Document:

exv10w1

 

Exhibit 10.1

Common Stock and Warrant Purchase Agreement

     This Common Stock and Warrant Purchase Agreement (this “Agreement”) is made as of October 28,
2005, by and among O2Diesel Corporation, a Delaware corporation (the “Company”), and Abengoa
Bioenergy R&D, Inc., a Missouri corporation (the “Purchaser”) (the Company and the Purchaser each a
“Party” and collectively the “Parties”).

     Whereas, Purchaser desires to purchase, and Company desires to sell, a certain number of
shares of common stock of the Company and warrants for a certain number of additional shares of
common stock of the Company, with a par value of $0.0001 per share, for the consideration and on
the terms set forth in this Agreement;

     Now, therefore, in consideration of the mutual promises and covenants herein, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:

1. Authorization and Sale of Common Stock and Warrants

     1.1 Authorization of Common Stock and Warrants. The Company has authorized the sale and
issuance to the Purchaser of 6,419,840 shares (the “Shares”) of its Common Stock, par value $
0.0001 per share (the “Common Stock”), and warrants to purchase 2,853,262 shares of Common Stock
(the “Warrants”), such Warrants having the terms set forth in the form attached hereto as Exhibit
A. The Shares and Warrants to be purchased hereunder are referred to collectively as the “Units”,
and a single “Unit” shall consist of one Share and a Warrant to purchase 0.44 Shares. [Note: The
number of shares and warrants will be determined on the day prior to the signing of this
agreement.]

     1.2 Sale and Issuance of Units. Subject to the terms and conditions hereof, the Company will
issue and sell to the Purchaser and the Purchaser will buy from the Company 6,419,840 Units at a
per Unit purchase price of $0.564 (the “Per Unit Price”), and at the aggregate purchase price of
€3,000,000 (the “Purchase Price”).

     1.3 Assignment of Shares. Purchaser shall have the right to assign the Units to an affiliate
at its sole discretion. However, such assignment of Units shall not affect any other rights or
obligations of the Parties under this Agreement or any other agreement between the Parties.

     1.4 Registration. The Company agrees to include the Shares in the first registration of its
shares it undertakes at any time commencing at least one year after Closing.

2. Closing Date; Delivery of this Agreement

     2.1
Closing Date. It is anticipated that the purchase and sale of the Units hereunder shall be consummated at a
closing (the “Closing”) held at the offices of Arnold & Porter LLP, 1600 Tysons Boulevard, Suite
900, McLean, VA 22122 on December 16, 2005, at 10:00 a.m., local time, or at such other date, time
and place upon which the Company and the Purchaser shall agree (the date and time of the Closing is
hereinafter referred to as the “Closing Date”).

 

 

     2.2 Delivery and Payment. At the Closing, the Company will deliver to the Purchaser a
certificate or certificates, registered in the Purchaser’s name, representing the Shares and
Warrants to be purchased by the Purchaser at the Closing, against payment of the Purchase Price
therefor, by wire transfer per the Company’s instructions.

3. Representations and Warranties of the Company

     The Company represents and warrants to the Purchaser that, as of the Closing Date:

     3.1 Organization and Standing. The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing (or the local law equivalent) under, and by virtue
of, the laws of the jurisdiction of its incorporation. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, to sell and to issue the Units
hereunder, and to issue the shares of Common Stock issuable upon exercise of the Warrants.

     3.2 Disclosure. The Disclosure Documents (as hereinafter defined) are true, correct and
complete in all material respects, and do not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading. Since the respective
dates as of which information was given in the Disclosure Documents, except as otherwise stated
therein, there has been no material adverse change in the financial condition, or in the results of
operations or affairs of the Company. There is no particular fact, event or other information of
which the Company has knowledge that has not been disclosed by the Company in writing to the
Purchaser that could reasonably be expected to have the effect of preventing, delaying or making
illegal the Closing under this Agreement.

     3.3 Litigation. There is no action, suit, proceeding or dispute pending or, to Company’s
knowledge, threatened against Company before or by any government authority that could reasonably
be expected to (whether individually or when aggregated with other actions, suits or proceedings)
have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated in this Agreement.

     3.4 Consents and Approvals; No Violations. No filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Authority is necessary or appropriate for
the execution and delivery by Seller of this Agreement or the consummation by the Company of the
transactions contemplated hereby. Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) violate the certificate of incorporation or bylaws (or
similar governing documents) of the Company, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company is a party or by which the Company or any of its
properties or assets may be bound or (iii) violate any Law applicable to the Company or any of its
properties or assets.

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     3.5 No Default. The Company is not in violation of any term of (i) any agreement or
instrument related to indebtedness for borrowed money or any other agreement to which it is a party
or by which it is bound, or (ii) any Law, that in the case or either (i) or (ii) above, would
materially and adversely affect Company or any of its properties or assets or the ability of
Company to consummate and perform the transactions contemplated in this Agreement.

     3.6 Governmental Actions. Other than the AMEX notice of noncompliance as contemplated by
Section 3.8 below, the Company has not received, at any time, any notice or other communication
(whether oral or written) from any governmental authority or any other Third Party regarding any
actual, alleged, possible, or potential violation of, or failure to comply with, any term or
requirement of any order, statute or regulation to which the Company, or any of the assets owned or
used by the Company, are or have been subject.

     3.7 Solvency. The Company is solvent and has assets having a value both at fair valuation and
at present fair saleable value greater than the amount required to pay its debts as they become
due. The Company does not intend to incur debts beyond its ability to pay such debts as they
become due. The Company will not be rendered insolvent by the execution, delivery and performance
of its obligations under this Agreement or any other related agreements between the Parties. The
Company does not intend to hinder, delay or defraud its creditors by or through the execution,
delivery and performance of this Agreement or any other agreement between the Parties.

     3.8 AMEX Compliance. Nothing in this Agreement or the Commercial Agreement violates the AMEX
listing requirements or the terms of the compliance plan that the Company has submitted to AMEX.
The Company will use its best efforts to comply with AMEX listing requirements and the terms of the
Company’s compliance plan.

     3.9 Shares Duly Authorized. The Units have been duly and validly authorized and, when issued,
will be duly and validly issued, fully paid and non-assessable, issued in compliance with all
applicable federal and state laws concerning the issuance of securities and free of preemptive
rights.

     3.10 Availability of Rule 144. Rule 144 (as referenced in Section 4.3 below) is available and
is not precluded due to any action or omission of the Company.

4. Representations and Warranties of the Purchaser

     The Purchaser hereby represents and warrants to the Company as follows:

     4.1 Preexisting Relationship with Company; Business and Financial Experience. By reason of its
business or financial experience or the business or financial experience of its professional
advisors who are unaffiliated with the Company and who are not compensated by the Company, the
Purchaser has the capacity to protect its own interests in connection with the purchase of the
Units. Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933, as amended (“Securities Act”).

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     4.2 Investment Intent; Blue Sky. It is acquiring the Units for investment for its own
account, not as a nominee or agent, and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the issuance of the Units and the Shares of Common Stock
issuable upon exercise of the Warrants have not been, and may not be, registered under the
Securities Act by reason of a specific exemption from the registration provisions of the Securities
Act, the availability of which depends upon, among other things, the bona fide nature of the
Purchaser’s investment intent and the accuracy of the Purchaser’s representations as expressed
herein. The Purchaser’s address set forth herein represents the Purchaser’s true and correct state
of domicile, upon which the Company may rely for the purpose of complying with applicable “Blue
Sky” laws.

