have the right to appoint an independent
          certified public accountant (“CPA”) at its own expense to determine that the
          correct amount of Royalties have been paid. If the Licensor determines
          there are
          discrepancies requiring adjustment, the Licensee shall pay the amount of
          any
          underpayment of Royalties within 30 days unless both parties cannot reach
          agreement whereby the parties shall subject themselves to binding mediation
          and
          arbitration pursuant to Article XII forthwith. Any overpayment of Royalties
          shall be deducted from future Royalty payments without recourse to
          Licensor.

         

        3.11    If
          the results of the examination pursuant to Paragraphs 3.9 and 3.10 determine
          that the Royalties were underpaid by an amount greater than or equal to
          5% of
          the actual Royalties calculated over the last four quarters covering Licensee’s
          fiscal year resulting from matters within Licensee’s control, then Licensee
          agrees to pay the cost of the examination plus a penalty equal to 10% of
          the
          amount of the underpayment in Royalties, the amount of the underpayment
          and the
          reimbursement of the costs of examination to be paid within thirty days
          of
          written notice of the underpayment. Further Licensor shall have the right
          to
          examine the calculation of Running Royalties over the succeeding two quarters
          at
          Licensee’s cost.

         

         

        

        

         

         

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

        ARTICLE
          IV

        IMPROVEMENTS

         

        4.1    Licensor
          and Licensee agree that they shall keep each other mutually informed of
          any
          Improvements of which they become aware during the term hereof, whether
          they
          become aware of such Improvements through their own efforts or efforts
          of third
          parties. Licensor and Licensee shall inform one another of the nature and
          substance thereof within thirty (30) days following awareness of such
          Improvements.

         

        4.2    Licensee
          shall have the right, for a period of ninety (90) days following a written
          communication to Licensee by Licensor describing the Improvements that
          have been
          reduced to practice by Licensor, to elect to include such Improvements
          within
          the terms of this License Agreement whereby such Improvements shall become
          Elected Improvements. If Licensee fails or refuses to so elect, Licensee
          hereby
          releases any rights to such Improvements to Licensor and Licensor shall
          be free
          to commercialize such Improvements without accounting to Licensee. Should
          Licensor elect such Improvements and subsequently and commercialize such
          Improvements, Licensee agrees to pay Royalties on such Improvements in
          accordance with Paragraph 3.1. 

         

        4.3    Licensor
          and Licensee agree to execute any documents or papers deemed necessary
          to
          effectuate the intent of this Article IV and further to execute such documents
          or papers as may be necessary for the prosecution of any patents or applications
          for patents covering the Elected Improvements. All expenses with respect
          to such
          assignments or patent applications shall be borne by the party making such
          request and prosecuting such applications.

         

        ARTICLE
          V

        PATENT
          APPLICATIONS AND PATENTS

         

        5.1    The
          parties hereto agree that Licensor’s consultant, Malcolm Glen Kertz, shall hold
          the entire right, title, and interest in and to the Patent Rights and Know-How,
          and Licensee agrees to perform all acts and to execute, acknowledge and
          deliver
          all instruments or writings reasonably requested and necessary for Malcolm
          Glen
          Kertz to perfect title to the Patent Rights and Know-How. Malcolm Glen
          Kertz
          shall grant an exclusive license of the Patent Rights and Know-How to Licensor
          who shall grant rights and licenses in the Patent Rights and Know-How to
          Licensee.

         

        5.2    The
          parties hereto agree that they will procure Patent Rights on the Licensed
          Products. Licensor shall have the sole right to prosecute, control, and
          pursue
          such Patent Rights under the patent laws of the United States and foreign
          countries. Licensor agrees to prosecute, with good faith and due diligence,
          all
          pending and future patent applications. All fees, costs and expenses shall
          be
          borne by Licensee. Licensee agrees to cooperate with Licensor to whatever
          extent
          is necessary to procure such patent protection. 

         

        5.3    In
          the event Licensee decides to abandon any pending United States or foreign
          patent application or to not pay any annuity or maintenance fee required
          by any
          country, Licensee shall give Licensor thirty (30) days prior written notice
          of
          such decision and shall allow Licensee to become the owner of such United
          States
          or foreign patent or application and to pay such fee. Licensee’s decision shall
          have no effect on the Royalties.

         

         

         

        

         

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

        5.4    Licensor
          agrees to keep Licensee fully informed, at Licensee’s expense, of the
          prosecution of all U.S. and foreign patent applications including submitting
          to
          the Licensee copies of all official actions and responses thereto.

         

        5.5    Licensee
          shall have the right to conduct an audit of the Patent Rights to ensure
          that the
          Patent Rights are in good standing and that Licensor has maintained them
          in good
          standing during the term of this License Agreement. In the event that Licensee
          determines that the Patent Rights are not in good standing, then Licensee
          shall
          have the right to place such Patent Rights in good standing and if necessary,
          to
          seek relief through binding mediation and arbitration pursuant to Article
          XII if
          the failure to maintain the Patent Rights in good standing may cause or
          has
          caused the Licensee damages.

         

        5.6    Licensee
          agrees to comply with any marking requirements of Licensor to insure compliance
          with 35 U.S.C. § 287, and agrees to insure compliance by its sublicensees, if
          any.

         

        ARTICLE
          VI

        CONFIDENTIALITY

         

        6.1    Subject
          to the rights of the parties pursuant to the licenses granted in Article
          II, the
          parties agree to receive and hold in confidence the Know-How, Patent Rights,
          and
          Improvements revealed pursuant to this License Agreement. The provisions
          of this
          paragraph shall not be applicable with respect to any portion of the Know-How,
          Patent Rights and Improvements which:

         

        (a)    is,
          or shall have been in the possession of disclosee prior to the first disclosure
          by discloser thereof to disclosee;

         

        (b)    is,
          or through no fault of the disclosee, becomes published or otherwise available
          to others or the public under circumstances such that such others or the
          public
          may utilize the Know-How, Patent Rights and Improvements without any direct
          or
          indirect obligation to Licensor or Licensee;

         

        (c)    is,
          or at any time may be, acquired by the disclosee from any third party rightfully
          possessed of the Know-How, Patent Rights and Improvements and having no
          direct
          or indirect obligation to the discloser with respect to such Know-How,
          Patent
          Rights and Improvements; or

         

        (d)    is
          necessarily disclosed through the sale of the Licensed Product pursuant
          to this
          License Agreement.

         

        6.2    Licensee
          agrees to protect and safeguard the Know-How, Patent Rights, and Improvements
          (“Confidential Information”) against unauthorized publication or disclosure by
          the same procedures utilized by Licensee in regard to its own Confidential
          Information, and agrees not to use any of the Confidential Information
          except
          for such purposes and licenses as are authorized and granted by this License
          Agreement. Licensee further agrees that the Confidential Information will
          be
          disclosed only to such of Licensee’s employees, sublicensees, agents, or
          contractors as have need for such Confidential Information in furtherance
          of the
          purposes for which Licensee is authorized to use it. Licensee will cooperate
          with Licensor in the enforcement of any secrecy agreement executed by such
          persons and will insure that all sublicensees, employees, and others to
          whom
          Licensee discloses Confidential Information executes such a secrecy
          agreement.

         

         

         

        

        

         

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

        ARTICLE
          VII

        INFRINGEMENT
          BY OTHERS; PROTECTION OF PATENTS

         

        7.1    Licensor
          and Licensee shall each promptly inform the other of any suspected infringement
          of any Patent Rights by a third party, and Licensor and Licensee each shall
          have
          the right to institute an action for infringement of the Patent Rights
          against
          such third party in accordance with the following procedure:

         

        (a)    Licensee
          shall have the right to institute suit in its name. Licensee shall bear
          the
          entire cost thereof, including attorneys’ fees, and shall be entitled to retain
          the entire amount of the recoveries, if any, whether by judgment, award,
          decree
          or settlement, subject to Licensor’s right of approval of any provisions
          relating to the validity and/or infringement of the Patent Rights and provided,
          however, that Licensor shall be paid any back Royalties relating to such
          action.
          Licensee shall exercise control over such actions; provided, however, that
          Licensor may, if it so desires, be represented by counsel of its own selection,
          the fees for which counsel shall be borne by Licensee.

         

        (b)    If
          Licensee determines not to institute a suit and in the event that Licensor
          and
          Licensee agree to institute suit jointly, the suit shall be brought in
          both
          their names, the cost thereof, including attorneys’ fees, shall be borne by
          mutual agreement and in the event the parties cannot reach mutual agreement,
          then the cost thereof shall be borne equally. The recoveries, if any, whether
          by
          judgment, award, decree or settlement, shall be shared in proportion to
          the
          costs borne by each party. Licensor’s share of the costs of such suit shall be
          deducted, at Licensor’s option, from Royalties payable to Licensor pursuant to
          Article III. Licensor shall exercise control over such actions; provided,
          however, that Licensee may, if it so desires, be represented by counsel
          of its
          own selection, the fees for which counsel shall be borne by Licensee.

         

        (c)    In
          the absence of agreement to institute a suit jointly and if Licensee determines
          not to institute a suit, Licensor may institute suit. Licensor shall bear
          the
          cost of such litigation including attorneys’ fees and shall be entitled to all
          recoveries, if any, whether by way of judgment, award, decree or
          settlement.

         

        7.2    Should
          either party commence a suit under the provisions of Paragraph 7.1 and
          thereafter elect to abandon the same, it shall give timely notice to the
          other
          party who may, if it so desires, continue prosecution of such suit; provided,
          however, that the sharing of expenses and recovery in such suit shall be
          agreed
          upon between the parties.

         

        ARTICLE
          VIII

        TERM
          AND TERMINATION

         

        8.1    This
          License Agreement shall terminate upon the termination of Licensee’s payment of
          Royalties pursuant to this License Agreement, unless sooner terminated
          as
          provided in this License Agreement. 

         

        8.2    Notwithstanding
          anything to the contrary contained in this License Agreement, Licensee
          shall
          have the absolute right to terminate this License Agreement by notifying
          Licensor in writing, discontinuing sales and paying any Royalties due.
          

         

         

         

        

         

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

        8.3    In
          the event Licensee shall commit a substantial breach of any of the provisions
          of
          this License Agreement, Licensor shall provide written notice of the substantial
          breach to Licensee. If such breach is capable of being remedied or made
          good,
          Licensee shall have thirty (30) days to remedy or make good such breach
          or to
          submit the matter to binding mediation and arbitration pursuant to Article
          XII.
          If such breach is remedied within such time period, this License Agreement
          shall
          continue in full force and effect. If such breach is not remedied or submitted
          to mediation and arbitration within such time period, Licensor may terminate
          this License Agreement upon ten (10) days written notice.

         

        8.4    This
          License Agreement shall automatically terminate if Licensee shall become
          bankrupt, or if a receiver shall be appointed for any of the property or
          assets
          of Licensee, or if Licensee shall make a general assignment or compromise
          of its
          obligations with its creditors, if Licensee files for bankruptcy protection,
          or
          if the Licensee becomes insolvent, or if the whole or any part of the business
          or shareholdings of Licensee shall be subjected to compulsory acquisition,
          nationalization, or forced sale. 

         

        8.5    Licensor
          shall have the right to terminate this License Agreement upon the failure
          of
          Licensee to pay the Adjustment Royalty pursuant to Paragraphs 3.3 and 3.5.
          If
          the matter is submitted to binding mediation and arbitration pursuant to
          Article
          XII, then this License Agreement shall not be terminated while the arbitration
          is pending and the arbitrator’s decision has not yet been rendered.

         

        8.6    Licensor
          shall not have the right to cancel this License Agreement for any reason
          other
          than as provided for under this License Agreement. 

         

        8.7    Upon
          termination of this License Agreement pursuant to the foregoing provisions
          of
          this Article VIII, the license granted hereunder shall terminate, and Licensee
          shall have no duty to pay the Royalties pursuant to Article III. Any Royalties
          accrued but not paid as of the date of such termination shall be paid to
          Licensor within thirty (30) days after such termination.

         

        8.8    Irrespective
          of the existence of an issued and unexpired Patent Rights and upon termination
          of this License Agreement, Licensee may complete and sell any Licensed
          Products
          and Ancillary Products in the process of production or sale by Licensee
          at the
          time of termination or for which raw materials for the production have
          been
          purchased, and may sell any inventory of Licensed Products or Ancillary
          Products
          produced or sold by Licensee on hand at the time of termination; provided
          that
          Licensee shall continue to account for and pay Running Royalties thereon
          as
          if the
          License Agreement had not been terminated. Notwithstanding the above, Licensee
          shall have no right and license to sell Licensed Products or Ancillary
          Products
          six months after the effective date of the termination of this License
          Agreement.

