
                                                                Exhibit 10o

The omitted portions indicated by brackets have been separately filed with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 406, promulgated under the Securities Act
of 1933, as amended.

                                 AGREEMENT

This Agreement is made this seventeenth day of December, 1997 by and
between Clean Diesel Technologies, Inc., a Connecticut corporation having
its principal place of business at 300 Atlantic Street, Suite 702,
Stamford, CT 06901-3522 USA (hereinafter referred to as "CDT") and AMBAC
International, a Delaware corporation, having its principle place of
business at 103 Myron Street, West Springfield, MA 01089 (hereinafter
referred to as "AMBAC").

                                  RECITALS

WHEREAS, CDT and AMBAC have entered into a Non-Disclosure Agreement, dated
10 October 1997, and attached hereto as (Exhibit A), and

WHEREAS, said Non-Disclosure Agreement was concerned with the development,
production and application of a CDT Reagent Injection System, hereinafter
RIS; and

WHEREAS, CDT and AMBAC are desirous of working on a joint effort to cost
effectively design, manufacture and market the RIS; and

WHEREAS, CDT has the marketing capabilities to identify and to develop
various markets and application for the RIS; and

WHEREAS, CDT has opportunity to demonstrate an advanced system to industry,
and interested parties; and

WHEREAS, CDT has applied the present-state RIS technology to select
internal combustion engines, furnaces and boiler systems; and

WHEREAS, AMBAC has the technical, design, development skills and technology
to bring about an advanced system for use in over-the-road, as well as
stationary, diesel applications of the RIS; and

WHEREAS, AMBAC has the technical, manufacturing, and process skills to cost
effectively mass produce all or select components of the advanced RIS; and

WHEREAS, CDT and AMBAC desire to reduce their agreements to writing.

NOW, THEREFORE, in consideration of the premises, of the mutual covenants
herein contained, and of other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereby agree as
follows:

                                 ARTICLE I
                                DEFINITIONS

1.1  Reagent Injection System - The term "RIS", (Reagent Injection System),
     shall mean the concepts and embodiments of the systems for injection
     of reagents into exhaust gases of internal combustion engines,
     boilers, furnaces and heaters as designed and developed by CDT in
     whole or in part based upon patents, patent application and know how,
     owned or licensed by CDT as of the date of this Agreement. These
     patents and applications are listed in Exhibit "B" entitled CDT RIS
     PATENTS, attached hereto.

     Advanced Reagent Injection Reduction System - The term "ARIS"
     (Advanced Reagent Injection System), shall mean the concept and
     embodiment of the system, for application to internal combustion
     engines, furnaces, boilers and heaters, as will exist at the stage of
     production-readiness, subsequent to the joint design, test, and
     development efforts by CDT and AMBAC. The scope of the ARIS
     development program shall be as identified in Exhibit C (Attached
     hereto).

1.2  LICENSE AGREEMENT RESERVED

1.3  AMBAC. The term "AMBAC" shall mean AMBAC International, its
     successors, assigns, and agents.

1.4  CDT. The term "CDT" shall mean Clean Diesel Technologies, Inc., its
     successors, assigns, agents, and any subsidiaries or companies
     controlled by Clean Diesel Technologies, Inc., i.e. ownership of more
     than 50% of the voting stock.

1.5  The term "burdened engineering costs" shall mean costs in a range of
     $45.00 to $60.00 per hour as of the date of this agreement and changes
     to rates can be agreed upon at quarterly review meetings.

                                 ARTICLE II
                                  PARTIES

2.1  The Parties to this Agreement are Clean Diesel Technologies, Inc., a
     Delaware Corporation, and AMBAC International, a Delaware Corporation.

                                ARTICLE III
                          DUTIES OF CDT AND AMBAC

3.1  CDT and AMBAC agree to jointly share all relevant information and
     technology related to the cost effective design, prototype, test,
     development, production release, manufacture, process development, and
     distribution of the ARIS, to be applied to engines, boilers, furnaces
     and heaters subject to the non-disclosure Agreement.