     4.3 Rule 144. It acknowledges that the Units and the shares of Common Stock issuable upon
exercise of the Warrants must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. It is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less than one year after a
party has purchased and paid for the security to be sold, the sale being effected through a
“broker’s transaction” or in a transaction directly with a “market maker,” and the number of shares
being sold during any three-month period not exceeding specified limitations.

     4.4 Restrictions on Transfer; Restrictive Legends. It understands that the transfer of the
Units and the shares of Common Stock issuable upon exercise of the Warrants is restricted by
applicable state and Federal securities laws and by the provisions of this Agreement, and that the
certificates representing the Shares, the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants will be imprinted with legends in the following form restricting transfer
except in compliance therewith:

The securities represented by this certificate have been acquired by the holder for
its own account, for investment purposes and not with a view to the distribution of
such securities. These securities have not been registered under the securities act
of 1933, as amended (the “act”), or any applicable state securities laws and may not
be sold or otherwise transferred except (i) pursuant to an effective registration
statement under the act and compliance with such state securities laws, (ii) in
compliance with Rule 144 under the act and applicable state securities laws, or
(iii) upon the delivery to O2Diesel Corporation (the “Company”) of an opinion of
counsel or other evidence satisfactory to the company that such registration and/ or
compliance is not required.

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     4.5 Access to Data; Disclosure Documents. Purchaser acknowledges that it has, to its
knowledge, received all such information as Purchaser deems necessary and appropriate to enable it
to evaluate the financial risk inherent in making an investment in the Units, including but not
limited to the Company’s reports filed under the Securities Exchange Act of 1934, as amended, with
the SEC (“Disclosure Documents”). Purchaser further acknowledges that Purchaser has to its
knowledge (a) received satisfactory and complete information concerning the business and financial
condition of the Company in response to all inquiries in respect thereof, and (b) been given the
opportunity to meet with management of the Company. Purchaser has relied solely upon the Disclosure
Documents, advice of its representatives, if any, and independent investigations made by the
Purchaser and/or its representatives, if any, in making the decision to purchase the Units and
acknowledges that no representations or agreements other than those set forth in this Agreement
have been made to the Purchaser in respect thereto.

     4.6 Authorization. All action on the part of the Purchaser’s partners, members, board of
directors, and stockholders, as applicable, necessary for the authorization, execution, delivery
and performance of this Agreement by the Purchaser, the purchase of and payment for the Units and
the performance of all of the Purchaser’s obligations under this Agreement have been taken or will
be taken prior to the Closing.

5. Covenants of the Company.

     5.1 Board Representation. For so long as the Commercial Agreement, by and between the
Company and the Purchaser, dated October 28, 2005 (“Commercial Agreement”) is in effect, the Board
of Directors of the Company shall undertake using its best efforts to secure for a candidate put
forward by the Purchaser a seat on the Board of Directors of the Company; provided, however, that
such candidate must meet all the necessary criteria required by the American Stock Exchange (the
“AMEX”) and the SEC to qualify as “independent director” and must otherwise be reasonably
acceptable to the Nominating Committee of the Board of Directors of the Company. The Company and
the Company’s Board of Directors shall provide the candidate with such reasonable support as is
normally afforded to candidates recommended to shareholders. The Company and its Board of
Directors will undertake to create an opening on the Board of Directors for Purchaser’s candidate
prior to the next director elections being held.

     5.2 Creation of Individual Account. Prior to Closing, the Company shall open an individual,
interest-bearing account in the name of its subsidiary, O2Diesel Europe, with which to receive the
Purchaser’s wired funds on the Closing Date. This account shall be used exclusively for funds
received from Purchaser in accordance with the terms of the Commercial Agreement.

     5.3 AMEX Listing. The Company shall have the Shares, Warrants and shares upon exercise of the
Warrant to be issued to the Purchaser under this Agreement authorized and approved by AMEX for
listing on AMEX, subject to official notice of issuance.

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6. Conditions to Closing of the Purchaser

     The Purchaser’s obligation to purchase the Units is, unless waived in writing by the
Purchaser, subject to the fulfillment as of the date of Closing of the following conditions:

     6.1 Representations and Warranties Correct. The representations and warranties made by the
Company in Section 3 hereof must have been accurate in all material respects as of the date of this
Agreement and must be true and correct in all material respects as of the Closing Date as if made
on the Closing Date.

     6.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be
performed or complied with by the Company on or prior to the Closing Date shall have been performed
or complied with.

     6.3 Listing. The Shares to be issued to the Purchaser under this Agreement shall have been
authorized for listing on AMEX, subject to official notice of issuance.

     6.4 Compliance Certificate. The Company shall have delivered to the Purchaser a certificate
of the Company, executed by the Chief Executive Officer of the Company, dated as of the date of the
Closing and certifying to the fulfillment of the conditions specified in Sections 6.1 and 6.2 of
this Agreement.

     6.5 Execution of Commercial Agreement. The Company shall have delivered to the Purchaser the
Commercial Agreement, executed by the Chief Executive Officer of the Company.

     6.6 No Proceedings. Since the date of this Agreement, there must not have been commenced or
threatened against the Company, or against any affiliate of the Company, any proceeding (i)
involving the dissolution, insolvency or bankruptcy of the Company, or (ii) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with any of the
transactions contemplated in this Agreement.

     6.7 No Prohibition. Neither the consummation nor the performance of any of the transactions
contemplated in this Agreement will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material violation of, or cause
Purchaser or any affiliate of Purchaser to suffer any material adverse consequence under any
applicable law, regulation, order, or other prohibition that has been published, introduced, or
otherwise proposed by or before any governmental entity.

     7. Conditions to Closing of the Company

     The Company’s obligation to sell and issue the Units is, unless waived in writing by the
Company, subject to the fulfillment as of the date of Closing of the following conditions:

     7.1 Representations and Warranties Correct. The representations made in Section 4 hereof by
the Purchaser shall be true and correct in all material respects as of the date of Closing.

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     7.2 Listing. The Shares, Warrants and shares upon exercise of the Warrant to be issued to the
Purchaser under this Agreement authorized and approved by AMEX for listing on AMEX, subject to
official notice of issuance.

     7.3 Execution of Commercial Agreement. The Purchaser shall have delivered to the Company the
Commercial Agreement, executed by the Director of the Purchaser.

8. Miscellaneous

     8.1 Termination. This Agreement may be terminated (a) by mutual agreement of the Company and
the Purchaser at any time or (b) by either the Company or the Purchaser if the Closing shall not
have occurred by the third (3rd) month following the date of this Agreement. If this
Agreement is terminated in accordance with this Section 8.1 and the transactions contemplated
hereby are not consummated, (i) this Agreement shall become null and void and of no further force
and effect except that the terms and provisions of this Section 8 shall survive the termination of
this Agreement and (ii) any termination of this Agreement shall not relieve any party hereto from
any liability for any willful breach of its obligations hereunder.

     8.2 Governing Law. This Agreement shall be governed in all respects by the internal laws of
the State of Delaware without regard to conflict of laws provisions.

     8.3 Survival. The warranties, representations, and covenants of the Company and the Purchaser
contained in or made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and Closing.

     8.4 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

     8.5 Entire Agreement; Amendment; Expiration of Term Sheet.
This Agreement, the Commercial Agreement, and the Form of Warrant, including the exhibits
hereto and thereto, constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as specifically set
forth herein or therein. Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company and Purchaser. The
Term Sheet between the Parties, executed August 25, 2005, shall expire at the execution of this
Agreement.