         

        8.9    Upon
          termination of this License Agreement for any reason, Licensee shall assign
          to
          Licensor all sublicenses granted pursuant to Paragraph 2.2 such that all
          Royalties or other consideration to be paid by sublicensees thereafter
          will be
          paid to Licensor.

         

        8.10    The
          duties and obligations of the parties pursuant to Paragraphs 3.1, 6.1,
          and 6.2
          shall survive any termination of this License Agreement. 

         

         

         

        ARTICLE
          IX

        ASSIGNMENT
          AND SALE

         

        9.1    Licensor
          agrees not to transfer or assign its interest in this License Agreement,
          except
          to Perry A. Martin and/or Malcolm Glen Kertz , without the prior written
          consent
          of the Licensee. If Licensor transfers this License Agreement to Perry
          A. Martin
          and/or Malcolm Glen Kertz, Perry A. Martin and/or Malcolm Glen Kertz shall
          be
          equally bound to Licensor’s obligations to the Licensee as defined in this
          License Agreement.

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

         

        9.2    In
          the event Licensor desires to assign all or any part of its rights, privileges
          and interests under this License Agreement, Licensor shall first offer
          (“Right
          of First Offer”) such assignment to Licensee by notifying Licensee in writing of
          the terms and conditions upon which Licensor would be willing to make such
          an
          assignment; and Licensee shall have the right to acquire said rights, privileges
          and interests of Licensor by accepting the offer in accordance with said
          terms
          and conditions or equivalent cash. If within fifteen (15) days after receipt
          of
          Licensor’s notice, Licensee advises Licensor of its acceptance of the offer as
          stated in the notice, Licensor agrees to promptly make the assignment to
          Licensee on the stated terms and conditions and shall have an additional
          thirty
          (30) business days, if the assignment price is less than $1 Million Dollars
          and
          sixty (60) days if the assignment price is over $1 Million Dollars, to
          pay for
          the same with delivery against payment. 

         

        9.3    If
          within fifteen (15) days after receipt of Licensor’s notice, Licensee does not
          indicate its acceptance of the offer as stated in the notice, Licensor
          shall
          thereafter have the right, subject to the prior written consent of Licensee,
          to
          make the assignment to another person, firm or corporation on the same
          terms and
          conditions as stated in the notice. Should the Licensee not exercise its
          Right
          of First Offer and should the contemplated assignment not be completed
          within
          ninety (90) days from the date of Licensor’s notice, or should the terms and
          conditions thereof be altered in any way, this Right of First Offer shall
          be
          reinstated in any subsequent proposed assignment, or the altered terms
          and
          conditions for the current transaction, must again be offered by Licensor
          in
          accordance with the terms of Paragraph 9.2. 

         

        9.4    Immediately
          prior to Licensor going into bankruptcy, Licensee shall have a Right of
          First
          Offer on any of Licensor’s assets at fair market value.

         

        9.5    It
          is hereby agreed that prior to sale to a third party contemplated pursuant
          to
          Paragraphs 9.1 and 9.2 above, the purchaser shall agree to be bound by
          the terms
          of this License Agreement and to assume all of Licensor’s obligations to
          Licensee thereunder.

         

        9.6    Licensee
          shall have the right to transfer and/or assign this License Agreement by
          providing written notice to Licensor, provided that Licensee is in good
          standing
          under this License Agreement and the transferee or assignee assumes all
          obligations of Licensee to Licensor under this License Agreement. 

         

        ARTICLE
          X

        REPRESENTATIONS
          AND WARRANTIES

         

        10.1    Licensor
          hereby represents and warrants to Licensee that Licensor is a corporation
          duly
          organized, validly existing and in good standing under the laws of the
          State of
          Nevada. Licensor further represents and warrants that it has not heretofore
          made
          any license, commitment or agreement, or will Licensor make any license,
          commitment or agreement for the term of this License Agreement which is
          inconsistent with this License Agreement and the rights granted herein,
          and that
          it has full and complete power and authority to enter into and carry out
          its
          obligations under this License Agreement and under any agreements and documents
          which may be executed in connection herewith. Licensor represents and warrants
          that to the best of its knowledge, the Patent Rights do not infringe upon
          the
          proprietary rights or patents of any third party. Licensor represents that
          to
          the best of its knowledge, Licensor is not aware of any regulations or
          laws in
          the Territory that might presently apply such that the sales potential
          of any of
          the Licensed Product is limited or reduced through legal violation or potential
          violation. Licensor agrees to indemnify and hold Licensee harmless of any
          liabilities, costs and expenses (including attorneys’ fees and expenses),
          obligations and causes of action arising out of or relating to any breach
          of the
          representations and warranties made by Licensor herein.

         

         

        

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

         

        10.2    Licensor
          does not represent and warrant to Licensee that patents will issue or be
          granted
          on any of the Patent Rights; or that any of the marks associated with the
          Licensed Product are registrable as a trademark; or that any of the Know-How
          is
          copyrightable. Further Licensor does not represent and warrant to Licensee
          that
          any of the Patent Rights have commercial value.

         

        10.3    Licensee
          hereby represents and warrants to Licensor that Licensee is a corporation
          duly
          organized, validly existing and in good standing under the laws of Canada.
          Licensee further represents and warrants that it has not heretofore made
          any
          license, commitment or agreement, or will Licensee make any license, commitment
          or agreement for the term of this License Agreement which is inconsistent
          with
          this License Agreement and the rights granted herein, and that it has full
          and
          complete power and authority to enter into and carry out its obligations
          under
          this License Agreement and under any agreements and documents which may
          be
          executed in connection herewith. Licensee represents and warrants that
          it is
          Licensee’s policy not to misappropriate or violate the proprietary trade secret
          or confidential information of third parties. Licensee agrees to indemnify
          and
          hold Licensor harmless of any liabilities, costs and expenses (including
          attorneys’ fees and expenses), obligations and causes of action arising out of
          or relating to any breach of the representations and warranties made by
          Licensee
          herein.

         

        ARTICLE
          XI

        PRODUCT
          QUALITY AND PRODUCT LIABILITY

         

        11.1    Licensee
          agrees that the Licensed Product and Ancillary Products will be produced
          in
          compliance with all federal, state and local laws. Licensee further agrees
          to
          submit samples of all finished Licensed Product and Ancillary Products,
          including packaging, shipping containers, and advertising, to Licensor
          for
          approval, which approval shall not be unreasonably withheld. In the event
          Licensee concludes that Licensor is withholding its approval unreasonably,
          Licensee may at its cost submit the matter to binding mediation and arbitration
          pursuant to Article XII with the arbitrator determining if Licensor’s approval
          has been unreasonably withheld. The arbitrator’s decision will be final and
          binding upon all parties.

         

        11.2    Licensee
          shall carry Product liability insurance in an amount commensurate with
          the risks
          connected with the production and sale of the Licensed Product and Ancillary
          Products. Such insurance shall name Licensor and the inventors of the Patent
          Rights as co-insureds. As proof of insurance, Licensee shall submit to
          Licensor
          a certificate of insurance naming Licensor and the inventors of the Patent
          Rights as insured parties and shall require the Licensee’s insurer to notify
          Licensor upon the failure to pay premiums due under the policy. This submission
          shall be made prior to any Licensed Product or Ancillary Products being
          distributed or sold.

         

        11.3    Licensee
          agrees to indemnify and hold Licensor harmless against any and all claims,
          liabilities, losses, expenses, fees, including without limitation attorneys’
fees, damages, including without limitation amounts of judgment and/or
          amounts
          paid in settlement or costs (all of the foregoing being collectively called
          “Costs”) incurred by it and arising out of or attributable to the production and
          sale of Licensed Product and Ancillary Products; provided, however, that
          such
          indemnity shall be null and void as to any cause of action, which can be
          shown
          by Licensee that Licensor knew or should have known and failed to timely
          inform
          Licensee of such cause of action. Promptly after receipt of notice of the
          commencement of any action or assertion of any claim against Licensor in
          respect
          of which indemnification be sought, Licensor shall notify Licensee in writing
          of
          the commencement of such action or assertion of such claim. Upon receipt
          of the
          notice of commencement of suit or assertion of such claim, Licensee shall
          notify
          Licensor within fifteen (15) days that Licensee shall appear and defend
          (including the sole authority to compromise and settle such claims; provided,
          however, that such settlement or compromise does not affect in any way
          the
          activities or rights of Licensor) against any such suit or claim at Licensee’s
          expense, with an attorney of its choice. In the event Licensee shall fail
          to
          give notice of and undertake to appear and defend within such fifteen (15)
          day
          period, then it is hereby expressly agreed that the right to appear and
          defend
          by Licensee has been waived, and Licensor shall proceed on its sole authority,
          at Licensee’s expense.

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

         

         

        

        ARTICLE
          XII

        MEDIATION
          AND ARBITRATION

         

        12.1    If
          a dispute arises between the parties regarding this License Agreement,
          the
          parties agree to resolve the dispute in the following manner:

         

        (a)    Negotiation.

         

        (1)    The
          parties shall attempt in good faith to resolve any dispute arising out
          of or
          relating to this License Agreement promptly by negotiation between executives
          of
          the parties who have authority to settle the controversy. Any party may
          give the
          other party written notice of any dispute not resolved in the normal course
          of
          business. Within 15 days after delivery of the notice, the receiving party
          will
          submit to the other a written response. The notice and the response will
          include
          (i) a statement of each party’s position and a summary of arguments supporting
          that position, and (ii) the name and title of the executive who will represent
          that party and of any other person who will accompany the executive. Within
          30
          days after delivery of the disputing party’s notice, the executives of both
          parties will meet at a mutually acceptable time and place, and thereafter
          as
          often as they reasonably deem necessary, to attempt to resolve the dispute.
          All
          reasonable requests for information made by one party to the other will
          be
          honored.

         

        (2)    All
          negotiations pursuant to this clause are confidential and will be treated
          as
          compromise and settlement negotiations for purposes of applicable rules
          of
          evidence.

         

        (b)    Non-binding
          Mediation.
          If the
          dispute has not been resolved by negotiation within 60 days of the disputing
          party’s notice, or if the parties failed to meet within 45 days, the parties
          will endeavor to settle the dispute by mediation under the presently effective
          Center for Public Resources (“CPR”) Model Procedure for Mediation of Business
          Disputes. The neutral third party will be selected from the CPR Panels
          of
          Distinguished Neutrals with the assistance of CPR.

         

        (c)    Arbitration.
          Any
          controversy or claim arising out of or relating to this License Agreement,
          or
          the enforcement, breach, termination or validity thereof, that has not
          been
          resolved by mediation pursuant to the preceding paragraph within 90 days
          from
          the appointment of a neutral third party will be settled by arbitration
          in
          accordance with the CPR Rules for Non-Administered Arbitration of Business
          Disputes in effect on the date of this License Agreement, by a sole arbitrator.
          If the parties cannot agree upon an arbitrator for a panel recommended
          by CPR,
          then CPR will select the arbitrator. Any other choice of law clause to
          the
          contrary in this License Agreement notwithstanding, the arbitration will
          be
          governed by the United States Arbitration Act, 9 U.S.C. § 1-16, and judgment
          upon the award rendered by the Arbitrator may be entered by any court having
          jurisdiction thereof. The place of the arbitration will be Houston, Texas.
          Insofar as the proceeding relates to patents, it will also be governed
          by 35
          U.S.C. § 294, to the extent applicable. The arbitrator is not empowered to award
          trebled, punitive or any other damages in excess of compensatory damages,
          and
          each party irrevocably waives any claim to recover any such damages. The
          arbitrator will make a reasoned award. If the result achieved in arbitration
          by
          the party instituting the arbitration is not more favorable to that party
          than
          the last offer made by the other party during the mediation, the former
          party
          will reimburse the legal fees, expert fees and other expenses reasonably
          incurred by the latter in the arbitration.

         

        ARTICLE
          XIII

        GENERAL

         

        13.1    Binding
          Agreement.
          This
          License Agreement shall be binding upon the successors and assigns of the
          parties hereto. Nothing contained in this License Agreement shall be construed
          to place the parties in the relationship of legal representatives, partners,
          or
          joint venturers.

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

         

        13.2    Applicable
          Law.
          This
          License Agreement shall be construed, interpreted and applied in accordance
          with
          the laws of the State of Texas.