3.2  CDT and AMBAC agree to share marketing data relating to uses and
     applications of the ARIS in whatever industry and wherever in the
     world such marketing may be applicable subject to the terms of
     confidentiality in Paragraph 11.1 below.

3.3  CDT and AMBAC agree to meet periodically, but no less often than every
     three (3) months to update, share and exchange the following:

          (a)  Quantity of ARIS anticipated to be sold in various markets
               during various calendar years; and

          (b)  Cost of producing the ARIS based upon the amortization of
               the tooling-capital and Sales and Volume projections
               developed in Section 3.3(a) above; and

          (c)  Cost of AMBAC burdened development engineering expenses
               expended in the development of a cost effective and readily
               manufactured ARIS; and

          (d)  Proposals of an Action Plan to meet the objectives of large
               volume-low cost supplier of ARIS based upon jointly
               developed cost-volume objectives;

                                 ARTICLE IV
                               DUTIES OF CDT

4.1  CDT will be responsible for the following tasks:

          (a)  Timely Provision to AMBAC of Performance Specifications,
               Initial Drawings, Test and Acceptance Criteria, known
               material incompatibilities, BOMs, target cost, etc., for the
               ARIS.

          (b)  Coordinating the ARIS demonstration to interested industry
               observers.

          (c)  Technical assistance to AMBAC on operation and testing of
               the ARIS.

          (d)  Technical and physical descriptions of standard components
               previously used in engine and boiler applications that are
               intended to be used in the ARIS, i.e., feed pumps, valving,
               piping, etc.

                                 ARTICLE V
                              DUTIES OF AMBAC

5.1  AMBAC will be responsible for the following tasks:

          (a)  Definition, design, development, and documentation of
               components configuration -- incorporating, as much as is
               possible, standard components as used in previous
               installations -- that result in a system capable of injecting
               urea-based reagents per specification through an injector
               that will lend itself to actuation by engine management
               control or other auxiliary controllers.

          (b)  Definition of the optimum mix of tooling and automation to
               achieve the cost-volume targets established by CDT and
               AMBAC.

          (c)  Actively participate in the concurrent engineering efforts
               to assure optimum producibility of the ARIS.

          (d)  Submission to CDT of a full review of proposed design for
               the purpose of concurrence prior to manufacture of prototype
               samples.

          (e)  Develop and sell to CDT, prototype/test "samples" at
               "out-of-pocket" (burdened) cost, whether such samples are
               procured internal to AMBAC or from an external supplier.
               AMBAC will expend its best effort to make the first samples
               available on or before February 15, 1998. Samples will be
               representative of "Production Intent" units.

                                 ARTICLE VI
                          DEVELOPMENT COST SHARING

6.1  Each party to this Agreement will be responsible for its own share of
     the development cost, with the following qualification: If prior to
     December 31, 2002, should CDT source manufacturing of the ARIS from
     another entity, not AMBAC, for reasons not related to any inability on
     the part of AMBAC to execute competitive production manufacturing, CDT
     will reimburse, fifty (50%) percent of AMBAC's burdened Engineering as
     reported in Section 3.3(c) of this Agreement. The engineering costs
     will be those costs expended and reported from the date this Agreement
     is signed until the Agreement is terminated in accordance with Section
     VIII or until 31 December 2000, whichever shall first occur. The
     payment will be made within sixty (60) days after the effective date
     of the termination with CDT reserving the right to audit such charges;
     however, upon mutual written consent, these engineering costs may be
     paid as royalty payments additional to those as described under
     Section 7.1(a) of this Agreement.

