FORM
      OF INCENTIVE STOCK OPTION AGREEMENT

    


    OPTIONEE:

    OPTION
      NUMBER:

    DATE
      OF
      GRANT: 

    EXERCISE
      PRICE: 

    COVERED
      SHARES:

    


    O2DIESEL
      CORPORATION

    2004
      STOCK INCENTIVE PLAN

    


    INCENTIVE
      STOCK OPTION AGREEMENT

    


    1. Definitions.
      In this
      Agreement, capitalized terms used herein and not defined elsewhere herein shall
      have the following meanings:

    


    1.1 “Affiliate”
      means a corporation, partnership, business trust, limited liability company
      or
      other form of business organization at least a majority of the total combined
      voting power of all classes of stock or other equity interests of which is
      owned
      by the Company either directly or indirectly.

    


    1.2 “Agreement”
      means this Stock Option Agreement.

    


    1.3 “Board”
      means the Board of Directors of the Company.

    


    1.4 “Cause”
      means the Optionee’s (a) failure to substantially perform his duties (other than
      by reason of disability) with respect to the Company or any of its Affiliates,
      (b) engaging in conduct injurious to the Company or any of its Affiliates,
      (c) breach of fiduciary duty to the Company or any of its Affiliates, (d)
      dishonesty, fraud, alcohol or illegal drug abuse, or misconduct with respect
      to
      the business or affairs of the Company or any of its Affiliates,
      (e) willful violation of the policies of the Company or any of its
      Affiliates after receiving written notice of such violation, or (f) conviction
      of a felony or crime involving moral turpitude. All determinations of Cause
      hereunder shall be made by the Committee in its discretion and shall be binding
      for all purposes hereunder.

    


    1.5 “Change
      of Control” means, and shall be deemed to have occurred, if:

    


    (a) any
      Person, excluding employee benefit plans of the Company or any of its
      Affiliates, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and
      13d-5 under the Exchange Act, which Rules shall apply for purposes of this
      clause (a) whether or not the Company is subject to the Exchange Act), directly
      or indirectly, of Company securities representing fifty percent (50%) or more
      of
      the combined voting power of the Company’s then outstanding securities (“Voting
      Power”);

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) the
      Company consummates a merger, consolidation, share exchange, division or other
      reorganization or transaction of the Company (a “Fundamental Transaction”) with
      any other corporation, other than a Fundamental Transaction that results in
      the
      voting securities of the Company outstanding immediately prior thereto
      continuing to represent (either by remaining outstanding or by being converted
      into voting securities of the surviving entity) at least sixty percent (60%)
      of
      the combined Voting Power immediately after such Fundamental Transaction of
      (i)
      the Company’s outstanding securities, (ii) the surviving entity’s
      outstanding securities, or (iii) in the case of a division, the outstanding
      securities of each entity resulting from the division; or

    


    (c) the
      shareholders of the Company approve a plan of complete liquidation or winding-up
      of the Company or an agreement for the sale or disposition (in one transaction
      or a series of transactions) of all or substantially all of the Company’s
      assets; provided,
      however,
      that
      the term “Change of Control” does not include any transaction or series of
      transactions principally for bona fide equity financing purposes in which cash
      is received by the Company or indebtedness is cancelled or converted or a
      combination thereof, including but not limited to, a public offering of capital
      stock of the Company that is effected pursuant to a registration statement
      filed
      with, and declared effective by, the Securities and Exchange Commission under
      the Securities Act of 1933.

    


    1.6 “Code”
      means the Internal Revenue Code of 1986, as amended.

    


    1.7 “Committee”
      means the Compensation Committee of the Board or such other committee(s),
      subcommittee(s) or person(s) appointed by the Board to administer the Plan
      or to
      make and/or administer specific Awards hereunder. If no such appointment is
      in
      effect at any time, “Committee” shall mean the Board.

    


    1.8 “Common
      Stock” means the common stock, par value $0.0001 per share, of the
      Company.

    


    1.9 “Company”
      means O2Diesel Corporation, a Washington corporation, and any successor
      thereto.

    


    1.10 “Covered
      Shares” means the shares of Common Stock subject to the Option.

