Preview | Share Exchange Agreement |

THIS SHARE EXCHANGE AGREEMENT (the Agreement) is made as of January 12, 2007 (the Effective Date), by and among O2Diesel Corporation, a corporation organized under the laws of the State of Delaware (Purchaser), ProEco Energy Company, Inc., a corporation organized under the laws of the State of South Dakota (Company), and each of the undersigned selling shareholders of Company (each a Seller and collectively the Sellers).

B. Purchaser desires to acquire 68,600,000 Company Shares from the Sellers, in the amounts specified on Schedule I of this Agreement (Schedule I), which Company Shares equal 80% of the outstanding equity interests of Company on a fully-diluted basis as of the Closing Date (as defined below), in exchange for 9,174,312 shares of Purchasers common stock, par value US$0.0001 per share (the Purchaser Stock), upon the terms and subject to the conditions contained in this Agreement (the Purchase);

D. In separate transactions in connection with the Purchase, (i) Purchaser and Company intend to work together to construct a new fuel-grade ethanol plant (the Ethanol Plant) with planned capacity of 100 million gallons per year to be built in two 50-million gallon trains (each, a Train and collectively, Trains) (the Potential Project); and (ii) Purchaser has extended credit to Company to finance the Potential Project (the Financing Transaction), including but not limited to purchase of an option (Option) to purchase parcels of land (collectively, the Parcels) on which the Ethanol Plant would be constructed.

NOW, THEREFORE, for and in consideration of the premises, covenants, and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties do covenant, agree, represent, warrant, and stipulate as follows:

(a) Purchase Price. Subject to the terms and conditions set forth herein, Purchaser hereby agrees to transfer to the Sellers 9,174,312 shares of Purchaser Stock (the Transaction Shares). The Transaction Shares shall be distributed to the Sellers in accordance with the terms of Section 1.1(b) of this Agreement.

(b) Transfer of Transaction Shares. On the Closing Date (as defined below), Purchaser shall transfer and instruct the transfer agent to register in the name of the several Sellers 60% of the Transaction Shares (the Closing Shares) as set forth on Schedule I. Purchaser shall transfer and instruct the transfer agent to register in the name of the several Sellers the balance of the Transaction Shares (the Earnout Shares) as set forth on Schedule I upon the achievement, in the reasonable business judgment of Purchaser, of the milestones relating to the Potential Project as set forth on Schedule II of this Agreement (the Project Milestones). The Closing Date shall be the date that the Purchase closes. For avoidance of doubt, the Closing Shares and the Earnout Shares collectively shall constitute all of the Transaction Shares.

(c) Earnout Shares. The Earnout Shares shall be held in escrow with an escrow agent to be mutually agreed upon by the parties (the Escrow Agent), to be held by the Escrow Agent pursuant to an escrow agreement in a form and on terms to be mutually agreed upon by the parties (the Escrow Agreement). The Escrow Agreement will authorize the Escrow Agent to release the Earnout Shares to the several Sellers upon the achievement of the applicable Project Milestones, within fifteen (15) days of such milestone, as confirmed in writing by Purchaser to the Escrow Agent. Purchaser agrees to instruct the Transfer Agent to register any Earnout Shares so released in the name of each individual Seller as specified on Schedule I.

(d) Stockholder Agreement. In connection with this Agreement, each Seller agrees to enter into a stockholder agreement with Purchaser in a form and on terms to be mutually agreed upon by the parties (the Stockholder Agreement). Such terms shall include, but not be limited to, a holding period for the Closing Shares (subject to customary exceptions with respect to tender offers) to end on the later of (x) the date that the final Train is completed and demonstrated to be operational to Purchasers reasonable satisfaction or (y) the end of a twelve-month period, rights to one (1) demand registration and unlimited registrations on Form S-3 of the Transaction Shares (each subject to customary black-out periods), unlimited piggy-back registration rights of the Transaction Shares, representation by the Sellers as a group on the board of directors of Purchaser (Purchasers Board) based on the Sellers ownership of the Transaction Shares and in accordance with and subject to the listing standards of the American Stock Exchange (AMEX), including but not limited to the AMEX independence standards.