                                ARTICLE VII
                     ROYALTY PAYMENTS AND LICENSE FEES

7.1  CDT and AMBAC are committed to a "WIN-WIN" program and therefore there
     will be no Royalty or License fees payable to or from either company
     for any technology jointly or separately developed from the date of
     this Agreement until its termination unless the following occurs:

          (a)  If CDT is required to develop another company to manufacture
               the ARIS and such need to develop another company is not due
               to any inability of AMBAC to execute competitive production
               manufacturing, then CDT shall compensate AMBAC in the
               following manner for a three (3) year period:

               [ ]% of sales price if sold by CDT or

               [ ]% of CDT's Negotiated Royalty if licensed to a
               manufacturer.

               In the above cases AMBAC shall grant to CDT a worldwide
               license to manufacture the ARIS using any and all technology
               developed by AMBAC for production of the ARIS.

          (b)  If CDT is required to develop another company to manufacture
               the ARIS and such need to develop another company is due to
               any inability of AMBAC to execute competitive production
               manufacturing, other than unit cost, then CDT shall not be
               required to compensate AMBAC and AMBAC shall grant to CDT a
               rent-free, exclusive, worldwide license to manufacture the
               ARIS using any and all technology developed by AMBAC for
               production of the ARIS. Such technology shall be used by CDT
               or its sub-contractor, agent, or assign only for the
               purposes of manufacturing the ARIS.

          (c)  After five years, or earlier, upon mutual written agreement,
               AMBAC shall be permitted to use the ARIS for all of the
               applications that shall have been developed by AMBAC and
               first disclosed to CDT subject to the following Royalty
               schedule:

               [ ]% royalty of AMBAC sales price will be payable to CDT.

          (d)  If CDT is unable to grow the production volume of the ARIS
               as per the Production volume below, or has not released
               AMBAC as per 7.1 (c), above, AMBAC shall be permitted to use
               ARIS for all applications that shall have been developed by
               AMBAC, subject to the Royalty schedule of 7.1 (c).

                           Calendar Year                Production Volume
                           -------------                -----------------
                                2000                           [ ]
                                2001                           [ ]
                                2002                           [ ]

7.2  PATENTS. CDT shall retain all patent rights to the ARIS and any
     patents, applications or licenses as of the date of this agreement.
     Any patent or improvement that is independently developed by either
     company during the term of this Agreement and specifically related to
     the ARIS, shall be the Intellectual Property of the developer and said
     developer will grant non-exclusive, no-cost, worldwide cross license
     to such intellectual property for use on the ARIS to the
     non-developing party, subject to terms under 7. 1.

                                ARTICLE VIII
                     TERM AND TERMINATION OF AGREEMENT

8.1  TERM. The term of this Agreement shall continue until 3 November 2002,
     unless terminated earlier in accordance with this Article. Nothing in
     this Article shall be interpreted as precluding this Agreement from
     being renewed and extended beyond the Termination Date.

8.2  TERMINATION FOR BANKRUPTCY. Either party shall have the right, at its
     option, to terminate this Agreement by giving notice to the other
     party at least ten (10) business days before the termination is to be
     effective, if:

          (1)  The other party shall be adjudicated or become bankrupt or
               insolvent as that term is defined in 11 USC Section 101(32);

          (2)  The other party shall file a voluntary petition under any
               bankruptcy, reorganization, or insolvency law;

          (3)  The other party shall apply for or consent to appointment of
               a trustee or receiver to take possession of all or
               substantially all its assets;

          (4)  The other party shall consent to, or shall file an answer
               admitting the jurisdiction of the court and the material
               allegations of, an involuntary petition filed under any
               bankruptcy, reorganization, or insolvency law;

          (5)  Any proceedings of bankruptcy, reorganization, or insolvency
               shall be commenced against the other party and not be
               dismissed within 30 calendar days after commencement;

          (6)  The other party shall make any assignment for the benefit of
               creditors, or other arrangement or composition under any
               laws for the benefit of insolvent's;

          (7)  Any order shall be entered under any bankruptcy,
               reorganization, or insolvency law of any jurisdiction, and
               shall not be dismissed or stayed within thirty (30) calendar
               days after its entry (a) approving an involuntary petition
               seeking an arrangement with the creditors of the other
               party, (b) approving an involuntary petition seeking
               reorganization, or (c) appointing any receiver or trustee of
               all or a substantial part of the property of the other
               party;

