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                                                                    EXHIBIT 10.6

                             Blue Rhino Corporation
                            1998 STOCK INCENTIVE PLAN

                                    ARTICLE I

                                  ESTABLISHMENT

      The Blue Rhino Corporation Stock Incentive Plan ("Plan") is hereby
established by Blue Rhino Corporation ("Company"). The purpose of the Plan is to
encourage key employees, officers, consultants and advisors of the Company and
its Affiliates to acquire a proprietary interest in the Company and to generate
an increased incentive to contribute to the Company's future success and
prosperity.

                                   ARTICLE II

                                  DEFINITIONS

      For purposes of the Plan, the following terms are defined as set forth
below:

      "AFFILIATE" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated association or other entity (other
than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.

      "AGREEMENT" or "OPTION AGREEMENT" means, individually or collectively, any
agreement entered into pursuant to the Plan pursuant to which a Stock Option is
granted to a Participant.

      "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of the
Company.

      "CAUSE" means, for purposes of whether and when a Participant has incurred
a Termination for Cause, any act or omission which permits the Company to
terminate the written agreement or arrangement between the Participant and the
Company or an Affiliate for Cause as defined in such agreement or arrangement,
or if there is no such agreement or arrangement or the agreement or arrangement
does not define the term "cause", then Cause means, unless otherwise defined in
the Option Agreement with respect to the corresponding Stock Option, (a) any act
or failure to act deemed to constitute cause under the Company's established
practices, policies or guidelines applicable to the Participant or (b) the
Participant's act or act of omission which constitutes gross misconduct with
respect to the Company or an Affiliate in any material respect, including,
without limitation, an act or act of omission of a criminal nature, the result
of which is detrimental to the interests of the Company or an Affiliate, or
conduct or the omission of conduct which constitutes a material breach of
Participant's duty of loyalty to the Company or an Affiliate.
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      "CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended, final Treasury Regulations thereunder and any subsequent Internal
Revenue Code.

      "COMMISSION" means the Securities and Exchange Commission or any successor
agency.

      "COMMITTEE" means the Compensation Committee of the Board, or such other
committee of the Board appointed by the Board of Directors to administer the
Plan, as further described in the Plan.

      "COMMON STOCK" means the shares of the Common Stock, $0.001 par value, of
the Company whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.

      "COMPANY" means Blue Rhino Corporation, a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company are exchanged; and any assignee of or
successor to substantially all of the assets of the Company.

      "DISABILITY" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability will not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. The determination of
Disability will be made by the Committee. The determination of Disability for
purposes of this Plan will not be construed to be an admission of disability for
any other purpose.

      "EFFECTIVE DATE" means May 18, 1998.

      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

      "FAIR MARKET VALUE" means the value determined on the basis of the good
faith determination of the Committee, without regard to whether the Common Stock
is restricted or represents a minority interest, pursuant to the applicable
method described below:

      (a) if the Common Stock is listed on a national securities exchange or
quoted on the Nasdaq National Market ("NASDAQ"), the closing price of the Common
Stock on the relevant date, as reported by the principal national exchange on
which such shares are traded (in the case of an exchange) or by the NASDAQ, as
the case may be;

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      (b) if the Common Stock is not listed on a national securities exchange or
quoted on the NASDAQ, but is actively traded in the over-the-counter market, the
average of the closing bid and asked prices for the Common Stock on the relevant
date, or the most recent preceding date for which such quotations are reported;
and

      (c) if, on the relevant date, the Common Stock is not publicly traded or
reported as described in (a) or (b), the value determined in good faith by the
Committee.

      "GRANT DATE" means the date that as of which a Stock Option is granted
pursuant to the Plan.

      "NON-EMPLOYEE DIRECTORS" has the meaning set forth in Rule 16b-3, or any
successor definition adopted by the Commission, provided the person is also an
"outside director" under Section 162(m) of the Code.

      "NON-QUALIFIED STOCK OPTION" means an Option to purchase Common Stock in
the Company granted under the Plan other than an incentive stock option within
the meaning of Section 422 of the Code.

      "OPTION PERIOD" means the period during which the Option will be
exercisable in accordance with the Option Agreement and Article VI.

      "OPTION PRICE" means the price at which the Common Stock may be purchased
under an Option as provided in Section 6.3.

      "PARTICIPANT" means a person who satisfies the eligibility conditions of
Article V and to whom a Stock Option has been granted by the Committee under the
Plan, and if a Representative is appointed for a Participant, then the term
"PARTICIPANT" means such appointed Representative, successor Representative, or
spouse as the case may be. The term also includes a trust for the benefit of the
Participant, the Participant's parents, spouse or descendants, or a custodian
under a uniform gifts to minors act or similar statute for the benefit of the
Participant's descendants, to the extent permitted by the Committee and not
inconsistent with the Rule 16b-3.

      "PLAN" means the Blue Rhino Corporation 1998 Stock Incentive Plan, as
herein set forth and as may be amended from time to time.

      "REPRESENTATIVE" means (a) the person or entity acting as the executor or
administrator of a Participant's estate pursuant to the last will and testament
of a Participant or pursuant to the laws of the jurisdiction in which the
Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; or (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death.

      "RETIREMENT" means the Participant's Termination after attaining either
the normal retirement age or the early retirement age as defined in the
principal (as determined by the Committee) tax-qualified plan of the Company or
an Affiliate, if the Participant is covered by

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such plan, and if the Participant is not covered by such a plan, then age 65, or
age 55 with the accrual of 10 years of service.

      "RULE 16B-3" means Rule 16b-3, as promulgated under the Exchange Act, as
amended from time to time, or any successor thereto.

      "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

      "STOCK OPTION" means a Non-Qualified Stock Option granted under this Plan.

      "TERMINATION" means the occurrence of any act or event, whether pursuant
to an employment agreement, consulting agreement, advisory agreement or
otherwise, that actually or effectively causes or results in the person's
ceasing, for whatever reason, to be an officer, employee, consultant or advisor
of the Company or of any Affiliate, or to be an officer, employee, consultant or
advisor of any entity that provides services to the Company or an Affiliate,
including, without limitation, death, Disability, dismissal, removal,
resignation, severance at the election of the Participant, Retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. With respect to any person who is not an employee of the
Company or an Affiliate, the Option Agreement will establish what act or event
will constitute a Termination for purposes of the Plan. A Termination will occur
for an employee who is employed by an Affiliate if the Affiliate ceases to be an
Affiliate and the Participant does not immediately thereafter become an employee
of the Company or an Affiliate. A Participant who is an employee on the Grant
Date will not be deemed to have incurred a Termination if, within thirty (30)
days after such individual ceases to be an employee, he or she becomes a
consultant or advisor to the Company. Similarly, a Participant who is a
consultant or advisor on the Grant Date shall not be deemed to have incurred a
Termination if, within thirty (30) days after such individual ceases to be a
consultant or advisor, he or she becomes an employee of the Company.

      In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.

                                   ARTICLE III

                                 ADMINISTRATION

      3.1 Committee Structure and Authority. The Plan will be administered by
the Committee. After the Company has an effective registration statement under
the Securities Act for the Common Stock, the Committee, except as provided
herein, will be comprised of such number of Non-Employee Directors (and no other
persons) as is required for application of Section 162(m) of the Code and Rule
16b-3. In the absence of appointment of the Committee or a successor committee
of the Board, the entire Board of Directors will constitute the Committee. A
majority of the Committee will constitute a quorum at any meeting thereof
(including

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telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
will be the acts of the Committee for purposes of this Plan. The Committee may
authorize any one or more of its members or an officer of the Company to execute
and deliver documents on behalf of the Committee. A member of the Committee will
not exercise any discretion respecting himself or herself under the Plan. The
Board will have the authority to remove, replace or fill any vacancy of any
member of the Committee upon notice to the Committee and the affected member.
Any member of the Committee may resign upon notice to the Board. The Committee
may allocate among one or more of its members, or may delegate to one or more of
its agents, such duties and responsibilities as it determines.

