Document:

EXHIBIT
      4.2

    

    O2DIESEL
      CORPORATION

    2004
      STOCK INCENTIVE PLAN, as amended

    

    1.    Definitions.
      In
      this
      Plan, except where the context otherwise indicates, the following definitions
      shall apply:

     

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

     

    1.2. “Agreement”
      means a written agreement or other document evidencing an Award that shall
      be in
      such form as may be specified by the Committee and that may, but need not,
      be
      signed by a Participant, as determined by the Committee in its
      discretion.

     

    1.3. “Award”
      means a grant of an Option, Right, Restricted Stock, Incentive Shares or
      Performance Award.

     

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

     

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

     

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

     

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

     

    1.8. “Company”
      means O2Diesel Corporation, and any successor thereto.

     

    1.9. “Date
      of
      Exercise” means the date on which the Company receives notice of the exercise of
      an Option or Right in accordance with the terms of Section 8.1
      hereof.

     

    1.10. “Date
      of
      Grant” means the date on which an Award is granted under this Plan.

     

    1.11. “Eligible
      Person” means any person who is (a) an Employee (b) hired to be an Employee, (c)
      a Non-Employee Director, or (d) a consultant or independent contractor to the
      Company or an Affiliate.

     

    1.12. “Employee”
      means any person determined by the Committee to be an employee of the Company
      or
      an Affiliate.

     

    1.13. “Exercise
      Price” means the price per Share at which an Option may be
      exercised.

     

    
      
         

      

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

     

    1.15. “Incentive
      Shares” means an award providing for the contingent grant of Shares pursuant to
      the provisions of Section 10 hereof.

     

    1.16. “Incentive
      Stock Option” means an Option granted under this Plan that the Company
      designates as an incentive stock option under Section 422 of the
      Code.

     

    1.17. “Non-Employee
      Director” means any member of the Company’s or an Affiliate’s Board of Directors
      who is not an Employee.

     

    1.18. “Nonstatutory
      Stock Option” means an Option granted under this Plan that is not an Incentive
      Stock Option.

     

    1.19. “Option”
      means an option to purchase Shares granted under this Plan in accordance with
      the terms of Section 6 hereof.

     

    1.20. “Option
      Period” means the period during which an Option may be exercised.

     

    1.21. “Participant”
      means an Eligible Person who has been granted an Award hereunder.

     

    1.22. “Performance
      Award” means a performance award granted under the Plan in accordance with the
      terms of Section 11 hereof.

     

    1.23. “Performance
      Goals” means performance goals established by the Committee which may be based
      on earnings or earnings growth, sales, return on assets, cash flow, total
      shareholder return, equity or investment, regulatory compliance, satisfactory
      internal or external audits, improvement of financial ratings, achievement
      of
      balance sheet or income statement objectives, implementation or completion
      of
      one or more projects or transactions, or any other objective goals established
      by the Committee, and may be absolute in their terms or measured against or
      in
      relationship to other companies comparably, similarly or otherwise situated.
      Such performance goals may be particular to an Eligible Person or the
      department, branch, Affiliate, or division in which the Eligible Person works,
      or may be based on the performance of the Company, one or more Affiliates,
      or
      the Company and one or more Affiliates, and may cover such period as may be
      specified by the Committee.

     

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

     

    1.25. “Related
      Option” means an Option in connection with which, or by amendment to which, a
      Right is granted.

     

    
      
         

      

      
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    1.26. “Related
      Right” means a Right granted in connection with, or by amendment to, an
      Option.

     

    1.27. “Restricted
      Stock” means Shares granted under the Plan pursuant to the provisions of Section
      9 hereof.

     

    1.28. “Right”
      means a stock appreciation right granted under the Plan in accordance with
      the
      terms of Section 7 hereof.

     

    1.29. “Right
      Period” means the period during which a Right may be exercised.