          (8)  A trustee or receiver shall be appointed to take possession
               of all or substantially all assets of the other party and
               shall not be dismissed within thirty (30) calendar days
               after appointment; or

          (9)  Any writ of attachment, garnishment, or execution shall be
               levied against all or substantially all assets of the other
               party, or all or substantially all assets of the other party
               shall be subject to any attachment, garnishment, execution,
               or other judicial seizure, and shall not be removed,
               released, or bonded within thirty (30) calendar days after
               the date of the attachment, garnishment, execution, or other
               judicial seizure.

8.3  TERMINATION BY MUTUAL AGREEMENT. This Agreement shall terminate upon
     written agreement of all parties to this Agreement to terminate. The
     Termination shall be effective upon the date the Termination is signed
     or as may be mutually agreed.

                                 ARTICLE IX
                          RIGHTS AFTER TERMINATION

9.1  EFFECT OF TERMINATION. Upon termination or expiration of this
     Agreement each party shall:

          (a)  Return to the other party all Proprietary information; and

          (b)  Return all Promotional Material.

9.2  OPEN PURCHASE ORDERS. AMBAC shall promptly complete and deliver all
     Purchase Orders which are open at the date of termination or
     expiration of this Agreement.

9.3  SURVIVAL. The following Articles shall survive the Termination of this
     Agreement.

          ARTICLE X INDEMNIFICATION; ARTICLE XI INTELLECTUAL PROPERTY-
          CONFIDENTIALITY; ARTICLE VI DEVELOPMENT COST SHARING; ARTICLE VII
          ROYALTY PAYMENTS AND LICENSE FEES.

                                 ARTICLE X
                              INDEMNIFICATION

10.1 In the event that a product liability action or proceeding is brought
     against AMBAC or CDT related to ARIS or any application using the
     ARIS, each party shall as promptly as practical, forward to the other
     party every summons and complaint and hereby gives the other party the
     right to inspect every other court document received by it, and if the
     other party is a named party in the action, in no event shall the
     party take action of settlement without the prior notification of the
     other party of such proposed action followed by a reasonable period of
     time, not to exceed ten (10) calendar days to allow the other party to
     respond to such notification.

10.2 The parties shall promptly notify the other of any potential
     performance or safety-related defect in the ARIS or in any application
     that may use the ARIS in any manner whatsoever.

                                 ARTICLE XI
                  INTELLECTUAL PROPERTY - CONFIDENTIALITY

11.1 Each party (the "Recipient Party") acknowledges that the other party
     (the "Disclosing Party") may disclose Information to the Recipient
     Party which is reduced to writing and marked proprietary or
     confidential within thirty (30) days of disclosing to the Disclosing
     Party or other parties ("Proprietary Information"). The Recipient
     Party agrees to maintain in confidence and not to disclose to any
     party or reproduce or use except for the purpose of this Agreement any
     such Proprietary Information, except with the written consent of the
     Disclosing Party. The foregoing restriction on use and disclosure of
     the Proprietary Information will not apply:

          (a)  If the information was generally available to the public at
               the time of disclosure;

          (b)  If the information is already a written record in Recipient
               Party's files prior to its receipt, under circumstances
               permitting its disclosure by Recipient Party to other;

          (c)  If Recipient Party at any time lawfully obtains said
               Information from a third party under circumstances
               permitting its disclosure by Recipient Party to others;

          (d)  If the Information becomes part of the public domain through
               no fault of Recipient Party; or

          (e)  After two (2) years from the termination of this Agreement.
               Upon any termination of this Agreement all proprietary
               Information in the Recipient Party's possession shall be
               returned to the Disclosing Party at the request of
               Disclosing Party.

                                ARTICLE XII
                            TECHNICAL ASSISTANCE

12.1 CDT shall provide at its sole discretion any technical assistance,
     information and or materials that may be reasonably required for
     servicing, operating, and installing the ARIS.