         

        13.3    Notices.
          All
          notices, demands or other writings in this License Agreement provided to
          be
          given or made or sent, or which may be given or made or sent, by either
          party
          hereto to the other, shall be deemed to have been fully given or made or
          sent
          when made in writing and deposited in the United States mail, first class,
          postage prepaid, sent certified or registered mail, and addressed to the
          addresses first hereinabove given or at such other address as either party
          hereto may specify by notice given in accordance with this
          paragraph.

         

        13.4    Waiver.
          Each
          party covenants and agrees that if the other party fails or neglects for
          any
          reason to take advantage of any of the terms hereof providing for the
          termination of this License Agreement, or if, having the right to declare
          this
          License Agreement terminated, such other party shall fail to do, any such
          failure or neglect shall not be or be deemed or be construed to be a waiver
          of
          any subsequently occurring cause for the termination of this License Agreement,
          or as a waiver of any of the terms, covenants or conditions of this License
          Agreement or the performance thereof. None of the terms, covenants or conditions
          of this License Agreement can be waived except by the written consent of
          the
          waiving party. Except as otherwise stated herein, each of the parties hereby
          waives any claims which it might have against the other prior to the date
          of
          execution of this License Agreement.

          

        13.5    Force
          Majeure.
          Neither
          party hereto shall be liable to the other party for failure or delay in
          the
          performance of any duties or obligations hereunder or in making shipments
          of
          Licensed Product produced hereunder due to strikes, lockouts, acts of God,
          acts
          of war, fire, flood, explosions, embargo, litigation or labor disputes,
          Government or any other laws and regulations, or any other cause beyond
          the
          control or without the fault of such party.

         

        13.6    Scope
          of Agreement.
          This
          License Agreement constitutes the entire agreement between the parties
          pertaining to the subject matter hereof.

         

        13.7    Construction.
          The
          parties acknowledge that each party and its counsel have reviewed and revised
          this License Agreement and that the normal rule of construction to the
          effect
          that any ambiguities are to be resolved against the drafting party shall
          not be
          employed in the interpretation of this License Agreement or any amendments
          or
          exhibits hereto.

         

        13.8    Headings.
          The
          subject headings of the paragraphs of this License Agreement are included
          for
          purposes of convenience only, and shall not effect the construction or
          interpretation of any of its provisions.

         

        13.9    Counterparts.
          This
          License Agreement may be executed in one or more counterparts, and also
          executed
          shall constitute one agreement, binding on both parties hereto, notwithstanding
          that both parties are not signatory to the same counterpart.

         

        13.10    Severability.
          If any
          part or parts of this License Agreement are found to be illegal or
          unenforceable, the remainder shall be considered severable, shall remain
          in full
          force and effect, and shall be enforceable.

         

        13.11    Further
          Documents.
          Each of
          the parties shall take all necessary actions, including the execution and
          delivery of all necessary documents or instruments, as may be reasonably
          requested by the other party in order to effectuate the intent of this
          License
          Agreement.

          

         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

         

        

        IN
          WITNESS WHEREOF, the parties hereto have executed this License Agreement
          in
          duplicate originals, individually, or by their duly authorized officers
          or
          representatives, as of the date of the last party to execute this License
          Agreement.

         

        
          	
                   

                	
                   

                	
                   

                
	
                   

                	
                  MK
                    ENTERPRISES LLC

                
	
                   

                   

                	
                   

                   

                	
                   

                   

                
	
                  WITNESS:_______________________________________

                	
                  By:  

                	
                  /s/ 

                
	
                   

                	
                   

                
	
                   

                	
                  Perry
                    A. Martin, President

                   

                  Date:_______________

                

        

        

         

        
          	
                   

                	
                   

                	
                   

                
	
                   

                	
                  VALCENT
                    PRODUCTS, INC.

                
	
                   

                   

                	
                   

                   

                	
                   

                   

                
	
                  WITNESS:_______________________________________

                	
                  By:  

                	
                  /s/ 

                
	
                   

                	
                   

                
	
                   

                	
                  Name:

                  Title:

                  Date:_______________

                

        

         

         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

         

        EXHIBIT
          “A”

         

        LICENSED
          ITEM

         

        High
          Density Vertical Bio-Reactor

        

        The
          technology involves the use of a series of thin membrane bio-reactors that
          are
          configured in a manner to facilitate the rapid growth of various forms
          of
          micro-algae. Each reactor is designed to allow the proper flow through
          of a
          nutrient rich food source and CO2 enhanced gas. The gas is mixed in the
          reactor
          by the design elements that are employed. Further, the design of the reactor
          allows the reactors to be closely stacked in a manner that allows sufficient
          sunlight to penetrate to all levels of the reactors. 

        

        The
          overall design of the system allows for the rapid production of various
          forms of
          algae. This algae is then harvested and dried. Once dried, the algae is
          processed to remove volatile oils. Depending on the species and strain
          of algae
          used, a yield of as much as 50% of the dry weight of the algae is recoverable
          oil. This oil is suitable for the production of bio-diesel.

        Overall,
          the objective of this technology is to deliver a commercial production
          unit that
          would be considered a renewable source for bio-diesel in a form that is
          economically viable.

         

        PATENT
          RIGHTS

         

        Licensed
          Product _____________, US App No _________, filed _______.

         

        26Promissary Note

    
      

    

    Exhibit
      10.18

    
      

    

     

    *000000000088498100095509292006*
      

     

    PROMISSORY
      NOTE 

    
      	
              Principal

            	
              Loan
                Date

            	
              Maturity

            	
              Loan
                Date

            	
              Call/Coll

            	
              Account

            	
              Officer

            	
              Initials

            
	
               

              $190,000.00

            	
               

              09-29-2006

            	
               

              09-29-2011

            	
               

              88498100

            	
               

              1763/10

            	 	
               

              130

            	 

    

     

    References
      in the shaded area are for lender's use only and do not limit the applicability
      of this document to any particular loan or item.

    Any
      item
      above containing" ***"
      has
      been
      omitted due to text length limitations. 

    
      
        

      

      
        

      

    

     

    

    
      	 Borrower: 	VALCENT
              MANUFACTURING. LTD. (TIN: 43-2091607) 
              1057
                DONIPHAN PARK CIRCLE, SUITE H 

              El
                PASO, TX 79922 

            	 Lender: 	STATE
              NATIONAL BANK El PASO-DOWNTOWN 
              P
                O
                BOX 5050 

              601
                NORTH MESA 

              El
                PASO, TX 79999 (915) 485-9200 

            

    

     

     

    
      	 Principal Amount: $190.000.00
	 Initial Rate: 8.500%	 Date of Note: September 29. 2006
              

    

       

     

    PROMISE
      TO PAY. VALCENT MANUFACTURING. LTD. ("Borrower") promises to pay to STATE
      NATIONAL BANK ("Lender"), or order, in lawful money of the United States of
      America. The principal amount of One Hundred Ninety Thousand & 00/100
      Dollars ($190.000.00), together with interest on the unpaid principal balance
      from September 29. 2006. until maturity. 

     

    PAYMENT.
      Subject to any payment changes resulting from changes in the Index. Borrower
      will pay this loan in 59 regular payments of $2.336.00 each and one irregular
      last payment estimated at $119.826.98. Borrower's first payment is due October
      29. 2006, and all subsequent payments arc due on the same day of each month
      after that. Borrower's final payment will be due on September 29. 2011, and
      will
      be for all principal and all accrued interest not yet paid. Payments include
      principal and interest. Unless otherwise agreed or required by applicable law,
      payments will be applied first to any accrued unpaid interest; then to
      principal; then to any late charges; and then to any unpaid collection costs.
      The annual interest rate for this Note is computed on a 365/360 basis; that
      is,
      by applying the ratio of the annual interest rate over a year of 360 days,
      multiplied by the outstanding principal balance, multiplied by the actual number
      of days the principal balance is outstanding, unless such calculation would
      result in a usurious rate, in which case interest shall be calculated on a
      per
      diem basis of a year of 365 or 366 days, as the case may be. Borrower will
      pay
      Lender at Lender's address shown above or at such other place as lender may
      designate in writing. 

     

    VARIABLE
      INTEREST RATE.
      The
      interest rate on this Note is subject to change from time to time based on
      changes in an independent index which is the Prime Rate as published in the
      Wall
      Street Journal. When a range of rates has been published, the higher of the
      rates will be used. (the "Index"). The Index is not necessarily the lowest
      rate
      charged by lender on its loans. If the Index becomes unavailable during the
      term
      of this loan, lender may designate a substitute index after notifying Borrower,
      lender will tell Borrower the current Index rate upon Borrower's request. The
      interest rate change will not occur more often than each year. Borrower
      understands that lender may make loans based on other rates as well.
The
      Index currently is 8.250% per annum.
      The
      interest rate to be applied prior to maturity to the unpaid principal balance
      during this Note will be at a rate of 0.250 percentage points over the Index,
      resulting in an initial rate of 8.500% per annum. NOTICE: Under no circumstances
      will the interest rate on this Note be more than the maximum rate allowed by
      applicable law. For purposes of this Note, the "maximum rate allowed by
      applicable law" means the greater of (A) the maximum rate of interest permitted
      under federal or other law applicable to the indebtedness evidenced by this
      Note, or (B) the "Weekly Ceiling" as referred to in Sections 303.002 and 303.003
      of the Texas Finance Code, Whenever increases occur in the interest rate,
      lender, at its option, may do one or more of the following: (A) increase
      Borrower's payments to ensure Borrower's loan will payoff by its original final
      maturity date, (B) increase Borrower's payments to cover accruing interest,
      (C)
      increase the number of Borrower's payments, and (D) continue Borrower's payments
      at the same amount and increase Borrower's final payment. 

     

    PREPAYMENT.
      Borrower
      may pay without penalty all or a portion of the amount owed earlier than it
      is
      due. Prepayment in full shall consist of payment of the remaining unpaid
      principal balance together with all accrued and unpaid interest and all other
      amounts, costs and expenses for which Borrower is responsible under this Note
      or
      any other agreement with lender pertaining to this loan, and in no event will
      Borrower ever be required to pay any unearned interest. Early payments will
      not,
      unless agreed to by lender in writing, relieve Borrower of Borrower's obligation
      to continue to make payments under the payment schedule. Rather, early payments
      will reduce the principal balance due and may result in Borrower's making fewer
      payments. Borrower agrees not to send lender payments marked "paid in full",
      "without recourse", or similar language. If Borrower sends such a payment,
      lender may accept it without losing any of Lender's rights under this Note,
      and
      Borrower will remain obligated to pay any further amount owed to Lender. All
      written communications concerning disputed amounts, including any check or
      other
      payment instrument that indicates that the payment constitutes "payment in
      full"
      of the amount owed or that is tendered with other conditions or limitations
      or
      as full satisfaction of a disputed amount must be mailed or delivered to: STATE
      NATIONAL BANK, DOWNTOWN BRANCH, P O BOX 5050 EL PASO, TX 79999. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    LATE
      CHARGE.
      If a
      payment is 10 days or more late, Borrower will be charged 5.000% of the
      regularly scheduled payment. 

     

    POST
      MATURITY RATE.
      The Post
      Maturity Rate on this Note is the lesser of (A) the maximum rate allowed by
      law
      or (B) 18.000% per annum. Borrower will pay interest on all sums due after
      final
      maturity, whether by acceleration or otherwise, at that rate. 

     

    DEFAULT.
      Each of
      the following shall constitute an event of default ("Event of Default") under
      this Note: 

     

    Payment
      Default. Borrower
      fails to make any payment when due under this Note. 

     

    Other
      Defaults.
      Borrower
      fails to comply with or to perform any other term, obligation, covenant or
      condition contained in this Note or in any of the related documents or to comply
      with or to perform any term, obligation, covenant or condition contained in
      any
      other agreement between Lender and Borrower. 

     

    Default
      in Favor of Third Parties.
      Borrower
      or any Grantor defaults under any loan, extension of credit, security agreement,
      purchase or sales agreement, or any other agreement, in favor of any other
      creditor or person that may materially affect any of Borrower's property or
      Borrower's ability to repay this Note or perform Borrower's obligations under
      this Note or any of the related documents. 

     

    False
      Statements.
      Any
      warranty, representation or statement made or furnished to lender by Borrower
      or
      on Borrower's behalf under this Note or the related documents is false or
      misleading in any material respect, either now or at the time made or furnished
      or becomes false or misleading at any time thereafter. 

     

    Death
      or Insolvency.
      The
      dissolution or termination of Borrower's existence as a going business or the
      death of any partner, the insolvency of Borrower, the appointment of a receiver
      for any part of Borrower's property, any assignment for the benefit of
      creditors, any type of creditor workout, or the commencement of any proceeding
      under any bankruptcy ·or insolvency laws by or against Borrower . 