      Among other things, the Committee will have the authority, subject to the
terms of the Plan:

      (a)   to select those persons to whom Stock Options may be granted from
time to time;

      (b) to determine the number of shares of Common Stock to be covered by
each Stock Option granted hereunder; provided, however, that the number of
shares of Common Stock which can be awarded in any calendar year to any
Participant shall not exceed twenty percent (20%) of the number of shares of
Common Stock reserved and available for issuance under this Plan as of the Grant
Date, and further provided that the Committee may limit the aggregate number of
shares granted to consultants and advisors if required in order to make the
registration statement described in Section 4.5 effective or cause the
registration statement to remain effective;

      (c) to determine the terms and conditions of any Stock Option granted
hereunder (including, without limitation, the Option Price, the Option Period,
any exercise restriction or limitation and any exercise acceleration, forfeiture
or waiver regarding any Stock Option and the shares of Common Stock relating
thereto); provided, however, that no Stock Option may be exercised earlier than
one (1) year from the Grant Date;

      (d) to adjust the terms and conditions, at any time or from time to time,
of any Stock Option, subject to the limitations of Section 8.1;

      (e) to determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to the exercise of a Stock Option will be
deferred;

      (f) to provide for the forms of Option Agreement to be utilized in
connection with the Plan;

      (g) to determine whether a Participant has a Disability or a Retirement;

      (h) to determine what securities law requirements are applicable to the
Plan, Stock Options, and the issuance of shares of Common Stock and to require
of a Participant that appropriate action be taken with respect to such
requirements;

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      (i) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Option Agreement, outstanding Stock Options;

      (j) to require as a condition of the exercise of a Stock Option or the
issuance or transfer of a certificate of Common Stock, the withholding from a
Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a deduction
or as may be otherwise required by law;

      (k) to determine whether and with what effect a Participant has incurred a
Termination;

      (l) to determine the restrictions or limitations on the transfer of Common
Stock;

      (m) to determine under what circumstances a Stock Option may be
transferred during the Participant's lifetime and to impose restrictions on such
transfers;

      (n) to determine whether a Stock Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms of an
Option Agreement;

      (o) to determine the permissible methods of Stock Option exercise and
payment, including cashless exercise arrangements;

      (p) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan and to amend or
modify any Option Agreement accordingly; and

      (q) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.

      The Committee will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it may,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Stock Option issued under the Plan (and any Option Agreement) and
to otherwise supervise the administration of the Plan. The Committee's policies
and procedures may differ with respect to Stock Options granted at different
times.

      Any determination made by the Committee pursuant to the provisions of the
Plan will be made in its sole discretion, and in the case of any determination
relating to a Stock Option, may be made at the time of the grant of the Stock
Option or, unless in contravention of any express term of the Plan or an Option
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of the Plan will be final and binding on all persons,
including the Company and Participants. No determination will be subject to de
novo review if challenged in court.

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                                   ARTICLE IV

                             STOCK SUBJECT TO PLAN

      4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Stock Options under the Plan will be 300,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.

      4.2 Release of Shares. If any shares of Common Stock that have been
optioned cease to be subject to a Stock Option, if any shares of Common Stock
that are subject to any Stock Option are forfeited or if any Stock Option
otherwise terminates without issuance of shares of Common Stock being made to
the Participant, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Stock Options under the Plan.

      4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of
a Stock Option will be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Option Agreement. The Company will
not be required to issue or deliver any certificates for shares of Common Stock,
cash or other property prior to (i) the listing of such shares on any stock
exchange (or other public market) on which the Common Stock may then be listed
(or regularly traded), (ii) the completion of any registration or qualification
of such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of a
Stock Option. The Company may cause any certificate for any share of Common
Stock to be delivered to be properly marked with a legend or other notation
reflecting the limitations on transfer of such Common Stock as provided in this
Plan or as the Committee may otherwise require. The Committee may require any
person exercising a Stock Option to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of the shares of Common Stock in compliance with applicable law or
otherwise. Fractional shares will not be delivered, but will be rounded to the
next lower whole number of shares.

      4.4 Stockholder Rights. No person will have any rights of a stockholder as
to shares of Common Stock subject to a Stock Option until, after proper exercise
of the Stock Option or other action required, such shares have been recorded on
the Company's official stockholder records as having been issued or transferred.
Upon exercise of the Stock Option or any portion thereof, the Company will have
thirty (30) days in which to issue the shares, and the Participant will not be
treated as a stockholder for any purpose whatsoever prior to such issuance. No
adjustment will be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued or transferred in
the Company's official stockholder records, except as provided herein or in an
Option Agreement.

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      4.5 Registration of Common Stock Under This Plan. The Company will
register under the Securities Act the Common Stock delivered or deliverable
pursuant to Stock Options on Commission Form S-8 if and when available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations, and any amendments
to such rules and regulations, governing such forms, as soon as the Committee,
in its sole discretion, deems such registration appropriate. The Company will
use its best efforts to cause the registration statement to become effective and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all shares
delivered pursuant to any Stock Option.

      4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction or event involving
the Company and having an effect similar to any of the foregoing, then the
Committee will adjust or substitute, as the case may be, the number of shares of
Common Stock available for Stock Options under the Plan, the number of shares of
Common Stock covered by outstanding Stock Options, the exercise price per share
of outstanding Stock Options, and any other characteristics or terms of the
Stock Options as the Committee deems necessary or appropriate to reflect
equitably the effects of such changes to the Participants; provided, however,
that any fractional shares resulting from such adjustment will be eliminated by
rounding to the next lower whole number of shares with appropriate payment for
such fractional share as will reasonably be determined by the Committee.

      In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (the "Acquisition"), or in the event of a liquidation of the
Company, the Board or the board of directors of any corporation assuming the
obligations of the Company may, in its discretion, take any one or more of the
following actions as to outstanding Stock Options: (i) provide that such Stock
Options shall be assumed, or substantially equivalent Stock Options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) on such terms as the Board determines to be appropriate, (ii) upon
written notice to Participants, provide that all unexercised vested Stock
Options will terminate immediately prior to the consummation of such transaction
unless exercised by the Participant within a specified period following the date
of such notice, (iii) in the event of an Acquisition under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the Acquisition (the
"Acquisition Price"), make or provide for a cash payment to Participants equal
to the difference between (A) the Acquisition Price times the number of shares
of Common Stock subject to

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outstanding Stock Options (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding Stock Options in exchange for the termination of such Stock
Options, and (iv) provide that all or any outstanding Stock Options shall become
exercisable or realizable in full prior to the effective date of such
Acquisition.

                                    ARTICLE V

                                   ELIGIBILITY

      5.1 Eligibility. Except as herein provided, the persons who will be
eligible to participate in the Plan and be granted Stock Options will be those
persons who are officers, employees, consultants or advisors of the Company or
any Affiliate, who are in a position, in the opinion of the Committee, to make
contributions to the growth, management, protection and success of the Company
and its Affiliates. Distributors of the Company and directors of the Company and
its affiliates who are not employees of the Company or its affiliates are not
eligible to participate in this Plan. Notwithstanding the foregoing, a
consultant or advisor shall not be eligible to receive a grant of Stock Options
under this Plan with respect to providing services directly or indirectly which
promote or maintain a market for the Company's or any Affiliate's securities. Of
those persons described in the preceding sentence, the Committee may, from time
to time, select persons to be granted Stock Options and determine the terms and
conditions with respect thereto. In making any such selection and in determining
the form of the Stock Option, the Committee may give consideration to the
functions and responsibilities of the person's contributions to the Company and
its Affiliates, the value of the individual's service to the Company and its
Affiliates and such other factors deemed relevant by the Committee. The
Committee may designate in writing any person who is not eligible to participate
in the Plan if such person would otherwise be eligible to participate in the
Plan.

