SEPARATION AGREEMENT

This Separation Agreement (the “Agreement”), made and entered into as of the
31st day of July 2007, by and between 02Diesel Corporation, a Delaware
corporation (the “Company”), and Richard J. Roger (the “Executive”).

WITNESSETH
 
WHEREAS, the Executive has been employed by the Company since July 1, 2005 as
the Chief Operating Officer pursuant to an Employment Agreement by and between
Executive and the Company, dated the 9th day of June 2005, (the “Employment
Agreement”); and
 
WHEREAS, the Company desires to terminate Executive’s employment without Cause
in accordance with Section 6.2(b) of the Employment Agreement;

WHEREAS, the Company and Executive have determined that it is in their
respective best interest to enter into this Agreement on the terms and
conditions as set forth herein.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1. Termination of Employment. Executive’s employment with the Company is
terminated by the Company without cause effective July 31, 2007 (the
“Termination Date”). Such termination will include termination from all
positions Executive may hold as an employee, officer, director, plan
administrator or trustee.

2. Restricted Stock. As of the Termination Date 166,667 shares of Company
Restricted Stock granted to Executive will vest and as of July 31, 2008 (or an
earlier date if Executive and the Company agree), an additional 166,666 shares
of Company Restricted Stock granted to the Executive will vest. Executive is
responsible for payment of any taxes that arise from the vesting of the Company
Restricted Stock.

3. Stock Options. The Options awarded Executive to purchase 1,450,000 shares of
Company Stock will have fully vested as of the Termination Date and Executive
will have thirty (30) days from the Termination Date to exercise the Options to
purchase all or less than all of the 1,450,000 shares of Company Stock. Thirty
(30) days after the Termination Date the Options, to the extent unexercised,
will expire.

4. Restrictions on Transfer of Company Stock. Executive agrees not to sell,
transfer, assign, pledge, encumber or otherwise divest himself of ownership or
control of all or any part of his Company stock for a period of one year from
the effective date of this Agreement, without the consent of the Company.

5. Severance Payments and Benefits. For the one year period following the
Termination Date, Company will pay Executive his current annual Base Salary,
less statutory deductions and withholdings, payable in accordance with the
Company’s normal payroll practices and Executive shall continue to receive
family medical and dental coverage at the Company’s expense. As soon as
reasonably practicable following the Termination Date and in accordance with the
Company’s normal payroll practices, Company will pay Executive for one week’s
vacation.

 
 

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6. Transition Services. Executive will make himself available to the Company for
up to a total of 20 business days and will be reasonably available by telephone
as needed, at no additional cost to the Company, to assist with the transition
of his responsibilities and relationships to others designated by the Company.

7. Continuing Obligations. Executive acknowledges that, except as expressly
modified by this Agreement, all obligations of Executive under the provisions of
the Employment Agreement, including but not limited to, the return of Company
property, the protection of Confidential Information (as defined in the
Employment Agreement), inventions discovered by Executive, non-competition and
non-solicitation, and non-disparagement, remain in effect following the
termination of Executive’s employment, and that the Executive will comply with
those provisions.

8. General Release. Executive hereby expressly waives, releases, acquits and
forever discharges the Company and its divisions, subsidiaries, affiliates,
parents, related entities, partners, officers, directors, shareholders,
investors, executives, managers, employees, agents, attorneys, representatives,
successors and assigns (hereinafter collectively referred to as “Releases”),
from any and all claims, demands, and causes of action which Executive has or
claims to have, whether known or unknown, of whatever nature, which exist or may
exist on Executive’s behalf from the beginning of time up to and including the
date of this Agreement. As used in this paragraph, “claims,” “demands,” and
“causes of action” include, but are not limited to, claims based on contract,
whether express or implied, defamation, wrongful termination, estoppels, equity,
tort, retaliation, intellectual property, personal injury, spoliation of
evidence, emotional distress, public policy, wage and hour law, statute or
common law, claims for severance pay, claims related to stock options and/or
fringe benefits, claims for attorneys’ fees, vacation pay, debts, accounts,
compensatory damages, punitive or exemplary damages, liquidated damages, and any
and all claims arising under any federal, state, or local statute, law, or
ordinance prohibiting discrimination on account of race, color, sex, age,
religion, sexual orientation, disability or national origin, including but not
limited to, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964 as amended, the Americans with Disabilities Act, the Family
and Medical Leave Act or the Employee Retirement Income Security Act.

9. Consideration Period. Executive acknowledges that he has been provided with a
period of twenty-one (21) days to consider the terms of the Company’s offer and
that this Agreement reflects negotiated changes. Executive agrees that any
changes to the offer, whether material or immaterial, will not restart the
running of the 21-day period.

10. Revocation Period. Executive acknowledges that he shall have seven (7) days
after signing this Agreement to revoke it if he chooses to do so.

 
 

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11. Effective Date. This Agreement shall take effect on the first business day
following the expiration of the Revocation Period, provided that Executive
chooses not to revoke it (“Effective Date”).

12. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

13. Headings. The headings contained in this Agreement are not a part of the
Agreement and are included solely for ease of reference.

14. Integration and Modification. Executive declares and represents that no
promise or agreement has been made to him other than those expressed herein.
Except as stated herein and in the Employment Agreement (as modified hereby),
this Agreement and the Employment Agreement constitute the entire agreement of
the parties and supersedes all prior understandings, whether oral or written,
between them. Any modification of this Agreement must be made in writing and
signed by all parties.

15. Severability. If any provision of this Agreement is or shall be declared
invalid or unenforceable by a court of competent jurisdiction, the remaining
provisions shall not be affected thereby and shall remain in full force and
effect.

16. Governing Law. Except to the extent any such laws are preempted by Federal
law, the parties agree that the terms of this Agreement shall be governed by the
laws of the State of Delaware without giving effect to the choice of laws
principles of any state, and that either party may pursue its or his respective
rights hereunder in any court of competent jurisdiction.

IN WITNESS WHEREOF, and with the intention of being legally bound hereby, the
parties have executed this Agreement on the dates noted below.
 
 
/s/ David H. Shipman                                 
Witness
 
/s/ Richard J. Roger                                  
Richard J. Roger
Date: August 1, 2007

O2 DIESEL CORPORATION

BY: /s/ Alan Rae                                       
Name: Alan Rae
Title:  Chief Executive Officer
Date: August 1, 2007

 
 
 

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