    .
      ',
  

    Creditor
      or Forfeiture Proceedings.
      Commencement of foreclosure or forfeiture proceedings, whether by judicial
      proceeding, self-help, repossession or any other method, by any creditor of
      Borrower or by any governmental agency against any collateral securing the
      loan.
      This includes a garnishment of any of Borrower's accounts, including deposit
      accounts, with lender. However this Event of Default (shall not apply if there
      is a good faith dispute by Borrower as to the validity or reasonableness of
      the
      claim which is the basis of the creditor or forfeiture proceeding and if
      Borrower gives lender written notice of the creditor or forfeiture proceeding
      and deposits with Lender monies or a surety bond for the creditor or forfeiture
      proceeding, in an amount determined by Lender, in its sole discretion, as being
      an adequate reserve or bond for the dispute. 

     

    Events
      Affecting Guarantor.
      Any of
      the preceding events occurs with respect to any guarantor, endorser, surety,
      or
      accommodation party of any of the indebtedness or any guarantor, endorser,
      surety, or accommodation party dies or becomes incompetent, or revokes or
      disputes the validity of, or liability under, any guaranty of the indebtedness
      evidenced by this Note. In the event of a death, lender, at its option, may,
      but
      shall not be required to, permit the guarantor's estate to assume
      unconditionally the obligations arising under the guaranty in a manner
      satisfactory to lender, and, in doing so, cure any Event of Default.

     

    Events
      Affecting General Partner of Borrower.
      Any of
      the preceding events occurs with respect to any general partner of Borrower
      or
      any general partner dies or becomes incompetent. 

     

    Change
      In Ownership.
      The
      resignation or expulsion of any general partner with an ownership interest
      of
      twenty-five percent (25%) or more in
      Borrower. 

     

    Adverse
      Change.
      A
      material adverse change occurs in Borrower's financial condition, or Lender
      believes the prospect of payment or performance of this Note is impaired.

     

    Insecurity.
      Lender
      in good faith believes itself insecure. 

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    PROMISSORY
      NOTE

    
      	
               Loan
                No: 88498100 

            	
                (Continued)
                

            	
               Page
                2

            

    

     

    Cure
      Provisions.
      If any
      default, other than a default in payment is curable, it may be cured if
      Borrower, after receiving written notice from Lender demanding cure of such
      default: (1) cures the default within twenty (20) days; or (2) if the cure
      requires more than twenty (20) days, immediately initiates steps which lender
      deems in lender's sole discretion to be sufficient to cure the default and
      thereafter continues and completes all reasonable and necessary steps sufficient
      to produce compliance as soon as reasonably practical. 

     

    LENDER'S
      RIGHTS.
      Upon
      default, Lender may declare the entire indebtedness, including the unpaid
      principal balance under this Note, all accrued unpaid interest, and all other
      amounts, costs and expenses for which Borrower is responsible under this Note
      or
      any other agreement with Lender pertaining to this loan, immediately due,
      without notice, and then Borrower will pay that amount. 

     

    ATTORNEYS'
      FEES; EXPENSES.
      Lender
      may hire an attorney to help collect this Note if Borrower does not pay, and
      Borrower will pay Lender's reasonable attorneys' fees. Borrower also will pay
      lender all other amounts lender actually incurs as court costs, lawful fees
      for
      filing, recording, releasing to any public office any instrument securing this
      Note; the reasonable cost actually expended for repossessing, storing, preparing
      for sale, and selling any security; and fees for noting a lien on or
      transferring a certificate of title to any motor vehicle offered as security
      for
      this Note, or premiums or identifiable charges received in connection with
      the
      sale of authorized insurance. 

     

    GOVERNING
      LAW. This Note will be governed by federal law applicable to Lender
      and, to the extent not preempted by federal law, the laws of the State of Texas
      without regard to its conflicts of law provisions. This Note has been accepted
      by Lender in the State of Texas. 

     

    DISHONORED
      CHECK CHARGE.
      Borrower
      will pay a processing fee of $29.00 if any check given by Borrower to Lender
      as
      a payment on this loan is dishonored. 

     

    RIGHT
      OF SETOFF.
      To the
      extent permitted by applicable law, Lender reserves a right of setoff in all
      Borrower's accounts with Lender (whether checking, savings, or some other
      account). This includes all accounts Borrower holds jointly with someone else
      and all accounts Borrower may open in the future. However, this does not include
      any IRA or Keogh accounts, or any trust accounts for which setoff would be
      prohibited by law. Borrower authorizes Lender, to the extent permitted by
      applicable law, to charge or setoff all sums owing on the indebtedness against
      any and all such accounts. 

     

    COLLATERAL.
      Borrower
      acknowledges this Note is secured by A DEED OF TRUST FROM BORROWER TO LENDER
      OF
      EVEN DATE AND AN ASSIGNMENT OF DEPOSIT ACCOUNT FROM BORROWER TO LENDER OF EVEN
      DATE. 

     

    ARBITRATION. Borrower
      and Lender agree that all disputes, claims and controversies between them
      whether individual, joint, or class in nature, arising from this Note or
      otherwise, including without limitation contract and tort disputes, shall be
      arbitrated pursuant to the Rules of the American Arbitration Association in
      effect at the time the claim is filed, upon request of either party. No act
      to
      take or dispose of any collateral securing this Note shall constitute a waiver
      of this arbitration agreement or be prohibited by this arbitration agreement.
      This includes, without limitation, obtaining injunctive relief or a temporary
      restraining order; invoking a power of sale under any deed of trust or mortgage;
      obtaining a writ of attachment or imposition of a receiver; or exercising any
      rights relating to personal property, including taking or disposing of such
      property with or without judicial process pursuant to Article 9 of the Uniform
      Commercial Code. Any disputes, claims, or controversies concerning the
      lawfulness or reasonableness of any act, or exercise of any right, concerning
      any collateral securing this Note, including any claim to rescind, reform,
      or
      otherwise modify any agreement relating to the collateral securing this Note,
      shall also be arbitrated, provided however that no arbitrator shall have the
      right or the power to enjoin or restrain any act of any party. Judgment upon
      any
      award rendered by any arbitrator may be entered in any court having
      jurisdiction. Nothing in this Note shall preclude any party from seeking
      equitable relief from a court of competent jurisdiction. The statute of
      limitations, estoppel, waiver, laches, and similar doctrines which would
      otherwise be applicable in an action brought by a party shall be applicable
      in
      any arbitration proceeding, and the commencement of an arbitration proceeding
      shall be deemed the commencement of an action for these purposes. The Federal
      Arbitration Act shall apply to the construction, interpretation, and enforcement
      of this arbitration provision. 

     

    SUCCESSOR
      INTERESTS.
      The
      terms of this Note shall be binding upon Borrower, and upon Borrower's heirs,
      personal representatives, successors and assigns, and shall inure to the benefit
      of Lender and its successors and assigns. 

     

    NOTIFY
      US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING
      AGENCIES.
      Please
      notify us if we report any inaccurate information about your account(s) to
      a
      consumer reporting agency. Your written notice describing the specific
      innacuracy(ies) should be sent to us at the following address: STATE NATIONAL
      BANK OPERATIONS P.O. BOX 5240 LUBBOCK, TX 79408. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    GENERAL
      PROVISIONS.
      If any
      part of this Note cannot be enforced, this fact will not affect the rest of
      the
      Note. Borrower does not agree or intend to pay, and Lender does not agree or
      intend to contract for, charge, collect, take, reserve or receive (collectively
      referred to herein as "charge or collect"), any amount in the nature of interest
      or in the nature of a fee for this loan, which would in any way or event
      (including demand, prepayment, or acceleration) cause Lender to charge or
      collect more for this loan than the maximum Lender would be permitted to charge
      or collect by federal law or the law of the State of Texas (as applicable).
      Any
      such excess interest or unauthorized fee shall, instead of anything stated
      to
      the contrary, be applied first to reduce the principal balance of this loan,
      and
      when the principal has been paid in full, be refunded to Borrower. The right
      to
      accelerate maturity of sums due under this Note does not include the right
      to
      accelerate any interest which has not otherwise accrued on the date of such
      acceleration, and Lender does not intend to charge or collect any unearned
      interest in the event of acceleration. All sums paid or agreed to be paid to
      Lender for the use, forbearance or detention of sums due hereunder shall, to
      the
      extent permitted by applicable law, be amortized, prorated, allocated and spread
      throughout the full term of the loan evidenced by this Note until payment in
      full so that the rate or amount of interest on account of the loan evidenced
      hereby does not exceed the applicable usury ceiling. Lender may delay or forgo
      enforcing any of its rights or remedies under this Note without losing them.
      Borrower and any other person who signs, guarantees or endorses this Note,
      to
      the extent allowed by law, waive presentment, demand for payment, notice of
      dishonor, notice of intent to accelerate the maturity of this Note, and notice
      of acceleration of the maturity of this Note. Upon any change in the terms
      of
      this Note, and unless otherwise expressly stated in writing, no party who signs
      this Note, whether as maker, guarantor, accommodation maker or endorser, shall
      be released from liability. All such parties agree that lender may renew or
      extend (repeatedly and for any length of time) this loan or release any party,
      partner, or guarantor or collateral; or impair, fail to realize upon or perfect
      Lender's security interest in the collateral without the consent of or notice
      to
      anyone. All such parties also agree that Lender may modify this loan without
      the
      consent of or notice to anyone other than the party with whom the modification
      is made. The obligations under this Note are joint and several. 

     

    PRIOR
      TO
      SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
      NOTE,
      INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS
      OF
      THE NOTE. 

    BORROWER
      ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. 

     

    BORROWER:
      

     

    VALCENT
      MANUFACTURING, LTD. 

     

    VALCENT
      MANUFACTURING, L.L.C.,  A General Partner
      of VALCENT MANUFACTURING, LTD. 

     

    
      	 By: Perry
              A Martin	 	 	 
	 Perry
              A Martin	 	 	 
	 Manager
              of VALCENT MANUFACTURING, L.L.C.,  	 	 	 

    

     

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    

    
      	 

              RECORDATION
                REQUESTED BY: 

                  STATE
                NATIONAL BANK 

                  EL
                PASO-DOWNTOWN 

                  PO
                BOX 5050 

                  601
                NORTH MESA 

                  El
                PASO, TX 79999 

            	 	 	 
	 

               

              WHEN
                RECORDED MAIL TO: 

                  STATE
                NATIONAL BANK 

                  OPERATIONS
                

                  P.O.
                BOX 5240 

                  LUBBOCK,TX
                79408 

               

            	 	
              Certified
                that this is a true and

              correct
                copy of the orginal

              Which
                has been transmited for

              recordation/

                  First
                American Title Co,

              /s/
                Schnell

              Schnell

            	 
	 

              SEND
                TAX NOTICES TO: 

              VALCENT
                MANUFACTURING, LTD. 

              1057
                DONIPHAN PARK CIRCLE, SUITE H

              El
                PASO, TX 79922

            	 	 	 

    

     

     

    *000000000088498100034009292006*
      

     

    DEED
      OF
      TRUST 

     

    THIS
      DEED OF TRUST is dated September 29, 2006, among VALCENT MANUFACTURING,
      LTD. ("Grantor"); STATE NATIONAL BANK, whose address is EL PASO-DOWNTOWN, POBOX
      5050, 601 NORTH MESA, EL PASO, TX 79999 (referred to below sometimes as
      "Beneficiary"); and Alan Lackey, whose address is P.O. Box 5240, Lubbock, TX
      79408 (referred to below as "Trustee"). 

     

    CONVEY
      ANCE AND GRANT.
      For
      valuable consideration, Grantor conveys to Trustee in trust, with power of
      sale,
      for the benefit of lender as Beneficiary, the following described real property,
      together with all existing or subsequently erected or affixed buildings,
      improvements and fixtures; and all easements, rights of way, and appurtenances;
      all water and water rights; and all other rights, royalties, and profits
      relating to the real property, including without limitation such rights as
      Grantor may have in all minerals, oil, gas, geothermal and similar matters,
      (the
      "Real Property") located in EL PASO County, State of Texas: 

     

    TRACTS
      10-B AND 10-B-1, BLOCK 20, UPPER VALLEY SURVEYS, IN EL PASO COUNTY, TEXAS,
      ACCORDING TO THE RESURVEY OF SAID UPPER VALLEY SURVEYS BY EL PASO COUNTY, TEXAS
      FOR TAX PURPOSES 

     

    The
      Real
      Property or its address is commonly known as SEE LEGAL, TX. 