                                   ARTICLE VI

                             GRANT OF STOCK OPTIONS

      6.1 General. The Committee will have authority to grant Options under the
Plan at any time or from time to time. Stock Options granted under this Plan
shall be Non-Qualified Stock Options. An Option will entitle the Participant to
receive shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Option Agreement (the
terms and provisions of which may differ from other Option Agreements) including
without limitation, payment of the Option Price.

      6.2 Grant and Exercise. The grant of a Stock Option will occur as of the
date the Committee determines. Each Option granted under this Plan will be
evidenced by an Option Agreement, in a form approved by the Committee, which
will embody the terms and conditions of such Option and which will be subject to
the express terms and conditions set forth in the

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Plan. Such Option Agreement will become effective upon execution by the
Participant. No Stock Options shall be granted under this Plan after the tenth
anniversary of the Effective Date of this Plan.

      6.3 Terms and Conditions. Stock Options will be subject to such terms and
conditions as will be determined by the Committee, including the following:

            (a) Option Period. The Option Period of each Stock Option will be
      fixed by the Committee; provided that no Stock Option will be exercisable
      more than 10 years after the Grant Date.

            (b) Option Price. The Option Price per share of the Common Stock
      purchasable under an Option will not be less than the Fair Market Value
      per share on the Grant Date.

            (c) Exercisability. Stock Options will vest and be exercisable at
      such time or times and subject to such terms and conditions as will be
      determined by the Committee. If the Committee provides that any Stock
      Option is exercisable only in installments, the Committee may at any time
      waive such installment exercise provisions, in whole or in part. In
      addition, the Committee may at any time accelerate the exercisability of
      any Stock Option.

            (d) Method of Exercise. Subject to the provisions of this Article
      VI, a Participant may exercise vested Stock Options, in whole or in part,
      at any time during the Option Period by the Participant's giving written
      notice of exercise on a form provided by the Committee (if available) to
      the Company specifying the number of shares of Common Stock subject to the
      Stock Option to be purchased. Such notice will be accompanied by payment
      in full of the purchase price by cash or check or such other form of
      payment as the Company may accept. If approved by the Committee, payment
      in full or in part may also be made (i) by delivering Common Stock already
      owned by the Participant having a total Fair Market Value on the date of
      such delivery equal to the Option Price; (ii) by authorizing the Company
      to retain shares of Common Stock which would otherwise be issuable upon
      exercise of the Option having a total Fair Market Value on the date of
      delivery equal to the Option Price; (iii) by the delivery of cash by a
      broker-dealer to whom the Participant has submitted a notice of exercise
      (in accordance with Part 220, Chapter II, Title 12 of the Code of Federal
      Regulations, so-called "cashless" exercise); or (iv) by any combination of
      the foregoing. No shares of Common Stock will be issued until full payment
      therefor has been made.

            (e) Transferability of Options. The Committee, in its sole
      discretion, may permit Stock Options to be transferred during the
      Participant's lifetime, subject to such conditions and limitations as the
      Committee deems reasonable and proper, including transfers pursuant to a
      domestic relations order which would be a "qualified domestic relations
      order" as defined in Section 414(p) of the Code.

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      6.4 Termination by Reason of Death. Unless otherwise provided in an Option
Agreement or determined by the Committee, if a Participant incurs a Termination
due to death, any unexpired and unexercised Stock Option held by such
Participant will thereafter be fully exercisable for a period of 90 days
following the date of the appointment of a Representative (or such other period
or no period as the Committee may specify) or until the expiration of the Option
Period, whichever period is the shorter.

      6.5 Termination by Reason of Disability. Unless otherwise provided in an
Option Agreement or determined by the Committee, if a Participant incurs a
Termination due to a Disability, any unexpired and unexercised Stock Option held
by such Participant will thereafter be fully exercisable by the Participant for
the period of ninety (90) days (or such other period or no period as the
Committee may specify) immediately following the date of such Termination or
until the expiration of the Option Period, whichever period is shorter, and the
Participant's death at any time following such Termination due to Disability
will not affect the foregoing.

      6.6 Other Termination. Unless otherwise provided in an Option Agreement or
determined by the Committee, if a Participant incurs a Termination due to
Retirement, or the Termination is involuntary on the part of the Participant
(but is not due to death or Disability or with Cause), any Stock Option held by
such Participant will thereupon terminate, except that such Stock Option, to the
extent then exercisable, may be exercised for the lesser of (a) the 90-day
period commencing with the date of such Termination, or (b) until the expiration
of the Option Period. If the Participant incurs a Termination which is either
(a) voluntary on the part of the Participant (and is not due to Retirement) or
(b) with Cause, the Option will terminate immediately. The death or Disability
of a Participant after a Termination otherwise provided herein will not extend
the time permitted to exercise an Option.

      6.7 Cashing Out of Option. Unless otherwise provided in the Option
Agreement, on receipt of written notice of exercise, the Committee may elect to
cash out all or part of the portion of any Stock Option to be exercised by
paying the Participant an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock that is subject to the Option over
the Option Price times the number of shares of Common Stock subject to the
Option on the effective date of such cash out.

                                   ARTICLE VII

             PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN

      7.1 Transfer of Shares. Subject to the restriction in any Option Agreement
or any other transfer restriction contained in any agreement between a
Participant and the Company, a Participant may at any time make a transfer of
shares of Common Stock received pursuant to the exercise of a Stock Option. Any
transfer of shares received pursuant to the exercise of a Stock Option will not
be permitted or valid unless and until the transferee agrees to be bound by the
provisions of the Plan, and any provision respecting Common Stock under the
Option Agreement.

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      7.2 Limited Transfer During Offering. If there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock are offered for sale in an underwritten offering, a Participant may
not, during the period requested by the underwriters managing the registered
public offering, effect any public sale or distribution of shares received
directly or indirectly pursuant to an exercise of a Stock Option.

                                  ARTICLE VIII

                                 MISCELLANEOUS

      8.1 Amendments and Termination . The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation may be made which would impair the rights of a Participant under
a Stock Option theretofore granted without the Participant's consent except such
an amendment made to cause the Plan to qualify for an exemption provided by the
Exchange Act, registration provisions of the Securities Act, or the rules
promulgated thereunder. In addition, no such amendment may be made without the
approval of the Company's stockholders to the extent such approval is required
by law or agreement.

      The Committee may amend the terms of any Stock Option theretofore granted,
prospectively or retroactively, but no such amendment may impair the rights of
any Participant without the Participant's consent, except such an amendment made
to cause the Plan or Stock Option to qualify for the exemption provided by Rule
16b-3. The Committee may also substitute new Stock Options for previously
granted Stock Options, including previously granted Stock Options having higher
Option Prices but no such substitution may be made which would impair the rights
of the Participant under such Stock Options theretofore granted without the
Participant's consent.

      Subject to the above provisions, the Board will have authority to amend
the Plan to take into account changes in law and tax, accounting and securities
rules, as well as other developments, and to grant Stock Options which qualify
for beneficial treatment under such rules without stockholder approval.

      8.2 General Provisions.

            (a) Representation. The Committee may require each person purchasing
      or receiving shares pursuant to a Stock Option to represent to and agree
      with the Company in writing that such person is acquiring the shares
      without a view to the distribution thereof. The certificates for such
      shares may include any legend which the Committee deems appropriate to
      reflect any restrictions on transfer.

            (b) No Additional Obligation. Nothing in the Plan will prevent the
      Company or an Affiliate from adopting other or additional compensation
      arrangements for its employees.

