Document:

SUPPLY
      AND DISTRIBUTION AGREEMENT

     

    This
      Supply and Distribution Agreement (the “Agreement”),
      effective as of September 15, 2006 (the “Effective
      Date”),
      is
      made between O2Diesel Corporation (“O2Diesel”),
      having its registered office at 100 Commerce Drive, Newark, DE 19713, USA and
      Energenics Pte Limited (“Energenics”)
      having
      its registered office at 7 Temaek Boulevard, Suntec City Tower 1 #04-01A,
      Singapore 038987 (each a “Party,”
and
      collectively the “Parties”).

     

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

     

    WHEREAS,
      Energenics desires to obtain a supply of O2Diesel’s proprietary fuel additive;
      and

     

    WHEREAS,
      O2Diesel desires to appoint Energenics as a distributor and provide such
      additive and support;

     

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

     

    1.  Definitions.

     

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

            

    

     

    
      	1.2  	
              “Change
                of Control”
                means a merger, consolidation, reorganization, recapitalization or
                sale,
                transfer or other disposition of all or substantially all of the
                assets of
                the company.

            

    

     

    
      	1.3  	
              “Closing”
                means the consummation of the purchase and sale of shares of common
                stock
                and warrants for the future purchase of common stock of O2Diesel,
                as such
                is contemplated and described by the Common Stock and Warrant Purchase
                Agreement executed by O2Diesel and an Affiliate of Energenics on
                September
                15, 2006.

            

    

     

    
      	1.4  	
              “Closing
                Date”
                means the date of Closing as agreed to by the Parties in Section
                2.1 of
                the Common Stock and Warrant Purchase
                Agreement.

            

    

     

    
      	1.5  	
              “O2Diesel
                Additive”
                means an O2Diesel proprietary compound that allows the mixing of
                diesel
                fuel and ethanol.

            

    

     

    
      	1.6  	
              “O2Diesel
                Product”
                means oxygenated diesel fuel comprising base diesel fuel, the O2Diesel
                Additive, ethanol and a cetane improver, conforming to the specifications
                for such product provided by O2Diesel (including all improvements
                or
                branded products).

            

    

    
       

      [*]
        =
        CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
        WITH
        THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
        REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. OMITTED TEXT IS INDICATED
        BY A
“*”.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

            

    

     

    
      	1.8  	
              “Term”
                shall have the meaning given in Section
                11.1.

            

    

     

    
      	1.9  	
              “Territory”
                means the following countries in South Asia and Asia Pacific, India,
                Australia, New Zealand, Singapore and Hong Kong. The countries of
                South
                Africa, Philippines and Thailand shall be included in the Territory
                subject to trials being conducted within twelve (12) months from
                the date
                of this Agreement.

            

    

     

    
      	1.10  	
              “Third
                Party”
                means any Person that is not a Party to this
                Agreement.

            

    

     

    2.  Supply
      of O2Diesel Additive.

     

    
      	2.1  	
              Appointment
                of Distributor.
                As
                of the Closing Date, O2Diesel hereby appoints on an exclusive basis
                Energenics as a distributor of O2Diesel Product in the Territory
                subject
                to the terms and conditions of this Agreement. For as long as Energenics
                has materially performed and continues to materially perform its
                obligations under this Agreement, O2Diesel is prohibited from entering
                into any agreement and/or arrangement to directly or indirectly distribute
                or sell and/or authorise a Third Party to distribute and/or sell
                O2Diesel
                Product in the Territory and distribute or sell to any Third Party
                O2Diesel Additive in the Territory. For as long as O2Diesel has materially
                performed and continues to materially perform its obligations under
                this
                Agreement, Energenics is prohibited from purchasing any competing
                product
                of O2Diesel Additive. 

            

    

     

    
      	2.2  	
              Ordering
                and Delivery.
                Energenics
                shall purchase and O2Diesel shall sell the O2Diesel Additive on the
                basis
                of Energenics purchase orders. Energenics shall submit the purchase
                orders
                for a requested quantity of O2Diesel Additive at least twelve (12)
                weeks
                prior to the requested delivery date. O2Diesel shall supply the requested
                quantity at a price agreed in the purchase order and the delivery
                shall be
                CIF. Further, the terms and conditions of the purchase order shall
                be in
                addition to the terms of this Agreement provided that, if any term
                of the
                purchase order is inconsistent with the terms of this Agreement,
                the terms
                of this Agreement shall prevail. 

            

    

     

    
      	2.3  	
              Minimum
                Volume.
                The
                Parties have agreed that Energenics shall place orders and O2Diesel
                shall
                supply the minimum of O2Diesel Additive (the “Minimum
                Volume”)
                at the price as set forth on Schedule
                A
                and O2Diesel shall in no event fail to supply the Minimum Volume
                provided
                however that, if the price of ethanol increases by *
                (*%)
                over the agreed price (“Price
                Threshold”)
                Energenics may at its option temporarily defer purchasing the Minimum
                Volume (“Deferred
                Volume”)
                and in such a case, Energenics shall be obligated to purchase the
                Deferred
                Volume once the price decreases below the Price Threshold over the
                same
                amount of time the Deferred Volume was deferred. For example, if
                the
                ethanol price is greater than the Price Threshold for six (6) months,
                Energenics shall have up to six (6) months to purchase the Deferred
                Volume. In the event that O2Diesel ceases to distribute the O2Diesel
                Additive in the Territory, O2Diesel shall assist Energenics in obtaining
                an agreement with Cognis Deutschland GmbH on the same terms and conditions
                that O2Diesel or its subsidiaries was supplying the O2Diesel Additive
                in
                the Territory. 

            

    

     

    
      
        
        

      

      
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      	2.4  	
              Forecasting.
                After the first commercial sale of O2Diesel Product, on a quarterly
                basis
                within five (5) days of the beginning of each quarter, Energenics
                shall
                provide non-binding forecasts of its expected requirements of O2Diesel
                Additive for the following twelve (12)
                months.

            

    

     

    
      	2.5  	
              Use
                of O2Diesel Additive.
                Energenics shall: (a) use O2Diesel Additive only to make O2Diesel
                Product,
                in accordance with all specifications and guidance provided by O2Diesel
                for the manufacture, use, handling, storage, transportation and disposal
                of O2Diesel Additive and O2Diesel Product; (b) resell O2Diesel
                Additive only as blended into O2Diesel Product or to Third Parties
                who
                agree to blend the O2Diesel additive into O2Diesel Product, in accordance
                with all specifications and guidance provided by O2Diesel for the
                manufacture, use, handling, storage, transportation and disposal
                of
                O2Diesel Additive and O2Diesel Product; and (c) not analyze or reverse
                engineer the O2Diesel Additive to determine its composition or method
                of
                manufacture.

            

    

     

    
      	2.6  	
              Sourcing
                of Other Supplies.
                O2Diesel acknowledges that, excluding O2Diesel Additive, neither
                Party is
                responsible for ensuring that the end user / blender has sufficient
                equipment and supplies for its performance under this Agreement,
                including
                supplies of base diesel fuel, ethanol and cetane improver for the
                production of O2Diesel Product.

