SETTLEMENT AGREEMENT AND RELEASE

Exhibit 10.39

SETTLEMENT AGREEMENT AND RELEASE

THIS SETTLEMENT AGREEMENT AND RELEASE (“Settlement Agreement”) is entered into effective as of the last date of any party’s signature hereto and exists by and among Process Water Solutions, LLC (“Process Water”); Veolia Water North America Operating Services, LLC (“Veolia”); Clean Water Technologies, LLC (“Clean Water”); and Dr. Phosphate, Inc. (“Dr. Phosphate”); on the one hand, and Basin Water-MPT, Inc. (“BWMPT”); Basin Water, Inc. (“BWI”); Robert Gorgol (“Gorgol”); Robert Stark; and Michael Stark; on the other hand.

WHEREAS, Process Water, Veolia, Clean Water, and Dr. Phosphate (collectively, “Plaintiffs”) have brought claims against BWMPT, BWI, Gorgol, Robert Stark, and Michael Stark (collectively, “Defendants”) asserting, among other things, that Defendants have acted to misappropriate and use to their own benefit certain claimed confidential information, trade secrets, and other intellectual property allegedly owned by one or more of the Plaintiffs and protected from disclosure to or use by Defendants, and subsequently filed an action styled Process Water Solutions, LLC; Veolia Water North America Operating Services, LLC; Clean Water Technologies, LLC; and Dr. Phosphate, Inc. v. Basin Water-MPT, Inc.; Robert Gorgol; Robert Stark; Basin Water, Inc.; and Michael Stark , in the United States District Court for the Middle District of Florida, Case No. 8:07CV1944-T24-MSS (the “Litigation”); and

WHEREAS, Defendants have denied all of the material allegations made by Plaintiffs in the Litigation, contend that they have not misappropriated or used any claimed trade secrets, confidential information, or other protected intellectual property allegedly owned by one or more of the Plaintiffs, and have, as to some of them, counterclaimed seeking, among other things, a declaration of rights regarding the claimed intellectual property and an award of attorneys’ fees; and

WHEREAS, in order to avoid further protracted and expensive litigation, the parties now desire to compromise and resolve all claims and controversies which exist between Plaintiffs and Defendants in regard to matters related to the Litigation, including all claims set out in the Litigation.

NOW, THEREFORE, in consideration of the mutual covenants and representations hereinafter set forth, the receipt and sufficiency of which are acknowledged by all parties, the parties as undersigned agree as follows:

Defendants shall make or cause to be made one joint payment of Five Hundred Seventy Five Thousand Dollars ($575,000.00) to Plaintiffs. Payment shall be made in the form of one or more draft(s) made payable on a joint basis to all Plaintiffs, and such draft(s) will be delivered to counsel for PWS within ten (10) business days of this Settlement Agreement becoming effective and not subject to any condition or contingency, including that hereinafter set forth in Paragraph 3 related to action of the court in the Litigation. It shall be the responsibility of the Plaintiffs to apportion and distribute the foregoing payment amount among themselves as they deem appropriate, and Plaintiffs, on a joint and several basis, will indemnify and hold harmless all Defendants with respect to any claim or controversy that may arise with respect to the apportionment and distribution of the foregoing payment amount.

Plaintiffs, for themselves and their predecessors and successors, hereby release and discharge Defendants, together with their respective officers, directors, shareholders, agents, employees, insurers, attorneys and affiliated companies, from any and all claims, actions, causes of action, sums of money due, attorneys’ fees, suits, debts, covenants, contracts, agreements, promises, demands or liabilities whatsoever, in law or in equity, whether known or unknown, which Plaintiffs ever had, now have, or might in the future have against any of the foregoing based upon facts occurring up to the effective date of this Settlement Agreement and related to the subject matter of the Litigation. This release specifically includes, without limitation, any claims which were asserted or could have been asserted in the Litigation, but excludes obligations arising under this Settlement Agreement.

Defendants, for themselves and their predecessors and successors, hereby release and discharge Plaintiffs, together with their respective officers, directors, shareholders, agents, employees, insurers, attorneys and affiliated companies, from any and all claims, actions, causes of action, sums of money due, attorneys’ fees, suits, debts, covenants, contracts, agreements, promises, demands or liabilities whatsoever, in law or in equity, whether known or unknown, which Defendants ever had, now have, or might in the future have against any of the foregoing based upon facts occurring up to the effective date of this Settlement Agreement and related to the subject matter of the Litigation.