                                       12
<PAGE>
            (c) Withholding. No later than the date as of which an amount first
      becomes includable in the gross income of the Participant for income tax
      purposes with respect to any Stock Option, the Participant will pay to the
      Company (or other entity identified by the Committee), or make
      arrangements satisfactory to the Company or other entity identified by the
      Committee regarding the payment of, any Federal, state, local or foreign
      taxes of any kind required by law to be withheld with respect to such
      Stock Option or exercise thereof. Unless otherwise determined by the
      Committee, withholding obligations may be settled with Common Stock,
      including Common Stock that is part of the Stock Option that gives rise to
      the withholding requirement, provided that any applicable requirements
      under Section 16 of the Exchange Act are satisfied. The obligations of the
      Company under the Plan, will be conditional on such payment or
      arrangements, and the Company and its Affiliates will, to the extent
      permitted by law, have the right to deduct any such taxes from any payment
      otherwise due to the Participant.

            (d) Representation. The Committee will establish such procedures as
      it deems appropriate for a Participant to designate a Representative to
      whom any amounts payable in the event of the Participant's death are to be
      paid.

            (e) Controlling Law. The Plan and all Stock Options made and actions
      taken thereunder will be governed by and construed in accordance with the
      laws of the State of Delaware (other than its law respecting choice of
      law) except to the extent the General Corporation Law of the State of
      Delaware would be mandatorily applicable. The Plan will be construed to
      comply with all applicable law and to avoid liability to the Company, an
      Affiliate or a Participant, including, without limitation, liability under
      Section 16(b) of the Exchange Act.

            (f) Offset. Any amounts owed to the Company or an Affiliate by the
      Participant of whatever nature may be offset by the Company from the value
      of any shares of Common Stock, cash or other thing of value under this
      Plan or an Option Agreement to be transferred to the Participant, and no
      shares of Common Stock or other thing of value under this Plan or an
      Option Agreement will be transferred unless and until all disputes between
      the Company and the Participant have been fully and finally resolved and
      the Participant has waived all claims to such against the Company or an
      Affiliate.

      8.3 Rights with Respect to Continuance of Employment. Nothing in this Plan
will be deemed to alter the relationship between the Company or an Affiliate and
a Participant, or the contractual relationship between a Participant and the
Company or an Affiliate if there is a written contract regarding such
relationship. Nothing in this Plan will be construed to constitute a contract of
employment or engagement between the Company or an Affiliate and a Participant.
The Company or an Affiliate and each of the Participants continue to have the
right to terminate the employment or service relationship at any time for any
reason, except as provided in a written contract. The Company or an Affiliate
will have no obligation to retain the Participant in its employ or service as a
result of this Plan. There will be no inference as to the length of employment
or service hereby, and the Company or an Affiliate reserves the same rights to

                                       13
<PAGE>
terminate the Participant's employment or service engagement as it existed prior
to the individual becoming a Participant in this Plan.

      8.4 Stock Options in Substitution for Stock Options Granted by Other
Corporations. Stock Options may be granted under the Plan from time to time in
substitution for Stock Options held by employees, or service providers of other
corporations who are about to become officers, employees, consultants or
advisors of the Company or an Affiliate as the result of a merger or
consolidation of the employing corporation with the Company or an Affiliate, or
the acquisition by the Company or an Affiliate of the assets of the employing
corporation, or the acquisition by the Company or Affiliate of the stock of the
employing corporation, as the result of which it becomes an Affiliate. The terms
and conditions of the Stock Options so granted may vary from the terms and
conditions set forth in this Plan at the time of such grant as the majority of
the members of the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the Stock Options in substitution for which they are
granted.

      8.5 Delay. If at the time a Participant incurs a Termination (other than
due to Cause) or if at the time of a Change in Control, the Participant is
subject to "short-swing" liability under Section 16 of the Exchange Act, any
time period provided for under the Plan or an Option Agreement to the extent
necessary to avoid the imposition of liability will be suspended and delayed
during the period the Participant would be subject to such liability, but not
more than six months and one day and not to exceed the Option Period as provided
in the Option Agreement. The Company will have the right to suspend or delay any
time period described in the Plan or an Option Agreement if the Committee
determines that the action may constitute a violation of any law or result in
liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted will not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee will have the discretion to suspend
the application of the provisions of the Plan required solely to comply with
Rule 16b-3 if the Committee determines that Rule 16b-3 does not apply to the
Plan.

      8.6 Headings. The headings in this Plan are for reference purposes only
and will not affect the meaning or interpretation of this Plan.

      8.7 Severability. If any provision of this Plan is for any reason held to
be invalid or unenforceable, such invalidity or unenforceability will not affect
any other provision of this Plan, and this Plan will be construed as if such
invalid or unenforceable provision were omitted.

      8.8 Successors and Assigns. This Plan will inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, will be
binding upon the Participant's heirs, legal representatives and successors.

Adopted by the Board of Directors on November 18, 1998.

Approved by the written consent of the Shareholders of the Company in April,
1998.

                                       14
<PAGE>
                        2000 DECLARATION OF AMENDMENT TO
                             BLUE RHINO CORPORATION
                            1998 STOCK INCENTIVE PLAN

      THIS 2000 DECLARATION OF AMENDMENT, is made this 19th day of December,
2000, by BLUE RHINO CORPORATION (the "Corporation"), to the Corporation's 1998
Stock Incentive Plan (the "1998 Plan").

                                R E C I T A L S:
                                - - - - - - - -

      WHEREAS, the Corporation has adopted, and the stockholders have
approved, the 1998 Plan; and

      WHEREAS, pursuant to Section 8.1 of the 1998 Plan, the Board of Directors
has authority to amend the 1998 Plan, subject to stockholder approval in certain
circumstances; and

      WHEREAS, the Board of Directors of the Corporation has deemed it advisable
to amend Section 4.1 of the 1998 Plan to increase the number of shares
authorized for issuance under the 1998 Plan from 1,200,000 shares to 2,200,000
shares and to impose an annual participant award limitation in accordance with
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), subject to the approval of the stockholders of the
Corporation of such amendments; and

      WHEREAS, the Corporation desires to evidence such amendments by this
Declaration of Amendment;

      NOW, THEREFORE, IT IS DECLARED that, effective as of December 19, 2000,
the 1998 Plan shall be and hereby is amended as follows (subject to stockholder
approval of such amendments):

      1. Amendment to Section 4.1. Section 4.1 ("Number of Shares") of the 1998
Plan is hereby amended by deleting the first sentence of Section 4.1 and
inserting the following in lieu thereof:

                  "4.1 Number of Shares. Subject to the adjustment under Section
            4.6, the total number of shares of Common Stock reserved and
            available for distribution pursuant to Stock Options under the Plan
            will be 2,200,000 shares of Common Stock." In addition, to the
            extent required pursuant to Section 162(m) of the Code, no
            participant may be granted options for more than 300,000 shares of
            Common Stock (or the equivalent value thereof based on the fair
            market value of the Common Stock at the time of grant) during any
            12-month period, subject to adjustment as provided in Section 4.6."
<PAGE>
      2. Amendment to Section 3.1(b) ("Committee Structure and Authority).
Section 3.1(b) of the 1998 Plan is hereby amended by deleting the following,
with the remainder of Section 3.1(b) to remain unchanged:

            "provided, however, that the number of shares of Common Stock which
            can be awarded in any calendar year to any Participant shall not
            exceed twenty percent (20%) of the number of shares of Common Stock
            reserved and available for issuance under this Plan as of the Grant
            Date; "

      3. Continued Effect. Except as set forth herein, the 1998 Plan shall
remain in full force and effect.

      IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of
Blue Rhino Corporation as of the day and year first above written.