12.2 CDT shall determine when the ARIS may be marketed and/or sold.

12.3 CDT, the OEM (if any), distributor or licensed agent, will be
     responsible for the cost of any application engineering that may be
     required for the application of the ARIS to internal combustion
     engines or boilers or heaters or furnaces.

12.4 CDT may request AMBAC to perform certain application engineering
     tasks, at a cost to be negotiated.

                                ARTICLE XIII
                               MISCELLANEOUS

13.1 FORCE MAJEURE. Any delay or failure of either party to perform its
     obligations hereunder shall be excused if, and to the extent that it
     is caused by an event or occurrence beyond the reasonable control of
     the party and with its fault or negligence, such as, by way of example
     and not by way of limitation, acts of God, actions by a governmental
     authority (whether valid or invalid), fires, floods, windstorms,
     explosions, riots, natural disasters, wars, sabotage, labor problems
     (including lockouts, strikes and slowdowns), inability to obtain
     power, material, labor equipment or transportation, or court injunction
     or order; provided that written notice of such delay (including the
     anticipated duration of the delay) shall be given by the affected
     party to the other party within ten (10) days. During the period of
     such delay or failure to perform by AMBAC, CDT at its option, may have
     the services to be performed by AMBAC hereunder performed by another
     party without liability to AMBAC. If requested by CDT, AMBAC shall,
     within ten (10) days of such request, provide adequate assurances that
     the delay shall not exceed thirty (30) days. If the delay lasts more
     than thirty (30) days or AMBAC does not provide adequate assurance
     that the delay will cease within thirty (30) days, CDT may immediately
     cancel this Agreement without liability. In the event such a period is
     experienced by CDT, wherein CDT is unable for reasons as stated above,
     to accept delivery on ordered and scheduled shipments, AMBAC, at its
     option, may produce such ordered and scheduled material, storing such
     undelivered material in a suitable location of its choice, invoking an
     inventory carrying charge calculated as Sales Price X 10% / 365 days X
     number of days beyond 30 days delay in shipment.

13.2 RESERVED

13.3 RESERVED

13.4 ADVERTISING. AMBAC shall not, without first obtaining the written
     consent of CDT, in any manner advertise or publish the fact that AMBAC
     has contracted to furnish the goods herein ordered, or use any
     trademarks or trade names of CDT in AMBAC's advertising or promotional
     materials. Neither party shall, without first obtaining the written
     consent of the other party, advertise or publish, in any manner, that
     AMBAC has contracted with CDT to furnish the goods which are the
     subject matter of this Agreement. CDT shall not advertise the product
     until authorized in writing by AMBAC, which mutual authorizations
     shall not be unreasonably withheld.

13.5 RELATIONSHIP OF PARTIES. CDT and AMBAC are independent contracting
     parties and nothing herein contained shall be construed to create a
     partnership, employment, joint venture or agency, and neither party
     shall be liable for the debts, obligations or responsibilities of the
     other. It is expressly agreed that neither party shall have any
     authority to assume or create any obligation or responsibility,
     express or implied, on behalf of or in the name of the other party or
     to bind the other party in any manner.

13.6 NOTICES. Any notice permitted or required under this Agreement shall
     be deemed to be given when sent if such notice shall be in writing and
     personally served, mailed by registered or certified air mail, postage
     prepaid evidenced by post office receipt of said registration or
     certification, or transmitted by electronic facsimile transfer with
     written confirmation personally served or mailed as heretofore
     provided to the addresses of the parties as follows:

            To CDT at:        Clean Diesel Technologies, Inc.
                              Attn.: Jim Valentine, TJ Tarabuski
                              300 Atlantic Street
                              Suite 702
                              Stamford, CT 06901-3522
                              (203) 327-7050

            To AMBAC at:      AMBAC International
                              Attn.: Gary Mistalski
                              103 Myron Street
                              West Springfield, MA 01089
                              (413) 785-6861

     Any party may change its address for purposes of this notice provision
     by giving the other parties written notice of the new address in the
     manner set forth above.