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     8.6 Notices, etc. All notices and other communications required or permitted hereunder shall
be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise
delivered by facsimile transmission, by hand or by messenger, addressed:

          (a) if to the Purchaser, to:

Abengoa Bioenergy R&D, Inc.

1400 Elbridge Payne Road

Suite 100

Chesterfield, MO 63005

Attn: Gerson Santos-Leon

Fax: 636-728-1148

          (b) if to the Company, to:

O2Diesel Corporation

100 Commerce Drive

Suite 300

Newark, Delaware 19713

Attn: Alan Rae

Fax: 302-266-7076

or at such other address as the Company shall have furnished to the Purchaser, with a copy to:

Arnold & Porter, LLP

1600 Tysons Blvd.

Suite 900

McLean, Virginia 22102

Attn: Kevin J. Lavin

Fax: 703-720-7399

Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given when received if delivered personally, if sent by facsimile, the
first business day after the date of confirmation that the facsimile has been successfully
transmitted to the facsimile number for the party notified, or, if sent by mail, at the earlier of
its
receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.

     8.7 Delays or Omissions. Except as expressly provided herein, no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach or default of another
party under this Agreement, shall impair any such right, power or remedy of such party nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any party of any breach
or default under this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not alternative.

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     8.8 Expenses. The Company and the Purchaser shall bear their own expenses incurred on their
own behalf with respect to this Agreement and the transactions contemplated hereby.

     8.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be an original, and all of which together shall constitute one instrument.

     8.10 Severability. In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall
continue in full force and effect without said provision, which shall be replaced with an
enforceable provision closest in intent and economic effect as the severed provision; provided that
no such severability shall be effective if it materially changes the economic benefit of this
Agreement to any party.

     8.11 Titles and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.

     8.12 Designation of Forum and Consent to Jurisdiction. The parties hereto (i) designate the
courts of the State of Delaware as the forum where all matters pertaining to this Agreement may be
adjudicated, and (ii) by the foregoing designation, consent to the exclusive jurisdiction and venue
of such courts for the purpose of adjudicating all matters pertaining to this Agreement.

     8.13 Waiver of Jury Trial.
Each of the parties hereto waives any right it may have to have a jury participate in
resolving any dispute arising out of or related to this Agreement. Instead, any such disputes
resolved in court shall be resolved in a bench trial without a jury.

     8.14 Confidentiality. Subject to required disclosure to governmental agencies, the Company
and the Purchaser agree to use commercially reasonable efforts to maintain the confidentiality of
this Agreement and any information and data provided by one party to the other in connection with
the transactions contemplated by this Agreement. The Company and the Purchaser further agree they
will not (i) use any portion of the information and data provided to such party by the other party
for any purpose other than the consummation of the transactions contemplated by this Agreement, or
(ii) except as contemplated by this Agreement or as previously disclosed in the Company’s security
filings, disclose any portion of the information and data provided to such party by the other party
to any persons or entities other than the officers, employees and consultants of such party who
reasonably need to have access to the information and data provided to such party for purposes of
the consummation of the transactions contemplated by this Agreement. The Company and the Purchaser
shall be bound by the confidentiality obligations described herein for a period of three (3) years
following the effective date of this Agreement.

[Remainder of Page Intentionally Left Blank]

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     The foregoing agreement is hereby executed as of the date first set forth above.

	 	 	 	 	 
	 	 	O2Diesel Corporation  
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Alan R. Rae
	 

	 	 	 	 
	 

	 	Name:
	 	Alan R. Rae
	 

	 	 	 	 
	 

	 	Title:
	 	CEO
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Abengoa Bioenergy R&D, Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Gerson Santos Leon
	 

	 	 	 	 
	 

	 	Name:
	 	Gerson Santos Leon
	 

	 	 	 	 
	 

	 	Title:
	 	Director
	 

	 	 	 	 

[Signature Page to Common Stock and Warrant Purchase Agreement]

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Exhibit A

Form of Warrantexv10w2

 

Exhibit 10.2

Commercial Agreement

This Commercial Agreement (the “Agreement”), effective as of October 28, 2005 (the “Effective
Date”), is made between O2Diesel Corporation (“O2Diesel”), AAE Technologies International PLC
(“O2Diesel Europe”) and Abengoa Bioenergy R&D, Inc. (“ABRD”) (each a “Party,” and collectively the
(Parties”).

     Whereas, O2Diesel has developed proprietary technology for oxygenated diesel fuel, including a
proprietary fuel additive, and market development experience from its activities in the United
States and Brazil;

     Whereas, O2Diesel Europe is an entity legally formed in Ireland owned or controlled by
O2Diesel and is in the business of selling O2Diesel Product in the Territory;

     Whereas, ABRD or its Affiliates has expertise in producing and marketing bio-ethanol and
seeking EU support for environmental programs, market development and deployment;

     Whereas, the Parties desire to cooperate to develop a market for O2Diesel’s proprietary
oxygenating diesel fuel in the Territories; and

     Whereas, ABRD or its Affiliates desires to be the exclusive supplier of ethanol in the
Territories for use in such fuel subject to the terms and conditions of this Agreement;

     Now, therefore, in consideration of the mutual promises contained in this Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as follows.

	1.	 	          Definitions.

     1.1.     “Affiliate,” with respect to a Person, means any other Person controlling, controlled
by or under common control with, such first Person.

     1.2.     “Closing” means the consummation of the purchase and sale of shares of common stock
and warrants for the future purchase of common stock of O2Diesel, as such is contemplated and
described by the Common Stock and Warrant Purchase Agreement executed by the Parties on October 28,
2005.

     1.3.     “Closing Date” means the date of Closing as agreed to by the Parties in Section 2.1
of the Common Stock and Warrant Purchase Agreement.

     1.4.     “O2Diesel Additive” means an O2Diesel proprietary compound that allows the mixing of
diesel fuel and ethanol.

     1.5.     “O2Diesel Product” means oxygenated diesel fuel comprising base diesel fuel, the
O2Diesel Additive, ethanol and a cetane improver, conforming to the specifications for such product
provided by O2Diesel.

 

 

     1.6.     “Ethanol” means the ethanol that is to be manufactured for and supplied to O2Diesel
Europe, or any Third Party designated by O2Diesel, hereunder in accordance with the Specifications
and the other requirements of this Agreement.

     1.7.     “Person” means a natural person, a corporation, a partnership, a trust, a joint
venture, any governmental authority or any other entity or organization.

     1.8.     “Specifications” means the manufacturing processes, standard procedures, formulae,
specifications, tests, and other standards pertaining to Ethanol all as is agreed upon by the
Parties and as may be modified from time to time by mutual written agreement. If no agreement can
be reached, the Specifications can be those commonly accepted by the ethanol industry for the use
intended by this Agreement.

     1.9.     “Term” shall have the meaning given in Section 9.1.

     1.10.     “Territory” or “Territories” means Spain, Germany, France and Portugal, Belgium,
Netherlands, and such other countries in the European Union that the Parties may from time to time
agree to in writing.

     1.11.     “Third Party” means any Person that is not a Party to this Agreement.

	2.	 	          Joint Efforts to Market O2Diesel Product.

     2.1.     O2Diesel Europe Related Agreements. Prior to the Closing Date, O2Diesel shall enter
into agreements with O2Diesel Europe such as are necessary for O2Diesel Europe to offer for sale
and to sell O2Diesel Product in the Territories. Such agreements may include a license to practice
O2Diesel’s technology for blending O2Diesel Product and a license to use O2Diesel’s trademarks in
connection with the sale of O2Diesel Product. ABRD agrees to enter into a confidentiality
agreement with O2Diesel Europe that is at least as protective of Confidential Information as the
provisions of Article 4.