            

    

     

    
      	2.7  	
              Government
                Approvals.
                Energenics
                together with the end user/purchaser shall investigate and determine
                whether any governmental approvals will be necessary for the distribution
                and use of O2Diesel Product in the Territory prior to selling any
                O2Diesel
                Product in the Territory. If Energenics together with the end
                user/purchaser have determined that governmental approvals are necessary
                for the distribution and use of O2Diesel Product in the Territory,
                they
                shall, promptly thereafter apply for such approvals in their name.
                O2Diesel agrees to provide all necessary information and support
                Energenics in obtaining such approval. A
                report
                of this information shall be delivered to O2Diesel promptly. In
                any
                event, Energenics shall consult with O2Diesel concerning all material
                issues in obtaining and maintaining governmental approvals and provide
                O2Diesel copies of all test results, applications, correspondence
                and
                other documents relating to government approvals. O2Diesel shall
                neither
                have any right to reproduce, use and disclose the foregoing approval
                nor
                shall it authorize the same for purposes of distributing oxygenated
                diesel
                fuel or other products without the prior written consent of Energenics.
                In
                any event, Energenics shall consult with O2Diesel concerning all
                material
                issues in obtaining and maintaining governmental approvals and provide
                O2Diesel copies of all test results, applications, correspondence
                and
                other documents relating to government approvals. O2Diesel shall
                have the
                perpetual right to reproduce, use and disclose the foregoing and
                authorize
                the same for purposes of distributing oxygenated diesel fuel or other
                products..

            

    

     

    
      
        
        

      

      
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      	2.8  	
              Other
                Territories.
                Energenics and its Affiliates shall not (a) export any O2Diesel Additive
                or O2Diesel Product from the Territory or (b) sell O2Diesel Additive
                or
                O2Diesel Product to any Third Party with the knowledge that such
                Third
                Party is likely to resell O2Diesel Additive unblended, resell O2Diesel
                Product, or export O2Diesel Additive or O2Diesel Product from the
                Territory. O2Diesel shall endeavor that importation and use of O2Diesel
                Product in the Territory by a Third Party shall be only from Energenics
                and not from O2Diesel or another authorized source outside the Territory.
                Notwithstanding the foregoing, each Party shall notify the other
                Party
                about any such activity and the Parties shall consult in good faith
                whether there is any practicable action that should be taken as a
                commercial matter to address the
                situation.

            

    

     

    
      	2.9  	
              Safety
                and Blending Procedures.
                Promptly after the Effective Date, O2Diesel shall provide to Energenics
                a
                manual describing procedures for the use, blending and handling of
                O2Diesel Additive and O2Diesel Product, including a material safety
                data
                sheet, procedures for blending O2Diesel Product, fuel tank preparation
                procedures for the storage of O2Diesel Product and sample warning
                decals
                (the “Manual”).
                O2Diesel shall have the right to reasonably add to, delete from and
                otherwise modify the Manual at any time. Energenics and its customers
                shall at all times blend, handle and store the O2Diesel Additive
                in
                accordance with the Manual. In the event such addition or deletion
                results
                in any reasonable costs to Energenics, the same shall be borne by
                O2Diesel.

            

    

     

    3.  Payments.

     

    
      	3.1  	
              Sales
                Targets.
                O2Diesel and Energenics have agreed to a sales target for the first
                three
                (3) years and three (3) months of the Term, as set forth in Schedule A.
                If the targets cannot be achieved Energenics will inform O2Diesel
                and
                mutual accepted targets will be agreed upon. If in good faith the
                Parties
                can not agree to a target, and Energenics’ orders fall below fifty percent
                (50%) of the previously agreed target, O2Diesel shall have the right
                to
                change Energenics’ as an exclusive distributor of O2Diesel Additive to a
                non-exclusive basis.

            

    

     

    
      	3.2  	
              Payments
                Due.
                All purchase orders from Energenics will be covered by a letter of
                credit
                (“L/C”)
                from first class bank in favor of O2Diesel at least thirty (30) days
                in
                advance of such order. Energenics shall make the payment once telephonic
                evidence of a shipment is received by Energenics. The terms of payment
                covered by L/C will be mutually agreed. Such L/C shall be issued
                by a
                mutually agreed-upon United States
                bank.

            

    

     

    
      	3.3  	
              Payments
                in General.
                All amounts payable by Energenics hereunder shall be paid in U.S.
                Dollars
                to O2Diesel by wire transfer, or by such other method mutually agreed
                upon
                by the Parties, for value no later than the due date thereof (with
                twenty-four (24)) hours advance notice of each such wire transfer)
                to such
                bank account or accounts as O2Diesel shall designate in writing within
                a
                reasonable period of time prior to such due date.
                

            

    

     

    
      
        
        

      

      
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      	3.4  	
              Late
                Payments.
                If
                Energenics fails to make any payment required under this Agreement
                when
                due, Energenics shall pay interest on such amount at the rate of
                2% per
                month, or the highest rate allowed by law, whichever is less, from
                the
                date the payment was due until the date the payment is made in full.
                

            

    

     

    
      	3.5  	
              Taxes.
                Energenics
                or the end user/purchaser shall pay applicable import taxes and in
                connection with purchase from O2Diesel and all amounts due hereunder
                shall
                be net of any taxes or similar governmental charges as Energenics
                or the
                end user/purhcaser may be liable. All other taxes and other associated
                costs shall be borne by the party liable for the same.
                

            

    

     

    4.  Use
      of Trademarks.
      

     

    
      	4.1  	
              License
                Grants. 

            

    

     

    
      	4.1.1  	
              O2Diesel
                hereby grants to Energenics an exclusive license,
                subject to instances that are beyond O2Diesel’s control, to use the name
                “O2Diesel” and the “O2Diesel” logo or such different or additional
                trademarks as O2Diesel may specify (the “O2Diesel Trademarks”)
                in the Territory during the Term of this Agreement in connection
                with the
                marketing, sale and distribution of O2Diesel Product that conforms
                to
                O2Diesel’s applicable specifications therefor and is produced using
                O2Diesel Additive purchased from O2Diesel pursuant to this Agreement.
                Energenics shall not interfere with the validity and O2Diesel’s ownership
                of the O2Diesel Trademarks and shall not do anything inconsistent
                with
                such validity and ownership. O2Diesel shall give a six months notice
                to
                Energenics to discontinue the use of O2Diesel Trademark and Energenics
                shall cease to use it within a reasonable time, provided that O2Diesel
                shall not during the Term of this Agreement notify Energenics to
                discontinue the use of O2Diesel Trademark. It is agreed between the
                Parties that Energenics shall have the right to sublicense the O2Diesel
                Trademarks to its Affiliates on terms and condition contained in
                this
                Agreement, with O2Diesel’s prior written consent, which consent not to be
                unreasonably withheld. 

            

    

     

    
      	4.1.2  	
              Energenics
                hereby grants to O2Diesel a nonexclusive, worldwide license to use
                Energenics’s name and logo (the “Energenics
                Trademarks”)
                during the Term to identify Energenics as the exclusive distributor
                of
                O2Diesel Product in the Territory.

            

    

     

    
      	4.1.3  	
              Notwithstanding
                anything contained herein, Energenics shall be free to re-brand the
                O2Diesel Product in the Territory as it may deem fit with O2Diesel’s prior
                written consent, which consent not to be unreasonably
                withheld.

            

    

     

    
      	4.2  	
              Limitations
                on Use of Marks.
                Energenics’s use of the O2Diesel Trademarks and O2Diesel’s use of the
                Energenics Trademarks shall (a) be consistent with the high quality
                image
                of the other Party so as to enhance the marks and the goodwill relating
                thereto, (b) conform to the style and usage guidelines prescribed
                by the
                other Party, (c) inure to the benefit of the other Party, and (d) be
                in a manner so as not to cause embarrassment to the other Party,
                tend to
                discredit the other Party’s image or reputation for quality, or suggest
                that any actions undertaken are actions of the other Party. On request,
                Energenics promptly shall provide to O2Diesel samples of Energenics’s use
                of the O2Diesel Trademarks, and O2Diesel promptly shall provide to
                Energenics samples of O2Diesel’s use of the Energenics Trademarks. Nothing
                in this Agreement shall interfere with a Party’s use of its marks anywhere
                in the world, except that during the Term, so long as the terms and
                conditions of this Agreement are met by Energenics, O2Diesel shall
                not use
                or authorize the use of the O2Diesel Trademarks in the Territory
                to
                indicate a source of oxygenated diesel fuel in the Territory other
                than
                Energenics.