                                    BLUE RHINO CORPORATION

                                    By:   /s/ Billy D. Prim
                                       ---------------------------------------
                                          Billy D. Prim, President and
                                          Chief Executive Officer

ATTEST:

/s/ Mark Castaneda
-------------------------
Mark Castaneda, Secretary

[Corporate Seal]
<PAGE>
                        2001 DECLARATION OF AMENDMENT TO
                             BLUE RHINO CORPORATION
                            1998 STOCK INCENTIVE PLAN

      THIS 2001 DECLARATION OF AMENDMENT, is made this 30th day of August, 2001,
by BLUE RHINO CORPORATION (the "Corporation"), to the Corporation's 1998 Stock
Incentive Plan (the "1998 Plan").

                                R E C I T A L S:
                                - - - - - - - -

      WHEREAS, the Corporation has adopted, and the stockholders have
approved, the 1998 Plan; and

      WHEREAS, pursuant to Section 8.1 of the 1998 Plan, the Board of Directors
has authority to amend the 1998 Plan, subject to stockholder approval in certain
circumstances; and

      WHEREAS, the Board of Directors of the Corporation has deemed it advisable
to amend Section 4.1 of the 1998 Plan to increase the number of shares
authorized for issuance under the 1998 Plan from 2,200,000 shares to 3,200,000
shares, subject to the approval of the stockholders of the Corporation of such
amendments; and

      WHEREAS, the Corporation desires to evidence such amendments by this
Declaration of Amendment;

      NOW, THEREFORE, IT IS DECLARED that, effective as of December 18, 2001,
the 1998 Plan shall be and hereby is amended as follows (subject to stockholder
approval of such amendment):

      1. Amendment to Section 4.1. Section 4.1 ("Number of Shares") of the 1998
Plan is hereby amended by deleting the first sentence of Section 4.1 and
inserting the following in lieu thereof:

                  "4.1 Number of Shares. Subject to the adjustment under Section
            4.6, the total number of shares of Common Stock reserved and
            available for distribution pursuant to Stock Options under the Plan
            will be 3,200,000 shares of Common Stock. In addition, to the extent
            required pursuant to Section 162(m) of the Code, no participant may
            be granted options for more than 300,000 shares of Common Stock (or
            the equivalent value thereof based on the fair market value of the
            Common Stock at the time of grant) during any 12-month period,
            subject to adjustment as provided in Section 4.6."

      2. Continued Effect. Except as set forth herein, the 1998 Plan shall
remain in full force and effect.
<PAGE>
      IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf of
Blue Rhino Corporation as of the day and year first above written.

                                    BLUE RHINO CORPORATION

                                    By:   /s/ Billy D. Prim
                                       --------------------------------------
                                          Billy D. Prim, President and
                                          Chief Executive Officer

ATTEST:

/s/ Mark Casteneda
-------------------------
Mark Castaneda, Secretary

[Corporate Seal]<PAGE>
                                                                    EXHIBIT 10.1

                                    AGREEMENT

         THIS AGREEMENT is dated this 29th day of November, 2001, by and between
Advanced Viral Research Corp., a Delaware corporation ("AVR"), and William
Bregman, an individual residing at 939 West 47th Court, Miami Beach, Florida
33140 ("Bregman").

                                    RECITALS

         WHEREAS, Bregman has served as Secretary, Treasurer and a member of the
Board of Directors of AVR since 1984, and as an officer and a member of the
Board of Directors of AVR's substantially-owned subsidiary, Advance Viral
Research, Ltd., a Bahamian corporation (the "Subsidiary"; AVR and the Subsidiary
are sometimes hereinafter referred to collectively as the "Corporation") since
1984; and

         WHEREAS, for sound business reasons and in the best interests of
Bregman and the Corporation, upon the terms and subject to the conditions of
this Agreement, Bregman, among other things, shall resign from his positions as
Secretary, Treasurer and a member of the Board of Directors of AVR and as an
officer and a member of the Board of Directors of the Subsidiary.

         NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereby agree as follows:

1. RESIGNATION.

         (a) Immediately following the execution of this Agreement, but after
first having taken the actions set forth in Section 1(c) below, Bregman shall
resign from all offices of AVR and the Subsidiary, including, without
limitation, as Secretary and Treasurer of AVR, and Bregman shall resign as a
member of the Board of Directors of each of AVR and the Subsidiary.

         (b) In consideration for Bregman's resignation from all offices of AVR
and the Subsidiary and his resignation as a member of the Board of Directors of
AVR and the Subsidiary, AVR shall pay to Bregman, concurrently with the
foregoing resignations, in cash, ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000)
in one lump sum. Bregman acknowledges that AVR's payment to him of the $150,000
contemplated in this Section 1(b) constitutes payment in full for all severance,
compensation and other remuneration and amounts accrued or owing by the
Corporation to Bregman, whether for services performed by Bregman on behalf of
the Corporation or otherwise, and the Corporation, from and after the execution
of this Agreement and its payment to Bregman of the $150,000 contemplated above,
shall have no monetary or other obligation or liability to Bregman except as
otherwise set forth in this Agreement.

         (c) Bregman and the Corporation acknowledge that as express conditions
to the execution of this Agreement, Bregman, prior to the execution of this
Agreement, in his capacity
<PAGE>

as a member of the Board of Directors of AVR, voted (or took written action in
lieu thereof) in favor of (i) increasing the size of AVR's Board of Directors
from four members to eight members and (ii) filling the four newly created
vacancies on AVR's Board of Directors with James F. Dicke II, Christopher
Forbes, David Seligman and Eli Wilner.

         (d) Concurrently with Bregman's resignation as an officer and a member
of the Board of Directors of AVR and the Subsidiary, AVR shall cancel all
company credit cards issued to Bregman and otherwise terminate all
company-related perquisites previously afforded to Bregman, including coverage
under the Corporation's medical insurance plans.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS.

         (a) RIGHT TO APPOINT DIRECTOR. The Corporation hereby grants Bregman,
along with Bernard Friedland ("Friedland"), the combined right for a period of
two years from the date hereof to appoint one additional member to the Board of
Directors of AVR (the "Bregman/Friedland Designee"), so long as both Bregman and
Friedland own Shares of AVR. The identity of the Bregman/Friedland Designee
shall be reasonably acceptable to the Corporation. The Bregman/Friedland
Designee, if appointed, shall serve on AVR's Board of Directors until his
successor shall be duly elected and shall qualify. Bregman acknowledges that
notwithstanding the foregoing or any contrary provision contained in AVR's
charter or by-laws or set forth in the Delaware General Corporation Law, the
Bregman/Friedland Designee may be removed as a member of the Board of Directors
of AVR, with or without cause, by the affirmative vote of the members of AVR's
then Board of Directors at any time following the date which is the earlier to
occur of: (i) two years from the date hereof or (ii) the complete divestiture of
both Bregman's and Friedland's ownership in AVR. The Bregman/Friedland Designee
shall be the same person referenced as the Bregman/Friedland Designee in that
certain Agreement of even date herewith concurrently being entered into between
the Corporation and Bernard Friedland.

         (b) ADVANCE VIRAL RESEARCH, LTD. As soon as practicable following the
execution of this Agreement, Bregman shall resign as a Trustee of the Bahamian
Trust (the "Trust") and, in connection therewith, in accordance with the terms
of the Trust and applicable law, cooperate with the Corporation in designating a
substitute Trustee of the Trust. The matters contemplated in this Section 2(b)
shall be completed in compliance with Bahamian and all other applicable laws.
Bregman represents and warrants to the Corporation that other than his interest
as Trustee of the Trust and as a stockholder of AVR, Bregman has no equity or
other ownership or control interest, direct or indirect, in the Trust or in the
Subsidiary. Bregman further represents and warrants that, to the best of his
knowledge, the Subsidiary owns (i) any export license required for the
Subsidiary to legally export any of the Corporation's products out of the
Bahamas and (ii) the manufacturing facility from which the Subsidiary conducts
its operations in the Bahamas.