     

    Grantor
      hereby absolutely assigns to lender (also known as Beneficiary in this Deed
      of
      Trust) all of Grantor's right, title, and interest in and to all present and
      future leases of the Property and all Rents from the Property. In addition,
      Grantor grants to lender a Uniform Commercial Code security interest in the
      Personal Property and Rents. 

     

    THIS
      DEED
      OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE
      RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS
      AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE RELATED
      DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST IS GIVEN AND ACCEPTED
      ON
      THE FOLLOWING TERMS: 

     

    PAYMENT
      AND PERFORMANCE.
      Except
      as otherwise provided in this Deed of Trust, Grantor shall pay to lender all
      amounts secured by this Deed of Trust as they become due, and shall strictly
      and
      in a timely manner perform all of Grantor's obligations under the Note, this
      Deed of Trust, and the Related Documents. 

     

    VENDOR'S
      LIEN.
      The debt
      evidenced by the Note is in part or total payment of the purchase price of
      the
      Property; the debt is secured by both this Deed of Trust and by a vendor's
      lien
      on the Property, which is expressly retained in the deed of the Property to
      Grantor. This Deed of Trust does not waive the vendor's lien, and the two liens
      and the rights created by this instrument shall be cumulative. Lender may elect
      to foreclose under either of the liens without waiving the other or may
      foreclose under both. The deed wherein the vendor's lien is retained is
      incorporated into this Deed of Trust. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    POSSESSION
      AND MAINTENANCE OF THE PROPERTY.
      Grantor
      agrees that Grantor's possession and use of the Property shall be governed
      by
      the following provisions: 

     

    Possession
      and Use.
      Until
      the occurrence of an Event of Default, Grantor may (1) remain in possession
      and
      control of the Property; (2) use, operate or manage the Property; and (3)
      collect the Rents from the Property. 

     

    Duty
      to Maintain.
      Grantor
      shall maintain the Property in tenantable condition and promptly perform all
      repairs, replacements, and maintenance necessary to preserve its value.

     

    Compliance
      With Environmental laws. Grantor represents and warrants to Lender
      that: (1) During the period of Grantor's ownership of the Property, there has
      been no use, generation, manufacture, storage, treatment, disposal, release
      or
      threatened release of any Hazardous Substance by any person on, under, about
      or
      from the Property; (2) Grantor has no knowledge of, or reason to believe that
      there has been, except as previously disclosed to and acknowledged by lender
      in
      writing, (a) any breach or violation of any Environmental Laws, (b) any use,
      generation, manufacture, storage, treatment, disposal, release or threatened
      release of any Hazardous Substance on, under, about or from the Property by
      any
      prior owners or occupants of the Property, or (c) any actual or threatened
      litigation or claims of any kind by any person relating to such matters; and
      (3)
      Except as previously disclosed to and acknowledged by Lender in writing, (a)
      neither Grantor nor any tenant, contractor, agent or other authorized user
      of
      the Property shall use, generate, manufacture, store, treat, dispose of or
      release any Hazardous Substance on, under, about or from the Property; and
      (b)
      any such activity shall be conducted in compliance with all applicable federal,
      state, and local laws, regulations and ordinances, including without limitation
      all Environmental Laws. Grantor authorizes Lender and its agents to enter upon
      the Property to make such inspections and tests, at Grantor's expense, as Lender
      may deem appropriate to determine compliance of the Property with this section
      of the Deed of Trust. Any inspections or tests made by Lender shall be for
      lender's purposes only and shall not be construed to create any responsibility
      or liability on the part of Lender to Grantor or to any other person. The
      representations and warranties contained herein are based on Grantor's due
      diligence in investigating the Property for Hazardous Substances. Grantor hereby
      (1) releases and waives any future claims against Lender for indemnity or
      contribution in the event Grantor becomes liable for cleanup or other costs
      under any such laws; and (2) agrees to indemnify, defend, and hold harmless
      Lender against any and all claims, losses, liabilities, damages, penalties,
      and
      expenses which Lender may directly or indirectly sustain or suffer resulting
      from a breach of this section of the Deed of Trust or as a consequence of any
      use, generation, manufacture, storage, disposal, release or threatened release
      occurring prior to Grantor's ownership or interest in the Property, whether
      or
      not the same was or should have been known to Grantor. The provisions of this
      section of the Deed of Trust, including the obligation to indemnify and defend,
      shall survive the payment of the Indebtedness and the satisfaction and
      reconveyance of the lien of this Deed of Trust and shall not be affected by
      lender's acquisition of any interest in the Property, whether by foreclosure
      or
      otherwise. 

     

    Nuisance,
      Waste.
      Grantor
      shall not cause, conduct or permit any nuisance nor commit, permit, or suffer
      any stripping of or waste on or to the Property or any portion of the Property.
      Without limiting the generality of the foregoing, Grantor will not remove,
      or
      grant to any other party the right to remove, any timber, minerals (including
      oil and gas), coal, clay, scoria, soil, gravel or rock products without Lender's
      prior written consent. This restriction will not apply to rights and easements
      (such as gas and oil) not owned by Grantor and of which Grantor has informed
      Lender in writing prior to Grantor's signing of this Deed of Trust.

     

    Removal
      of Improvements.
      Grantor
      shall not demolish or remove any Improvements from the Real Property without
      Lender's prior written 

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      

      DEED
        OF TRUST 

      
        	
                 Loan
                  No: 88498100 

              	
                  (Continued)
                  

              	
                 Page
                  2

              

      

    

     

    

    Consent.
      As a condition to the removal of any Improvements, lender may require Grantor
      to
      make arrangements satisfactory to lender to replace such Improvements with
      Improvements of at least equal value. 

     

    Lender's
      Right to Enter.
      Lender
      and lender's agents and representatives may enter upon the Real Property at
      all
      reasonable times to attend to lender's interests and to inspect the Real
      Property for purposes of Grantor's compliance with the terms and conditions
      of
      this Deed of Trust. 

     

    Compliance
      with Governmental Requirements.
      Grantor
      shall promptly comply with all laws, ordinances, and regulations, now or
      hereafter in effect, of all governmental authorities applicable to the use
      or
      occupancy of the Property, including without limitation, the Americans With
      Disabilities Act. Grantor may contest in good faith any such law, ordinance,
      or
      regulation and withhold compliance during any proceeding, including appropriate
      appeals, so long as Grantor has notified lender in writing prior to doing so
      and
      so long as, in lender's sole opinion, lender's interests in the Property are
      not
      jeopardized. lender may require Grantor to post adequate security or a surety
      bond, reasonably satisfactory to lender, to protect lender's interest.

     

    Duty
      to Protect.
      Grantor
      agrees neither to abandon or leave unattended the Property. Grantor shall do
      all
      other acts, in addition to those acts set forth above in this section, which
      from the character and use of the Property are reasonably necessary to protect
      and preserve the Property. 

     

    DUE
      ON SALE - CONSENT BY LENDER.
      Lender
      may, at lender's option, declare immediately due and payable all sums secured
      by
      this Deed of Trust upon the sale or transfer, without lender's prior written
      consent, of all or any part of the Real Property, or any interest in the Real
      Property. A "sale or transfer" means the conveyance of Real Property or any
      right, title or interest in the Real Property; whether legal, beneficial or
      equitable; whether voluntary or involuntary; whether by outright sale, deed,
      installment sale contract, land contract, contract for deed, leasehold interest
      with a term greater than three (3) years, lease-option contract, or by sale,
      assignment, or transfer of any beneficial interest in or to any land trust
      holding title to the Real Property, or by any other method of conveyance of
      an
      interest in the Real Property. If any Grantor is a corporation, partnership
      or
      limited liability company, transfer also includes any change in ownership of
      more than twenty-five percent (25%) of the voting stock, partnership interests
      or limited liability company interests, as the case may be, of such Grantor.
      However, this option shall not be exercised by lender if such exercise is
      prohibited by federal law or by Texas law. 

     

    TAXES
      AND LIENS.
      The
      following provisions relating to the taxes and liens on the Property are part
      of
      this Deed of Trust: 

     

    Payment.
      Grantor
      shall pay when due (and in all events prior to delinquency) all taxes, special
      taxes, assessments, charges (including water and sewer), fines and impositions
      levied against or on account of the Property, and shall pay when due all claims
      for work done on or for services rendered or material furnished to the Property.
      Grantor shall maintain the Property free of all liens having priority over
      or
      equal to the interest of lender under this Deed of Trust, except for the lien
      of
      taxes and assessments not due and except as otherwise provided in this Deed
      of
      Trust. 

     

    Right
      to Contest.
      Grantor
      may withhold payment of any tax, assessment, or claim in connection with a
      good
      faith dispute over the obligation to pay, so long as lender's interest in the
      Property is not jeopardized. If a lien arises or is filed as a result of
      nonpayment, Grantor shall within fifteen (15) days after the lien arises or,
      if
      a lien is filed, within fifteen (15) days after Grantor has notice of the
      filing, secure the discharge of the lien, or if requested by lender, deposit
      with lender cash or a sufficient corporate surety bond or other security
      satisfactory to lender in an amount sufficient to discharge the lien plus any
      costs and lender's reasonable attorneys' fees, or other charges that could
      accrue as a result of a foreclosure or sale under the lien. In any contest,
      Grantor shall defend itself and lender and shall satisfy any adverse judgment
      before enforcement against the Property. Grantor shall name lender as an
      additional obligee under any surety bond furnished in the contest proceedings.
      

     

    Evidence
      of Payment.
      Grantor
      shall upon demand furnish to lender satisfactory evidence of payment of the
      taxes or assessments and shall authorize the appropriate governmental official
      to deliver to lender at any time a written statement of the taxes and
      assessments against the Property. 

     

    Notice
      of Construction.
      Grantor
      shall notify lender at least fifteen (15) days before any work is commenced,
      any
      services are furnished, or any materials are supplied to the Property, if any
      mechanic's lien, materialmen's lien, or other lien could be asserted on account
      of the work, services, or materials. Grantor will upon request of lender furnish
      to lender advance assurances satisfactory to lender that Grantor can and will
      pay the cost of such improvements. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    PROPERTY
      DAMAGE INSURANCE.
      The
      following provisions relating to insuring the Property are a part of this Deed
      of Trust. 

     

    Maintenance
      of Insurance.
      Grantor
      shall procure and maintain policies of fire insurance with standard extended
      coverage endorsements on a fair value basis for the full insurable value
      covering all Improvements on the Real Property in an amount sufficient to avoid
      application of any coinsurance clause, and with a standard mortgagee clause
      in
      favor of lender. Grantor shall also procure and maintain comprehensive general
      liability insurance in such coverage amounts as lender may request with Trustee
      and lender being named as additional insureds in such liability insurance
      policies. Additionally, Grantor shall maintain such other insurance, including
      but not limited to hazard, business interruption, and boiler insurance, as
      lender may reasonably require. Policies shall be written in form, amounts,
      coverages and basis reasonably acceptable to lender, with losses made payable
      to
      lender. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER THROUGH EXISTING
      POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH EQUIVALENT INSURANCE FROM
      ANY
      INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN THE STATE OF TEXAS. If
      Grantor fails to provide any required insurance or fails to continue such
      insurance in force, lender may, but shall not be required to, do so at Grantor's
      expense, and the cost of the insurance will be added to the Indebtedness. If
      any
      such insurance is procured by lender, Grantor will be so notified, and Grantor
      will have the option of furnishing equivalent insurance through any insurer
      authorized to transact business in Texas. Grantor, upon request of lender,
      will
      deliver to lender from time to time the policies or certificates of insurance
      in
      form satisfactory to lender, including stipulations that coverages will not
      be
      cancelled or diminished without at least ten (10) days prior written notice
      to
      lender. Each insurance policy also shall include an endorsement providing that
      coverage in favor of lender will not be impaired in any way by any act, omission
      or default of Grantor or any other person. Should the Real Property be located
      in an area designated by the Director of the Federal Emergency Management Agency
      as a special flood hazard area, Grantor agrees to obtain and maintain Federal
      Flood Insurance, if available, for the full unpaid principal balance of the
      loan
      and any prior liens on the property securing the loan, up to the maximum policy
      limits set under the National Flood Insurance Program, or as otherwise required
      by lender, and to maintain such insurance for the term of the loan.

