Document:

exv10w2

 

Exhibit 10.2

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.

O2DIESEL CORPORATION

Warrant for the Purchase of Common Stock (Void after October___, 2009)

No. W-___

     FOR VALUE RECEIVED, this Warrant is hereby issued by 02DIESEL CORPORATION, a Delaware corporation
(the “Company”), to UBS AG London Branch (the “Holder”). Subject to the provisions of this Warrant,
the Company hereby grants to Holder the right to purchase 2,666,666 shares of the Company’s common
stock, par value $.0001 per share (“Common Stock”), at $0.825 per share (“Exercise Price”) during
the period of six (6) months to forty two (42) months following the Closing (as defined in the
Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”)).

     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 October___,
2006 and no later than October ___,
2009. 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

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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.

     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

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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.

          (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.

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          (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. Legend. 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:

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.

     8. 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.

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     9. 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.

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     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:

	 	 	 	By:	 	 	 	 
	 

	 	 

David H. Shipman	 	 	 	 

Alan R. Rae
	 	 
	 

	 	Chief Financial Officer
	 	 	 	Chief Executive Officer	 	 

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Appendix A

WARRANT EXERCISE FORM

     The undersigned hereby irrevocably elects to 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. 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:
 

	 	 
	 

	 	 	 	 

	 	 

7exv10w3

 

Exhibit 10.3

 COMMON STOCK AND WARRANT PURCHASE AGREEMENT 

     This Common Stock and Warrant Purchase Agreement (this
“Agreement”) is made as of April 6th, 2006 (the “Execution Date”), by
and among O2Diesel Corporation, a Delaware corporation (the
“Company”), and Standard Bank Plc (the “Purchaser”).

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

1. AUTHORIZATION AND SALE OF COMMON STOCK AND WARRANTS

     1.1
 Authorization of Common Stock and Warrants. The
Company has authorized the sale and issuance to the Purchaser of
3,333,333 shares (the “Shares”) of its Common Stock, pur
value $0.0001 per share (the “Common Stock”), and warrants to
purchase 1,666,667 shares of Common Stock (the “Warrants”), such
Warrants having the terms set forth in the form attached hereto as
Exhibit A. The Shares and Warrants to be purchased hereunder are
referred to collectively as the “Units”, and a single
“Unit” shall
consist of one Share and a Warrant to purchase [one half] Share.

     1.2 Sale and Issuance of Units.

     Subject to the terms and conditions hereof, the Company will
issue and sell to the Purchaser and the Purchaser will buy from the
Company 3,333,333 Units at a per Unit purchase price of US$0.75 (the
“Per Unit Price”), and at the aggregate purchase price of
US$2,500,000 (the “Purchase Price”).

2. CLOSING DATE; DELIVERY

     2.1 Closing Date. It is anticipated that the purchase and
sale of the Units hereunder
shall be consummated at a closing (the “Closing”) held at the
offices of Arnold & Porter LLP,
l600 Tysons Boulevard, Suite 900, McLean, VA 22122 on April _,
2006, at 10:00 a.m., local
time, or at such other date, time and place upon which the Company
and the Purchaser shall
agree (the date and time of the Closing is hereinafter referred to as the “Closing Date”).

     2.2 Delivery and Payment.

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

     2.3 Escrow of Funds Pending Closing.

     Concurrent with the execution of this Agreement, the Purchaser
will tender to legal counsel for the Company funds equal to the
Purchase Price for the Units. Such funds will be held by such counsel
in escrow pending notice by the Company and Purchaser of the Closing.
If the Closing has not occurred by the termination date specified in
Section 8.1, the parties will

 

 

instruct counsel to return the funds to the Purchaser. Such funds
shall be delivered to Arnold & Porter LLP, 1600 Tysons Boulevard,
McLean, Virginia 22102, Attn.: Kevin J. Lavin, Esq. by wire transfer
to the following account:

	 	 	 
	Account Name:

	 	Arnold & Porter LLP Client Trust Account
	Account No.

	 	3700 3379
	ABA No.

	 	254 07 0116
	Bank Name:

	 	Citibank FSB
	 

	 	1101 Pennsylvania Avenue, NW
	 

	 	Washington, DC 20004
	Note:

	 	O2Diesel Corporation / Equity Subscription

3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

     3.1
 Organization and Standing; Certificate of Incorporation
and Bylaws. The Company is a corporation duly organized and
existing under, and by virtue of, the laws of the State of Delaware
and is in good standing under such laws. The Company has all requisite
legal and corporate power and authority to execute and deliver this
Agreement, to sell and to issue the Units hereunder, and to issue the shares of Common Stock issuable upon exercise of the Warrants.

     3.2
Disclosure Documents. The Disclosure Documents (as hereinafter defined) are true,
correct and complete in all material respects, and do not contain an untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading. Since the respective dates as of which information was given in the Disclosure
Documents, except as otherwise stated therein, there has been no material adverse change in the
financial condition, or in the results of operations or affairs of the Company.

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

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

     4.1
Preexisting Relationship with Company; Business and Financial
Experience.

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

     4.2
Investment Intent; Blue Sky.

     It is acquiring the Units for investment for its own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, any distribution thereof. It understands
that the issuance of the Units and the Shares of Common Stock issuable upon exercise of the
Warrants have not been, and will not be, registered under the Securities Act by reason of a

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specific exemption from the registration provisions of the Securities
Act, the availability of which depends upon, among other things, the
bona fide nature of the Purchaser’s investment intent and the
accuracy of the Purchaser’s representations as expressed herein. The
Purchaser’s address set forth herein represents the Purchaser’s true
and correct state of domicile, upon which the Company may rely for
the purpose of complying with applicable “Blue Sky” laws.