     

    1.30. “Section
      422 Employee” means an Employee who is employed by the Company or a “parent
      corporation” or “subsidiary corporation” (both as defined in Sections 424(e) and
      (f) of the Code) with respect to the Company.

     

    1.31. “Share”
      means a share of Common Stock.

     

    1.32. “Ten-Percent
      Stockholder” means a Section 422 Employee who (applying the rules of Section
      424(d) of the Code) owns stock possessing more than ten percent (10%) of the
      total combined voting power of all classes of stock of the Company or a “parent
      corporation” or “subsidiary corporation” (both as defined in Sections 424(e) and
      (f) of the Code) with respect to the Company.

     

    2.    Purpose.
      This
      Plan
      is intended to assist the Company and its Affiliates in attracting and retaining
      Eligible Persons of outstanding ability and to promote the identification of
      their interests with those of the stockholders of the Company and its
      Affiliates.

     

    3.    Administration.
      The
      Committee shall administer this Plan and shall have plenary authority, in its
      discretion, to grant Awards to Eligible Persons, subject to the provisions
      of
      this Plan. The Committee shall have plenary authority and discretion, subject
      to
      the provisions of this Plan, to determine the Eligible Persons to whom Awards
      shall be granted, the terms (which terms need not be identical) of all Awards,
      including without limitation the Exercise Price of Options, the time or times
      at
      which Awards are granted, the number of Shares covered by Awards, whether an
      Option shall be an Incentive Stock Option or a Nonstatutory Stock Option, any
      exceptions to nontransferability, any Performance Goals applicable to Awards,
      any provisions relating to vesting, and the period during which Options and
      Rights may be exercised and Restricted Stock shall be subject to restrictions.
      In making these determinations, the Committee may take into account the nature
      of the services rendered or to be rendered by Award recipients, their present
      and potential contributions to the success of the Company and its Affiliates,
      and such other factors as the Committee in its discretion shall deem relevant.
      Subject to the provisions of the Plan, the Committee shall have plenary
      authority to interpret the Plan and Agreements, prescribe, amend and rescind
      rules and regulations relating to them, and make all other determinations deemed
      necessary or advisable for the administration of this Plan and Awards granted
      hereunder. The determinations of the Committee on the matters referred to in
      this Section 3 hereof shall be binding and final.

     

    4.    Eligibility.
      Awards
      may be granted only to Eligible Persons.

     

    
      
         

      

      
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    5.    Stock
      Subject to Plan.

     

    5.1. Subject
      to adjustment as provided in Section 13 hereof, (a) the maximum number of Shares
      that may be issued under this Plan is 9,750,000 Shares provided that in the
      event that the exercise price of an Option is paid (in whole or in part) with
      Shares, such Shares received by the Company as payment shall be available for
      reissuance under the Plan.

     

    5.2. If
      an
      Option or Right expires or terminates for any reason (other than termination
      by
      virtue of the exercise of a Related Option or Related Right, as the case may
      be)
      without having been fully exercised or surrendered pursuant to Section 6.4
      hereof, if shares of Restricted Stock are forfeited, or if Shares covered by
      an
      Incentive Share Award or Performance Award are not issued or are forfeited,
      the
      unissued or forfeited Shares that had been subject to the Award shall be
      available for the grant of additional Awards. In the event an Option is
      surrendered, in whole or in part, pursuant to Section 6.4 hereof, the difference
      between (a) the number of Shares as to which the Option is surrendered, and
      (b)
      the number of whole Shares to be received by the Participant pursuant to such
      surrender (including Shares applied to the payment of withholding taxes), shall
      be available for the grant of additional Awards.

     

    5.3. Upon
      exercise of a Right (regardless of whether the Right is settled in cash or
      Shares), the number of Shares with respect to which the Right is exercised
      shall
      be charged against the number of Shares issuable under the Plan and shall not
      become available for the grant of other Awards.