    


    1.11 “Date
      of
      Exercise” means the date on which the Company receives notice pursuant to
      Section 5.1 of the exercise, in whole or in part, of the
      Option.

    


    1.12 “Date
      of
      Expiration” means the date on which the Option shall expire, which shall be the
      earliest of the following times:

    


    (a) the
      date
      of the first notification to the Optionee that the Optionee’s Service is
      terminated by the Company or an Affiliate for Cause;

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) thirty
      days after termination of the Optionee’s Service for any reason other than by
      the Company or an Affiliate for Cause, Retirement, death or Disability;
      provided, however, that if the Optionee dies within thirty (30) days of such
      termination, the Option shall be exercisable for a period of one (1) year after
      such termination;

    


    (c) three
      years after termination of the Optionee’s Service with the Company or an
      Affiliate by reason of death, Disability or Retirement; or

    


    (d) ten
      years
      after the Date of Grant.

    


    1.13 “Date
      of
      Grant” means the date set forth at the beginning of this Agreement.

    


    1.14 “Disability”
      means total and permanent disability under Section 22(e)(3) of the Code or
      the
      Optionee’s becoming entitled to long-term disability benefits under the
      long-term disability plan or policy of the Company and/or its Affiliates that
      covers the Optionee.

    


    1.15 “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

    


    1.16 “Fair
      Market Value” means an amount equal to the then fair market value of a Share as
      determined by the Committee pursuant to a reasonable method adopted in good
      faith for such purpose, or, unless otherwise determined by the Committee, if
      the
      Common Stock is traded on a securities exchange or automated dealer quotation
      system, fair market value shall be the last sale price for a Share, as of the
      relevant date, on such securities exchange or automated dealer quotation system
      as reported by such source as the Committee may select.

    


    1.17 “Option”
      means the stock option granted to the Optionee in Section 2 of this
      Agreement.

    


    1.18 “Optionee”
      means the person identified on page 1 of this Agreement.

    


    1.19 “Exercise
      Price” means the dollar amount per share of Common Stock set forth on
      page 1 of this Agreement, as it may be adjusted from time to time pursuant
      to Section 4 hereof.

    


    1.20 “Person”
      means the term “person” within the meaning of Section 3(a)(9) of the Exchange
      Act, as modified and used in Sections 13(d)(3) and 14(d) thereof.

    


    1.21 “Plan”
      means the O2Diesel Corporation 2004 Stock Incentive Plan, as amended from time
      to time.

    


    1.22 “Retirement”
      means the Optionee’s termination of Service (other than for Cause) on or after
      attaining age 55 and completing ten years of Service.

    


    1.23 “Service”
      means, if the Optionee is (a) an employee of the Company and/or any of its
      Affiliates (as determined by the Committee in its discretion), the Optionee’s
      service as an employee of the Company and/or any of its Affiliates, (b) a member
      of the Board of Directors of the Company or any of its Affiliates but not an
      employee of the Company or any of its Affiliates (as determined by the Committee
      in its discretion), the Optionee’s service as a member of such Board of
      Directors, or (c) a consultant or independent contractor to the Company or
      any
      of its Affiliates (as determined by the Committee in its discretion) and is
      not
      described in the preceding clause (b), the Optionee’s service as a consultant or
      independent contractor to the Company and/or any of its Affiliates. The
      Optionee’s Service shall not be treated as having terminated if the capacity in
      which the Optionee provides Service, as described in the preceding sentence,
      changes, provided that the Optionee’s Service is continuous notwithstanding such
      change.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.24 “Unvested
      Shares” means Unvested Shares as defined in Section 3.3
      hereof.

    


    2. Grant
      of Option.
      Pursuant to the Plan and subject to the terms of this Agreement, the Company
      hereby grants to the Optionee, as of the Date of Grant, the Option to purchase
      from the Company that number of shares identified as the “Covered Shares” on
      page 1 of this Agreement, exercisable at the Exercise Price.