This release specifically includes, without limitation, any claims which were asserted or could have been asserted in the Litigation with the exception of any claim by the parties with respect to a declaration of rights to intellectual property allegedly owned by one or more of the Plaintiffs. The scope of this release excludes obligations arising under this Settlement Agreement, and this release does not apply to claims based upon any conduct occurring after the execution of this Settlement Agreement, even if such conduct is purportedly a continuation of conduct occurring prior to such execution.

In addition to the releases set out above in this Paragraph 2, Plaintiffs agree to obtain and deliver to counsel for Defendants release riders executed by Vaughn Astley, Gwen Astley, Dennis Michalski and Donald Luke in the form attached hereto as Exhibit “A”. Plaintiffs acknowledge, represent, and warrant that the consideration being provided by Defendants pursuant to this Settlement Agreement will have direct benefit to, and constitutes valuable and adequate consideration to, said persons with respect to their giving of the subject release riders. Said executed release riders shall be delivered to counsel for Defendants within five (5) business days of execution of this Settlement Agreement by all parties to the Litigation and shall be a condition to the effectiveness of the Settlement Agreement. Said release riders shall be held in escrow by counsel for Defendants and not released to Defendants until this Settlement Agreement becomes effective and not subject to any condition or contingency, including that hereinafter set forth in Paragraph 3 related to action of the court in the Litigation.

The parties agree that, in the event any party to this Settlement Agreement is made the object of a claim purportedly released via this Settlement Agreement, and provided the person or entity asserting the claim is claiming by or through the releasing party through an assignment or other intentional act of the releasing party, then such releasing party shall indemnify and hold harmless the party

made the object of the claim, including payment of attorneys’ fees and expenses. Plaintiffs represent and warrant that, as of the effective date of the Settlement Agreement, they have no knowledge of a basis for the assertion of any claim by Plaintiffs, or any of them, against Defendants, or any of them, except as set forth in the Litigation.

On or immediately after the last date of any party’s signature hereto, counsel for the parties shall execute that certain Stipulated Final Injunction and Order of Dismissal (“Injunction and Dismissal”) attached hereto as Exhibit “B” and shall petition the court in the Litigation to enter the Injunction and Dismissal. Notwithstanding anything else in this Settlement Agreement, the effectiveness and of this Settlement Agreement, including executed releases in the form attached hereto as Exhibit “A,” is conditioned upon entry by the court of the Injunction and Dismissal in the form attached hereto as Exhibit “B”. Absent such entry, this Settlement Agreement shall have no force or effect. Should the court fail to enter the Injunction and Dismissal on or before the sixtieth (60 ^th ) day following the effective date of this Settlement Agreement, this Settlement Agreement shall terminate.

Veolia acknowledges that Gorgol resigned from Veolia of his own volition. Veolia further agrees to provide only a neutral reference as regards Gorgol, Robert Stark and Daniel Prokop, consisting only of the dates of employment and last position held.

Prior to the initiation by one or more Plaintiffs of any litigation involving any of the Defendants in relation to a claimed violation of this Settlement Agreement or the intellectual property rights of any Plaintiff, written notice of demand shall be sent to the appropriate Defendants and to their counsel at the addresses provided below. If the involved parties have failed to reach a resolution within thirty (30) days after the notice of demand is delivered, the involved parties shall submit the dispute to good faith mediation, which shall be completed within the next thirty (30) days and before any litigation is commenced. Notwithstanding the foregoing, if any party is threatened with genuine and immediate irreparable harm by another party in relation to a claimed violation of this Settlement Agreement, such party may seek immediate injunctive relief, but the notice and mediation requirements of this paragraph 5 shall otherwise remain applicable.

All parties shall bear all of their respective costs and expenses associated with the Litigation, including but not limited to filing and attorneys’ fees. No party to this Settlement Agreement shall be required to make any payment relating to the Litigation other than the settlement payment specifically provided for in Paragraph 1, above. In the event that subsequent litigation arises in relation to claimed breach of this Settlement Agreement or an enforcement action relating to the Injunction and Dismissal, the prevailing party shall be entitled to recover its costs of litigation, including attorneys’ fees and costs, from the non-prevailing party.