            

    

     

    
      
        
        

      

      
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      	4.3  	
              Protection
                of Marks.
                All rights with respect to the O2Diesel Trademarks and Energenics
                Trademarks not expressly granted in this Agreement are reserved by
                O2Diesel or Energenics, as the case may be. Energenics acknowledges
                the
                validity and O2Diesel’s ownership of the O2Diesel Trademarks, and O2Diesel
                acknowledges the validity and Energenics’s ownership of Energenics’
                Trademarks. Neither Party shall challenge the validity or ownership
                of the
                other Party’s marks or do anything inconsistent with such validity and
                ownership. Neither Party shall use any unitary composite mark consisting
                of marks of both Parties. Neither Party shall apply for registration
                of
                any of the other Party’s marks as a trademark in any country or oppose
                registration of the other party’s marks by the other Party. The Parties
                may agree in writing that Energenics shall have the right to enforce
                the
                O2Diesel Trademarks against any particular infringement by a distributor
                of oxygenated diesel fuel in the Territory. In other respects, each
                Party
                shall have the sole right, but not the obligation, to register, protect
                and enforce its marks.

            

    

     

    
      	4.4  	
              Additional
                Trademarks.
                Notwithstanding anything contained herein, Energenics shall be free
                to
                re-brand the O2Diesel Product in the Territory as it may deem fit
                with
                O2Diesel’s prior written consent, which consent not to be unreasonably
                withheld. If Energenics believes that a trademark other than the
                O2Diesel
                Trademarks should be used to identify O2Diesel Product in the Territory,
                it shall give a notice in writing to O2Diesel. In the absence of
                a written
                agreement to the contrary, any such re-branded mark shall be owned
                by
                Energenics and treated as an Energenics Trademark for the purposes
                of this
                Agreements.

            

    

     

    5.  Confidentiality.

     

    
      	5.1  	
              Definitions.
                In connection with its activities under this Agreement, a Party (the
                “Receiving
                Party”)
                may receive or otherwise have access to “Confidential Information” of the
                other Party (the “Disclosing
                Party”).
                The term “Confidential
                Information”
                include any material or information relating to the Disclosing Party’s
                technology, research, development, product plans, trade secrets,
                finances
                or business operations that the Disclosing Party treats as confidential
                as
                well as this Agreement, but not any material or information that
                the
                Receiving Party can demonstrate (a) is or becomes publicly known
                through
                no fault of the Receiving Party; (b) is developed independently by
                the
                Receiving Party; (c) is known by the Receiving Party when disclosed
                by the
                Disclosing Party if the Receiving Party does not then have a duty
                to
                maintain its confidentiality; or (d) is rightfully obtained by the
                Receiving Party from a Third Party not obligated to preserve its
                confidentiality who did not receive the material or information directly
                or indirectly from the Disclosing
                Party.

            

    

     

    
      
        
        

      

      
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      	5.2  	
              Limitations
                on Use and Disclosure.
                A
                Receiving Party shall not use the Disclosing Party’s Confidential
                Information for any purpose other than performance of this Agreement
                and
                shall not disclose Confidential Information to any Person other than
                its
                employees and its independent contractors subject to a nondisclosure
                obligation comparable in scope to this Article, which employees and
                independent contractors have a need to know such Confidential Information
                for the performance of this Agreement. Upon the expiration or termination
                of this Agreement or such earlier time as particular Confidential
                Information may no longer be necessary for the performance of this
                Agreement, a Receiving Party shall, on request, return or destroy
                all
                embodiments of the Disclosing Party’s Confidential Information in its
                possession or control. The Parties shall notify their employees of
                the
                confidential nature of the Confidential Information, and the Receiving
                Party shall be liable to the Disclosing Party for any unauthorized
                use or
                disclosure made by any person receiving Confidential Information
                the
                Receiving Party.

            

    

     

    
      	5.3  	
              Exception.
                Notwithstanding
                Section 5.2, a Receiving Party may disclose Confidential Information
                to the extent required by a court or other governmental authority,
                provided that (a) the Receiving Party gives the Disclosing Party
                reasonable notice of the disclosure, (b) the Receiving Party uses
                reasonable efforts to resist disclosing the Confidential Information
                and
                minimize the amount of Confidential Information disclosed, and (c)
                the
                Receiving Party cooperates with the Disclosing Party on request to
                seek a
                protective order or otherwise limit the effects of the disclosure.
                

            

    

     

    
      	5.4  	
              Acknowledgement.
                The Parties acknowledge that either Party’s breach of this Article 7 would
                cause the other Party irreparable injury for which it would not have
                an
                adequate remedy at law. In the event of a breach, the non-breaching
                Party
                shall be entitled to injunctive relief in addition to any other remedies
                it may have at law or in equity.

            

    

     

    6.  Other
      Intellectual Property Matters.

     

    
      	6.1  	
              In
                General.
                Subject to all of Energenics’s obligations under this Agreement, O2Diesel
                hereby acknowledges that Energenics may practice O2Diesel’s patents and
                trade secrets in the Territory during the Term to the extent necessary
                to
                blend O2Diesel Product using O2Diesel Additive purchased from O2Diesel
                under Article 4. As between the Parties, O2Diesel shall retain all
                right,
                title and interest in and to its patents, trade secrets and other
                intellectual property ( the “O2Diesel
                Intellectual Property”).
                All rights with respect to O2Diesel Intellectual Property not expressly
                granted to Energenics in this Agreement are reserved by O2Diesel,
                and
                O2Diesel grants no licenses by implication or estoppel. Energenics
                shall
                take no action inconsistent with such O2Diesel Intellectual Property
                rights. For the avoidance of doubt, and without limiting the generality
                of
                the foregoing, (a) Energenics is not authorized to manufacture, offer
                for
                sale or sell O2Diesel Additive as such; (b) Energenics shall not
                grant
                sublicenses under the O2Diesel Intellectual Property to any Third
                Party
                without the written consent of O2Diesel, which consent not to be
                unreasonably withheld; and (c) Energenics shall not challenge the
                validity
                or enforceability of the O2Diesel Intellectual Property.
                

            

    

     

    
      
        
        

      

      
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      	6.2  	
              Third
                Party Infringement.
                Energenics shall inform O2Diesel of any infringement by any Third
                Party of
                any of the O2Diesel Intellectual Property in the Territory of which
                it
                becomes aware. O2Diesel may, but shall not be required to, take legal
                action to enforce the O2Diesel Intellectual Property against infringement
                by Third Parties and defend the O2Diesel Intellectual Property against
                challenges by Third Parties. Energenics shall cooperate fully with
                O2Diesel in any such enforcement or defense and supply all assistance
                reasonably requested by O2Diesel in carrying on such action, at O2Diesel’s
                expense, including by using commercially reasonable efforts to have
                its
                employees testify when requested and to make available relevant records,
                information, specimens and the like.

            

    

     

    
      	6.3  	
              Joint
                Improvements.
                To the extent that employees of O2Diesel or its Affiliates together
                with
                employees of Energenics or its Affiliates jointly invent or discover
                any
                improvements to the O2Diesel Additive, O2Diesel Product or to any
                other
                invention, discovery, know-how or technology, the Parties shall jointly
                own the same, and each Party shall be free to exploit or authorize
                the
                exploitation of the same without the consent of or accounting to
                the other
                Party, subject to any other relevant intellectual property rights
                of the
                other Party. If a Party becomes aware of any such joint invention,
                discovery, know-how or technology, it shall verify that the other
                Party is
                aware of the same and the parties shall consult and cooperate with
                respect
                to the protection of the same.