         (c) VOTING AGREEMENTS TERMINATED. Except as provided in this Agreement,
all agreements regarding the voting or disposition of shares of common stock of
AVR, par value $.00001 per share (the "Common Stock"), held by Bregman,
including, without limitation, the agreement to nominate Shalom Hirschman, M.D.
("Hirschman") for election to the Corporation's Board of Directors, are hereby
terminated. Without limiting the foregoing, concurrently therewith, the
provision set forth in the Employment Agreement between AVR and Hirschman

                                       2
<PAGE>

prohibiting Hirschman from voting any shares of Common Stock owned by him in any
manner adverse to Bregman shall also be terminated.

         (d) PRODUCT R. Provided that the Corporation is then permitted in
accordance with applicable United States Food and Drug Administration ("FDA")
and other relevant statutes, laws and regulations to dispense and dispose of
Product R, the Corporation shall provide Bregman, for his own personal or family
use in accordance with then FDA policy, with 500 ampules of Product R annually,
such distribution to commence on the date hereof and to continue on each
anniversary of the date hereof until Bregman's death.

         (e) INDEMNIFICATION BY THE CORPORATION. To the fullest extent permitted
by Section 145 of the Delaware General Corporation Law (or any successor
provision) and AVR's charter and by-laws, the Corporation shall promptly
indemnify Bregman for all amounts (including, without limitation, judgments,
fines, settlement payments, losses, damages, costs and expenses (including
reasonable attorneys' fees)) incurred or paid by Bregman in connection with any
action, proceeding, suit or investigation arising out of or relating to the
performance by Bregman of services for the Corporation, including as a director,
officer or employee of the Corporation.

         Promptly after receipt by Bregman of notice of the assertion of a claim
against him for actions related to such services, Bregman will give AVR written
notice of the assertion of such claim. If any claim is brought against Bregman
by means of a proceeding and Bregman gives written notice to AVR of the
commencement of such proceeding, AVR will be entitled to participate in such
proceeding and, to the extent that it wishes (unless (i) AVR is also a party to
such proceeding and Bregman determines in good faith that joint representation
would be inappropriate or (ii) AVR fails to provide reasonable assurance to
Bregman of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the defense of such
proceeding with counsel satisfactory to Bregman. After written notice from AVR
to Bregman of its election to assume the defense of such proceeding, AVR will
not, as long as it diligently conducts such defense, be liable to Bregman under
this indemnification for any fees of other counsel or any other expenses with
respect to the defense of such proceeding, in each case subsequently incurred by
Bregman in connection with the defense of such proceeding, other than reasonable
costs of investigation. If AVR assumes the defense of a proceeding, (i) it will
be conclusively established for purposes of this indemnification that the claims
made in that proceeding are within the scope of and subject to indemnification;
and (ii) no compromise or settlement of such claims may be effected by AVR
without Bregman's consent, which consent Bregman shall not unreasonably
withhold. If written notice is given to AVR of the commencement of any
proceeding and AVR does not, within ten days after Bregman's written notice is
given, give written notice to Bregman of its election to assume the defense of
such proceeding, the Corporation will be bound by any determination made in such
proceeding or any compromise or settlement effected by Bregman.

         (f) CONTINUATION OF DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. For a
period of six continuous years from the date hereof, the Corporation shall cause
Bregman to continue to be insured under a directors' and officers' liability
insurance policy covering the same circumstances and events covered under the
directors' and officers' liability insurance policy maintained by the
Corporation on the date hereof (to the extent such circumstances and events may

                                       3
<PAGE>

then legally be insured against), which policy shall provide for up to $5
million of insurance coverage.

         (g) INTELLECTUAL PROPERTY. Bregman represents and warrants that he does
not own, directly or indirectly, any patents, trademarks, trade names, service
marks, trade secrets, designs, manufacturing information, know-how, copyrights,
inventions, rights in internet websites or domain names, or any registrations,
applications or other rights to any of the foregoing, or any other proprietary
rights or information relating to the Corporation, Reticulose or Product R
(collectively, the "Intellectual Property"). Bregman further represents and
warrants that Bregman has previously transferred and assigned to the Corporation
all of his right, title and interest in and to any and all such Intellectual
Property. Notwithstanding the foregoing, to the extent that Bregman has
inadvertently failed to transfer and assign to the Corporation any such
Intellectual Property, Bregman, in consideration, among other things, for the
sum being paid to him under this Agreement, hereby irrevocably transfers and
assigns to the Corporation all of Bregman's right, title and interest in and to
such Intellectual Property.

         (h) PROXY FOR VOTING OF COMMON STOCK. With respect to (i) the election
of directors of the Corporation and (ii) compensation packages for directors of
the Corporation, including any stock option plans for directors, Bregman, by
this Agreement, does hereby constitute and appoint AVR, or any nominee thereof,
with full power of substitution, during the period commencing on the date hereof
until the Expiration Date (as defined below) as his true and lawful attorney and
proxy for and in his name, place and stead, to vote all the shares of Common
Stock of AVR Bregman beneficially owns, directly or indirectly (the "Shares"),
at the time of such vote, at any annual, special or adjourned meeting of the
stockholders of the Corporation (and this appointment will include the right to
sign on his behalf (as a stockholder) any consent, certificate or other document
relating to AVR that laws of the State of Delaware may require or permit).
Bregman acknowledges that this proxy shall be irrevocable until the Expiration
Date and is coupled with an interest sufficient at law to support an irrevocable
proxy and is being given to AVR as an inducement to enter into this Agreement.

         For shares of Common Stock of the Corporation as to which Bregman is
the beneficial but not the record owner, Bregman, immediately following the
execution of this Agreement, shall use all commercial efforts to cause any
record owner of such shares to grant to AVR an irrevocable proxy identical to
the irrevocable proxy being granted by Bregman to AVR hereunder. For purposes of
this section, "Expiration Date" shall mean the earlier to occur of (i) two years
from the date hereof or (ii) as to those Shares sold, the date of the sale of
such Shares by Bregman to one or more unrelated third parties in a bona fide
sale after Bregman shall have first complied with AVR's right of first refusal
set forth in Section 4 hereof.

         (i) BOOKS AND RECORDS. Bregman represents and warrants that he has
caused to be delivered to the Corporation's Yonkers, New York offices (the "New
York Offices"), prior to the date hereof, all material books and records, in any
form or media, of the Corporation relating in a meaningful way to the business
and affairs of the Corporation that, to the best of Bregman's knowledge, were
located in the Corporation's Florida offices or that were otherwise under
Bregman's direct or indirect control (collectively, the "Books and Records").
Included in the Books and Records is information relating to all banking and
checking accounts maintained by the Corporation in Florida and the contents of
all safe deposit boxes and other vaults maintained or utilized by the

                                       4
<PAGE>

Corporation in Florida, including, without limitation, the contents of the safe
deposit box maintained by the Corporation in Sarasota, Florida. Bregman further
represents and warrants that included in the Books and Records are originals (or
copies), to the best of his knowledge, of all stock option and warrant records
relating to the Corporation and all material written agreements (and written
summaries of all material oral agreements) between the Corporation and any of
A.V.R. Canada Inc., Plata Partners Limited Partnership, D.C.T. SRL, CURE Inc.,
AVIX Inc., Commonwealth Pharmaceuticals and any other similar distributor.

         (j) MISCELLANEOUS OTHER AGREEMENTS. Bregman represents and warrants, to
the best of his knowledge, that (i) the Corporation is not indebted to, nor have
any amounts accrued from the Corporation for the benefit of, Judge Jethro Miller
(other than in the ordinary course of business consistent with past practice)
and (ii) no employment agreement exists between the Corporation and any worker
at the Corporation's Bahamian manufacturing facility other than Mr. Malcolm
Santer.