     

    6.    Options.

     

    6.1. Options
      granted under this Plan to Eligible Persons shall be either Incentive Stock
      Options or Nonstatutory Stock Options, as designated by the Committee; provided,
      however, that Incentive Stock Options may only be granted to Eligible Persons
      who are Section 422 Employees on the Date of Grant. Each Option granted under
      this Plan shall be identified either as a Nonstatutory Stock Option or an
      Incentive Stock Option and shall be evidenced by an Agreement that specifies
      the
      terms and conditions of the Option. Options shall be subject to the terms and
      conditions set forth in this Section 6 hereof and such other terms and
      conditions not inconsistent with this Plan as the Committee may specify. The
      Committee may, in its discretion, condition the grant or vesting of an Option
      upon the achievement of one or more specified Performance Goals.

     

    6.2. The
      Exercise Price of an Incentive Stock Option granted under this Plan shall not
      be
      less than one hundred percent (100%) of the Fair Market Value of the Common
      Stock on the Date of Grant. Notwithstanding the foregoing, in the case of an
      Incentive Stock Option granted to an Employee who, on the Date of Grant is
      a
      Ten-Percent Shareholder, the Exercise Price shall not be less than one hundred
      and ten percent (110%) of the Fair Market Value of a share on the Date of
      Grant.

     

    6.3. The
      Option Period shall be determined by the Committee and specifically set forth
      in
      the Agreement; provided, however, that an Option shall not be exercisable after
      ten (10) years (five (5) years in the case of an Incentive Stock Option granted
      to a Ten-Percent Stockholder) from its Date of Grant.

     

    
      
         

      

      
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    6.4. The
      Committee, in its discretion, may provide in an Agreement for the right of
      a
      Participant to surrender to the Company an Option (or a portion thereof) that
      has become exercisable and to receive upon such surrender, without any payment
      to the Company (other than required tax withholding amounts) that number of
      Shares (equal to the highest whole number of Shares) having an aggregate Fair
      Market Value as of the date of surrender equal to that number of Shares subject
      to the Option (or portion thereof) being surrendered multiplied by an amount
      equal to the excess of (i) the Fair Market Value on the date of surrender over
      (ii) the Exercise Price, plus an amount of cash equal to the fair market value
      of any fractional Share to which the Participant would be entitled but for
      the
      parenthetical above relating to whole number of Shares. Any such surrender
      shall
      be treated as the exercise of the Option (or portion thereof).

     

    7.    Rights.

     

    7.1. Rights
      granted under the Plan shall be evidenced by an Agreement specifying the terms
      and conditions of the Award.

     

    7.2. A
      Right
      may be granted under the Plan:

     

    7.2.1. in
      connection with, and at the same time as, the grant of an Option under the
      Plan;

     

    7.2.2. by
      amendment of an outstanding Option granted under the Plan; or

     

    7.2.3. independently
      of any Option granted under the Plan. A Right described in clause (a) or (b)
      of
      the preceding sentence is a Related Right. A Related Right may, in the
      Committee’s discretion, apply to all or any portion of the Shares subject to the
      Related Option.

     

    7.3. A
      Right
      may be exercised in whole or in part as provided in the applicable Agreement,
      and, subject to the terms of the Agreement, entitles a Participant to receive,
      without payment to the Company (but subject to required tax withholding), either
      cash or that number of Shares (equal to the highest whole number of Shares),
      or
      a combination thereof, in an amount or having an aggregate Fair Market Value
      as
      of the Date of Exercise not to exceed the number of Shares subject to the
      portion of the Right exercised multiplied by an amount equal to the excess
      of
      (a) the Fair Market Value on the Date of Exercise of the Right over (b) either
      (i) the Fair Market Value on the Date of Grant (or such amount in excess of
      such
      Fair Market Value as may be specified by the Committee) of the Right if it
      is
      not a Related Right, or (ii) the Exercise Price as provided in the Related
      Option if the Right is a Related Right.