            

    

     

    
      	6.4  	
              Energenics
                Improvements.
                Before commencing any research or testing efforts with respect to
                the
                oxygenation of diesel fuel, the Party commencing such research/testing
                (“Research
                Party”)
                shall disclose the same to the other Party. Subject to Section 6.3,
                to the extent that the Research Party may during the Term invent
                or
                discover or otherwise acquire rights to any improvements to the O2Diesel
                Additive, O2Diesel Product or any related know-how or technology
                for the
                oxygenation of diesel fuel, such Party shall promptly disclose the
                same to
                the other Party., and the grants of a worldwide, perpetual, royalty-free,
                paid-up, nonexclusive license to practice and authorize the practice
                of
                such improvements and other know-how and technology shall be agreed
                to by
                the Parties.

            

    

     

    
      	6.5  	
              Patent
                Marking.
                Energenics shall, if applicable, comply with any laws and regulations
                in
                the Territory concerning the marking or other identification of O2Diesel
                Product as being patented.

            

    

     

    7.  Representations
      and Warranties.

     

    
      	7.1  	
              Representations
                and Warranties of Both Parties.
                Each Party represents and warrants
                that:

            

    

     

    
      	7.1.1  	
              it
                is a company duly organized, validly existing and in good standing
                under
                the laws of, in the case of O2Diesel, the state of Delaware, and
                in the
                case of Energenics, Singapore;

            

    

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    
      	7.1.2  	
              the
                execution of this Agreement on its behalf has been properly authorized
                by
                all necessary corporate action;

            

    

     

    
      	7.1.3  	
              this
                Agreement is valid and binding on it and enforceable against it in
                accordance with the terms hereof, subject to applicable bankruptcy
                and
                similar laws affecting creditors’ rights and remedies generally, and
                subject, as to enforceability, to general principles of equity;
                

            

    

     

    
      	7.1.4  	
              neither
                the execution nor the performance of this Agreement will constitute
                a
                breach or violation of the terms of its charter or organizational
                documents or any contract, agreement or other commitment to which
                it is a
                party or by which it or any of its properties are
                bound;

            

    

     

    
      	7.1.5  	
              there
                are no bankruptcy,
                insolvency, receivership or similar proceedings involving it or any
                of its
                Affiliates either pending or being contemplated, or any other pending
                or
                threatened actions, suits, arbitrations or other proceedings by or
                against
                it;

            

    

     

    
      	7.1.6  	
              its
                business is being conducted in compliance in all material respects
                with
                all applicable laws and regulations;
                and

            

    

     

    
      	7.1.7  	
              it
                is not in default with respect to any governmental or court order
                and
                there are no pending lawsuits or unsatisfied judgments against
                it.

            

    

     

    
      	7.2  	
              Representations
                and Warranties of Energenics.
                Energenics represents and warrants that: (a) Energenics is experienced
                in
                fuel distribution; (b) Energenics has had a reasonable opportunity
                to, and has in fact, investigated independently its business prospects
                under this Agreement before entering into this Agreement; (c) Energenics
                is not relying upon any information, representation or warranty provided
                by O2Diesel except as expressly set forth in this Agreement; and
                (d)
                Energenics is not relying upon O2Diesel’s providing significant assistance
                with or control over Energenics’s method of operation under this
                Agreement.

            

    

     

    
      	7.3  	
              Representations
                and Warranties of O2Diesel.

            

    

     

    
      	7.3.1  	
              O2Diesel
                warrants that the O2Diesel Additive delivered to Energenics hereunder
                complies with O2Diesel’s specifications for such product, provided that
                Energenics notifies O2Diesel of any defects therein within thirty
                (30)
                days after taking delivery thereof. Energenics’s exclusive remedy for a
                breach of this Section 7.3 shall be, at O2Diesel’s option, a refund
                of any amounts already paid for the nonconforming O2Diesel Additive
                or
                prompt redelivery of the same quantity of conforming O2Diesel
                Additive.

            

    

     

    
      	7.3.2  	
              O2Diesel
                represents and warrants that it has the right title interest in the
                O2Diesel Additive and O2Diesel Product and it has the right to distribute
                O2Diesel Additive and/or O2Diesel Product. O2Diesel (as contemplated
                in
                this agreement) represents and warrants that the O2Diesel Additive
                and
                O2Diesel Product are fit for the purposes for which they would ordinarily
                be used and are free from any defect of manufacturing and material.
                O2Diesel further represents and warrants that all the O2Diesel Trademarks
                and Intellectual Property are registered in the name of O2Diesel
                and that
                the use of such Trademark and Intellectual Property by O2Diesel or
                Energenics does not violate in any manner whatsoever or infringe
                any third
                party's right or intellectual
                property.

            

    

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    
      	7.3.3  	
              To
                the best of its knowledge, O2Diesel has disclosed in its public filings,
                all technical and logistical issues relating to the O2Diesel Additive.
                

            

    

     

    8.  Indemnification.
      

     

    
      	8.1  	
              In
                General.
                Each Party (the “Indemnifying
                Party”)
                shall defend, indemnify and hold harmless the other Party (the
                “Indemnified
                Party”),
                its Affiliates, and its and their employees, officers, directors,
                agents,
                distributors and licensees against any loss, damage, expense, or
                cost,
                including reasonable attorneys fees, arising out of any claim, demand,
                action, suit, investigation, arbitration or other proceeding by a
                Third
                Party (an “Action”)
                based on (a) the Indemnifying Party’s breach of this Agreement; (b)
                negligence, willful misconduct or violation of any law or regulation
                by
                the Indemnifying Party, its Affiliates, or its or their employees,
                officers, directors, or agents;
                or (c) the Indemnifying Party’s manufacture, use, sale, handling, storage,
                transportation or disposal of O2Diesel Additive, O2Diesel Product
                or other
                products.

            

    

     

    
      	8.2  	
              Procedure. If
                an Indemnified Party becomes aware of any Action it believes is
                indemnifiable under Section 8.1, (a) the Indemnified Party shall give
                the Indemnifying Party prompt written notice of such Action; (b) the
                Indemnifying Party shall assume, at its expense, the sole defense
                of such
                claim or cause of action through counsel selected by it and reasonably
                acceptable to the Indemnified Party, except that in the case of a
                conflict
                of interest between the Parties, the Indemnifying Party shall, at
                the
                Indemnifying Party’s expense, provide separate counsel for the Indemnified
                Party selected by the Indemnified Party; (c) the Indemnifying Party
                shall
                maintain control of such defense, including any decision as to settlement,
                except that any settlement of an Action shall require the written
                consent
                of both Parties, which consent shall not to be withheld or delayed
                unreasonably; (d) the Indemnified Party may, at its option and
                expense, participate in such defense, and in any event, the Parties
                shall
                cooperate with one another in such defense; and (e) the Indemnifying
                Party
                shall bear the total costs of any court award or settlement in such
                Action.

            

    

     

    
      	9.  	
              Insurance. 
                Energenics
                shall during the Term maintain general liability and product insurance
                as
                per Singapore law covering at least claims arising out of the manufacture,
                use, sale, handling, storage, transportation and disposal of O2Diesel
                Product by Energenics. 

            

    

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    10.  Limitation
      of Liability.
      

     

    
      	10.1  	
              Neither
                party shall be liable to the other party
                for any indirect, incidental, special, consequential or punitive
                damages
                arising out of or related to this Agreement, even if the party has
                been
                advised of the possibility thereof. O2Diesel’s liability to Energenics for
                other damages, if any, shall in no event exceed the total amount
                distributor has paid to O2Diesel for any product or service giving
                rise to
                a claim of liability. 