    


    3. Terms
      of the Option.

    


    3.1 Type
      of Option.
      The
      Option is intended to be an incentive stock option under Section 422 of the
      Code; provided, however, that to the extent that, during any calendar year,
      the
      Option becomes exercisable for the first time with respect to Shares having
      an
      aggregate fair market value in excess of the limit imposed by Section 422(d)
      of
      the Code or all or any portion of the Option does not otherwise qualify as
      an
      incentive stock option under Section 422 of the Code, (a) the Option shall
      be
      treated as a nonstatutory stock option and not as an incentive stock option,
      and
      (b) upon any exercise of the Option, the Optionee shall be required to designate
      the extent to which the exercise of the Option is with respect to that portion,
      if any, of the Option that is a nonstatutory stock option and that portion,
      if
      any, of the Option that is an incentive stock option. If, as of the same date,
      the Optionee exercises the Option with respect to a portion of the Option that
      is an incentive stock option and with respect to a portion of the Option that
      is
      a nonstatutory stock option, the Company shall issue separate certificates
      to
      the Optionee representing (i) those Shares that were acquired pursuant to the
      exercise of an incentive stock option (which Shares shall be identified on
      the
      Company’s stock transfer records as such), and (ii) those Shares that were
      acquired pursuant to the exercise of a nonstatutory stock option.

    


    3.2 Option
      Period; Exercisability.
      The
      Option may be exercised in whole shares during the period commencing on the
      Date
      of Grant and terminating on the Date of Expiration, as follows:

    


    (a) beginning
      on the first anniversary after the Date of Grant, the Option may be exercised
      as
      to a maximum of thirty-four percent (34%) of the Covered Shares;

    


    (b) beginning
      on the first day of each month thereafter, the Option may be exercised as to
      an
      additional sixteen and one-half percent (16.5%) of the Covered Shares until
      the
      Option is exercisable as to all of the Covered Shares.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Notwithstanding
      the foregoing, in the event of a Change of Control, or in the event of
      termination of the Optionee’s Service by reason of Disability, Retirement, or
      Death, the Option shall thereupon become exercisable at any time prior to the
      Date of Expiration, as to the full number of Covered Shares. In no event shall
      the number of Covered Shares as to which the Option is exercisable increase
      after termination of the Optionee’s Service. 

    


    3.3 Early
      Exercise.
      Notwithstanding the provisions of Section 3.2 of this Agreement, the Option
      may,
      at any time prior to the Date of Expiration, be exercised, in whole or in part,
      as to Covered Shares with respect to which the Option is not exercisable
      pursuant to the provisions of Section 3.2 of this Agreement (“Unvested Shares”)
      by delivering a written notice of exercise pursuant to Section 5.1 of this
      Agreement; provided, however, that as a condition to exercising the Option
      as to
      Unvested Shares, the Optionee shall execute a Restricted Stock Purchase
      Agreement substantially in the form attached hereto as Exhibit B, and the
      Unvested Shares as to which the Option is exercised shall be subject to the
      terms of such agreement. Notwithstanding
      the foregoing provision of this Section 3.3, the number of Unvested Shares
      as to
      which the Option is exercisable for the first time during any calendar year
      pursuant to this Section 3.3 shall be reduced (but not below zero) so that
      after
      taking into account the number of Covered Shares as to which the Option becomes
      exercisable pursuant to Section 3.2 hereof for the first time during the same
      calendar year does not result in the Option being treated as an option that
      is
      not an incentive stock option (within the meaning of Section 422 of the Code)
      with respect to any of the Unvested Shares as to which the Option would
      otherwise be exercisable pursuant to this Section 3.3 during that calendar
      year.
      In no event shall the number of Covered Shares as to which the Option becomes
      exercisable pursuant to Section 3.2 be reduced as the result of the preceding
      sentence. 

    


    3.4 Nontransferability.
      The
      Option is not transferable by the Optionee other than by will or by the laws
      of
      descent and distribution, and is exercisable, during the Optionee’s lifetime,
      only by the Optionee, or, in the event of the Optionee’s legal disability, by
      the Optionee’s legal representative.