         (k) FLORIDA LEASE. Bregman represents and warrants, to the best of his
knowledge, that (i) the lease for the Corporation's Florida offices expires in
December 2001, (ii) that such lease has not been renewed by the Corporation and
cannot be renewed unilaterally without the Corporation's consent, (iii) all
amounts accrued or otherwise currently due under such lease have been paid to
date and (iv) the December 2001 rent payment under such lease (which is the
final rent payment due under such lease) does not exceed $5,000.

         (l) ASSIGNMENT OF LIFE INSURANCE. Bregman covenants that following his
execution of this Agreement, Bregman will reasonably assist the Corporation in
effecting Bregman's assignment to the Corporation of Bregman's 20% beneficiary
interest in the life insurance policy currently maintained by the Corporation
covering Bregman's life.

         (m) FURTHER ASSISTANCE. Following the execution of this Agreement, each
of Bregman and the Corporation, from time to time at the other's request, and
without further consideration, shall execute and deliver to the other such
documents and instruments and take such other action as the other party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby.

3. RESTRICTION AGAINST TRANSFER.

         Except with respect to a Permitted Transfer (as defined below), Bregman
agrees that he will not transfer, assign, hypothecate, or in any way alienate
any of his Shares, or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, unless in a transfer that meets the
requirements of this Agreement. Any purported transfer in violation of any
provision of this Agreement shall be void and ineffectual, shall not operate to
transfer any interest or title in the purported transferee, and shall give the
Corporation a right to purchase such Shares in the manner and on the terms and
conditions provided for herein. For purposes hereof, a "Permitted Transfer"
means a transfer, sale, assignment or other disposition, with or without
consideration, of the Shares to any spouse, member of Bregman's family, or to a
custodian, trustee (including a trustee of a voting trust), executor, or other
fiduciary for the account of Bregman's spouse, or members of Bregman's family,
or to a trust, the primary beneficiary of which is Bregman or a member of
Bregman's family. Notwithstanding the

                                       5
<PAGE>

foregoing, no Permitted Transfer shall be valid or effective unless and until
the transferee of the Shares in question agrees in writing with the Corporation
to be bound by the provisions of Sections 2(h), 3, 4 and 5 hereof. Further, and
notwithstanding anything to the contrary set forth herein, the parties agree
that Bregman may freely transfer, sell or otherwise dispose of an aggregate of
250,000 Shares outside of, and without giving effect to, the restrictions on
transfer and other provisions set forth in Sections 2(h), 3 and 4 of this
Agreement.

4. RIGHT OF FIRST REFUSAL.

         (a) "OFF THE MARKET" TRANSACTION. In the event Bregman receives a bona
fide offer (whether or not such offer is derived from Bregman's solicitation)
for the purchase of all or a portion of his Shares (or any rights or interests
therein) in a privately negotiated "off the market" transaction, Bregman shall
give written notice of such offer to the Corporation in the manner and at the
address set forth in Section 7(i) hereof. The notice must set forth the name of
the proposed transferee, the number of Shares to be transferred, the price per
Share, and all other terms and conditions of the proposed transfer (no non-cash
consideration may comprise a portion of the offer). On receipt of the notice
with respect to such offer, the Corporation shall have the exclusive right and
option, exercisable at any time for two business days from the time of the
Corporation's receipt of said notice, to purchase the Shares of the Corporation
covered by the offer in question (the "Offered Shares") at the same price and on
the same terms and conditions of the offer as set out in such notice. The
Corporation's right to purchase Shares as provided in this Section 4(a) shall
expire 12 months from the date hereof.

         (b) "ON THE MARKET" TRANSACTION. In the event Bregman receives a bona
fide offer (whether or not such offer is derived from Bregman's solicitation)
for the purchase of Shares which, when combined with all other Shares sold by
Bregman in the prior three (3) months, exceeds the greater of: (i) 1% of the
outstanding shares of common stock of the Corporation, or (ii) the average
weekly trading volume of the Common Stock over the immediately preceding four
weeks, in a transaction which is executed as an "on the market" transaction,
Bregman shall give written notice of such offer to the Corporation in the manner
and at the address set forth in Section 7(i) hereof. The notice must set forth
the number of Shares to be transferred, the price per Share, and all other terms
and conditions of the proposed transfer (no non-cash consideration may comprise
a portion of the offer). On receipt of the notice with respect to such offer,
the Corporation shall have the exclusive right and option, exercisable at any
time for two business days from the time of the Corporation's receipt of said
notice, to purchase that number of Offered Shares, at the same price and on the
same terms and conditions of the offer as set out in such notice. The
Corporation's right to purchase Shares as provided in this Section 4(b) shall
expire six (6) months from the date hereof.

         (c) EXERCISE OF RIGHTS. If the Corporation elects to exercise its
rights set forth in Sections 4(a) or (b) above, the Corporation shall (i) give
written notification to this effect to Bregman, (ii) deposit the required
purchase price in an escrow account (with a mutually acceptable escrow agent)
within one business day from the time of the Corporation's receipt of said
notice, and (iii) consummate the sale and purchase within two business days
thereafter. If the Corporation does not elect to exercise its rights to purchase
any or all of the Offered Shares, Bregman shall have the right, for the five
business day period following the expiration of the Corporation's right of first
refusal exercise period, to transfer all of the Offered Shares free and clear of

                                       6
<PAGE>

any restrictions against transfer that might otherwise have been created by this
Agreement. If Bregman does not transfer all of the Offered Shares in strict
compliance with this Section 4(c), any other disposition of Shares by Bregman
must be made pursuant to a new bona fide offer and subject to the timing and
other provisions of this Section 4.

         (d) CERTIFICATE TO BE HELD IN ESCROW. Whenever the Corporation
purchases Shares pursuant to this Agreement, such Shares shall be held in escrow
by a mutually acceptable escrow agent, until full payment for said Shares shall
have been made to Bregman, at which time said Shares shall be transferred to the
Corporation by the escrow agent. Subject to the terms of this Agreement, if the
Corporation defaults in the payment of the purchase price for the Shares
purchased pursuant to this Agreement, Bregman may elect to rescind such
purchase. In the event of a rescission, the Shares held in escrow shall be
returned to Bregman, and all monies paid by the Corporation on account of the
purchase price shall be retained by Bregman as liquidated damages.

5. NONDISCLOSURE OF CONFIDENTIAL INFORMATION AND NO DISPARAGEMENT.

         (a) CONFIDENTIAL INFORMATION. Bregman agrees that he will not at any
time, in any fashion, form or manner, either directly or indirectly, divulge,
disclose or communicate to any person, firm or corporation, in any manner
whatsoever, any Confidential Information of the Corporation, as defined below.
Bregman understands that Confidential Information means (i) information,
including, but not limited to, technical or nontechnical data, formulae,
pattern, compilation, program, device, method, technique, drawing, process,
financial data or list of actual or potential customers or suppliers, that is
sufficiently secret to derive economic value, actual or potential, from not
being generally known to other persons who can obtain economic value from its
disclosure or use, and (ii) any other information regarding the Corporation
which has not been disseminated to the public through a press release of the
Corporation or included in one of the Corporation's regulatory filings with the
Securities and Exchange Commission.

         Without limiting the generality of the foregoing nondisclosure
provisions, Bregman specifically agrees that such nondisclosure provisions apply
to customer lists, formulae, names and addresses of suppliers and distributors,
business procedures and practices, and any other information concerning the
business of the Corporation which is or may from time to time be designated as
confidential by an authorized representative of the Corporation.

