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. 

    


    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    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