     

    7.4. The
      Right
      Period shall be determined by the Committee and specifically set forth in the
      Agreement; provided, however, that

     

    7.4.1. a
      Right
      will expire no later than the earlier of (i) ten (10) years from the Date of
      Grant, or (ii) in the case of a Related Right, the expiration of the Related
      Option; and

     

    7.4.2. a
      Right
      that is a Related Right to an Incentive Stock Option may be exercised only
      when
      and to the extent the Related Option is exercisable.

     

    
      
         

      

      
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    7.5. The
      exercise, in whole or in part, of a Related Right shall cause a reduction in
      the
      number of Shares subject to the Related Option equal to the number of Shares
      with respect to which the Related Right is exercised. The exercise, in whole
      or
      in part, of a Related Option shall cause a reduction in the number of Shares
      subject to the Related Right equal to the number of Shares with respect to
      which
      the Related Option is exercised.

     

    8.    Exercise
      of Options and Rights.

     

    8.1. An
      Option
      or Right may, subject to the terms of the applicable Agreement evidencing the
      Award, be exercised in whole or in part by the delivery to the Company of a
      notice of the exercise, in such form as the Committee may prescribe,
      accompanied, in the case of an Option, by (a) a full payment for the Shares
      with
      respect to which the Option is exercised or (b) irrevocable instructions to
      a
      broker to deliver promptly to the Company cash equal to the exercise price
      of
      the Option. To the extent provided in the applicable Agreement, payment may
      be
      made by (i) delivery (including constructive delivery) of Shares (provided
      that
      such Shares, if acquired pursuant to an option or other award granted hereunder
      or under any other compensation plan maintained by the Company or any Affiliate,
      have been held by the Participant for at least six (6) months or such other
      period as determined by the Committee) valued at Fair Market Value on the Date
      of Exercise or (ii) delivery of a promissory note as provided in Section 8.2
      hereof.

     

    8.2. To
      the
      extent provided in an Agreement and permitted by applicable law, the Committee
      may accept as payment of all or a portion of the Exercise Price a promissory
      note executed by the Participant evidencing his or her obligation to make future
      cash payment thereof. Promissory notes made pursuant to this Section 8.2 shall
      (a) be secured by a pledge of the Shares received upon exercise of the Option,
      (b) bear interest at a rate fixed by the Committee, and (c) contain such other
      terms and conditions as the Committee may determine in its
      discretion.

     

    9.    Restricted
      Stock Awards. Each
      grant of Restricted Stock under this Plan shall be subject to an Agreement
      specifying the terms and conditions of the Award. Restricted Stock granted
      under
      this Plan shall consist of Shares that are restricted as to transfer, subject
      to
      forfeiture, and subject to such other terms and conditions as may be determined
      by the Committee. Such terms and conditions may provide, in the discretion
      of
      the Committee, for the lapse of such transfer restrictions or forfeiture
      provisions to be contingent upon the achievement of one or more specified
      Performance Goals.

     

    10.    Incentive
      Share Awards. Each
      grant of Incentive Shares under this Plan shall be evidenced by an Agreement
      that: (a) provides for the issuance of Shares to a Participant at such times
      and
      (b) contains such other terms and conditions, as determined by the Committee,
      including without limitation, terms that condition the issuance of Shares upon
      the achievement of one or more specified Performance Goals.

     

    11.    Performance
      Awards. Each
      Performance Award granted under this Plan shall be evidenced by an Agreement
      that: (a) provides for the payment of cash and/or issuance of Shares to a
      Participant contingent upon the attainment of one or more specified Performance
      Goals and (b) contains such other terms and conditions as may be determined
      by
      the Committee. For purposes of Section 5.1(b) hereof and, Section 5.2 hereof,
      a
      Performance Award shall be deemed

     

    
      
         

      

      
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    to
      cover
      a number of Shares equal to the sum of (a) the maximum number of Shares that
      may
      be issued upon payment of the Award and (b) to the extent the Award is not
      payable in Shares, a number of Shares equal to the quotient obtained by dividing
      the maximum dollar amount of the Award that is not payable in Shares by the
      Fair
      Market Value of a Share as of the Date of Grant of the Award, rounded to the
      next highest whole number.