    


    3.5 Payment
      of the Exercise Price.
      The
      Optionee, upon exercise, in whole or in part, of the Option, may pay the
      Exercise Price by any or all of the following means, either alone or in
      combination:

    


    (a) cash
      or
      check payable to the order of the Company; or

    


    (b) if,
      at
      the time of exercise, the Common Stock is listed for trading on a national
      securities exchange or automated dealer quotation system, delivery (either
      actual or constructive) of shares of unencumbered Common Stock (provided that
      such shares, if acquired under the Option or under any other option or award
      granted under the Plan or any other plan sponsored or mentioned by the Company,
      have been held by the Optionee for at least six months or such other period
      as
      determined by the Committee) that have an aggregate Fair Market Value on the
      Date of Exercise equal to that portion of the Exercise Price being paid by
      delivery of such shares; or

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c) if,
      at
      the time of exercise, the Common Stock is listed for trading on a national
      securities exchange or automated dealer quotation system, and in accordance
      with
      such rules as may be specified by the Committee, delivery to the Company of
      a
      properly executed exercise notice and irrevocable instructions to a registered
      securities broker promptly to deliver to the Company cash equal to the Exercise
      Price for that portion of the Option being exercised; or

    


    (d) with
      the
      approval of the Company (which approval may be withheld in the Company’s sole
      discretion), by delivery to the Company of a fully recourse promissory note
      executed by the Optionee evidencing the Optionee’s obligation to make future
      cash payment thereof and secured by a pledge of the shares of Common Stock
      received upon exercise of the Option, bearing interest at a rate fixed by the
      Committee and having such other terms and conditions as the Committee may
      specify in its discretion.

    


    4. Capital
      Adjustments.
      The
      number of Covered Shares as to which the Option has not been exercised, the
      Exercise Price, and the type of stock or other consideration to be received
      on
      exercise of the Option shall be subject to such adjustment or change, if any,
      as
      the Committee in its sole discretion deems appropriate to reflect such events
      as
      stock dividends, split-ups, spin-offs, recapitalizations, reclassifications,
      combinations or exchanges of shares, mergers, consolidations, liquidations,
      or
      the like, of or by the Company. Any adjustment determined to be appropriate
      by
      the Committee shall be conclusive and shall be binding on the
      Optionee.

    


    5. Exercise.

    


    5.1 Notice.
      The
      Option shall be exercised, in whole or in part (but in no event for less than
      one hundred (100) Covered Shares or the number of Covered Shares remaining
      subject to the Option, if less) by the delivery to the Company of written notice
      of such exercise, in such form as the Committee may from time to time prescribe,
      accompanied by full payment (or means of full payment permitted by
      Section 3.5 hereof) of the Exercise Price with respect to that portion of
      the Option being exercised. Until the Committee notifies the Optionee to the
      contrary, the form attached to this Agreement as Exhibit A shall be used to
      exercise the Option.

    


    5.2 Withholding.
      The
      Company’s obligation to issue or deliver shares of Common Stock upon the
      exercise of the Option (and, if shares of Common Stock are subject to a
      Restricted Stock Purchase Agreement substantially in the form attached as
      Exhibit B, the Company’s obligation to deliver shares released from the
      Company’s Repurchase Right (as defined in the Restricted Stock Purchase
      Agreement)) shall be subject to the satisfaction of any applicable federal,
      state and local tax withholding requirements. The Optionee may satisfy any
      such
      withholding obligation by any of the following means or by a combination of
      such
      means: (a) tendering a cash payment; (b) if at the time the withholding
      obligation arises, the Common Stock is listed for trading on a national
      securities exchange or automated dealer quotation system, authorizing the
      Company to withhold shares of Common Stock (other than Unvested Shares) from
      the
      shares otherwise issuable to the Optionee upon exercise of the Option; or (c)
      if
      at the time the withholding obligation arises, the Common Stock is listed for
      trading on a national securities exchange or automated dealer quotation system,
      delivering to the Company already-owned and unencumbered shares of Common Stock.
      For purposes of this Section 5.2, shares of Common Stock that are withheld
      or
      delivered to satisfy applicable withholding taxes shall be valued at their
      Fair
      Market Value on the date the withholding tax obligation arises, and in no event
      shall the aggregate Fair Market Value of the shares of Common Stock withheld
      and/or delivered pursuant to this Section 5.2 exceed the minimum amount of
      taxes
      required to be withheld in connection with exercise of the Option.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.3 Effect.
      The
      exercise, in whole or in part, of the Option shall cause a reduction in the
      number of Covered Shares as to which the Option may be exercised in an amount
      equal to the number of shares of Common Stock as to which the Option is
      exercised.