            

    

     

    
      	10.2  	
              The
                Parties have agreed that Energenics shall not in any circumstance
                whatsoever be liable for the O2Diesel Additive and the O2Diesel Product
                to
                O2Diesel or to any third party for any deficiency in the product
                so long
                as it uses the product per the instructions provided by
                O2Diesel.

            

    

     

    11.  Term
      and Termination.
      

     

    
      	11.1  	
              Term.
                

            

    

     

    
      	11.1.1  	
              This
                Agreement shall commence as of the Effective Date and, unless terminated
                as provided in Section 11.2, continue in full force and effect for
                an
                initial term of five (5) years (the “First
                Term”).
                Upon expiry of the First Term, this Agreement shall be automatically
                renewed for another term of five (5) years (the “Second
                Term”),
                unless written notice is provided to O2Diesel by Energenics at least
                six
                (6) months prior to the termination of the First Term.
                

            

    

     

    
      	11.1.2  	
              Notwithstanding
                the above, if O2Diesel proposes to sell the assets and intellectual
                property, unless pursuant to a Change of Control, with respect to
                O2Diesel
                Additive and/or O2 Diesel Product, in the territory, Energenics shall
                have
                the first right of refusal with respect to any such transfer, sale
                or
                disposal. The consideration for such transfer shall be determined
                by
                independent valuation by an independent registered public accounting
                firm
                who is not appointed by either party as its advisor or
                auditors.

            

    

     

    
      	11.2  	
              Termination
                for Default.
                If either Party materially breaches this Agreement and fails to cure
                the
                breach within thirty (30) days after receiving written notice thereof
                from
                the other Party, the other Party may terminate this Agreement upon
                further
                written notice to the breaching Party at any time that the breach
                remains
                uncured. Either Party may terminate this Agreement if it has reasonable
                grounds for insecurity concerning the other Party’s future performance and
                does not receive reasonably adequate assurance of performance within
                ten
                (10) days after giving written notice demanding the
                same.

            

    

     

    
      	11.3  	
              Rights
                and Obligations of Parties upon Expiration and
                Termination.

            

    

     

    
      	11.3.1  	
              Termination
                of this Agreement by either Party for any reason shall not affect
                and
                shall be without prejudice to the rights and obligations of the Parties
                accrued prior to the effective date of termination.
                

            

    

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    
      	11.3.2  	
              To
                the extent that Energenics has outstanding orders for O2Diesel Additive
                at
                the expiration or termination of this Agreement, such orders shall
                be
                deemed cancelled unless O2Diesel notifies Energenics within thirty
                (30)
                days after expiration or termination that it will deliver the ordered
                quantity of O2Diesel Additive. If O2Diesel so honors such orders,
                Energenics shall take and pay for the O2Diesel Additive in accordance
                with
                the provisions of this Agreement.

            

    

     

    
      	11.3.3  	
              Within
                thirty (30) days after the expiration or termination of this Agreement,
                Energenics shall notify O2Diesel of the quantity of O2Diesel Additive
                that
                Energenics then has on hand (“Remaining
                Quantity”).
                Energenics shall have the right to use such O2Diesel Additive to
                make and
                sell O2Diesel Product subject to the applicable terms of this Agreement,
                but in no event shall such right continue for longer than six (6)
                months
                after the date of expiration or termination. If Energenics does not
                use
                the Remaining Quantity, O2Diesel shall have the option to purchase
                from
                Energenics the Remaining Quantity at the same price Energenics paid
                for
                such O2Diesel Additive. After the expiration or termination of the
                Agreement and any further period of distribution permitted under
                this
                Section 11.3.3, Energenics shall take no action that would infringe
                O2Diesel Intellectual Property or use O2Diesel Confidential Information.
                

            

    

     

    
      	11.3.4  	
              After
                the expiration or termination of this Agreement and any further period
                of
                distribution permitted under Section 11.3.3, Energenics shall, within
                thirty (30) days after O2Diesel’s request, return to O2Diesel or destroy
                any materials provided by O2Diesel and any excess marketing materials
                for
                O2Diesel Product.

            

    

     

    
      	11.3.5  	
              The
                provisions of Sections 2.5, 3 (for so long as any amounts payable
                remain
                unpaid) and 11.3 and Articles 4 through 8, 10, and 12 through 14
                of this
                Agreement shall survive the expiration or termination of this
                Agreement.

            

    

     

    12.  Dispute
      Resolution.

     

    
      	12.1  	
              Discussions.
                The Parties shall use reasonable efforts to amicably resolve any
                disputes
                arising out of or relating to this Agreement by direct discussions
                between
                them. 

            

    

     

    
      	12.2  	
              Arbitration
                of Disputes.
                Any dispute not resolved as set forth in Section 12.1 within fifteen
                (15) days after one Party notifies the other Party that it wishes
                to
                discuss the matter (“Dispute”),
                shall be resolved by arbitration. The venue of the arbitration shall
                be
                London, United Kingdom and the arbitration shall be governed by the
                Rules
                of the London Court of Arbitration. The language of the arbitration
                shall
                be English language.

            

    

     

    
      	12.3  	
              Arbitration
                Procedures.
                The arbitration shall be presided by a panel of three (3) arbitrators.
                Each Party shall appoint one arbitrator and the third arbitrator
                shall be
                appointed by the two arbitrators so appointed by the
                Parties.

            

    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    
      	12.4  	
              Judicial
                Action.
                Notwithstanding the above, either Party may seek from any court having
                jurisdiction hereof any interim, provisional or injunctive relief
                or
                specific performance that may be necessary to protect the rights
                or
                property of any Party or to maintain the status quo before, during
                or
                after the pendency of the arbitration proceeding. The institution
                and
                maintenance of any judicial action or proceeding for any such interim,
                provisional or injunctive relief shall not constitute a waiver of
                the
                right or obligation of either Party to submit the dispute to arbitration,
                including any claims or disputes arising from the exercise of any
                such
                interim, provisional or injunctive
                relief.

            

    

     

    13.  Notices.

     

    
      	13.1  	
              Delivery
                of Notices.
                All notices sent under this Agreement shall be in writing and (a)
                hand
                delivered; (b) transmitted by legible facsimile with a copy sent
                concurrently by certified mail, return receipt requested; or (c)
                delivered
                by prepaid priority delivery
                service.

            

    

     

    
      	13.2  	
              Addresses
                for Notices.
                Notices shall be sent to the Parties at the following addresses or
                such
                other addresses as the parties subsequently may
                provide:

            

    

     

    
      	
              If
                to O2Diesel:

            	
              100
                Commerce Drive

              Suite
                301

              Newark,
                Delaware 19713

            
	 	 
	
              Attention: 

            	
              Alan
                Rae

            
	
              Telephone:

            	
              (302)
                266-6000

            
	
              Fax:       

            	
              (302)
                266-7076

            
	 	 
	 	 
	
              If
                to Energenics:

            	
              7
                Temasek Boulevard

            
	 	
              Suntec
                City Tower 1 #04-01A

            
	 	
              Singapore
                038987

            
	 	 
	
              Attention: 

            	
              Ronen
                Hazarika

            
	
              Telephone:

            	
              +65
                6415 1650

            
	
              Fax:       

            	
              +65
                6415 1656

            
	 	 

    

    14.  Miscellaneous.
      

     

    
      	14.1  	
              Relationship
                Between Parties.
                O2Diesel and Energenics are separate business entities, and shall
                not be
                considered as joint ventures, partners, agents, servants, employee,
                or
                fiduciaries of each other. Neither this Agreement nor the relationship
                between the Parties shall be considered in any way to deem Energenics
                a
                franchisee of O2Diesel for any purpose whatsoever. The Parties
                specifically agree that any obligation to act in good faith and to
                deal
                fairly with each other which may be implied in law shall be deemed
                satisfied by the Parties’ compliance with the express terms of this
                Agreement.