The parties agree that they, as well as their affiliated and related persons and entities, shall not make negative reference to the character or the business reputation of the non-corporate parties to this Settlement Agreement. This obligation excludes communications compelled by law or as may occur internally among employees of the respective Plaintiffs or affiliated entities.

A) Entire Agreement . This Settlement Agreement supersedes any and all prior agreements between the parties, and represents the entire agreement among the parties, relating to the subject matter hereof. The parties acknowledge and agree that there have been no offers or inducements which have led to the execution of this Settlement Agreement other than as stated herein.

B) Amendments . Any modification, amendment, restatement or termination of this Settlement Agreement must be in writing and executed by each and every party.

C) Governing Law . This Settlement Agreement shall be interpreted and controlled by the substantive law of the state of Florida without reference to the principles of conflicts of law.

D) Capacity; Non-Assignment . All parties warrant and represent that they have not sold, assigned, granted, conveyed, or otherwise transferred to any other firm, corporation, person, or other entity, any of the rights, obligations, claims, demands, actions, or causes of action described herein or in the Litigation, and that they have the full legal capacity to enter into, execute and perform their respective obligations set forth in this Settlement Agreement. The parties further represent and warrant that, as of the effective date of the Settlement Agreement, they have no knowledge of any person or entity entitled to claim, or contemplating claiming, legal wrongs and associated relief against one more of the other parties to this Settlement Agreement or their related persons and entities except as currently set forth by a party in the Litigation.

E) Binding Effect . This Settlement Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors in interest and assigns.

F) Indemnity . The parties acknowledge that the representations and warranties set forth in this Settlement Agreement have been relied upon and are material to the making of this Settlement Agreement. Any party making an untrue or inaccurate representation or warranty herein shall indemnify and hold harmless, including but not limited to the payment of attorneys’ fees and expenses, any other party damaged by virtue of such circumstances.

G) Counterparts . This Settlement Agreement may be executed in multiple counterparts, at different times and places. When all parties have executed a counterpart of this Settlement Agreement, it shall be considered fully executed notwithstanding that all of the parties may not have signed the same counterpart. A facsimile or other copy of an executed counterpart hereof, such as an e-mailed PDF copy, shall have the same effect as an original.

H) No Presumptions . The parties to this Settlement Agreement acknowledge that they have read and understand this agreement and they have been represented by legal counsel in its negotiation and drafting, which has been a joint undertaking. No party shall be deemed to be the drafter of this Settlement Agreement, in full or in part, and there shall be no presumptions raised in relation to any drafting of this instrument.

I) Confidentiality . Except as may be otherwise required or compelled by law, all parties agree not disclose or publish, verbally, in writing or otherwise, to any person or entity any details regarding the negotiations leading up to the making of this Settlement Agreement, the consideration passing pursuant to this Settlement Agreement, or any other term or condition of this Settlement Agreement. The only statements that shall be made regarding the Litigation or the terms of this Settlement Agreement to any non-party to the Litigation shall be a statement to the effect that the Litigation and the underlying disputes have been resolved by agreement and are concluded. Notwithstanding the foregoing provisions of this paragraph 8(I), a corporate party to this Settlement Agreement shall be permitted to make otherwise prohibited disclosure to its outside lawyers and auditors, as well as internally on a strict business “need to know” basis only.

J) All Necessary Steps . The parties acknowledge and agree to take all necessary steps, including the execution of documents, to carry through and complete the exchange of consideration described in this Settlement Agreement.

K) Notices . All notices required hereunder shall be in writing and shall be delivered by facsimile, delivery service, or overnight delivery service, as well as by First Class mail, to the parties at their respective addresses set forth below. Notice shall be deemed given upon receipt.

L) Titles . The parties acknowledge and agree that the titles used in this Settlement Agreement are for informational purposes only and shall not be considered in construing the terms hereof.

IN WITNESS WHEREOF, the parties have executed this Settlement Agreement knowingly, voluntarily and of their own free will.