    


    6. Representations.
      The
      Optionee agrees that, upon the issuance of any shares of Common Stock upon
      the
      exercise of the Option, the Optionee will, upon the request of the Company,
      represent and warrant in writing that the Optionee (a) has received and
      reviewed a copy of the Plan; (b) is capable of evaluating the merits and
      risks of exercising the Option and acquiring the shares and able to bear the
      economic risks of such investment; (c) has made such investigation as he or
      she deems necessary and appropriate of the business and financial prospects
      of
      the Company and (d) is acquiring the shares for investment only and not
      with a view to resale or other distribution thereof. The Optionee shall make
      such other representations and warranties that the Committee may request for
      the
      purpose of complying with applicable law. 

    


    7. Transfer
      of Shares.
      The
      Optionee hereby agrees to notify the Company in writing within 30 days
      after the date of any disposition of shares of Common Stock acquired upon
      exercise of the Option within two (2) years after the Date of Grant or within
      one (1) year after such shares were transferred to the Optionee, which notice
      shall state the number of shares sold or transferred, the date the shares were
      sold or transferred, and the sale price. 

    


    8. Legends.
      The
      Optionee agrees that the certificates evidencing the shares of Common Stock
      issued upon exercise of the Option may include any legend which the Committee
      deems appropriate to reflect the transfer and other restrictions contained
      in
      the Plan, this Agreement, or to comply with applicable laws.

    


    9. Rights
      as Stockholder.
      The
      Optionee shall have no rights as a stockholder with respect to any shares of
      Common Stock subject to the Option until and unless a certificate or
      certificates representing such shares are issued to the Optionee pursuant to
      this Agreement.

    


    10. Service.
      Neither
      the grant of the Option evidenced by this Agreement nor any term or provision
      of
      this Agreement shall constitute or be evidence of any understanding, express
      or
      implied, on the part of the Company to employ or retain the Optionee for any
      period.

    


    11. Subject
      to the Plan.
      The
      Option evidenced by this Agreement and the exercise thereof are subject to
      the
      terms and conditions of the Plan, which is incorporated by reference and made
      a
      part hereof, but the terms of the Plan shall not be considered an enlargement
      of
      any rights or benefits under this Agreement. In addition, the Option is subject
      to any rules and regulations promulgated by the Committee.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    12. Governing
      Law.
      The
      validity, construction, interpretation and enforceability of this agreement
      shall be determined and governed by the laws of the State of Delaware without
      giving effect to the principles of conflicts of laws.

    


    13. Severability.
      If any
      provision of this Agreement shall be held to be invalid, illegal or
      unenforceable in any material respect, such provision shall be replaced with
      a
      provision that is as close as possible in effect to such invalid, illegal or
      unenforceable provision, and still be valid, legal and enforceable, and the
      validity, legality and enforceability of the remainder of this Agreement shall
      not in any way be affected or impaired thereby.

    


    IN
      WITNESS WHEREOF, the Company has caused this Agreement to be signed on its
      behalf by the undersigned, thereunto duly authorized, effective as of the Date
      of Grant.

     

    
      	
              ATTEST:

               

               

               

              ____________________________

            	
              O2Diesel Corporation

               

               

               

              By: ____________________________

            


    

    
Accepted
      and agreed to as of the Date of Grant:

    



    
      	
               

            	
              _______________________________

              Optionee

            




    
      
         

      

      
         

        
          

        

      

      
         

      

    


    “EXHIBIT
      A”

    EXERCISE
      OF OPTION

    


    


    Board
      of
      Directors

    O2Diesel
      Corporation

    200
      Executive Drive

    Newark,
      Delaware 19702

    


    Gentlemen:

    