            

    

     

    
      	14.2  	
              Technical
                Services Agreement.
                Within thirty (30) days of the Closing, the Parties shall enter into
                a
                Technical Services Agreement that will establish the terms for the
                reimbursement of any technical services provided by O2Diesel in the
                Territory.

            

    

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    
      	14.3  	
              Compliance
                with Laws.
                In obtaining necessary government approvals and in other aspects
                of
                Energenics’s business relating to O2Diesel Product, Energenics shall: (a)
                in compliance with the U.S. Foreign Corrupt Practices Act, Title
                15 United
                States Code § 78dd, not directly or indirectly pay, give, offer or promise
                any money, gift or anything else of value to (i) any officer or employee
                of any government or any department, agency, or instrumentality thereof,
                (ii) any person acting in an official capacity for or on behalf of
                any
                foreign government or any department, agency, or instrumentality
                thereof,
                (iii) any political party, or (iv) any candidate for political office
                (collectively “Governmental
                Official”),
                or to any family member of any Governmental Official, to influence
                any act
                or decision of such Governmental Official, induce such Governmental
                Official to do or omit to do any act in violation of the lawful duty
                of
                such Governmental Official, or secure any advantage in obtaining,
                retaining or directing business for or with any Person; (b) not export
                or
                reexport any information, products or other items in violation of
                U.S.
                export control laws and regulations; and (c) comply with the conditions
                of
                any applicable governmental approvals and all other applicable laws
                and
                regulations. 

            

    

     

    
      	14.4  	
              Governing
                Law; Jurisdiction.
                This Agreement shall be governed and construed in accordance with
                English
                Law. Subject to the arbitration clause set out above, the High Court
                in
                London shall have jurisdiction with respect to any matter/dispute
                arising
                out of this Agreement. 

            

    

     

    
      	14.5  	
              Recordkeeping
                and Inspection.
                During the Term and for three (3) years thereafter, or such longer
                period
                as may be required by law, Energenics shall keep and maintain reasonable
                records of all agreements, approvals and other activities relating
                to this
                Agreement. O2Diesel may, at its expense, during regular business
                hours and
                with reasonable prior notice, examine, review, and inspect all facilities
                in which O2Diesel Additive or O2Diesel Product is stored, blended
                or
                distributed by or on behalf of Energenics, and review, audit and
                analyze
                Energenics’s records relating to this Agreement and representative samples
                of O2Diesel Additive and O2Diesel Product in Energenics’s custody or
                control. 

            

    

     

    
      	14.6  	
              Force
                Majeure.
                Neither Party shall be liable for the consequences of any failure
                to
                perform, or default in performing, any of its obligations under this
                Agreement, if that failure or default is caused without the fault
                or
                negligence of the Party by any act of “Force Majeure.” For the purposes of
                this Agreement, “Force
                Majeure”
                shall mean war (whether declared or not); act of God; revolution;
                acts or
                omissions of third parties beyond the control of either Party; faulty
                or
                impassable roads; invasion; insurrection; riot; civil commotion;
                sabotage;
                military or usurped power; lightning; explosion; fire; storm; drought;
                flood; earthquake; epidemic; quarantine; strikes; acts or restraints
                of
                governmental authorities; inability to secure materials, machinery,
                equipment or labor; and laws and regulations of any governmental
                authority.

            

    

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    
      	14.7  	
              Severability.
                The provisions of this Agreement are severable, and the unenforceability
                of any provision of this Agreement shall not affect the enforceability
                of
                the remainder of this Agreement. The Parties acknowledge that it
                is their
                intention that if any provision of this Agreement is determined by
                a court
                to be unenforceable as drafted, that provision should be construed
                in a
                manner designed to effectuate the purpose of that provision to the
                greatest extent possible under applicable
                law.

            

    

     

    
      	14.8  	
              Construction
                of Agreement.
                The Parties acknowledge that they thoroughly have reviewed this Agreement
                and bargained over its terms. Accordingly, this Agreement shall be
                construed without regard to the Party or Parties responsible for
                its
                preparation and shall be deemed to have been prepared jointly by
                the
                Parties.

            

    

     

    
      	14.9  	
              Cumulative
                Rights and Remedies.
                The rights and remedies provided in this Agreement and all other
                rights
                and remedies available to either Party at law or in equity are, to
                the
                extent permitted by law, cumulative and not exclusive of any other
                right
                or remedy now or hereafter available at law or in equity. Neither
                asserting a right nor employing a remedy shall preclude the concurrent
                assertion of any other right or employment of any other remedy, nor
                shall
                the failure to assert any right or remedy constitute a waiver of
                that
                right or remedy.

            

    

     

    
      	14.10  	
              Assignment.
                No
                Party shall transfer or assign any of its rights, including by a
                Change of
                Control, under this Agreement to any Third Party without the prior
                written
                consent of the other Party, provided that if Energenics enters into
                a
                sub-distributor arrangement with Affiliates of Energenics, the terms
                and
                conditions of the sub-distributorship shall be same as the terms
                and
                conditions set out in this Agreement.

            

    

     

    
      	14.11  	
              Amendments.
                This Agreement may be modified or amended only by written agreement
                of the
                Parties.

            

    

     

    
      	14.12  	
              Entire
                Agreement.
                This Agreement constitutes the entire agreement between the Parties
                concerning the subject matter of this Agreement and supersedes all
                prior
                agreements between the Parties concerning the subject matter
                hereof.

            

    

     

    
      	14.13  	
              Counterparts.
                This
                Agreement may be executed in any number of counterparts, each of
                which
                when so executed shall be deemed to be an original and all of which
                when
                taken together shall constitute this
                Agreement.

            

    

     

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    
 

    IN
      WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their
      respective duly authorized officers as of the Effective Date.

     

    

    O2DIESEL
      CORPORATION

    

    

    By: 
      /s/
      Alan R. Rae

    Name:
      Alan
      R.
      Rae

    Title:  
      Chief
      Executive Officer

    

    

    ENERGENICS
      PTE LIMITED

    

    

    By:  /s/
      Ronen Hazarika

    Name:
      Ronen
      Hazarika

    Title:  
      Director

     

     

    

 

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    SCHEDULE
      A

     

    SALES
      TARGETS

     

    1st
      Contract Period September 1, 2006 to December 31, 2007: *
      liters1 

     

    2nd
      Contract Period January 1, 2008 to December 31, 2008: *
      liters

     

    3rd
      Contract Period 1 January 1, 2009 to December 31, 2009: *
      liters

     

    PRICING

    

    IBC’s

    

    $*
      per
      MT

    

    *%
      retrospective discount on achieving *
      MT
      equivalent to $*
      per
      MT

    An
      additional *%
      retrospective discount on achieving *
      MT
      equivalent to $*
      per
      MT

    An
      additional *%
      retrospective discount on achieving *
      MT
      equivalent to $*
      per
      MT.

    

    

    ISO’s

    

    $*
      per
      MT

    

    *%
      retrospective discount on achieving *
      MT
      equivalent to $*
      per
      MT

    An
      additional *%
      retrospective discount on achieving *
      MT
      equivalent to $*
      per
      MT

    An
      additional *%
      retrospective discount on achieving *
      MT
      equivalent to $*
      per
      MT.

    

    

    The
      above
      prices are CIF Singapore and shall apply until 12/31/2006. From 1/01/2007,
      the
      price for the O2Diesel Additive shall be adjusted by the mutual agreement
      between the parties based on evidence of the feedstock prices and changes to
      these prices from the prior year.