     

    Application
      of Proceeds.
      Grantor
      shall promptly notify lender of any loss or damage to the Property. Lender
      may
      make proof of loss if Grantor fails to do so within fifteen (15) days of the
      casualty. Whether or not lender's security is impaired, lender may, at lender's
      election, receive and retain the proceeds of any insurance and apply the
      proceeds to the reduction of the Indebtedness, payment of any lien affecting
      the
      Property, or the restoration and repair of the Property. If lender elects to
      apply the proceeds to restoration and repair, Grantor shall repair or replace
      the damaged or destroyed Improvements in a manner satisfactory to lender. Lender
      shall, upon satisfactory proof of such expenditure, pay or reimburse Grantor
      from the proceeds for the reasonable cost of repair or restoration if Grantor
      is
      not in default under this Deed of Trust. Any proceeds which have not been
      disbursed within 180 days after their receipt and which lender has not committed
      to the repair or restoration of the Property shall be used first to pay any
      amount owing to Lender under this Deed of Trust, then to pay accrued interest,
      and the remainder, if any, shall be applied to the principal balance of the
      Indebtedness. If lender holds any proceeds after payment in full of the
      Indebtedness, such proceeds shall be paid to Grantor as Grantor's interests
      may
      appear. 

     

    Grantor's
      Report on Insurance.
      Upon
      request of lender, however not more than once a year, Grantor shall furnish
      to
      lender a report on each existing policy of insurance showing: (1) the name
      of
      the insurer; (2) the risks insured; (3) the amount of the policy; (4) the
      property insured, the then current replacement value of such property, and
      the
      manner of determining that value; and (5) the expiration date of the policy.
      Grantor shall, upon request of lender, have an independent appraiser
      satisfactory to lender determine the cash value replacement cost of the
      Property. 

     

    LENDER'S
      EXPENDITURES.
      If any
      action or proceeding is commenced that would materially affect lender's interest
      in the Property or if Grantor fails to comply with any provision of this Deed
      of
      Trust or any Related Documents, including but not limited to Grantor's failure
      to discharge or pay when due any amounts Grantor is required to discharge or
      pay
      under this Deed of Trust or any Related Documents, lender on Grantor's behalf
      may (but shall not be obligated to) take any action that lender deems
      appropriate, including but not limited to discharging or paying all taxes,
      liens, security interests, encumbrances and other claims, at any time levied
      or
      placed on the Property and paying all costs for insuring, maintaining and
      preserving the Property. All such expenditures paid by lender for such purposes
      will then bear interest at the Note rate from the date paid by lender to the
      date of repayment by Grantor. To the extent permitted by applicable law, all
      such expenses will become a part of the Indebtedness and, at lender's option,
      will (A) be payable on demand; (B) be added to the balance of the Note and
      be
      apportioned' among and be payable with any installment payments to become due
      during either (1) the term of any applicable insurance policy; or (2) the
      remaining term of the Note; or IC) be treated as a balloon payment which will
      be
      due and payable at the Note's maturity. The Deed of Trust also will secure
      payment of these amounts. Such right shall be in addition to all other rights
      and remedies to which lender may be entitled upon Default. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    

    DEED
      OF TRUST 

    
      	
               Loan
                No: 88498100 

            	
                (Continued)
                

            	
               Page 3
                

            

    

    WARRANTY;
      DEFENSE OF TITLE.
      The
      following provisions relating to ownership of the Property are a part of this
      Deed of Trust: 

     

    Title.
      Grantor
      warrants that: (a) Grantor holds good and marketable title of record to the
      Property in fee simple, free and clear of all liens and encumbrances other
      than
      those set forth in the Real Property description or in any title insurance
      policy, title report, or final title opinion issued in favor of, and accepted
      by, Lender in connection with this Deed of Trust, and (b) Grantor has the full
      right, power, and authority to execute and deliver this Deed of Trust to Lender.
      

     

    Defense
      of Title.
      Subject
      to the exception in the paragraph above, Grantor warrants and will forever
      defend the title to the Property against the lawful claims of all persons.
      In
      the event any action or proceeding is commenced that questions Grantor's title
      or the interest of Trustee or Lender under this Deed of Trust, Grantor shall
      defend the action at Grantor's expense. Grantor may be the nominal party in
      such
      proceeding, but Lender shall be entitled to participate in the proceeding and
      to
      be represented in the proceeding by counsel of Lender's own choice, and Grantor
      will deliver, or cause to be delivered, to Lender such instruments as Lender
      may
      request from time to time to permit such participation. 

     

    Compliance
      With Laws.
      Grantor
      warrants that the Property and Grantor's use of the Property complies with
      all
      existing applicable laws, ordinances, and regulations of governmental
      authorities. 

     

    Survival
      of Representations and Warranties.
      All
      representations, warranties, and agreements made by Grantor in this Deed of
      Trust shall survive the execution and delivery of this Deed of Trust, shall
      be
      continuing in nature, and shall remain in full force and effect until such
      time
      as Grantor's Indebtedness shall be paid in full. 

     

    CONDEMNATION,
      JUDGMENTS AND AWARDS.
      The
      following provisions relating to condemnation proceedings, judgments, decrees
      and awards for injury to the Property are a part of this Deed of Trust:

     

    Proceedings.
      If any
      proceeding in condemnation is filed, Grantor shall promptly notify Lender in
      writing, and Grantor shall promptly take such steps as may be necessary to
      defend the action and obtain the award. Grantor may be the nominal party in
      such
      proceeding, but lender shall be entitled to participate in the proceeding and
      to
      be represented in the proceeding by counsel of its own choice, and Grantor
      will
      deliver or cause to be delivered to lender such instruments and documentation
      as
      may be requested by lender from time to time to permit such participation.
      

     

    Application
      of Net Proceeds.
      To the
      extent permitted by applicable law, all judgments, decrees and awards for injury
      or damage to the Property, or any part of the Property, and awards pursuant
      to
      proceedings for condemnation of the Property, are hereby absolutely assigned
      to
      lender, and if all or any part of the Property is condemned by eminent domain
      proceedings or by any proceeding or purchase in lieu of condemnation, Lender
      may
      at its election require that all or any portion of the net proceeds of the
      award
      be applied to the Indebtedness or the repair or restoration of the Property.
      The
      net proceeds of the award, judgment or decree shall mean the award after payment
      of all reasonable costs, expenses, and attorneys' fees incurred by Trustee
      or
      Lender in connection with the condemnation. 

     

    SECURITY
      AGREEMENT; FINANCING STATEMENTS.
      The
      following provisions relating to this Deed of Trust as a security agreement
      are
      a part of this Deed of Trust: 

     

    Security
      Agreement.
      This
      instrument shall constitute a Security Agreement to the extent any of the
      Property constitutes fixtures, and Lender shall have all of the rights of a
      secured party under the Uniform Commercial Code as amended from time to time.
      

     

    Security
      Interest.
      Upon
      request by Lender, Grantor shall take whatever action is requested by Lender
      to
      perfect and continue lender's security interest in the Rents and Personal
      Property. In addition to recording this Deed of Trust in the real property
      records, Lender may, at any time and without further authorization from Grantor,
      file executed counterparts, copies or reproductions of this Deed of Trust as
      a
      financing statement. Grantor shall reimburse. Lender for all expenses incurred
      in perfecting or continuing this security interest. Upon default, Grantor shall
      not remove, sever or detach the Personal Property from the Property. Upon
      default, Grantor shall assemble any Personal Property not affixed to the
      Property in a manner and at a place reasonably convenient to Grantor and Lender
      and make it available to lender within three (3) days after receipt of written
      demand from lender to the extent permitted by applicable law. 

     

    Addresses.
      The
      mailing addresses of Grantor (debtor) and Lender (secured party) from which
      information concerning the security interest granted by this Deed of Trust
      may
      be obtained (each as required by the Uniform Commercial Code) are as stated
      on
      the first page of this Deed of Trust. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    FURTHER
      ASSURANCES; ATTORNEY-IN-FACT.
      The
      following provisions relating to further assurances and attorney-in-fact are
      a
      part of this Deed of Trust: 

     

    Further
      Assurances.
      At any
      time, and from time to time, upon request of Lender, Grantor will make, execute
      and deliver, or will cause to be made, executed or delivered, to Lender or
      to
      Lender's designee, and when requested by Lender, cause to be filed, recorded,
      refilled, or rerecorded, as the case may be, at such times and in such offices
      and places as lender may deem appropriate, any and all such mortgages, deeds
      of
      trust, security deeds, security agreements, financing statements, continuation
      statements, instruments of further assurance, certificates, and other documents
      as may, in the sole opinion of Lender, be necessary or desirable in order to
      effectuate, complete, perfect, continue, or preserve (1) Grantor's obligations
      under the Note, this Deed of Trust, and the Related Documents, and (2) the
      liens
      and security interests created by this Deed of Trust as first and prior liens
      on
      the Property, whether now owned or hereafter acquired by Grantor. Unless
      prohibited by law or lender agrees to the contrary in writing, Grantor shall
      reimburse lender for all costs and expenses incurred in connection with the
      matters referred to in this paragraph. 

     

    Attorney-in-Fact.
      If
      Grantor fails to do any of the things referred to in the preceding paragraph,
      Lender may do so for and in the name of Grantor and at Grantor's expense. For
      such purposes, Grantor hereby irrevocably appoints Lender as Grantor's
      attorney-in-fact for the purpose of making, executing, delivering, filing,
      recording, and doing all other things as may be necessary or desirable, in
      lender's sole opinion, to accomplish the matters referred to in the preceding
      paragraph .. 

     

    FULL
      PERFORMANCE.
      If
      Grantor pays all the Indebtedness when due, and otherwise performs all the
      obligations imposed upon Grantor under this Deed of Trust, lender shall execute
      and deliver to Grantor a release of this Deed of Trust lien and suitable
      statements of termination of any financing statement on file evidencing lender's
      security interest in the Rents and the Personal Property. However, it is agreed
      that the payment of all the Indebtedness and performance of such obligations
      shall not terminate this Deed of Trust unless the liens and interests created
      hereby are released by Lender by a proper recordable instrument. Any filing
      fees
      required by law shall be paid by Grantor, if permitted by applicable
law.
      

     

    EVENTS
      OF DEFAULT.
      Each of
      the following, at lender's option, shall constitute an Event of Default under
      this Deed of Trust: 

     

    Payment
      Default.
      Grantor
      fails to make any payment when due under the Indebtedness. 

     

    Other
      Defaults.
      Grantor
      fails to comply with or to perform any other term, obligation, covenant or
      condition contained in this Deed of Trust or in any of the Related Documents
      or
      to comply with or to perform any term, obligation, covenant or condition
      contained in any other agreement between lender and Grantor. 

     

    Compliance
      Default.
      Failure
      to comply with any other term, obligation, covenant or condition contained
      in
      this Deed of Trust, the Note or in any of the Related Documents. 

     

    Default
      on Other Payments.
      Failure
      of Grantor within the time required by this Deed of Trust to make any payment
      for taxes or insurance, or any other payment necessary to prevent filing of
      or
      to effect discharge of any lien. 

     

    Default
      in Favor of Third Parties.
      Should
      Grantor default under any loan, extension of credit, security agreement,
      purchase or sales agreement, or any other agreement, in favor of any other
      creditor or person that may materially affect any of Grantor's property or
      Grantor's ability to repay the Indebtedness or perform their respective
      obligations under this Deed of Trust or any of the Related Documents ..

     

    False
      Statements.
      Any
      warranty, representation or statement made or furnished to lender by Grantor
      or
      on Grantor's behalf under this Deed of Trust or the Related Documents is false
      or misleading in any material respect, either now or at the time made or
      furnished or becomes false or misleading at any time thereafter. 

     

    Defective
      Collateralization.
      This
      Deed of Trust or any of the Related Documents ceases to be in full force and
      effect (including failure of any collateral document to create a valid and
      perfected security interest or lien) at any time and for any reason.

     

    Death
      or Insolvency.
      The
      dissolution or termination of Grantor's existence as a going business or the
      death of any partner, the insolvency of Grantor, the appointment of a receiver
      for any part of Grantor's property, any assignment for the benefit of creditors,
      any type of creditor workout, or the commencement of any proceeding under any
      bankruptcy or insolvency laws by or against Grantor. 

     

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    DEED
      OF TRUST 

    
      	
               Loan
                No: 88498100 

            	
                (Continued)
                

            	
               Page
                4

            

    

     

    
       

      Creditor
        or Forfeiture Proceedings.
        Commencement of foreclosure or forfeiture proceedings, whether by judicial
        proceeding, self-help,  repossession or any other method, by any
        creditor of Grantor or by any governmental agency against any property securing
        the Indebtedness. This includes a garnishment of any of Grantor's accounts,
        including deposit accounts, with Lender. However, this Event of Default shall
        not apply if there is a good faith dispute by Grantor as to the validity
        or
        reasonableness of the claim which is the basis of the creditor or forfeiture
        proceeding and if Grantor gives Lender written notice of the creditor or
        forfeiture proceeding and deposits with Lender monies or a surety bond for
        the
        creditor or forfeiture proceeding, in an amount determined by Lender, in
        its
        sole discretion, as being an adequate reserve or bond for the dispute.