13.7 SUCCESSORS OF PARTIES. This Agreement shall be binding on, and shall
     inure to the benefit of the parties to it and their respective heirs,
     legal representatives, successors, and assigns.

13.8 ASSIGNMENT. Neither party shall assign or delegate its obligations
     under this Agreement without the others prior written consent and any
     attempt to make such an assignment or delegation without such consent
     shall be void.

13.9 NO IMPLIED WAIVER. The failure of either party at any time to require
     performance by the other party of any provision of this Agreement
     shall not in any way affect the right to require such performance at
     any time thereafter nor shall the waiver by of either party of a right
     hereunder or a breach of any provision of this Agreement constitute a
     continuing waiver or waiver of a right or similar breach. No waiver
     shall be binding unless executed in writing by the party making the
     waiver.

13.10 SEVERABILITY. If any term or provision hereof is declared void or
     unenforceable or becomes unlawful in its operation under any statue,
     regulation, ordinance, executive order or other rule of law, such term
     or provision shall be deemed reformed or deleted, but only to the
     extent necessary to comply with such statute, regulation, ordinance,
     order or rule, and the remaining provisions of this Agreement, which
     shall continue to be binding and remain in full force and effect.

13.11 GOVERNING LAW; ARBITRATION. This Agreement, its interpretation and
     any disputes or controversies concerning the transactions contemplated
     herein shall be governed by the internal substantive laws of Delaware
     and determined in final, binding arbitration before a single
     arbitration under the then rules of commercial arbitration of the
     American Arbitration Association (the "AAA"), in Stamford,
     Connecticut, if initiated by AMBAC, and in West Springfield,
     Massachusetts, if initiated by CDT. The arbitrator shall have no power
     to award consequential, statutory or punitive damages. Any award in
     arbitration may be entered in and enforced by any court having
     jurisdiction. Prior to commencement of arbitration proceedings, the
     parties shall participate in a period of mediation of not more than
     sixty (60) days under AAA rules.

13.12 HEADINGS. The headings of the articles and paragraphs of this
     Agreement have been herein only to facilitate reference and shall not
     be given any significance whatsoever in the construction and
     interpretation of this Agreement.

13.13 EXHIBITS APPENDED. There have been approved, appended, and made a
     part of this Agreement the following exhibits: "A" Non-Disclosure
     Agreement; "B", CDT Patents; "C" Scope of ARIS Development Program. In
     the event of any conflict, the provisions set forth in the body of
     this Agreement shall be deemed paramount.

13.14 ENTIRE AGREEMENT. This Agreement, together with any attachments,
     exhibits, or supplements, specifically referencing in this Agreement,
     constitutes the entire Agreement between CDT and AMBAC pertaining
     to the subject matter hereof. All prior and contemporaneous
     agreements, representations, negotiations and understanding of the
     parties, oral or written, are hereby superseded and merged herein.
     Each party to this Agreement expressly warrants and represents to the
     other that it has not relied upon any representation, inducement,
     promise or agreement, oral or otherwise, by any party, or anyone
     acting on behalf of any party, which is not embodied herein. No
     modification, waiver or amendment of this Agreement shall be binding
     unless fully executed in writing and signed by an authorized
     representative of each of the parties hereto.


IN WITNESS WHEREOF, the parties have caused this Agreement to be executed,
in duplicate, by their duly authorized representatives.