     2.2.     Funding of O2Diesel Europe. As between the Parties, O2Diesel shall be responsible
for funding O2Diesel Europe’s operations. O2Diesel agrees to fund O2Diesel Europe with at least
three million Euros on the Closing Date. The first three million Euros that O2Diesel provides to
O2Diesel Europe for funding shall be referred to herein as the “Investment”. The Investment shall
be deposited in a separate, interest-bearing account and shall be withdrawn as advised by the
Budget Advisory Committee (as such committee is described below). Conforming with the directives
given by the Budget Advisory Committee, O2Diesel shall cause O2Diesel Europe to use the Investment
for (i) the general day-to-day operating expense of O2Diesel Europe; (ii) developing the market for
O2Diesel Product in the Territories (the “Market”) by public and private testing and fleet
demonstrations; (iii) obtaining public financing to support the development of the Market and (iv)
any other purposes approved by the Budget Advisory Committee. O2Diesel shall not be obligated to
provide to O2Diesel Europe funds in excess of the Investment.

 

 

     2.3.     Sublease of Office Space for O2Diesel Europe. ABRD shall cause its Affiliate to
sublease a portion of its office space at Avda. de la Buhaira No. 2 in Seville, Spain to O2Diesel
Europe pursuant to an agreement containing commercially reasonable terms, but at no cost, that
is executed promptly after Closing.

     2.4.     Cooperation in Marketing O2Diesel Product. The Parties shall reasonably cooperate,
and O2Diesel shall cause O2Diesel Europe to reasonably cooperate, with respect to the activities
taken by and on behalf of O2Diesel Europe with respect to the marketing of O2Diesel Product in the
Territories and the development of the Market. The Parties shall direct such cooperation through
the use of the Advisory Committees formed and operated as provided in Section 2.5 below.

     2.5.     Advisory Committees.

          (a)         Formation and Duration. Within ninety (90) days after the Effective Date, the
Parties shall establish a “Technical Advisory Committee” for the purposes set forth in Section
2.5(b) and with a composition specified by Section 2.5(d), and within thirty (30) days after the
Effective Date the Parties shall establish a “Budget Advisory Committee” for the purposes set forth
in Section 2.5(c) and with a composition specified by Section 2.5(d) (collectively the “Advisory
Committees”). Except to the extent otherwise provided by mutual written agreement of the Parties,
the Advisory Committees shall not disband until the earlier of the termination or expiration of
this Agreement or the expenditure by O2Diesel Europe of all of the Investment together with any
future investment or other input of operating capital to O2Diesel or O2Diesel Europe by ABRD or any
of its Affiliates, including but not limited to ABRD’s exercise of warrants as contemplated by that
certain Stock Purchase Agreement executed by the Parties and dated October 28, 2005.

          (b)         Technical Advisory Committee. The Technical Advisory Committee shall (i) review
all testing and demonstration results with respect to the O2Diesel Product, (ii) shall discuss and
identify future projects that assist in developing the Market, opportunities for O2Diesel Europe to
participate in public and private fleet demonstrations and opportunities for O2Diesel Europe to
obtain government grants (each a “Project”), and (iii) shall advise O2Diesel and O2Diesel Europe
regarding Projects and demonstration activities. In addition to the voting members of the
Technical Advisory Committee designated pursuant to Section 2.5(d), the Technical Advisory
Committee may also have non-voting members nominated by one Party and approved by the other Party.
The Technical Advisory Committee shall create a three (3) year master plan (“Plan”) to be agreed
upon no later than six (6) months after formation of the Technical Advisory Committee. All
revisions of the Plan shall be by unanimous consent of the voting members of the Technical Advisory
Committee.

          (c)         Budget Advisory Committee. The Budget Advisory Committee shall consider, amend if
necessary, and ultimately approve an annual budget proposed by O2Diesel Europe for general
operating expenses, including salaries, benefits, rent, ordinary marketing expenses and such other
ordinary expenses as are necessary or desirable to market the O2Diesel Product in the Territory
and, in the event the Technical Advisory Committee identifies and approves a Project, the Budget
Advisory Committee shall agree upon a budget for such Project specifying the amounts that may be
spent by O2Diesel Europe with respect to such Project, broken into such categories as the Budget
Advisory Committee deems appropriate (collectively, the “Budget”). In the event that O2Diesel
Europe decides to pursue such Project, it may spend
funds from the Investment in accordance with such Budget.

 

 

O2Diesel Europe shall not and
O2Diesel shall cause O2Diesel Europe to not expend funds from the Investment on Projects without
obtaining approval from the Budget Advisory Committee. The Parties hereby agree to the preliminary
general operating budget for the first fiscal year of this Agreement as is attached hereto as
Exhibit A. The Budget Advisory Committee may freely amend the Budget at any time, provided that in
the event the Budget Advisory Committee cannot agree on a new Budget for general operating expenses
in a subsequent period, the Budget for the previous period will be used for the subsequent period.
All aspects of the Budget shall be subject to periodic audits as a Party may deem necessary at such
Party’s expense.

          (d)         Composition. O2Diesel and O2Diesel Europe shall designate a total of two (2)
employees of O2Diesel, O2Diesel Europe or their respective Affiliates to represent O2Diesel and
O2Diesel Europe; and ABRD shall designate two (2) employees of ABRD or its Affiliates to represent
ABRD on the Technical Advisory Committee. O2Diesel and O2Diesel Europe shall designate a total of
two (2) persons to represent O2Diesel and O2Diesel Europe; and ABRD shall designate two (2) persons
to represent ABRD on the Budget Advisory Committee. Only representatives designated pursuant to
this Section 2.5(d) shall have the right to vote on the applicable Advisory Committee. The number
of representatives may be increased upon mutual agreement by the Parties. Each Party shall appoint
or nominate its respective representatives to the Advisory Committees and, from time to time, may
substitute one or more of its representatives. Additional representatives or consultants of a
Party may from time to time, with the consent of the other Party (with such consent not to be
unreasonably withheld) attend meetings of the Advisory Committees, subject to such representative’s
and/or consultant’s written agreement to comply with the confidentiality obligations equivalent to
those set forth in Article 4, and provided that such additional representatives shall have no vote.
The Advisory Committees may establish such working groups or sub-committees as it may choose from
time to time to accomplish its purposes.

          (e)         Governance. The Advisory Committees shall be chaired by a representative of
O2Diesel. Decisions of the Advisory Committees shall be made by unanimous vote, with each Party’s
voting representatives on the applicable Advisory Committee collectively having one (1) vote.

          (f)         Meetings. The Advisory Committees shall meet at least once each calendar quarter
in accordance with a schedule established by mutual written agreement of the Parties, with the
location for such meetings determined by agreement of the Parties. Either Party may call for
non-scheduled meetings of the Advisory Committees for good cause, which shall occur at mutually
agreeable times. The Advisory Committees upon mutual agreement may meet by means of
teleconference, videoconference or other similar communications equipment. No Advisory Committee
meeting may be conducted unless at least two (2) representatives of each Party are participating.

          (g)         Records. The chair of each Advisory Committee, or his/her designee, shall have
responsibility for preparing minutes of each Advisory Committee meeting. Such minutes shall
provide a description, in reasonable detail, of the discussions at the meeting and any Projects,
actions and Budgets approved by the applicable Advisory Committee. Such
minutes shall be circulated to all members of the applicable Advisory Committee within thirty
(30) days following such Advisory Committee meeting.