     

    12.    Dividends
      and Dividend Equivalents.
      The
      terms of an Award may, subject to such terms and conditions as the Committee
      may
      specify, provide a Participant with the right to receive dividend payments
      or
      dividend equivalent payments with respect to Shares covered by the Award, which
      payments may be either made currently or credited to an account established
      for
      the Participant, and may be settled in cash or Shares, as determined by the
      Committee.

     

    13.    Capital
      Adjustments. In
      the
      event of any change in the outstanding Common Stock by reason of any stock
      dividend, split-up, recapitalization, reclassification, combination or exchange
      of shares, merger, consolidation, liquidation or the like, the Committee may,
      in
      its discretion, provide for a substitution for or adjustment in (a) the number
      and class of shares subject to outstanding Awards or the type of consideration
      to be received upon the exercise or vesting of outstanding Awards, (b) the
      Exercise Price of Options and the base price upon which payments under Rights
      that are not Related Rights are determined, and (c) the aggregate number and
      class of Shares for which Awards thereafter may be granted under this Plan,
      and
      (d) the maximum number of Shares with respect to which an Employee may be
      granted Awards during the period specified in Section 5.1(b)
      hereof.

     

    14.    Termination
      or Amendment. The
      Board
      may amend or terminate this Plan in any respect at any time; provided, however,
      that, after this Plan has been approved by the stockholders of the Company,
      no
      amendment or termination of this Plan shall be made by the Board without
      approval of (a) the Company’s stockholders to the extent stockholder approval of
      the amendment is required by applicable law or regulations or the requirements
      of the principal exchange or interdealer quotation system on which the Common
      Stock is listed or quoted, if any, and (b) each affected Participant if such
      amendment or termination would adversely affect such Participant’s rights or
      obligations under any Award granted prior to the date of such amendment or
      termination.

     

    15.    Modification,
      Substitution of Awards.

     

    15.1. Subject
      to the terms and conditions of this Plan, the Committee may modify the terms
      of
      any outstanding Awards; provided, however, that no modification of an Award
      shall, without the consent of the Participant, alter or impair any of the
      Participant’s rights or obligations under such Award.

     

    15.2. Anything
      contained herein to the contrary notwithstanding, Awards may, at the discretion
      of the Committee, be granted under this Plan in substitution for stock options
      and other awards covering capital stock of another corporation which is merged
      into, consolidated with, or all or a substantial portion of the property or
      stock of which is acquired by, the Company or one of its Affiliates. The terms
      and conditions of the substitute Awards so granted may vary from the terms
      and
      conditions set forth in this Plan to such extent as the Committee may deem
      appropriate in order to conform, in whole or part, to the provisions of the
      awards in substitution for which

     

    
      
         

      

      
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    they
      are
      granted. Such substitute Awards granted hereunder shall not be counted toward
      the Share limit imposed by Section 5.1(b) hereof, except to the extent it is
      determined by the Committee that counting such Awards is required in order
      for
      Awards granted hereunder to be eligible to qualify as “performance-based
      compensation” within the meaning of Section 162(m) of the Code.

     

    15.3. Any
      provision of the Plan or any Agreement to the contrary notwithstanding, the
      Committee may cause any Award granted hereunder to be canceled in consideration
      of a cash payment or alternative Award made to the holder of such canceled
      Award
      equal in value to the Fair Market Value of such canceled Award. For purposes
      of
      this Section 15.3, the Fair Market Value of any canceled Award shall be
      determined assuming that the Award is fully vested at the time of
      cancellation.