     

    _________________________

      
        1
          The Parties agree that the * of O2Diesel Additive purchased by Energenics
          prior
          to the date of this agreement shall be included in the Minimum Volume for
          the
          1st Contract Period.FORM
      OF WARRANT

     

    THIS
      WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
      AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
      DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES
      ACT
      OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
      COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH
      REGISTRATION.

     

    __________,
      2006

     

    O2DIESEL
      CORPORATION 

     

    Warrant
      for the Purchase of Common Stock
      (Void
      after __________, 2010)

     

    No.
      W-________

     

    FOR
      VALUE
      RECEIVED, this Warrant is hereby issued by O2DIESEL CORPORATION, a Delaware
      corporation (the “Company”), to Energenics Holdings PTE Ltd, having its
      registered office at 7 Temaek Boulevard, Suntec City Tower 1 #04-01A, Singapore
      038987 (the “Holder”). Subject to the provisions of this Warrant, the Company
      hereby grants to Holder the right to purchase 685,871 shares of the Company’s
      common stock, par value $.0001 per share (“Common Stock”), at US$0.972 per share
      during the period of six (6) months to sixty-six (66) months following the
      Closing (as defined in the Common Stock and Warrant Purchase Agreement (the
      “Purchase Agreement”)) (“Exercise Price”). 

     

    The
      Holder agrees with the Company that this Warrant is issued, and all the rights
      hereunder shall be held, subject to all of the conditions, limitations and
      provisions set forth herein.

     

    1.  Exercise
      of Warrant.
      Subject
      to the terms and conditions set forth herein, the Holder may exercise this
      Warrant on or after _________, 2007 and no later than __________, 2013. To
      exercise this Warrant the Holder shall present and surrender this Warrant to
      the
      Company at its principal office, with the Warrant Exercise Form, attached hereto
      as Appendix
      A,
      duly
      executed by the Holder and accompanied by payment in cash or by check, payable
      to the order of the Company, of the aggregate Exercise Price for the total
      aggregate number of securities for which this Warrant is exercised. The Common
      Stock deliverable upon such exercise, and as adjusted from time to time, are
      hereinafter referred to as “Warrant Stock.”

     

    Upon
      receipt by the Company of this Warrant, together with the executed Warrant
      Exercise Form and payment of the Exercise Price, if any, for the securities
      to
      be acquired, in proper form for exercise, and subject to the Holder’s compliance
      with all requirements of this Warrant for the exercise hereof, the Holder shall
      be deemed to be the holder of record of the Warrant Stock issuable upon such
      exercise, notwithstanding that the stock transfer books of the Company shall
      then be closed or that certificates representing such securities shall not
      then
      be actually delivered to the Holder; provided, however, that no exercise of
      this
      Warrant shall be effective, and the Company shall have no obligation to issue
      any Warrant Stock to the Holder upon any attempted exercise of this Warrant,
      unless the Holder shall have first delivered to the Company, in form and
      substance reasonably satisfactory to the Company, appropriate representations
      so
      as to provide the Company reasonable assurances that the securities issuable
      upon exercise may be issued without violation of the registration requirements
      of the Securities Act and applicable state securities laws, including without
      limitation representations that the exercising Holder is an “accredited
      investor” as defined in Regulation D under the Securities Act and that the
      Holder is familiar with the Company and its business and financial condition
      and
      has had an opportunity to ask questions and receive documents relating thereto
      to his reasonable satisfaction. 

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    2.  Reservation
      of Shares.
      The
      Company will reserve for issuance and delivery upon exercise of this Warrant
      all
      shares of Warrant Stock. All such shares shall be duly authorized and, when
      issued upon such exercise, shall be validly issued, fully paid and
      non-assessable and free of all preemptive rights.

     

    3.  Assignment
      or Loss of Warrant.
      Subject
      to the transfer restrictions herein (including Section 6), upon surrender of
      this Warrant to the Company or at the office of its stock transfer agent, if
      any, with the Assignment Form, attached hereto as Appendix
      B,
      duly
      executed and funds sufficient to pay any transfer tax, the Company shall,
      without charge, execute and deliver a new Warrant in the name of the assignee
      named in such instrument of assignment and this Warrant shall promptly be
      canceled. Upon receipt by the Company of evidence reasonably satisfactory to
      it
      of the loss, theft, destruction or mutilation of this Warrant, and of reasonably
      satisfactory indemnification by the Holder, and upon surrender and cancellation
      of this Warrant, if mutilated, the Company shall execute and deliver a
      replacement Warrant of like tenor and date.

     

    4.  Rights
      of the Holder.
      The
      Holder shall not, by virtue hereof, be entitled to any rights of a stockholder
      in the Company, either at law or in equity, and the rights of the Holder are
      limited to those expressed in this Warrant.

     

    5.  Adjustments.

     

    (a)  Adjustment
      for Recapitalization.
      If the
      Company shall at any time after the date hereof subdivide its outstanding shares
      of Common Stock by recapitalization, reclassification or split-up thereof,
      or if
      the Company shall declare a stock dividend or distribute shares of Common Stock
      to its shareholders, the number of shares of Common Stock subject to this
      Warrant immediately prior to such subdivision shall be proportionately
      increased, and if the Company shall at any time after the date hereof combine
      the outstanding shares of Common Stock by recapitalization, reclassification
      or
      combination thereof, the number of shares of Common Stock subject to this
      Warrant immediately prior to such combination shall be proportionately
      decreased. 

     

    (b)  Adjustment
      for Reorganization, Consolidation, Merger, Etc.
      If at
      any time after the date hereof the Company has a Change in Control, the Holder
      agrees that, either (a) Holder shall exercise its purchase right under this
      Warrant and such exercise will be deemed effective immediately prior to the
      consummation of such Change in Control or (b) if the Holder elects not to
      exercise the Warrant, this Warrant will expire upon the consummation of the
      Change of Control. For purposes of this Warrant, a “Change in Control” shall be
      deemed to occur in the event of a change in ownership or control of the Company
      effected through any of the following transactions: (i) the acquisition,
      directly or indirectly, by any person or related group of persons (other than
      the Company or a person that immediately
      before the Change of Control directly
      or indirectly controls, or is controlled by, or is under common control with,
      the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
      Securities Exchange Act of 1934, as amended) of outstanding
      securities possessing more than fifty percent (50%) of the total combined voting
      power of the Company’s outstanding securities;
      or (ii)
      the sale, transfer or other disposition of all or substantially all of the
      Company’s assets; or (iii) the consummation of a merger or consolidation of the
      Company with or into another entity or any other corporate reorganization,
      if
      more than fifty percent (50%) of the combined voting power of the continuing
      or
      surviving entity’s securities outstanding immediately after such merger,
      consolidation or other reorganization is owned by persons who were not
      stockholders of the Company immediately prior to such merger, consolidation
      or
      other reorganization.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (c)  Certificate
      as to Adjustments.
      The
      adjustments provided in this Section 5 shall be interpreted and applied by
      the Company in such a fashion so as to reasonably preserve the applicability
      and
      benefits of this Warrant (but not to increase or diminish the benefits
      hereunder). In each case of an adjustment in the number of shares of Common
      Stock receivable on the exercise of the Warrant, the Company at its expense
      will
      promptly compute such adjustment in accordance with the terms of the Warrant
      and
      prepare a certificate executed by two executive officers of the Company setting
      forth such adjustment and showing in detail the facts upon which such adjustment
      is based. The Company will mail a copy of each such certificate to each
      Holder.