DATED: 18TH DECEMBER 1997

CLEAN DIESEL TECHNOLOGIES, INC.                 AMBAC INTERNATIONAL

BY:  /S/JIM VALENTINE                           BY:  /S/GARY MISTALSKI
      JIM VALENTINE                                  GARY MISTALSKI

TITLE:  CHIEF OPERATING OFFICER                 TITLE:  GENERAL MANAGER
                                                        WEST SPRINGFIELD
<PAGE>
                                                       Exhibit A to
                                                          Agreement

                         CONFIDENTIALITY AGREEMENT

This Confidentiality Agreement (hereinafter referred to as ("Agreement") is
entered into by and between

                      CLEAN DIESEL TECHNOLOGIES, INC.
                            300 Atlantic Street
                                 Suite 702
                        Stamford, CT 06901-3522 USA

                   (hereinafter referred to as "CDT") and

                            AMBAC INTERNATIONAL
                              103 Myron Street
                   West Springfield, Massachusetts 01089
                    (hereinafter referred to as "AMBAC")

both parties together hereinafter referred to as "Parties" or individually
hereinafter referred to as "Party."

                                  PREAMBLE

WHEREAS, CDT is in the business of designing, developing, and marketing
urea based selective catalytic reduction systems (SCR) and related devices
and reagents for the transportation and stationary power industries; and

WHEREAS, AMBAC amongst others is engaged in the business of design,
developing, manufacturing, sale, and distributing diesel fuel injection
products; and

WHEREAS, the Parties are interested to evaluate a business relationship in
which CDT develops (independently or jointly with AMBAC), designs, and
supplies to AMBAC certain selective catalytic reduction concepts, ideas,
and strategies which utilize AMBAC fuel injection equipment as is or with
slight variation, and CDT intends to market such systems; and

WHEREAS, the Parties are interested, but not obligated to exchange certain
Information (defined herein) pertinent and necessary to the conduct of the
Party's stated business relationship. Such "Information" may take the form
of drawings, electronic data, product or program descriptions; layouts or
renderings; timing or planning schedules; samples, parts, components or
systems; cars, models or prototypes; development, procedures,
specifications or standards; visual or audiovisual media; and/or any other
type of information, inclusive business or operational secrets; methods or
inventions; and

WHEREAS, the receiving Party agrees to maintain the confidentiality of such
Information.

NOW THEREFORE, the Parties hereto agree to the following:

1.   The purpose of this Agreement is to avoid transfer and disclosure of
     any of the Information so obtained/gathered and of further
     developments and copies thereof, to any third party, when the
     Information has been obtained

     - in the form of hard copies and clearly marked as confidential or as
       legally protected or
     - in any other form; e.g., data communication line or in any verbal
       discussion and stated as confidential or legally protected by the
       disclosing Party in a written form within 15 working days after
       disclosure. Information received in this way shall, within the above
       period, be treated as confidential by the receiving Party.

2.   Such Information must be used exclusively for the purposes set out in
     the provisions of the preamble. It shall be made accessible to the
     personnel of the receiving Party only insofar as required for such
     purposes, and shall be disclosed to third parties only after receipt
     of the prior written consent of the Party initially providing the
     Information.

3.   Subsequent to obtaining prior written consent from the disclosing
     Party to transfer/disclose certain limited Information to a specified
     third party for a clearly defined purpose, the receiving party may
     forward it only after receipt of written confirmation from such third
     party that it will avoid any further transfer/disclosure to any other
     third party and will use the Information only for such defined purpose
     and in accordance with the terms of this Agreement.

4.   The obligation of nondisclosure is not applicable to Information,

     - which is or becomes generally known other than by violation of this
       Agreement or
     - which is made available to the receiving Party by a third party, who
       was not subject to an obligation of nondisclosure and other than by
       violation of this Agreement or
     - of which the receiving Party can prove that it was already in
       possession prior to the effective date of this Agreement or of which
       it can prove independent development after the effective date.

5.   The Receiving Party of any Information hereunder agrees to handle
     Information with the same care it uses to avoid disclosure,
     publication, or circulation of any other type of its own information,
     documents, drawings, electronic data, descriptions, layouts,
     renderings, schedules, samples, parts, components, systems, models,
     prototypes, developments, procedures, specifications, standards,
     visual/audiovisual media, methods, business/operational secrets, or
     inventions, which are confidential.

