Exhibit 10.3
                                    AGREEMENT


Dated:            Effective as of March 31, 2004

Between:          Daniel M. Smith ("Smith")

And:              California Clean Air, Inc. ("Company")

         WHEREAS,  Smith has  advanced  certain  operating  funds to the Company
which,  as of the  date of this  Agreement,  total in the  aggregate  the sum of
$204,048 ("Sums Advanced")

         WHEREAS,  Smith and  Company  desire to set forth their  agreement  and
understanding  with  respect  to the right of Smith to demand  repayment  by the
Company of the Sums Advanced.

         NOW THEREFORE, IT IS AGREED AS FOLLOWS:

         1. The Sums Advanced  shall be considered a non- interest  bearing loan
by Smith to the Company which shall be repaid on demand.

         2. Smith agrees not to demand repayment of the Sums Advanced until July
1, 2005, after which date Smith shall be entitled to demand repayment,  in whole
or in part, of the Sums Advanced.

         3. The Company  shall make  payment to Smith  within five (5)  business
days after receipt from Smith of written demand for payment,  which demand shall
set forth the amount to be repaid.

         4.  In the  event  that  Smith  shall  be  required  to  undertake  any
collection  action  against the Company to recover any amounts owing  hereunder,
Smith shall be  entitled to the  recovery  of his  collection  costs,  including
reasonable attorney's fees.

         5. The Agreement  shall be governed by the laws of the State of Oregon.
This Agreement  represents the entire agreement and understanding of the parties
with respect to its subject matter and  supercedes any and all prior  agreements
and  understandings,  written or oral with respect to the subject matter of this
Agreement.  This Agreement shall be binding on the respective  heirs,  legatees,
executors, administrators, successors and assigns of the parties.

         WHEREAS,  this Agreement is deemed effective as of the date first above
written.

CALIFORNIA CLEAN AIR, INC.

By: /s/ STEPHEN D. WILSON                                /s/ DANIEL M. SMITH
     Stephen D. Wilson, President                        Daniel M. Smith