 

 

     2.6.     Additional ABRD Commitments.

          (a)         Dedicated Employee. ABRD shall commit or shall cause an Affiliate to commit and
fund at least one full-time employee to support its efforts under this Agreement on a full-time
basis. ABRD shall direct such employee to identify and cultivate opportunities for O2Diesel Europe
to develop the Market by public and private fleet demonstrations and to use the ABRD network to
obtain government grants for the development of the Market. To the extent ABRD is successful in
obtaining government grants for the development of the Market, ABRD shall be entitled to twenty
percent (20%) of such government grants for expenses related to obtaining such government grants,
supporting O2Diesel’s market development activities, and supporting O2Diesel’s fleet demonstrations
and market development activities.

          (b)         Government Approvals. ABRD shall assist O2Diesel Europe in determining whether
any governmental approvals will be necessary for the distribution and use of O2Diesel Product in
the Territory and, if ABRD or O2Diesel Europe determine that approvals are necessary, ABRD shall
provide reasonable assistance for O2Diesel Europe to apply for such approvals in O2Diesel Europe’s
name.

          (c)         Marketing. Upon request, ABRD shall provide to O2Diesel the following information
to support efforts of O2Diesel Europe to develop the Market, to the extent available to ABRD and
relevant to the Territory: market research, lessons learned from distribution of Ethanol by ABRD
and other licensees and distributors, identification of high priority potential customer groups,
economic modeling for distribution of O2Diesel Product, sample marketing materials, and the status
of development of enhanced technologies subject to this Agreement; provided that ABRD shall not be
required to disclose any information that ABRD is not permitted to disclose under its nondisclosure
agreements with Third Parties.

          (d)         Authority of ABRD Affiliates. ABRD shall have the option, at its sole discretion,
to implement any of the rights or obligations imposed on it by this Agreement through a designated
Affiliate or Affiliates, provided however that such delegation shall not alter ABRD’s ultimate
responsibility for the proper performance of its obligations under this Agreement.

	3.	 	          Supply of Ethanol.

     3.1.     Obligation to Supply. ABRD is entitled to supply or to cause its Affiliates to
supply to O2Diesel, O2Diesel Europe, any Third Party designated by O2Diesel Europe or any O2Diesel
Affiliate, with all quantities of Ethanol for use in the O2Diesel Product that is intended for sale
in the Territory. All Ethanol shall conform to the Specifications and shall be supplied in
accordance with any other applicable terms and conditions of this Agreement.

     3.2.     Exclusivity. So long as ABRD offers to supply Ethanol at a price that is comparable
to locally available ethanol and that meets industry standard performance criteria, O2Diesel Europe
shall and O2Diesel agrees to cause O2Diesel Europe to purchase from ABRD or its Affiliates all of
its requirements for Ethanol for use to blend the O2Diesel Product intended
for sale in the Territory during the Term of this Agreement.

 

 

For the avoidance of doubt, such
exclusivity obligation (subject to the price limitation set forth above) shall extend to any Third
Party that O2Diesel Europe may employ to blend the O2Diesel Product and any customers of O2Diesel
Europe that may be authorized to blend O2Diesel Product on its own, in either case for use in the
Territory. To this end, O2Diesel and O2Diesel Europe shall contractually obligate such Third Party
blenders to purchase ethanol exclusively from ABRD or its Affiliates (subject to the rights to
purchase ethanol from others as provided in Section 3.3 below) for so long as this exclusivity is
in effect. Nothing in this Agreement shall be deemed to obligate O2Diesel or O2Diesel Europe to
purchase any minimum amount of Ethanol from ABRD.

     3.3.     Terms of Supply. The supply of Ethanol pursuant to this Agreement shall be governed
by ABRD’s standard purchase order for the supply of ethanol with terms and conditions mutually
acceptable to the parties to such agreement; provided that such terms and conditions shall be at
least as favorable to the terms and conditions ABRD or an Affiliate offers to any other customer to
which it or its Affiliates sell ethanol under comparable transactions with comparable conditions.
The price ABRD or an Affiliate charges for Ethanol it is obligated to supply under this Agreement
shall be comparable to the market price for ethanol around the time of sale in the approximate
location at which the Ethanol is to be delivered. In the event that the exclusivity obligation
does not apply because the price of Ethanol offered by ABRD or an Affiliate is higher than the
then-current cost of ethanol in the Territory, at ABRD’s option either (i) ABRD or an Affiliate
shall purchase Ethanol from Third Parties at the market price and sell such Ethanol to O2Diesel
Europe, or to a Third Party designated by O2Diesel or O2Diesel Europe, at such cost or (ii)
O2Diesel may purchase Ethanol directly from Third Parties. In the event O2Diesel provides
notice to ABRD that it shall resort to items (i) or (ii) above, it shall be compelled to
submit to ABRD a report from a reputable accounting firm that has conducted a reasonably detailed
ethanol price survey showing the price disparity between ABRD’s or an Affiliate’s price and the
average market price.

	4.	 	          Confidentiality.

     4.1.     Definitions. In connection with its activities under this Agreement, a Party (the
“Receiving Party”) may receive or otherwise have access to “Confidential Information” of the other
Party (the “Disclosing Party”). The term “Confidential Information” means any material or
information relating to the Disclosing Party’s technology, research, development, product plans,
trade secrets, finances or business operations that the Disclosing Party treats as confidential,
but not any material or information that the Receiving Party can demonstrate (a) is or becomes
publicly known through no fault of the Receiving Party; (b) is developed independently by the
Receiving Party; (c) is known by the Receiving Party when disclosed by the Disclosing Party if the
Receiving Party does not then have a duty to maintain its confidentiality; or (d) is rightfully
obtained by the Receiving Party from a Third Party not obligated to preserve its confidentiality
who did not receive the material or information directly or indirectly from the Disclosing Party.

     4.2.     Limitations on Use and Disclosure. A Receiving Party shall not use the Disclosing
Party’s Confidential Information for any purpose other than performance of this Agreement and shall
not disclose Confidential Information to any Person other than its employees and its independent
contractors subject to a nondisclosure obligation comparable in scope to this Article, which
employees and independent contractors have a need to know such Confidential Information
for the performance of this Agreement.

 

 

Upon written request of the Disclosing Party delivered
at any time during the period beginning on the expiration date set forth in Paragraph 4.5 below and
ending one (1) year thereafter, the Receiving Party shall, on request, return or destroy all
embodiments of the Disclosing Party’s Confidential Information in its possession or control. The
Parties shall notify their employees of the confidential nature of the Confidential Information,
and the Receiving Party shall be liable to the Disclosing Party for any unauthorized use or
disclosure made by any person receiving Confidential Information.

     4.3.     Exception. Notwithstanding Section 4.2, a Receiving Party may disclose Confidential
Information to the extent required by a court or other governmental authority, provided that (a)
the Receiving Party gives the Disclosing Party reasonable notice of the disclosure, (b) the
Receiving Party uses reasonable efforts to resist disclosing the Confidential Information and
minimize the amount of Confidential Information disclosed, and (c) the Receiving Party cooperates
with the Disclosing Party on request to seek a protective order or otherwise limit the effects of
the disclosure.

     4.4.     Acknowledgement. The Parties acknowledge that either Party’s breach of this Article
4 would cause the other Party irreparable injury for which it would not have an adequate remedy at
law. In the event of a breach, the non-breaching Party shall be entitled to seek injunctive relief
in addition to any other remedies it may have at law or in equity.

     4.5.     Expiration of Obligations. A Receiving Party’s obligations pursuant to this Article
4 will expire three (3) years after the expiration or termination of this Agreement.