6.   Neither of the Parties will derive rights from Information received,
     even if such rights are legally justified. All rights are reserved to
     each of the Parties, particularly insofar as the right to obtain
     patents and utility patents for their own inventions is concerned.

     Rights to Information disclosed are limited to such rights explicitly
     agreed herein, additional rights such as license right, copyright,
     right of use and others are not granted, regardless of whether any
     valid patent rights exist or not.

7.   a. An obligation to disclose Information is not agreed herein.

     b. Nothing contained herein shall be construed as granting any
     intellectual property rights except as expressly provided herein.

     c. Nothing in this Agreement shall be construed as obligating either
     Party to enter into a business arrangement with the other. Any such
     arrangement, and the terms and conditions thereof shall be agreed upon
     separately.

     d. Nothing in this Agreement shall preclude either Party from entering
     into a similar relationship with a third party.

8.   This Agreement becomes effective when it is executed by both Parties
     to this Agreement. It will expire three (3) years after the last date
     of execution, unless this Agreement is previously terminated by either
     Party hereto by giving the other Party at least three (3) months'
     advance notice of such termination in writing.

9.   With respect to any Information disclosed by either Party hereto to
     the other Party during the term of this Agreement, the obligations and
     restrictions set forth in clauses I - 5 above against the transfer,
     disclosure, and use of such Information shall end seven (7) years
     after disclosure of such Information and shall survive any expiration
     or termination of this Agreement prior to the end of such period.

10.  Upon request of the disclosing Party, any Information received shall
     be returned without undue delay at any time such a request has been
     received and automatically if the Agreement has been terminated. Any
     transcriptions, copies, records, and further developments thereof
     shall be destroyed or erased from any Data Processing system or media.
     Evidence of compliance hereof shall be provided by the receiving party
     upon written request of the disclosing Party.

11.  All agreements between the Parties are Included in this Agreement.
     Additional verbal agreements have not been made. Changes of and
     supplements to this Agreement must be agreed to in writing by both
     Parties to become effective, including any deviation from the
     aforementioned form requirement.

12.  If single provisions of this Agreement shall be or become invalid or
     unenforceable, the remaining provisions shall continue in full force
     and effect. The parties shall in this event be obliged to accept as
     the replacement for the invalid provision a valid provision which
     corresponds as far as possible to the spirit and the purpose of the
     invalid provision.

13.  The parties will work together in good faith to remedy any
     difficulties which may arise in connection therewith. In the event
     disputes do arise in connection with the Agreement which the Parties
     are unable to settle amicably, the dispute shall be finally settled by
     arbitration in accordance the then effective Rules of The American
     Arbitration Association by one arbitrator appointed in accordance with
     such Rules. The place of proper venue is Hartford, Connecticut, unless
     otherwise agreed to in writing by the Parties.

14.  This Agreement is executed in two counterparts, each of which shall be
     deemed an original.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement through
their duly authorized personnel on the dates set forth below. Each party
received one original version of this Agreement.

For:                                    For:

CLEAN DIESEL TECHNOLOGIES, INC.         AMBAC INTERNATIONAL

Name:                                   Name:
       --------------------------               --------------------------
Title:                                  Title: 
       --------------------------               --------------------------
Date:                                   Date:
       --------------------------               --------------------------
<PAGE>
                                                           Exhibit B to
                                                              Agreement

(A)  U. S. PATENT APPLICATION

     Reducing NOx Emissions from an Engine by Temperature-Controlled Urea
     Injection for Selective Catalytic Reduction

     J. D. Peter-Hoblyn, E. N. Balles, J. E. Hofmann, T. J. Tarabulski

     (Application submitted April 2, 1997)

(B)  U. S. PATENT APPLICATION

     Reducing NOx Emissions from an Engine While Maximizing Fuel Economy

     T. J. Tarabulski

     (Application submitted April 4, 1997)
<PAGE>



                                                             Exhibit C to
                                                                Agreement

                       SCHEMATIC DIAGRAM OF ARIS(TM)