    

     

    Breach
      of Other Agreement.
      Any
      breach by Grantor under the terms of any other agreement between Grantor and
      Lender that is not remedied within any grace period provided therein, including
      without limitation any agreement concerning any indebtedness or other obligation
      of Grantor to Lender, whether existing now or later. 

     

    Events
      Affecting Guarantor.
      Any of
      the preceding events occurs with respect to any guarantor, endorser, surety,
      or
      accommodation party of any of the Indebtedness or any guarantor, endorser,
      surety, or accommodation party dies or becomes incompetent, or revokes or
      disputes the validity of, or liability under, any Guaranty of the Indebtedness.
      In the event of a death, Lender, at its option, may, but shall not be required
      to, permit the guarantor's estate to assume unconditionally the obligations
      arising under the guaranty in a manner satisfactory to Lender, and, in doing
      so,
      cure any Event of Default. 

     

    Adverse
      Change.
      A
      material adverse change occurs in Grantor's financial condition, or Lender
      believes the prospect of payment or performance of the Indebtedness is impaired.
      

     

    Insecurity.
      Lender
      in good faith believes itself insecure. 

     

    Right
      to Cure.
      If any
      default, other than a default in payment is curable, it may be cured if Grantor,
      after receiving written notice from Lender demanding cure of such default:
      (1)
      cures the default within twenty (20) days; or (2) if the cure requires more
      than
      twenty (20) days, immediately initiates steps which Lender deems in Lender's
      sole discretion to be sufficient to cure the default and thereafter continues
      and completes all reasonable and necessary steps sufficient to produce
      compliance as soon as reasonably practical. 

     

    RIGHTS
      AND REMEDIES ON DEFAULT.
      If an
      Event of Default occurs under this Deed of Trust, at any time thereafter,
      Trustee or Lender may exercise anyone or more of the following rights and
      remedies: 

     

    Election
      of Remedies.
      Election
      by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
      and an election to make expenditures or to take action to perform an obligation
      of Grantor under this Deed of Trust, after Grantor's failure to perform, shall
      not affect Lender's right to declare a default and exercise its remedies.

     

    Accelerate
      Indebtedness.
      Lender
      may declare the unpaid principal balance of the Indebtedness due and payable.
      In
      no event will Grantor be required to pay any unearned interest. 

     

    Foreclosure.
      If
      Lender invokes the power of sale, Trustee, at the request of Lender, may sell
      all or any portion of the Property at public auction to the highest bidder
      for
      cash at the location within the courthouse designated by the County
      Commissioners Court, or if no such area has been designated, at the area
      designated in the notice of sale within the courthouse, between the hours of
      10:00 A.M. and 4:00 P.M. on the first Tuesday of any month, after the Trustee
      or
      its agent has given notice of the time and place of sale and of the property
      to
      be sold as required by the Texas Property Code, as then amended. 

     

    UCC
      Remedies.
      With
      respect to all or any part of the Personal Property, Lender shall have all
      the
      rights and remedies of a secured party under the Uniform Commercial Code.

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    Collect
      Rents.
      As
      additional security for the payment of the Indebtedness, Grantor hereby
      absolutely assigns to Lender all Rents as defined in the Definitions section
      of
      this Deed of Trust. Until the occurrence of an Event of Default, Grantor is
      granted a license to collect and retain the Rents; however, upon receipt from
      Lender of a notice that an Event of Default exists under this Deed of Trust,
      Lender may terminate Grantor's license, and then Lender, as Grantor's agent,
      may
      collect the Rents. In addition, if the Property is vacant, Lender may rent
      or
      lease the Property. Lender shall not be liable for its failure to rent the
      Property, to collect any Rents, or to exercise diligence in any matter relating
      to the Rents; Lender shall be accountable only for Rents actually received.
      Lender neither has nor assumes any obligation as lessor or landlord with respect
      to any occupant of the Property. Rents so received shall be applied by Lender
      first to the remaining unpaid balance of the Indebtedness, in such order or
      manner as Lender shall elect, and the residue, if any, shall be paid to the
      person or persons legally entitled to the residue. 

     

    Trustee's
      Powers.
      Grantor
      hereby jointly and severally authorizes and empowers Trustee to sell all or
      any
      portion of the Property together or in lots or parcels, as Trustee may deem
      expedient, and to execute and deliver to the purchaser or purchasers of such
      Property good and sufficient deeds of conveyance of fee simple title, or of
      lesser estates, and bills of sale and assignments, with covenants of general
      warranty made on Grantor's behalf. In no event shall Trustee be required to
      exhibit, present or display at any such sale any of the Property to be sold
      at
      such sale. The Trustee making such sale shall receive the proceeds of the sale
      and shall apply the same as provided below. Payment of the purchase price to
      Trustee shall satisfy the liability of the purchaser at any such sale of the
      Property, and such person shall not be bound to look after the application
      of
      the proceeds. 

     

    Appoint
      Receiver.
      Lender
      shall have the right to have a receiver appointed to take possession of all
      or
      any part of the Property, with the power to protect and preserve the Property,
      to operate the Property preceding foreclosure or sale, and to collect the Rents
      from the Property and apply the proceeds, over and above the cost of the
      receivership, against the Indebtedness. The receiver may serve without bond
      if
      permltted by law. Lender's right to the appointment of a receiver shall exist
      whether or not the apparent value of the Property exceeds the Indebtedness
      by a
      substantial amount. Employment by Lender shall not disqualify a person from
      serving as a receiver. 

     

    Tenancy
      at Sufferance.
      If
      Grantor remains in possession of the Property after the Property is sold as
      provided above or Lender otherwise becomes entitled to possession of the
      Property upon default of Grantor, Grantor shall become a tenant at sufferance
      of
      Lender or the purchaser of the Property and shall, at Lender's option, either
      (1) pay a reasonable rental for the use of the Property, (2) vacate the Property
      immediately upon the demand of Lender, or (3) if such tenants refuse to
      surrender possession of the Property upon demand, the purchaser shall be
      entitled to institute and maintain the statutory action of forcible entry and
      detainer and procure a writ of possession thereunder, and Grantor expressly
      waives all damages sustained by reason thereof. 

     

    Sale
      of the Property.
      To the
      extent permitted by applicable law, Grantor hereby waives any and all rights
      to
      have the Property marshalled. In exercising its rights and remedies, the Trustee
      or Lender shall be free to sell all or any part of the Property together or
      separately, in one sale or by separate sales. lender shall be entitled to bid
      at
      any public sale on all or any portion of the Property. Trustee may convey all
      or
      any part of the Property to the highest bidder for cash with a general warranty
      binding Grantor, subject to prior liens and to other exceptions to conveyance
      and warranty. Grantor waives all requirements of appraisement, if any. The
      affidavit of any person having knowledge of the facts to the effect that proper
      notice as required by the Texas Property Code was given shall be prima facie
      evidence of the fact that such notice was in fact given. Recitals and'
      statements of fact in any notice or in any conveyance to the purchaser or
      purchasers of the Property in any foreclosure sale under this Deed of Trust
      shall be prima facie evidence of the truth of such facts, and all prerequisites
      and requirements necessary to the validity of any such sale shall be presumed
      to
      have been performed. Any sale under the powers granted by this Deed of Trust
      shall be a perpetual bar against Grantor, Grantor's heirs, successors, assigns
      and legal 

    representatives.
      

     

    Proceeds.
      Trustee
      shall pay the proceeds of any sale of the Property (a) first, to the expenses
      of
      foreclosure, including reasonable fees or charges paid to the Trustee, including
      but not limited to fees for enforcing the lien, posting for sale, selling,
      or
      releasing the Property, (b) then to Lender the full amount of the Indebtedness,
      (c) then to any amount required by law to be paid before payment to Grantor,
      and
      (d) the balance, if any, to Grantor. 

     

    Attorneys'
      Fees; Expenses.
      If
      Lender institutes any suit or action to enforce any of the terms of this Deed
      of
      Trust, Lender shall be entitled to recover such sum as the court may adjudge
      reasonable as Lender's attorneys' fees at trial and upon any appeal. Whether
      or
      not any court action is involved, and to the extent not prohibited by law,
      all
      reasonable expenses Lender incurs that in Lender's opinion are necessary at
      any
      time for the protection of its interest or the enforcement of its rights shall
      become a part of the Indebtedness payable on demand and shall bear interest
      at
      the Note rate from the date of the expenditure until repaid. Expenses covered
      by
      this paragraph include, without limitation, however subject to any limits under
      applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses,
      whether or not there is a lawsuit, including Lender's reasonable attorneys'
      fees
      and expenses for bankruptcy proceedings (including efforts to modify or vacate
      any automatic stay or injunction), appeals, and any anticipated post-judgment
      collection services, the cost of searching records, obtaining title reports
      (including foreclosure reports). surveyors' reports, and appraisal fees, title
      insurance, and fees for the Trustee, to the extent permitted by applicable
      law.
      Grantor also will pay any court costs, in addition to all other sums provided
      by
      law. In the event of foreclosure of this Deed of Trust, Lender shall be entitled
      to recover from Grantor Lender's reasonable attorneys' fees and actual
      disbursements that Lender necessarily incurs in pursuing such foreclosure.
      

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      DEED
        OF TRUST 

      
        	
                 Loan
                  No: 88498100 

              	
                  (Continued)
                  

              	
                 Page 5
                  

              

      

    POWERS
      AND OBLIGATIONS OF TRUSTEE.
      The
      following provisions relating to the powers and obligations of Trustee are
      part
      of this Deed of Trust: 

     

    Powers
      of Trustee.
      In
      addition to all powers of Trustee arising as a matter of law, Trustee shall
      have
      the power to take the following actions with respect to the Property upon the
      written request of. Lender and Grantor: (a) join in preparing and filing a
      map
      or plat of the Real Property, including the dedication of streets or other
      rights to the public; (b) join in granting any easement or creating any
      restriction on the Real Property; and (c) join in any subordination or other
      agreement affecting this Deed of Trust or the interest of Lender under this
      Deed
      of Trust. 

     

    Obligations
      to Notify.
      Trustee
      shall not be obligated to notify any other lienholder of the Property of the
      commencement of a foreclosure proceeding or of the commencement of any other
      action to which Lender may avail itself as a remedy, except to the extent
      required by applicable law or by written agreement. 

     

    Trustee.
      In
      addition to the rights and remedies set forth above, with respect to all or
      any
      part of the Property, the Trustee shall have the right to foreclose by notice
      and sale, and Lender shall have the right to foreclose by judicial foreclosure,
      in either case in accordance with and to the full extent provided by applicable
      law. 

     

    Substitute
      Trustee. Lender, at Lender's option, from time to time, and more than once,
      may
      appoint in writing a successor or substitute trustee, with or without cause,
      including the resignation, absence, death, inability, refusal or failure to
      act
      of the Trustee. The successor or substitute trustee may be appointed without
      ever requiring the resignation of the former trustee and without any formality
      except for the execution and acknowledgment of the appointment by the
      beneficiary of this Deed of Trust. The successor or substitute trustee shall
      then succeed to all rights, obligations, and duties of the Trustee. This
      appointment may be made on Lender's behalf by the President, any Vice President,
      Secretary, or Cashier of Lender. 

     

    NOTICES.
      Any
      notice required to be given under this Deed of Trust, including without
      limitation any notice of default and any notice of sale shall be given in
      writing, and shall be effective when actually delivered, when actually received
      by telefacsimile (unless otherwise required by law), when deposited with a
      nationally recognized overnight courier, or, if mailed, when deposited in the
      United States mail, as first class, certified or registered mail postage
      prepaid, directed to the addresses shown near the beginning of this Deed of
      Trust. Any party may change its address for notices under this Deed of Trust
      by
      giving formal written notice to the other parties, specifying that the purpose
      of the notice is to change the party's address. For notice purposes, Grantor
      agrees to keep Lender informed at all times of Grantor's current address. Unless
      otherwise provided or required by law, if there is more than one Grantor, any
      notice given by Lender to any Grantor is deemed to be notice given to all
      Grantors. 

     

    CROSS-COLLATERALIZATION.
      In
      addition to the Note, this Agreement secures all obligations, debts and
      liabilities, plus interest thereon, of Grantor to lender, as well as all claims
      by Lender against Grantor whether now existing or hereafter arising, whether
      related or unrelated to the purpose of the Note, whether voluntary or otherwise,
      whether due or not due, direct or indirect, determined or undetermined, absolute
      or contingent, liquidated or unliquidated whether Grantor may be liable
      individually or jointly with others whether obligated as guarantor surety,
      accommodation party or otherwise. However, this Agreement shall not secure,
      and
      the "Indebtedness" shall not include, any obligations arising under Subchapters
      E and F of Chapter 342 of the Texas Finance Code, as amended. 