	5.	 	          Intellectual Property Matters.

     5.1.     Third Party Infringement. ABRD shall inform O2Diesel and O2Diesel Europe of any
infringement by any Third Party of any O2Diesel patents, trade secrets and other intellectual
property (“O2Diesel Intellectual Property”) of which it becomes aware. O2Diesel or O2Diesel Europe
may, but shall not be required to, take legal action to enforce the O2Diesel Intellectual Property
against infringement by Third Parties and defend the O2Diesel Intellectual Property against
challenges by Third Parties. ABRD shall cooperate fully with O2Diesel and O2Diesel Europe in any
such enforcement or defense and supply all assistance reasonably requested by O2Diesel and O2Diesel
Europe in carrying on such action, at O2Diesel’s expense, including by using commercially
reasonable efforts to have its employees testify when requested and to make available relevant
records, information, specimens and the like.

     5.2.     Joint Improvements. To the extent that employees of O2Diesel, O2Diesel Europe, or
their Affiliates on the one hand, together with employees of ABRD or its Affiliates on the other,
jointly invent or discover any improvements to the O2Diesel Additive, O2Diesel Product or to any
other invention, discovery, know-how or technology, the Parties shall jointly own the same, and
each Party shall be free to exploit or authorize the exploitation of the same without the consent
of or accounting to the other Party, subject to any other relevant intellectual property rights of
the other Party. If a Party becomes aware of any such joint invention, discovery, know-how or
technology, it shall verify that the other Party is aware of the same and the Parties shall consult
and cooperate with respect to the protection of the same.

 

 

     5.3.     ABRD Improvements. Before commencing any research or testing efforts with respect to
the oxygenation of diesel fuel, ABRD shall disclose the same to O2Diesel and O2Diesel Europe.
Subject to Section 5.2, to the extent that ABRD or its Affiliates may during the Term invent or
discover or otherwise acquire rights to any improvements to the O2Diesel Additive, O2Diesel Product
or any related know-how or technology for the oxygenation of diesel fuel (“Improvements”), ABRD
promptly shall disclose the same to O2Diesel or O2Diesel Europe, and ABRD hereby grants to O2Diesel
and O2Diesel Europe a perpetual, royalty-free, paid-up, worldwide, nonexclusive license to practice
and authorize the practice of such Improvements. For the avoidance of doubt, ABRD’s right to
practice such Improvements is subject to any relevant O2Diesel Intellectual Property. The license
and rights created in this Section 5.3 shall terminate and shall be of no further force or effect
upon the assignment (whether by operation of law or otherwise) of this Agreement by O2Diesel or
O2Diesel Europe unless otherwise agreed in writing by ABRD.

	6.	 	          Representations and Warranties.

     6.1.     Representations and Warranties of the Parties. The Parties represent and warrant
that:

          (a)         it is a company duly organized, validly existing and in good standing under the
laws of, in the case of O2Diesel, Delaware, in the case of O2Diesel Europe, Ireland, and in the
case of ABRD, Missouri;

          (b)         the execution of this Agreement on its behalf has been properly authorized by all
necessary corporate action;

          (c)         this Agreement is valid and binding on it and enforceable against it in accordance
with the terms hereof, subject to applicable bankruptcy and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general principles of equity;

          (d)         neither the execution nor the performance of this Agreement will constitute a
breach or violation of the terms of its charter or organizational documents or any contract,
agreement or other commitment to which it is a party or by which it or any of its properties are
bound; and

          (e)         there are no bankruptcy, insolvency, receivership or similar proceedings involving
it or any of its Affiliates either pending or being contemplated, or any other pending or
threatened actions, suits, arbitrations or other proceedings by or against it.

     6.2.     Except as provided explicitly herein, no party makes any representations or
warranties of any kind and specifically disclaims all other warranties of any kind, either express
or implied, including but not limited to warranties of merchantability and fitness for a particular
purpose.

 

 

     6.3.     Representations and Warranties of O2Diesel and O2Diesel Europe.

          (a)         Litigation. As of the Closing Date, there is no action, suit, proceeding
or dispute pending or, to O2Diesel’s or O2Diesel Europe’s knowledge, threatened against O2Diesel or
O2Diesel Europe before or by any government authority that could reasonably be expected to (whether
individually or when aggregated with other actions, suits or proceedings) have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated in this Agreement.

          (b)         Disclosure. The information disclosed by or on behalf of O2Diesel or
O2Diesel Europe to ABRD in connection with the transactions contemplated hereby as of the Closing
Date, when taken as a whole with all other written disclosures to such parties, do not contain an
untrue statement of a material fact or omit to state a material fact necessary to make the
statements herein, in light of the circumstances under which they were made, not misleading; it
being understood with respect to any projections contained in such materials that such projections
are based on good faith estimates and assumptions by the management of O2Diesel, it being
recognized that projections as to future events are not to be viewed as fact and that actual
results during the period covered by such projections may differ from projected results, except
that neither the management of O2Diesel or O2Diesel Europe have any reason to believe that such
projections are materially false or incorrect. There is no peculiar fact of which O2Diesel or
O2Diesel Europe has knowledge as of the Closing Date that has not been disclosed by O2Diesel or
O2Diesel Europe in writing to ABRD that could reasonably be expected to have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated in this Agreement.

          (c)         No Default. As of the Closing Date, neither O2Diesel nor O2Diesel Europe
are in violation of any term of (i) any agreement or instrument related to indebtedness for
borrowed money or any other agreement to which they are a party or by which they are bound, or (ii)
any law, that in the case or either (i) or (ii) above, would materially and adversely affect
O2Diesel or O2Diesel Europe or any of their properties or assets or the ability of O2Diesel or
O2Diesel Europe to consummate or perform the transactions contemplated in this Agreement.

               (d)         Governmental Actions. Excluding notice of noncompliance by the
American Stock and Options Exchange as has previously been disclosed to ABRD, as of the
Closing Date neither O2Diesel nor O2Diesel Europe has received, at any time, any notice or
other communication (whether oral or written) from any governmental authority or any other
Third Party regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any order, statute or regulation to which the
O2Diesel or O2Diesel Europe, or any of the assets owned or used by O2Diesel or O2Diesel
Europe, are or have been subject.

7. Indemnification. In General. Each Party (the “Indemnifying Party”) shall defend,
indemnify and hold harmless the other Party (the “Indemnified Party”), its Affiliates, and its and
their employees, officers, directors, agents, distributors and licensees against any loss, damage,
expense, or cost, including reasonable attorneys’ fees, arising out of any claim, demand, action,
suit, investigation, arbitration or other proceeding by a Third Party (an “Action”) based on (a)
the Indemnifying Party’s breach of this Agreement; or (b) negligence, willful misconduct or
violation of any law or regulation by the Indemnifying Party, its Affiliates, or its or their
employees, officers, directors, or agents. Procedure.

 

 

If an Indemnified Party becomes
aware of any Action it believes is indemnifiable under Section 7.1, (a) the Indemnified Party shall
give the Indemnifying Party prompt written notice of such Action; (b) the Indemnifying Party shall
assume, at its expense, the sole defense of such claim or cause of action through counsel selected
by it and reasonably acceptable to the Indemnified Party, except that in the case of a conflict of
interest between the Parties, the Indemnifying Party shall, at the Indemnifying Party’s expense,
provide separate counsel for the Indemnified Party selected by the Indemnified Party; (c) the
Indemnifying Party shall maintain control of such defense, including any decision as to settlement,
except that any settlement of an Action shall require the written consent of both Parties, which
consent shall not be withheld or delayed unreasonably; (d) the Indemnified Party may, at its option
and expense, participate in such defense, and in any event, the Parties shall cooperate with one
another in such defense; and (e) the Indemnifying Party shall bear the total costs of any court
award or settlement in such Action.