    The
      undersigned, the Optionee under the Stock Option Agreement (“Agreement”)
      identified as Option No. ____ granted pursuant to the O2Diesel Corporation
      2004 Stock Incentive Plan, hereby irrevocably elects to exercise the Option
      granted in the Agreement to purchase ___ shares of Common Stock of O2Diesel
      Corporation, par value $0.0001 per share (the “Option Shares”), and herewith
      makes payment of $   
      in the
      form of (check all that apply and if more than one is checked, indicate the
      amount to be paid by each payment method):

    


    
      	
              [
                ]
                Cash or Check:

            	_______________
	 	 
	
              [
                ]
                Common Stock:

            	_______________
	 	 
	
              [
                ]
                Brokerage Transaction:

            	_______________


    

    


    The
      undersigned hereby elects to satisfy applicable withholding requirements by
      (check all that apply and, if more than one is checked, indicate the amount
      to
      be withheld by each withholding method):

    


    
      	
              [
                ]
                Cash or Check:

            	_______________
	 	 
	
              [
                ]
                Withholding of Common Stock: 

            	_______________
	 	 
	
              [
                ]
                Delivery of Common Stock:

            	_______________


    

    


     

    If
      applicable pursuant to Section 3.1 of the Agreement, Optionee elects that
      __________ of the Option Shares shall be treated as being acquired pursuant
      to
      the exercise of an incentive stock option and _______ of the Option shares
      shall
      be treated as acquired pursuant to the exercise of a nonqualified stock option
      that is not an incentive stock option. 

    


    Capitalized
      terms used herein but not defined shall have the meanings ascribed to such
      terms
      in the Agreement:

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The
      undersigned hereby represents as follows:

    


    1. The
      Optionee has received and reviewed a copy of the Plan and the statutory
      prospectus relating to the Plan.

    
 

    
      	
              Date: __________________

            	
              ________________________________

              (Signature
                of Optionee)

            




    


    Date
      received by O2Diesel Corporation: __________________

    


    Received
      by: ________________________

    


    Note:
      Shares of Common Stock being delivered in payment of all or any part of the
      Exercise Price must be represented by certificates registered in the name of
      the
      Optionee and duly endorsed by the Optionee and by each and every other co-owner
      in whose name the shares may also be registered.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    EXHIBIT
      B

    


    RESTRICTED
      STOCK PURCHASE AGREEMENT

    


    THIS
      AGREEMENT is made between _____________ (“Purchaser”) and O2Diesel
      Corporation (the “Company”), as of __________________, 200_.

    


    RECITALS

    


    WHEREAS,
      pursuant to the exercise of the Option granted to Purchaser under the O2Diesel
      Corporation 2004 Stock Incentive Plan and pursuant to the Stock Option Agreement
      (the “Option Agreement”) dated [ , 2006] by and between the Company and
      Purchaser with respect to such grant, which Option Agreement is hereby
      incorporated by reference, Purchaser has elected to exercise the Option as
      to
      __________ of the Unvested Shares (the “Covered Unvested Shares”) pursuant to
      Section 3.3 of the Option Agreement.

    


    WHEREAS,
      as required by the Option Agreement, as a condition to Purchaser’s election to
      exercise the Option with respect to Unvested Shares, Purchaser must execute
      this
      Restricted Stock Purchase Agreement, which sets forth the rights and obligations
      of the parties with respect to Unvested Shares acquired upon exercise of the
      Option.

    


    NOW,
      THEREFORE, in consideration of the covenants and agreements herein contained
      and
      for other valuable consideration, the receipt and sufficiency of which are
      hereby acknowledged, the parties hereto hereby agree as follows:

    


    1. Capitalized
      Terms.
      Capitalized terms used herein and not defined shall have the meanings ascribed
      to such terms in the Option Agreement.

    


    2. Issuance
      of Shares.
      Upon
      exercise of the Option with respect to the Covered Unvested Shares, such Covered
      Unvested Shares shall be issued in the name of the Purchaser and deposited
      with
      the Company together with a stock assignment duly endorsed in blank,
      substantially in the form attached hereto as Attachment -1.
      