    MISCELLANEOUS
      PROVISIONS.
      The
      following miscellaneous provisions are a part of this Deed of Trust:

     

    Amendments.
      This
      Deed of Trust, together with any Related Documents, constitutes the entire
      understanding and agreement of the parties as to the matters set forth in this
      Deed of Trust. No alteration of or amendment to this Deed of Trust shall be
      effective unless given in writing and signed by the party or parties sought
      to
      be charged or bound by the alteration or amendment. 

     

    Annual
      Reports. If
      the
      Property is used for purposes other than Grantor's residence, Grantor shall
      furnish to Lender, upon request, a certified statement of net operating income
      received from the Property during Grantor's previous fiscal year in such form
      and detail as Lender shall require. "Net operating income" shall mean all cash
      receipts from the Property less all cash expenditures made in connection with
      the operation of the Property. 

     

    Arbitration. Grantor
      and Lender agree that all disputes, claims and controversies between them
      whether individual, joint, or class in nature, arising from this Deed of Trust
      or otherwise, including without limitation contract and tort disputes, shall
      be
      arbitrated pursuant to the Rules of the American Arbitration Association in
      effect at the time the claim is filed, upon request of either party. No act
      to
      take or dispose of any Property shall constitute a waiver of this arbitration
      agreement or be prohibited by this arbitration agreement. This includes; without
      limitation, obtaining injunctive relief or a temporary restraining order;
      invoking a power of sale under any deed of trust or mortgage; obtaining a writ
      of attachment or imposition of a receiver: or exercising any rights relating
      to
      personal property, including taking or disposing of such property with or
      without judicial process pursuant to Article 9 of the Uniform Commercial Code.
      Any disputes, claims, or controversies concerning the lawfulness or
      reasonableness of any act, or exercise of any right, concerning any Property,
      including any claim to rescind, reform, or otherwise modify any agreement
      relating to the Property, shall also be arbitrated, provided however that no
      arbitrator shall have the right or the power to enjoin or restrain any act
      of
      any party. Judgment upon any award rendered by any arbitrator may be entered
      in
      any court having jurisdiction. Nothing in this Deed of Trust shall preclude
      any
      party from seeking equitable relief from a court of competent jurisdiction.
      The
      statute of limitations, estoppel, waiver, laches. and similar doctrines which
      would otherwise be applicable in an action brought by a party shall be
      applicable in any arbitration proceeding, and the commencement of an arbitration
      proceeding shall be deemed the commencement of an action for these purposes.
      The
      Federal Arbitration Act shall apply to the construction, interpretation, and
      enforcement of this arbitration provision. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    Caption
      Headings.
      Caption
      headings in this Deed of Trust are for convenience purposes only and are not
      to
      be used to interpret or define the provisions of this Deed of Trust.

     

    Merger.
      There
      shall be no merger of the interest or estate created by this Deed of Trust
      with
      any other interest or estate in the Property at any time held by or for the
      benefit of Lender in any capacity, without the written consent of Lender.

     

    Governing
      law. This Deed of Trust will be governed by federal law applicable to
      lender and, to the extent
      not
      preempted by federal law, the laws of the State of Texas without regard to
      its
      conflicts' of law provisions. This Deed of Trust has been accepted by Lender
      in
      the 

    State
      of
      Texas.

     

    No
      Waiver by Lender.
      Lender
      shall not be deemed to have waived any rights under this Deed of Trust unless
      such waiver is given in writing and signed by Lender. No delay or omission
      on
      the part of Lender in exercising any right shall operate as a waiver of such
      right or any other right. A waiver by Lender of a provision of this Deed of
      Trust shall not prejudice or constitute a waiver of Lender's right otherwise
      to
      demand strict compliance with that provision or any other provision of this
      Deed
      of Trust. No prior waiver by Lender, nor any course of dealing between Lender
      and Grantor, shall constitute a waiver of any of Lender's rights or of any
      of
      Grantor's obligations as to any future transactions. Whenever the consent of
      Lender is required under this Deed of Trust, the granting of such consent by
      Lender in any instance shall not constitute continuing consent to subsequent
      instances where such consent is required and in all cases such consent may
      be
      granted or withheld in the sole discretion of Lender. 

     

    Severability.
      If a
      court of competent jurisdiction finds any provision of this Deed of Trust to
      be
      illegal, invalid, or unenforceable as to any circumstance, that finding shall
      not make the offending provision illegal, invalid, or unenforceable as to any
      other circumstance. If feasible, the offending provision shall be considered
      modified so that it becomes legal, valid and enforceable. If the offending
      provision cannot be so modified, it shall be considered deleted from this Deed
      of Trust. Unless otherwise required by law, the illegality, invalidity, or
      unenforceability of any provision of this Deed of Trust shall not affect the
      legality, validity or enforceability of any other provision of this Deed of
      Trust. 

     

    Successors
      and Assigns.
      Subject
      to any limitations stated in this Deed of Trust on transfer of Grantor's
      interest, this Deed of Trust shall be binding upon and inure to the benefit
      of
      the parties, their successors and assigns. If ownership of the Property becomes
      vested in a person other than Grantor, Lender, without notice to Grantor, may
      deal with Grantor's successors with reference to this Deed of Trust and the
      Indebtedness by way of forbearance or extension without releasing Grantor from
      the obligations of this Deed of Trust or liability under the Indebtedness.
      

    Time
      is
      of the Essence. Time is of the essence in the performance of this Deed of Trust.
      

     

    DEFINITIONS.
      The
      following capitalized words and terms shall have the following meanings when
      used in this Deed of Trust. Unless specifically stated to the contrary, all
      references to dollar amounts shall mean amounts in lawful money of the United
      States of America. Words and terms used in the singular shall include the
      plural, and the plural shall include the singular, as the context may require.
      Words and terms not otherwise defined in this Deed of Trust shall have the
      meanings attributed to such terms in the Uniform Commercial Code: 

     

    Beneficiary.
      The word
      "Beneficiary" means STATE NATIONAL BANK, and its successors and assigns.

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    DEED
      OF TRUST 

    
      	
               Loan
                No: 88498100 

            	
                (Continued)
                

            	
               Page 6
                

            

    

     

    Borrower.
      The
      word
      "Borrower" means VALCENT MANUFACTURING, LTD. and includes all co-signers and
      co-makers signing the Note and all their successors and assigns. 

     

    Deed
      of Trust.
      The
      words "Deed of Trust" mean this Deed of Trust among Grantor, Lender, and
      Trustee, and includes without limitation all assignment and security interest
      provisions relating to the Personal Property and Rents. 

     

    Default.
      The
      word" Default" means the Default set forth in this Deed of Trust in the section
      titled" Default" . 

     

    Environmental
      Laws.
      The
      words "Environmental Laws" mean any and all state, federal and local statutes,
      regulations and ordinances relating to the protection of human health or the
      environment, including without limitation the Comprehensive Environmental
      Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
      9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act
      of
      1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
      49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
      42
      U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules,
      or regulations adopted pursuant thereto. 

     

    Event
      of Default.
      The
      words "Event of Default" mean any of the events of default set forth in this
      Deed of Trust in the events of default section of this Deed of Trust.

     

    Grantor.
      The word
      "Grantor" means VALCENT MANUFACTURING, LTD. 

     

    Guaranty.
      The word
      "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation
      party to Lender, including without limitation a guaranty of all or part of
      the
      Note. 

     

    Hazardous
      Substances.
      The
      words "Hazardous Substances" mean materials that, because of their quantity,
      concentration or physical, chemical or infectious characteristics, may cause
      or
      pose a present or potential hazard to human health or the environment when
      improperly used, treated, stored, disposed of, generated, manufactured,
      transported or otherwise handled. The words "Hazardous Substances" are used
      in
      their very broadest sense and include without limitation any and all hazardous
      or toxic substances, materials or waste as defined by or listed under the
      Environmental Laws. The term "Hazardous Substances" also includes, without
      limitation, petroleum and petroleum by-products or any fraction thereof and
      asbestos. 

     

    Improvements.
      The word
      "Improvements" means all existing and future improvements, buildings,
      structures, mobile homes affixed on the Real Property, facilities, additions,
      replacements and other construction on the Real Property. 

     

    Indebtedness.
      The word
      "Indebtedness" means all principal, interest, and other amounts, costs and
      expenses payable under the Note or Related Documents, together with all renewals
      of, extensions of, modifications of, consolidations of and substitutions for
      the
      Note or Related Documents and any amounts expended or advanced by Lender to
      discharge Grantor's obligations or expenses incurred by Trustee or Lender to
      enforce Grantor's obligations under this Deed of Trust, together with interest
      on such amounts as provided in this Deed of Trust. 

     

    Lender.
      The
      word
      "Lender" means STATE NATIONAL BANK, its successors and assigns. 

     

    Note.
      The word
      "Note" means the promissory note dated September 29, 2006, in
      the
      original principal amount of $190,000.00
      from
      Grantor to Lender, together with all renewals of, extensions of, modifications
      of, refinancings of, consolidations of, and substitutions for the promissory
      note or agreement. NOTICE
      TO GRANTOR: THE NOTE CONTAINS A VARIABLE INTEREST RATE. 

     

    Personal
      Property.
      The
      words "Personal Property" mean all equipment, fixtures, and other articles
      of
      personal property now or hereafter owned by Grantor, and now or hereafter
      attached or affixed to the Real Property; together with all accessions, parts,
      and additions to, all replacements of, and all substitutions for, any of such
      property; and together with all proceeds (including without limitation all
      insurance proceeds and refunds of premiums) from any sale or other disposition
      of the Property. 

     

    Property.
      The word
      "Property" means collectively the Real Property and the Personal Property.
      

     

    Real
      Property.
      The
      words "Real Property" mean the real property, interests and rights, as further
      described in this Deed of Trust. 

     

    Related
      Documents.
      The
      words "Related Documents" mean all promissory notes, credit agreements, loan
      agreements, environmental agreements, guaranties, security agreements,
      mortgages, deeds of trust, security deeds, collateral mortgages, and all other
      instruments, agreements and documents, whether now or hereafter existing,
      executed in connection with the Indebtedness. 

     

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    Rents.
      The word
      "Rents" means all present and future rents, revenues, income, issues, royalties,
      profits, and other benefits derived from the Property. 

     

    Trustee.
      The word
      "Trustee" means Alan Lackey, whose address is P.O. Box 5240, Lubbock, TX 79408
      and any substitute or successor trustees. 

     

    GRANTOR
      ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND GRANTOR
      AGREES TO ITS TERMS. 

     

    GRANTOR:
      

     

    VALCENT
      MANUFACTURING, LTD. 

     

    VALCENT
      MANUFACTURING, L.L.C., A General Partner of
      VALCENT MANUFACTURING, LTD. 

     

    By:
      Perry A Martin

    Perry
      A Martin

    Manager
      of VALCENT MANUFACTURING, L.L.C., 

     

    LENDER:
      

     

    STATE
      NATIONAL BANK 

     

    X
       ______________________________________

    Authorized
      Officer 

    

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      DEED
        OF TRUST 

      
        	
                 Loan
                  No: 88498100 

              	
                  (Continued)
                  

              	
                 Page 7
                  

              

      

    

    

       

      PARTNERSHIP
        ACKNOWLEDGMENT 

    

     

    
      	 STATE OF Texas	 ) 
	 	 SS )
              
	 COUNTY OF El Paso	 )

    

     

    

    This
      instrument was acknowledged before me on__Sept 29___,2006____by
PERRY
      A. MARTIN, Manager of VALCENT MANAGEMENT, L.L.C.,
      a
      partner on behalf of VALCENT MANUFACTURING, LTD., a
      partnership.

    NOTORY
      SEAL                                          _/s/
      San E
      Hitsell___________________

                                                                                                                                    
      San E Hitsell

                                                        Notary
      Public, State
      of Texas

     

                                                        

    

     

    LENDER
      ACKNOWLEDGMENT 

    
       

      
        	 STATE OF	 ) 
	 	 SS )
                
	 COUNTY OF	 )

      

       

    

    

    

    This
      instrument was acknowledged before me on
      _______________________  ,
      20
 by
      ____________  of 
      ___________________________ STATE NATIONAL BANK, on behalf of STATE NATIONAL
      BANK. 

     

    Notary
      Public, State of Texas

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