	8.	 	Limitation of Liability.

     Neither party or any of their respective officers, directors, employees, agents or
subcontractors shall be liable to the other party for any indirect, incidental, special,
consequential or punitive damages (including without limitation loss of use or lost business,
revenue or good will) arising out of or related to this agreement, even if the party has been
advised of the possibility thereof.

	9.	 	          Term and Termination.

     9.1.     Term. This Agreement shall commence as of the Effective Date and, unless terminated
as provided in this Article 9, continue in full force and effect for five (5) years (the “Term”).

     9.2.     Termination for Default. If either Party materially breaches this Agreement and
fails to cure the breach within thirty (30) days after receiving written notice thereof from the
other Party, the other Party may terminate this Agreement upon further written notice to the
breaching Party at any time that the breach remains uncured.

     9.3.     Termination for Insolvency. Either Party may terminate this Agreement if the other
Party becomes insolvent, voluntarily files a petition for relief under bankruptcy or any similar or
other insolvency laws (or has a petition filed against it and the same remains undischarged or
unstayed for 60 days) or voluntarily or involuntarily enters receivership or any similar or other
insolvency proceeding.

     9.4.     Effect of Termination for Material Breach. In the event of termination of this
Agreement by ABRD for material breach by O2Diesel, O2Diesel Europe or their Affiliates or an
officer, director or agent of either, and upon a final arbitral opinion not subject to appeal that
such a breach was in fact a material breach, at ABRD’s request O2Diesel (or O2Diesel Europe) and
ABRD shall enter into a non-exclusive supply and distribution agreement for the Territory, pursuant
to which O2Diesel shall agree to (a) supply to ABRD O2Diesel Additive; (b) grant to ABRD a
perpetual, royalty-free license to O2Diesel’s Intellectual Property to the extent necessary for
ABRD to blend O2Diesel Product using O2Diesel Additive and to use and sell such O2Disel Product in
the Territories; and (c) provide to ABRD written detailed information
and technical assistance sufficient for ABRD to blend or to use and sell O2Diesel Product
using O2Diesel Additive.

 

 

In the event the Parties cannot reach agreement on the terms of the
distribution agreement described above, O2Diesel shall supply the O2Diesel Additive at the same
terms and conditions as it supplied Third Party blenders in the Territory prior to the material
breach, subject to reasonable adjustments from time to time to reflect any increases in
manufacturing costs, until such time as the Parties reach a mutually acceptable agreement.

     9.5.     Effect of Termination for Insolvency. O2Diesel and represents and warrants that its
agreement with the manufacturer of O2Diesel Additive (the “Manufacturer”) contains a mechanism by
which the Manufacturer may sell O2Diesel Additive in a territory in which O2Diesel elects not to
exploit the O2Diesel Additive. O2Diesel agrees that if this Agreement is terminated by ABRD
pursuant to Section 9.3, it will (i) provide to ABRD the contact information of an appropriate
employee of its Manufacturer or any future manufacturer so as to permit ABRD to negotiate for the
purchase of O2Diesel Additive directly if it so desires, and (ii) not take any action that will
interfere with (a) ABRD’s ability to negotiate the purchase of O2Diesel Additive directly from the
Manufacturer or any future manufacturer or (b) the right of the Manufacturer or such future
manufacturer to sell O2Diesel Additive directly to ABRD. O2Diesel further agrees to not amend such
mechanism in its agreement with the Manufacturer, and to include a mechanism into any agreement it
may enter into with any future manufacturer under which such future manufacturer may sell O2Diesel
Additive directly to ABRD in the event this Agreement is terminated by ABRD pursuant to Section
9.3.

     9.6.     Effect of Termination; Other Remedies available. Notwithstanding anything in this
Agreement to the contrary, in the event of termination of this Agreement as is provided in this
Article 9, ABRD shall have available every remedy allowed under law and equity, including but not
limited to specific performance, suit for damages, and rescission.

     9.7.     Effectiveness of this Agreement. The Effective Date notwithstanding, this Agreement
shall become effective only upon (i) execution of the Common Stock and Warrant Purchase Agreement
by the Parties, (ii) approval by the shareholders of O2Diesel of the terms and conditions therein,
and (iii) upon ABRD’s transfer of funds as contemplated therein.

	10.	 	          Dispute Resolution

     10.1.     Discussions. The Parties shall use reasonable efforts to amicably resolve any
disputes arising out of or relating to this Agreement by direct discussions between them.

     10.2.     Arbitration of Disputes. Any dispute not resolved as set forth in Section 10.1
within fifteen (15) days after one Party notifies the other Party that it wishes to discuss the
matter (“Dispute”), except matters relating to O2Diesel’s Intellectual Property, shall be resolved
by arbitration in New York City, New York under the Commercial Arbitration Rules (“Commercial
Rules”) of the American Arbitration Association (“AAA”), including the AAA Supplementary Procedures
for Large Complex Commercial Disputes (“Complex Procedures”), as such rules shall be in effect on
the date of delivery of a demand for arbitration (“Demand”), except to the extent that such rules
are inconsistent with the provisions set forth herein. Notwithstanding the foregoing, the Parties
may agree that the Complex Procedures shall not apply in order to promote
the efficient arbitration of Disputes where the nature of the Dispute, including the amount in
controversy, does not justify the application of such procedures.

 

 

     10.3.     Arbitration Procedures. The arbitration shall be conducted in the English language
before one (1) impartial arbitrator selected by mutual agreement of the Parties. If the
Parties are unable to mutually agree on an impartial arbitrator within ten (10) days, a neutral
arbitrator shall be appointed by the AAA from the panel of commercial arbitrators of any of the AAA
Large and Complex Resolution Programs. The arbitrator’s award shall be a final and binding
determination of the dispute. If awarded by the arbitrator, the prevailing Party shall be entitled
to recover its reasonably attorneys’ fees and expenses, including arbitration administration fees
incurred in connection with such proceeding.

     10.4.     Judicial Action. Notwithstanding the above, either Party may seek from any court
having jurisdiction hereof any interim, provisional or injunctive relief or specific performance
that may be necessary to protect the rights or property of any Party or to maintain the status quo
before, during or after the pendency of the arbitration proceeding. The institution and
maintenance of any judicial action or proceeding for any such interim, provisional or injunctive
relief shall not constitute a waiver of the right or obligation of either Party to submit the
dispute to arbitration, including any claims or disputes arising from the exercise of any such
interim, provisional or injunctive relief.

	11.	 	          Notices.

     11.1.     Delivery of Notices. All notices sent under this Agreement shall be in writing and
(a) hand delivered; (b) transmitted by legible facsimile with a copy sent concurrently by certified
mail, return receipt requested; or (c) delivered by prepaid priority delivery service.

     11.2.     Addresses for Notices. Notices shall be sent to the Parties at the following
addresses or such other addresses as the Parties subsequently may provide:

	 	 	 	 	 
	 

	 	If to O2Diesel or
	 	100 Commerce Drive
	 

	 	O2Diesel Europe:
	 	Suite 301
	 

	 	 	 	Newark, Delaware 19713
	 
	 	 	 	 
	 

	 	Attention:
	 	Alan Rae
	 

	 	Telephone:
	 	(302) 266-6000
	 

	 	Fax:
	 	(302) 266-7076
	 
	 	 	 	 
	 

	 	If to ABRD:
	 	1400 Elbridge Payne
	 

	 	 	 	Suite 100
	 

	 	 	 	Chesterfield, Missouri 63017
	 

	 	Attention:
	 	Gerson Santos Leon
	 

	 	Telephone:
	 	636-728-0508
	 

	 	Fax:
	 	636-728-1148

 

 

	12.	 	          Miscellaneous

     12.1.     No Authority to Bind Parties. Neither Party shall have the authority and shall not
purport to have the authority to enter into any contracts or make any representations or warranties
on behalf of the other Party or its Affiliates or otherwise to bind or obligate the other Party or
its Affiliates in any manner whatsoever.