    


    3. Repurchase
      Right.

    


    3.1 Upon
      the
      termination of the Optionee’s Service with the Company and its Affiliates for
      any reason, including for Cause, death, Retirement, or Disability, the Company
      shall have the right and option to purchase from Purchaser, or Purchaser’s
      personal representative, as the case may be, all of the Purchaser’s Covered
      Unvested Shares (other than any such shares that have been released from the
      Company’s Repurchase Right pursuant to Section 3.4 hereof) as of the date on
      which the Optionee’s Service terminates at the Exercise Price paid by the
      Purchaser for such Covered Unvested Shares in connection with the exercise
      of
      the Option (the “Repurchase Right”).

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.2 The
      Company may exercise its Repurchase Right by delivering personally or by
      certified mail, to Purchaser or Purchaser’s legal representative, as the case
      may be, within ninety (90) days of the date on which the Optionee’s Service
      terminates, a notice in writing indicating the Company’s intention to exercise
      the Repurchase Right and setting forth a date for closing not later than thirty
      (30) days from the mailing of such notice. The closing shall take place at
      such
      location as may be designated by the Company. At the closing, the Company shall
      deliver the purchase price for the Covered Unvested Shares being purchased
      by
      the Company, and such Covered Unvested Shares shall be transferred from the
      Purchaser to the Company.

    


    3.3 If
      the
      Company does not elect to exercise the Repurchase Right conferred above by
      giving the requisite notice within ninety (90) days following the date on which
      the Optionee’s Service with the Company or an Affiliate terminates, the
      Repurchase Right shall terminate.

    


    3.4 One
      hundred percent (100%) of the Covered Unvested Shares shall initially be subject
      to the Repurchase Right. The Covered Unvested Shares shall be released from
      the
      Repurchase Right at the time that the Option would have first become exercisable
      as to such shares, not taking into account Section 3.3 of the Option Agreement.
      If this Agreement covers less than all of the Unvested Shares covered by the
      Option as of the date of this Agreement, the Covered Unvested Shares shall
      be
      deemed to be the first Covered Shares as to which the Option becomes
      exercisable. Fractional Shares shall be rounded to the nearest whole
      Share.

    


    3.5 Upon
      written request of Purchaser, but no more than once per calendar year, unless
      the Company’s Repurchase Right has been exercised, the Company shall deliver to
      Purchaser a certificate or certificates representing such number of shares
      of
      Common Stock as have been released from the Company’s Repurchase Right pursuant
      to Section 3.4 hereof and not theretofore delivered to the Optionee, which
      shares of Common Stock shall remain subject to the terms of the Option
      Agreement. Within one hundred twenty (120) days of the date on which the
      Optionee’s Service terminates, the Company shall deliver to Purchaser a
      certificate or certificates representing the aggregate number of shares held
      or
      issued pursuant to this Agreement and not purchased by the Company or its
      assignees pursuant to exercise of the Company’s Repurchase Right, which shares
      shall remain subject to the terms of the Option Agreement.

    


    4. Ownership,
      Voting Rights, Duties.
      This
      Agreement shall not affect in any way the ownership, voting rights or other
      rights or duties of Purchaser, except as specifically provided herein.


    


    5. Legends.
      The
      share certificate evidencing the Covered Unvested Shares issued hereunder shall
      be endorsed with the following legend (in addition to any legends required
      under
      the Option Agreement and applicable state securities laws):

    


    THE
      SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
      UPON
      TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN A RESTRICTED STOCK PURCHASE
      AGREEMENT BETWEEN O2DIESEL CORPORATION AND THE STOCKHOLDER, A COPY OF WHICH
      IS
      ON FILE WITH THE SECRETARY OF THE COMPANY.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6. Capital
      Events.
      

    


    6.1 The
      number of Covered Unvested Shares and the Company’s purchase price for the
      Covered Unvested Shares pursuant to the Repurchase Right shall be subject to
      such equitable adjustment or change, as determined by the Board, to reflect
      such
      events as stock dividends, stock splits, recapitalizations, mergers,
      consolidations or reorganizations of or by the Company. 

    


    6.2 In
      the
      event of any stock dividend, stock split, recapitalization, or other change
      affecting the Common Stock as a class that is effected without receipt of
      consideration, any new, substituted, or additional securities or other property
      that is by reason of such event distributed with respect to the Covered Unvested
      Shares (other than any such shares that have been released from the Company’s
      Repurchase Right pursuant to Section 3.4 hereof), Shares shall be
      immediately delivered to the Company and shall be covered by the Repurchase
      Right, as adjusted or changed pursuant to Section 6.1 hereof.