     

    (d)  Notices
      of Record Date, Etc.
      In the
      event that:

     

    (i)  the
      Company shall declare any dividend or other distribution to the holders of
      Common Stock, or authorizes the granting to Common Stock holders of any right
      to
      subscribe for, purchase or otherwise acquire any shares of stock of any class
      or
      any other securities; or

     

    (ii)  the
      Company has a Change in Control; or

     

    (iii)  the
      Company authorizes any voluntary or involuntary dissolution, liquidation or
      winding up of the Company,

     

    then,
      and
      in each such case, the Company shall mail or cause to be mailed to the holder
      of
      this Warrant at the time outstanding a notice specifying, as the case may be,
      (a) the date on which a record is to be taken for the purpose of such dividend,
      distribution or right, and stating the amount and character of such dividend,
      distribution or right, or (b) the date on which such reorganization,
      reclassification, consolidation, merger, conveyance, dissolution, liquidation
      or
      winding up is to take place, and the time, if any is to be fixed, as to which
      the holders of record of Common Stock shall be entitled to exchange their shares
      of Common Stock for securities or other property deliverable upon such
      reorganization, reclassification, consolidation, merger, conveyance,
      dissolution, liquidation or winding up. Such notice shall be mailed at least
      20
      days prior to the date therein specified.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (e)  No
      Impairment.
      The
      Company will not, by any voluntary action, avoid or seek to avoid the observance
      or performance of any of the terms to be observed or performed hereunder by
      the
      Company, but will at all times in good faith assist in the carrying out of
      all
      the provisions of this Section 5 and in the taking of all such action as may
      be
      necessary or appropriate in order to protect the rights of the Holder of this
      Warrant against impairment.

     

    6.  Transfer
      to Comply with the Securities Act.
      This
      Warrant and any Warrant Stock may not be sold, transferred, pledged,
      hypothecated or otherwise disposed of except as follows: (a) to a person who,
      in
      the opinion of counsel to the Company, is a person to whom this Warrant or
      the
      Warrant Stock may legally be transferred without registration and without the
      delivery of a current prospectus under the Securities Act with respect thereto
      and then only against receipt of an agreement of such person to comply with
      the
      provisions of this Section 6 with respect to any resale or other disposition
      of
      such securities; or (b) to any person upon delivery of a prospectus then meeting
      the requirements of the Securities Act relating to such securities and the
      offering thereof for such sale or disposition, and thereafter to all successive
      assignees.

     

    7.  Reports
      Under Securities Exchange Act of 1934.
      With a
      view to making available to the Holder the benefits of Rule 144 under the
      Securities Act (“Rule 144”) and any other rule or regulation of the Securities
      Exchange Commission (“Commission”) that may at any time permit a Holder to sell
      securities of the Company to the public without registration, the Company
      shall:

     

    (a)  make
      and
      keep public information available, as required by Rule 144, at all
      times;

     

    (b)  file
      with
      the Commission in a timely manner all reports and other documents required
      of
      the Company under the Securities Act and the Exchange Act; and

     

    (c)  furnish
      to the Holder, forthwith upon request (i) a written statement by the Company
      that it has complied with the reporting requirements of Rule 144, the Securities
      Act and the Exchange Act; (ii) a copy of the most recent annual or quarterly
      report of the Company and such other reports and documents so filed by the
      Company and (iii) such other information as may be reasonably requested in
      availing any Holder of any rule or regulation of the Commission which permits
      the selling of any such securities without registration.

     

    8.  Legend. 

     

    (a)  Unless
      the shares of Warrant Stock have been registered under the Securities Act,
      upon
      exercise of this Warrant and the issuance of any of the shares of Warrant Stock,
      all certificates representing shares shall bear on the face thereof
      substantially the following legend:

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    THE
      SECURITIES
      REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER FOR ITS OWN
      ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION OF
      SUCH
      SECURITIES. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED (THE “ACT”),
      OR
      ANY APPLICABLE STATE SECURITIES LAWS AND MAY
      NOT
      BE
      SOLD OR OTHERWISE TRANSFERRED EXCEPT (I)
      PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND COMPLIANCE WITH SUCH
      STATE SECURITIES LAWS, (II)
      IN
      COMPLIANCE WITH RULE 144 UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS,
      OR
(III) UPON
      THE DELIVERY TO O2DIESEL CORPORATION (THE
      “COMPANY”)
      OF AN
      OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH
      REGISTRATION AND/ OR COMPLIANCE IS NOT REQUIRED.

     

    (b)  The
      legend requirements shall terminate when (i) the shares in question shall have
      been effectively registered under the Securities Act and disposed of pursuant
      thereto or (ii) the Company shall have received an opinion of counsel reasonably
      satisfactory to it that such legend is not required in order to insure
      compliance with the Securities Act.

     

    (c)  Upon
      termination of the legend requirements as per Section 8(b) above, the Company
      shall instruct its transfer agent to issue a new share certificate at no cost
      to
      the Holder without a legend limiting the sale or transfer of the
      shares.

     

    9.  Notices.
      All
      notices required hereunder shall be in writing and shall be deemed given when
      telegraphed, delivered personally or within two days after mailing when mailed
      by certified or registered mail, return receipt requested, to the Company or
      the
      Holder, as the case may be, for whom such notice is intended, if to the Holder,
      at the address of such party as set forth in the Purchase Agreement, or if
      to
      the Company, O2Diesel Corporation, 100 Commerce Drive, Suite 301, Newark,
      Delaware 19713 or at such other address of which the Company or the Holder
      has
      been advised by notice hereunder.

     

    10.  Applicable
      Law.
      The
      Warrant is issued under and shall for all purposes be governed by and construed
      in accordance with the laws of the State of Delaware, without regard to the
      conflict of laws provisions of such State.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf,
      in its corporate name, by its duly authorized officer, all as of the day and
      year first above written.

     

    

     

    O2Diesel
      Corporation

    

    

    By:_____________________

    Alan
      R.
      Rae

    Chief
      Executive Officer

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Appendix
      A

     

    WARRANT
      EXERCISE FORM

     

    The
      undersigned hereby irrevocably elects to (i) exercise the within Warrant to
      purchase __________ shares of the Common Stock of O2DIESEL CORPORATION, a
      Delaware corporation, pursuant to the provisions of Section 1 of the attached
      Warrant, and hereby makes payment of $__________ in payment therefor, or (ii)
      exercise this Warrant for the purchase of _______ shares of Common Stock,
      pursuant to the provisions of Section 1 of the attached Warrant. The
      undersigned’s execution of this form constitutes the undersigned’s agreement to
      all the terms of the Warrant and to comply therewith.

     

     

    ________________________________________

    Signature

     

    Print
      Name:_______________________________

    

    

     

    ________________________________________

    Signature,
      if jointly held

    

    Print
      Name:_______________________________

    

    Date:____________________________________

    

     

    
 

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Appendix
      B

     

    ASSIGNMENT
      FORM

     

    FOR
      VALUE
      RECEIVED_____________________________ (“Assignor”) hereby sells, assigns and
      transfers unto _______________________________ (“Assignee”) all of Assignor’s
      right, title and interest in, to and under Warrant No. W-____ issued by
      ____________________________, dated ______________.

     

    DATED:
      _________________

     

    ASSIGNOR:

    

     

    _____________________________________________

    Signature

    Print
      Name:____________________________________

     

    

     

    ____________________________________________

    Signature,
      if jointly held

    Print
      Name:___________________________________

     

    ASSIGNEE:

     

    The
      undersigned agrees to all of the terms of the Warrant and to comply
      therewith.

     

    

     

    ____________________________________________

    Signature

    Print
      Name:___________________________________

    

    

     

    ____________________________________________

    Signature,
      if jointly held

    Print
      Name:___________________________________

     

    
 

    
      
         

      

      
        8

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