     

    16.    Foreign
      Employees.
      Without
      amendment of this Plan, the Committee may grant Awards to Eligible Persons
      who
      are subject to the laws of foreign countries or jurisdictions on such terms
      and
      conditions different from those specified in this Plan as may in the judgement
      of the Committee be necessary or desirable to foster and promote achievement
      of
      the purposes of this Plan. The Committee may make such modifications,
      amendments, procedures, sub-plans and the like as may be necessary or advisable
      to comply with provisions of laws of other countries or jurisdictions in which
      the Company or any of its Affiliates operate or have employees.

     

    17.    Stockholder
      Approval.
      This
      Plan, and any amendments hereto requiring stockholder approval pursuant to
      Section 14 hereof, are subject to approval by vote of the stockholders of the
      Company at the next annual or special meeting of stockholders following adoption
      by the Board.

     

    18.    Withholding.
      The
      Company’s obligation to issue or deliver Shares or pay any amount pursuant to
      the terms of any Award granted hereunder shall be subject to satisfaction of
      applicable federal, state and local tax withholding requirements. To the extent
      provided in the applicable Agreement and in accordance with rules prescribed
      by
      the Committee, a Participant may satisfy any such withholding tax obligation
      by
      any of the following means or by a combination of such means: (a) tendering
      a
      cash payment, (b) authorizing the Company to withhold Shares otherwise issuable
      to the Participant, or (c) delivering to the Company already-owned and
      unencumbered Shares.

     

    19.    Term
      of Plan.
      Unless
      sooner terminated by the Board pursuant to Section 14, this Plan shall terminate
      on the date that is ten (10) years after the earlier of that date that the
      Plan
      is adopted by the Board or approved by the Company’s stockholders, and no Awards
      may be granted or awarded after such date. The termination of this Plan shall
      not affect the validity of any Award outstanding on the date of
      termination.

     

    20.    Indemnification
      of Committee.
      In
      addition to such other rights of indemnification as they may have as members
      of
      the Board or Committee, members of the Committee shall be indemnified by the
      Company against all reasonable expenses, including attorneys’ fees, actually and
      reasonably incurred in connection with the defense of any action, suit or
      proceeding, or in connection with any appeal therein, to which they or any
      of
      them may be a party by reason of any action taken or failure to act under or
      in
      connection with this Plan or any Award granted hereunder, and against all
      amounts reasonably paid by them in settlement thereof or paid by
      them

     

    
      
         

      

      
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    in
      satisfaction of a judgment in any such action, suit or proceeding, if such
      members acted in good faith and in a manner which they believed to be in, and
      not opposed to, the best interests of the Company.

     

    21.    General
      Provisions.

     

    21.1. The
      establishment of this Plan shall not confer upon any Eligible Person any legal
      or equitable right against the Company, any Affiliate or the Committee, except
      as expressly provided in this Plan. Participation in this Plan shall not give
      an
      Eligible Person any right to be retained in the service of the Company or any
      Affiliate.

     

    21.2. Neither
      the adoption of this Plan nor its submission to the Company’s stockholders shall
      be taken to impose any limitations on the powers of the Company or its
      Affiliates to issue, grant, or assume options, warrants, rights, or restricted
      stock, or other awards otherwise than under this Plan, or to adopt other stock
      option, restricted stock, or other plans, or to impose any requirement of
      stockholder approval upon the same.

     

    21.3. The
      interests of any Eligible Person under this Plan are not subject to the claims
      of creditors and may not, in any way, be assigned, alienated or encumbered
      except to the extent provided in an Agreement.

     

    21.4. This
      Plan
      shall be governed, construed and administered in accordance with the laws of
      the
      State of Washington.

     

    21.5. The
      Committee may require each person acquiring Shares pursuant to Awards granted
      hereunder to represent to and agree with the Company in writing that such person
      is acquiring the Shares without a view to distribution thereof. The certificates
      for such Shares may include any legend which the Committee deems appropriate
      to
      reflect any restrictions on transfer. All certificates for Shares issued
      pursuant to this Plan shall be subject to such stock transfer orders and other
      restrictions as the Committee may deem advisable under the rules, regulations
      and other requirements of the Securities and Exchange Commission, any stock
      exchange upon which the Common Stock is then listed or interdealer quotation
      system upon which the Common Stock is then quoted, and any applicable federal
      or
      state securities laws. The Committee may place a legend or legends on any such
      certificates to make appropriate reference to such restrictions.