     12.2.     Relationship Between Parties. O2Diesel, O2Diesel Europe and ABRD are separate
business entities, and shall not be considered as joint ventures, partners, agents, servants,
employee, or fiduciaries of each other. Neither this Agreement nor the relationship between the
Parties shall be considered in any way to deem ABRD a franchisee of O2Diesel or O2Diesel Europe for
any purpose whatsoever. The Parties specifically agree that any obligation to act in good faith
and to deal fairly with each other which may be implied in law shall be deemed satisfied by the
Parties’ compliance with the express terms of this Agreement.

     12.3.     Foreign Corrupt Practices Act and Anti-Bribery Provisions.

          (a)         During the Term of this Agreement, the Parties will not, and shall cause their
Affiliates to not, make or provide any payments or gifts or any offers or promises of any kind,
directly or indirectly, to any official of any government or to any official of any agency or
instrumentality of any government, or to any political party or to any candidate for political
office (the foregoing individually and collectively referred to as “Government Official”). If on
the date hereof or at any time during the term of this Agreement any Governmental Official or an
active member of the armed services of any government (a) owns an interest in that certain Party or
its Affiliate, (b) has any legal or beneficial interest in this Agreement or in payments to be
received by that certain Party or its Affiliate in connection with the services to be provided by
hereunder, or (c) is a director, officer or employee of that certain Party or its Affiliate, that
certain Party will notify the other Party and will take such actions to assure that the affected
person does not take any action, official or otherwise, and/or use any influence in connection with
the other Party’s business.

          (b)         Each Party warrants, on its behalf and on behalf of its Affiliates, that they have
not and will not pay or offer, directly or indirectly, any commission or finders or referral fee to
any person or entity in connection with its activities relating to this Agreement, unless it has
obtained prior written agreement thereto from the other Party.

          (c)         Each Party, including its Affiliates, and all of its and their directors,
officers, shareholders, employees and agents, have conducted with respect to the activities
contemplated in this Agreement and shall during the term of this Agreement conduct all of their
activities in accordance with the U.S. Foreign Corrupt Practices Act and the substantive provisions
of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions dated 21 November 1997 as well as any amendments thereto.

     12.4.     Governing Law; Jurisdiction. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, without regard to its conflict of laws
principles.

 

 

     12.5.     Recordkeeping and Inspection. During the Term and for three (3) years thereafter,
or such longer period as may be required by law, the Parties shall keep and maintain reasonable
records of all agreements, approvals and other activities relating to this Agreement. O2Diesel or
O2Diesel Europe may, at its expense, during regular business hours and with reasonable prior
notice, examine, review, and inspect all facilities in which Ethanol is manufactured or distributed
by or on behalf of ABRD and review, audit and analyze ABRD’s records relating to this Agreement.
ABRD may, at its expense, during regular business hours and with reasonable prior notice, examine,
review, and inspect all facilities in which O2Diesel Product is blended or distributed by or on
behalf of O2Diesel or O2Diesel Europe, and review, audit and analyze O2Diesel’s or O2Diesel
Europe’s records relating to this Agreement.

     12.6.     Force Majeure. No Party shall be liable to any other Party for the consequences of
any failure to perform, or default in performing, any of its obligations under this Agreement, if
that failure or default is caused without the fault or negligence of the defaulting Party by any
act of “Force Majeure.” For the purposes of this Agreement, “Force Majeure” shall mean war
(whether declared or not); act of God; revolution; acts or omissions of non-defaulting Party or
third parties beyond the control of the defaulting Party; faulty or impassable roads; invasion;
insurrection; riot; civil commotion; sabotage; military or usurped power; lightning; explosion;
fire; storm; drought; flood; earthquake; epidemic; quarantine; strikes; acts or restraints of
governmental authorities; inability to secure materials, machinery, equipment or labor; and laws
and regulations of any governmental authority.

     12.7.     Severability. The provisions of this Agreement are severable, and the
unenforceability of any provision of this Agreement shall not affect the enforceability of the
remainder of this Agreement. The Parties acknowledge that it is their intention that if any
provision of this Agreement is determined by a court to be unenforceable as drafted, that provision
should be construed in a manner designed to effectuate the purpose of that provision to the
greatest extent possible under applicable law.

     12.8.     Construction of Agreement. The Parties acknowledge that they thoroughly have
reviewed this Agreement and bargained over its terms. Accordingly, this Agreement shall be
construed without regard to the Party or Parties responsible for its preparation and shall be
deemed to have been prepared jointly by the Parties.

     12.9.     Cumulative Rights and Remedies. The rights and remedies provided in this Agreement
and all other rights and remedies available to either Party at law or in equity are, to the extent
permitted by law, cumulative and not exclusive of any other right or remedy now or hereafter
available at law or in equity. Neither asserting a right nor employing a remedy shall preclude the
concurrent assertion of any other right or employment of any other remedy, nor shall the failure to
assert any right or remedy constitute a waiver of that right or remedy.

     12.10.     Assignment. ABRD may transfer or assign its rights under this Agreement to any
Affiliate or successor entity. O2Diesel may transfer or assign this Agreement for financing
purposes or to any Affiliate or successor entity. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the Parties and their respective successors, permitted
assigns and legal representatives.

 

 

     12.11.     Headings. All headings in this Agreement are included solely for convenient
reference, are not intended to be full and accurate descriptions of the contents of this Agreement,
shall not be deemed a part of this Agreement, and shall not affect the meaning or interpretation of
this Agreement.

     12.12.     Publicity. Neither Party shall, without the prior written approval of the other
Party, (i) advertise or otherwise publicize the existence or terms of this Agreement or any other
aspect of the relationship between the Parties, or (ii) use the other Party’s or its Affiliates or
any or their employees’ names or any trade name, trademark or service mark belonging to the other
Party in press releases or in any form of advertising.

     12.13.     Amendments. This Agreement may be modified or amended only by written agreement of
the Parties.

     12.14.     English Language. The Parties shall use the English language in all communications
relating to this Agreement, and the English language version of this Agreement signed by the
Parties shall control over any and all translations.

     12.15.     Entire Agreement. This Agreement constitutes the entire agreement between the
Parties concerning the subject matter of this Agreement and supersedes all prior agreements between
the Parties concerning the subject matter hereof.

     12.16.     Counterparts. This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of which when taken together shall
constitute this Agreement.

     12.17.     Survival. Articles 4 through 12 of this Agreement shall survive the expiration or
termination of this Agreement.

 

 

     In witness whereof, the Parties have caused this Agreement to be executed by their respective
duly authorized officers as of the Effective Date.

O2Diesel Corporation

By: /s/ Alan R. Rae

Name: Alan R. Rae

Title: CEO

AAE Technologies International PLC

By: /s/ Alan R. Rae

Name: Alan R. Rae

Title: CEO

Abengoa Bioenergy R&D, Inc.

By: /s/ Gerson Santos Leon

Name: Gerson Santos Leon

Title: Director

[Signature Page to Commercial Agreement]

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