    


    7. Notices.
      Notices
      required hereunder shall be given in person or by registered mail to the address
      of Purchaser shown on the records of the Company, and to the Company at its
      principal executive office.

    


    8. Survival
      of Terms.
      This
      Agreement shall apply to and bind Purchaser and the Company and their respective
      permitted assignees and transferees, heirs, legatees, executors, administrators
      and legal successors.

    


    9. Section
      83(b) Election.
      Purchaser represents that Purchaser has consulted any tax advisor(s) Purchaser
      deems advisable in connection with the purchase of the Unvested Shares or the
      filing of the election under Section 83(b) of the Code and similar tax
      provisions under State law) and agrees that Purchaser is (a) solely responsible
      for filing any such election(s) and (b) will promptly provide the Company with
      a
      copy of any such election that is filed. Not later than ten days after filing
      an
      election under Section 83(b) of the Code with respect to Unvested Shares,
      Purchaser shall provide a copy of such election to the Committee and shall
      make
      arrangements satisfactory to the Company, in accordance with Section 5.2 of
      the
      Option Agreement, for the satisfaction of any applicable tax withholding
      requirements arising from the filing of such election.

    


    10. Representations.
      Purchaser has reviewed with Purchaser’s own tax advisors the federal, state,
      local and foreign tax consequences of this investment and the transactions
      contemplated by this Agreement. Purchaser is relying solely on such advisors
      and
      not on any statements or representations of the Company or any of its agents.
      Purchaser understands that Purchaser (and not the Company) shall be responsible
      for Purchaser’s own tax liability that may arise as a result of this investment
      or the transactions contemplated by this Agreement. Purchaser acknowledges
      that
      it is Purchaser’s sole responsibility, and not the Company’s, to file timely the
      election under Section 83(b).

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    11. Binding
      Effect.
      This
      Agreement shall be binding upon the heirs, executors, administrators, successors
      and permitted assigns of the parties hereto.

    


    12. Governing
      Law.
      The
      validity, construction, interpretation and enforceability of this Restricted
      Stock Purchase Agreement shall be determined and governed by the laws of the
      State of Delaware without giving effect to principles of conflicts of law.
      

    


    13. Severability.
      If any
      provision of this Agreement shall be held to be invalid, illegal or
      unenforceable in any material respect, such provision shall be replaced with
      a
      provision that is as close as possible in effect to such invalid, illegal or
      unenforceable provision, and still be valid, legal and enforceable, and the
      validity, legality and enforceability of the remainder of this Agreement shall
      not in any way be affected or impaired thereby.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth
      above.

    
 

    
      	 	
              O2Diesel
                Corporation

              


              


              By:
                ________________________________

              


              Title:
                _______________________________

              


              


              


              PURCHASER

              


              ____________________________________

              [Name]

              


              Address:

              ____________________________________

              


              ____________________________________

            


    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    ATTACHMENT
      1

    to
      Restricted Stock Purchase Agreement

    


    ASSIGNMENT
      SEPARATE FROM CERTIFICATE

    


    FOR
      VALUE
      RECEIVED, I, _____________________, hereby sell, assign, and transfer unto
      ____________________ (________) shares of the Common Stock of O2Diesel
      Corporation standing in my name of the books of said corporation represented
      by
      Certificate No. ____ herewith and do hereby irrevocably constitute and appoint
      __________________ to transfer the said stock on the books of the within named
      corporation with full power of substitution in the premises. 

    


    This
      Stock Assignment may be used only in accordance with the Restricted Stock
      Purchase Agreement between O2Diesel Corporation and the undersigned dated
      ______________.

    
 

    
      	
              Dated:
                _______________

            	
              Signature:
                ______________________________

              Name

            


    

     

    


    INSTRUCTIONS: Please
      do not fill in any blanks other than the signature line. The purpose of this
      assignment is to enable the Company to exercise the Repurchase Right, as set
      forth in the Restricted Stock Purchase Agreement, without requiring additional
      signatures on the part of the Purchaser.