     4.3
Rule 144.

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

     4.4
 Restrictions on Transfer; Restrictions Legends.

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

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

     4.5 Access to Data; Disclosure Documents.

     Purchaser acknowledges that it has received all such information
as Purchaser deems necessary and appropriate to enable it to evaluate
the financial risk inherent in making an investment in the Units,
including but not limited to the Company’s reports filed under the

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Securities Exchange Act of 1934, as amended, with the SEC
(“Disclosure Documents”). Purchaser further acknowledges that
Purchaser has (a) received satisfactory and complete information
concerning the business and financial condition of the Company in
response to all inquiries in respect thereof, and (b) been given the
opportunity to meet with management of the Company. Purchaser has
relied solely upon the Disclosure Documents, advice of its
representatives, if any, and independent investigations made by the
Purchaser and/or its representatives, if any, in making the decision
to purchase the Units and acknowledges that no representations or
agreements other than those set forth in this Agreement have been
made to the Purchaser in respect thereto.

     4.6
Authorization.

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

5. COVENANTS.

     5.1
Registration.

     The Company agrees it shall within thirty (30) days
following the Closing, prepare and file, at its own expense, a
registration statement or registration statements for all the Shares
(the “Registration Statements”) under the Securities Act with the SEC.
The Company will use its reasonable best efforts to cause such
Registration Statements to become effective within ninety (90) days,
or one hundred twenty (120) days if such Registration Statement is
subject to review by the staff of the SEC (the “Deadline”), in each
case from the initial filing thereof. The Company will pay to the
Purchaser, in cash or shares of Common Stock at the Company’s
discretion, 1% of the Purchaser Price as liquidated damages for every
month after the Deadline that it takes for the Registration Statements
to be declared effective. Any damages paid by the Company in shares of
Common Stock will be calculated at the Per Unit Price.

     5.2
Intellectual Property. No patent or intellectual
property of the Company is subject to any litigation, proceeding or
judgment restricting in any manner the use, transfer, or licensing
thereof by the Company, or that may affect the validity, use, or
enforceability of the patent or intellectual property. Following the
Closing, the Company will provide to the Purchaser all necessary
documentation to verify the Company’s ownership in the patents and
intellectual property.

6. CONDITIONS TO CLOSING OF THE PURCHASER

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

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     6.1 Representations and Warranties Correct.

     The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects
as of the date of the Closing.

     6.2 Covenants.

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

     6.3 Listing.

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

     6.4 Compliance and Incumbency Certificates.

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

7. CONDITIONS TO CLOSING OF THE COMPANY

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

     7.1 Representations and Warranties Correct.

     The representations made in Section 4 hereof by the
Purchasers shall be true and correct in all material respects as of
the date of Closing.

     7.2 Covenants.

     All covenants, agreements, and conditions contained in
this Agreement to be performed or complied with by the Purchaser on
or prior to the date of Closing shall have been performed or complied
with in all material respects.

     7.3 Listing.

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

8. MISCELLANEOUS

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     8.1 Termination.

     This Agreement may be terminated (a) by mutual agreement of the Company and the Purchaser at
any time or (b) by either the Company or the Purchaser if the Closing shall not have occurred by
the thirtieth (30th) day following the date of this Agreement. If this Agreement is
terminated in accordance with this Section 8.1 and the transactions contemplated hereby are not
consummated, (i) this Agreement shall become null and void and of no further force and effect
except that the terms and provisions of this Section 8 shall survive the termination of this
Agreement and (ii) any termination of this Agreement shall not relieve any party hereto from any
liability for any willful breach of its obligations hereunder.

     8.2 Governing Law.

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

     8.3 Survival.

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

     8.4 Successors and Assigns.

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

     8.5 Entire Agreement, Amendment. 

     This Agreement, including the exhibits hereto, constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof and thereof, and
no party shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Purchaser.

     8.6 Notices, etc.

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

          (a) if to the Purchaser, to:

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Attn:

Fax:

          (b) if to the Company, to:

O2Diesel Corporation

100 Commerce Drive

Suite 300

Newark, Delaware 19713

Attn: Alan Rae

Fax: 302-266-7076

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

Arnold
& Porter, LLP 

1600 Tysons Blvd.

Suite 900

McLean, Virginia 22102

Attn: Kevin J. Lavin 

Fax: 703-720-7399

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

     8.7 Delays or Omissions. 

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

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     8.8 Expenses.

     The Company and the Purchasers shall bea their own expenses incurred on their own behalf with
respect to this Agreement and the transactions contemplated hereby.

     8.9 Counterparts.

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

     8.10 Severability.

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

     8.11 Titles and Subtitles.

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

     8.12 Designation of Forum and Consent to Jurisdiction.

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

     8.13 Waiver of Jury Trial.

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

[Remainder of Page Intentionally Left Blank]

8

 

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

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	O2DIESEL CORPORATION
	 
	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	By:
	 	/s/ Alan R. Rae
	 

	 	 
	 	 	 	 	 	 
	 

	 	 
	 	 	 	Name:
	 	Alan R. Rae
	 

	 	 
	 	 	 	Title:
	 	Chief Executive Officer
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	[PURCHASER]
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Nic Contomichalos
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Nic Contomichalos
	 

	 	 	 	 	 	Title:
	 	Managing Director
	 
	 	 	 	 	 	 	 	 

SUBJECT
TO FORMAL APPROVAL OF O2DIESEL’S BOARD OF DIRECTORS

[Signature Page to Common Stock and Warrant Purchase Agreement]

9

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