     

    21.6. The
      Company shall not be required to issue any certificate or certificates for
      Shares with respect to Awards granted under this Plan, or record any person
      as a
      holder of record of such Shares, without obtaining, to the complete satisfaction
      of the Committee, the approval of all regulatory bodies deemed necessary by
      the
      Committee, and without complying to the Board’s or Committee’s complete
      satisfaction, with all rules and regulations, under federal, state or local
      law
      deemed applicable by the Committee.

     

    21.7. To
      the
      extent that the Plan provides for issuance of stock certificates to reflect
      the
      issuance of Shares, the issuance may be effected on a noncertificated basis,
      to
      the extent not prohibited by applicable law or the rules of any stock exchange
      or automated dealer quotation system on which the Shares are
      traded.

     

    
      
         

      

        -9-FORM
      OF INCENTIVE STOCK OPTION AGREEMENT

    

    OPTIONEE:

    OPTION
      NUMBER:

    DATE
      OF
      GRANT: 

    EXERCISE
      PRICE: 

    COVERED
      SHARES:

    

    O2DIESEL
      CORPORATION

    2004
      STOCK INCENTIVE PLAN

    

    INCENTIVE
      STOCK OPTION AGREEMENT

    

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

    

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

    

    1.2 “Agreement”
      means this Stock Option Agreement.

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

    (d) ten
      years
      after the Date of Grant.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

    3. Terms
      of the Option.

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

    

    5. Exercise.

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

     

    
      	
              ATTEST:

               

               

               

              ____________________________

            	
              O2Diesel Corporation

               

               

               

              By: ____________________________

            

    

    
Accepted
      and agreed to as of the Date of Grant:

    

    
      	
               

            	
              _______________________________

              Optionee

            

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “EXHIBIT
      A”

    EXERCISE
      OF OPTION

    

    

    Board
      of
      Directors

    O2Diesel
      Corporation

    200
      Executive Drive

    Newark,
      Delaware 19702

    

    Gentlemen:

    

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

    

    
      	
              [
                ]
                Cash or Check:

            	_______________
	 	 
	
              [
                ]
                Common Stock:

            	_______________
	 	 
	
              [
                ]
                Brokerage Transaction:

            	_______________

    

    

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

    

    
      	
              [
                ]
                Cash or Check:

            	_______________
	 	 
	
              [
                ]
                Withholding of Common Stock: 

            	_______________
	 	 
	
              [
                ]
                Delivery of Common Stock:

            	_______________

    

    

     

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The
      undersigned hereby represents as follows:

    

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

    
 

    
      	
              Date: __________________

            	
              ________________________________

              (Signature
                of Optionee)

            

    

    Date
      received by O2Diesel Corporation: __________________

    

    Received
      by: ________________________

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      B

    

    RESTRICTED
      STOCK PURCHASE AGREEMENT

    

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

    

    RECITALS

    

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

    

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

    

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

    

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

    

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

    

    3. Repurchase
      Right.

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6. Capital
      Events.
      

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    
 

    
      	 	
              O2Diesel
                Corporation

              

              

              By:
                ________________________________

              

              Title:
                _______________________________

              

              

              

              PURCHASER

              

              ____________________________________

              [Name]

              

              Address:

              ____________________________________

              

              ____________________________________

            

    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ATTACHMENT
      1

    to
      Restricted Stock Purchase Agreement

    

    ASSIGNMENT
      SEPARATE FROM CERTIFICATE

    

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

    

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

    
 

    
      	
              Dated:
                _______________

            	
              Signature:
                ______________________________

              Name

            

    

     

    

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

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