         (b) MATERIALITY. Bregman further agrees that the matters in this
Section 5 are important, material and confidential, and gravely affect the
effective and successful conduct of the business of Corporation and its
goodwill, and that any breach of the terms of this Section 5 is a material
breach of this Agreement and will subject Bregman to court orders as to
affirmative acts necessary to protect any Confidential Information and to
damages on account of losses actually incurred by the Corporation.

         (c) BINDING NATURE. Bregman further agrees that his promise not to
disclose any Confidential Information of the Corporation will be binding upon
him both during the period that this Agreement is in effect and at all times
thereafter, excepting any disclosure expressly authorized in writing by the
Corporation.

                                       7
<PAGE>

         (d) REMEDIES. In the event that Bregman fails to comply with, or
threatens not to comply with, any provision of this Section, the Corporation
shall be entitled to an injunction requiring such affirmative acts from Bregman
as may be necessary to enforce such paragraph, and further restraining Bregman
from disclosing or exploiting, in whole or in part, any Confidential Information
of the Corporation, or from rendering any services to any person, firm,
corporation, association or other entity to whom such Confidential Information,
in whole or in part, has been disclosed or by whom it has been exploited or is
threatened to be disclosed or exploited. Nothing herein shall be construed as
prohibiting the Corporation's pursuit of other remedies for such noncompliance
or threatened noncompliance, including the recovery of damages from Bregman.

         (e) PROPERTY OF THE CORPORATION. All notes, records, drawings,
documents or writings made or compiled by Bregman or made available to Bregman
while employed by the Corporation concerning any Confidential Information shall
be the property of the Corporation, and shall be delivered to the Corporation on
the date hereof (if not previously delivered to the Corporation).

         (f) AGREEMENT NOT TO DISPARAGE. From and after the date hereof, each of
Bregman and the Corporation agrees that he and it shall not say, write or
communicate in any manner to any person or entity anything derogatory about the
other, regardless of the truth or falsity of the information nor shall either
take any action which could reasonably result in the other suffering any
economic harm; provided, that nothing herein is intended to or shall limit the
Corporation's or Bregman's ability to comply with applicable laws, rules or
regulations.

6. NONCOMPETE.

         (a) For a period of three (3) years commencing on the date hereof,
Bregman shall not at any time or place or to any extent whatsoever, either
directly or indirectly, without the express prior written consent of the
Corporation, engage in any business, calling, or enterprise which is or may be
competitive with or adverse to the business or affairs of the Corporation,
whether alone, as a partner, or as an officer, director, employee, or
shareholder of any other corporation, or as a trustee, fiduciary, or other
representative, except under and pursuant to this Agreement. For purposes of
this Agreement, the parties agree that the business or affairs of the
Corporation means the development, production, distribution or other
commercialization of any pharmaceutical product which is a derivative of a
peptide nucleic acid formulation. Notwithstanding the foregoing, the parties
acknowledge that nothing contained herein shall prohibit Bregman from acquiring
equity securities of a publicly held entity engaged in activities which are
similar to, or competitive with, the business or affairs of the Corporation
which in the aggregate do not exceed 5% of the issued and outstanding equity
securities of such publicly held entity.

         (b) Without limiting the generality of the foregoing, Bregman will not,
without the Corporation's prior written approval, directly or indirectly, for
Bregman's own account, or as an agent or employee of another person, partnership
or corporation, canvass, solicit or accept business from any client or customer
or former client of the Corporation, or in any business then engaged in by the
Corporation. For such period, Bregman will not accept business or employment for
the account of Bregman or others without the prior written consent of the

                                       8
<PAGE>

Corporation, which consent shall not be unreasonably withheld if Bregman agrees
in writing to restrict such activities so as not to compete with the
Corporation, for example, by limiting Bregman's activities to a single
corporation which had not been an actual or prospective client or customer of
the Corporation and does not compete with the Corporation.

         (c) Bregman further agrees that, during the term set forth in Section
6(a) hereof, Bregman will not employ, engage or contract for services any
individual employed by the Corporation or under contract with the Corporation as
an independent contractor, representative or distributor of the Corporation
during the term of this Agreement without the prior written consent of the
Corporation.

         (d) Bregman consents and agrees that if Bregman violates any of the
provisions of the preceding subparagraphs of this Section, the Corporation
shall, in addition to any other remedies it has at law and in equity, be
entitled to an injunction to be issued by a court or arbitrator of competent
jurisdiction, said injunction to restrain Bregman from committing or continuing
any violation of such provisions. In the event that a court or arbitrator of
competent jurisdiction determines that any covenant contained herein is too
broad in scope or duration, it is the desire of both Bregman and the Corporation
to have such covenant enforced to the maximum extent permitted by law.

7. MISCELLANEOUS.

         (a) This Agreement represents the entire agreement between the parties
with respect to all matters expressed or referred to herein; all prior
representations, promises or statements between the parties regarding such
matters shall hereby merge with this Agreement.

         (b) No amendments of or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.

         (c) This Agreement and all of its provisions shall be governed in all
respects, whether as to validity, construction, capacity, performance or
otherwise, by the laws of the State of Delaware. Each of the parties irrevocably
and unconditionally submits, for himself and itself and his and its property, to
the exclusive jurisdiction of any Florida court sitting in the County of
Miami-Dade or any Federal court of the United States sitting in the Southern
District of Florida in any suit, action or proceeding arising out of or relating
to this Agreement.

         (d) The principal headings used in this Agreement are included solely
for the convenience of the parties and shall not affect, or be used in
connection with, the interpretation of this Agreement.

         (e) The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of the same or any other provisions of this Agreement.

         (f) The parties hereto shall not assign any of their rights under this
Agreement, or delegate the performance of any of their duties hereunder, without
the prior written consent of the other party.

                                       9
<PAGE>

         (g) This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective heirs, personal representatives,
successors and assigns, and other legal representatives.

         (h) In the event that performance by either the Corporation or Bregman
of any obligations or undertakings hereunder shall be interrupted or delayed by
any occurrence not occasioned by the conduct of such party, whether such
occurrence be an act of God or an act of the common enemy or the result of war,
riot, civil commotion, sovereign conduct, or the act or conduct of any person or
persons not party or privy hereto, then the party concerned shall be excused
from such performance for such period of time as is reasonably necessary after
such occurrence to remedy the effects thereof.

         (i) All notices required, permitted or desired to be given under this
Agreement shall be deemed given if in writing and sent by certified mail, return
receipt requested, or by facsimile, to the parties at the following addresses,
or to such other addresses as either party may designate in writing to the
other:

         If to the Corporation:       Advanced Viral Research Corp.
                                      200 Corporate Boulevard South
                                      Yonkers, New York 10701
                                      Attn:  President
                                      Facsimile: 914-376-9368

         If to Bregman:               William Bregman
                                      939 West 47th Court
                                      Miami Beach, Florida  33140

         (j) Unless otherwise required by law, any press release concerning the
transactions contemplated by this Agreement will be subject to the review and
approval of Bregman, which approval Bregman shall not unreasonably withhold.

         (k) If any term, condition, or provision of this Agreement shall be
declared invalid or unenforceable, the remainder of the Agreement, other than
such term, condition, or provision, shall not be affected thereby and shall
remain in full force and effect and shall be valid and enforceable to the
fullest extent provided by law.

                                       10
<PAGE>

         IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
all as of the day and year first above written.

                                    ADVANCED VIRAL RESEARCH CORP.

                                    By:  /s/ Shalom Z. Hirschman, M.D.
                                         -----------------------------
                                    Shalom Z. Hirschman, M.D., President

                                    /s/ William Bregman
                                    -----------------------
                                    William Bregman

                                    For purposes of Section 2(c) only:

                                    /s/ Shalom Z. Hirschman, M.D.
                                    -----------------------------
                                    Shalom Z. Hirschman, M.D.

                                       11

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