Preview | Commercial Agreement |

Commercial Agreement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1.9. ?Term? shall have the meaning given in Section 9.1.

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

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

Joint Efforts to Market O2Diesel Product.

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

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

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

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

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