H2DIESEL HOLDINGS,
INC.
Stock Option
Agreement
1.
Grant of
Option . In accordance with and subject to the terms
and conditions of this Stock Option Agreement (the “
Agreement ”), H2Diesel Holdings, Inc., a Florida
corporation (the “ Corporation ”, which term
shall include any entity which acquires, through merger, share
exchange, purchase of assets or otherwise, substantially all of the
capital stock or assets of the Corporation), grants to Cary J.
Claiborne (the “ Optionee ”) a nonqualified
stock option (the “ Option ”) to purchase the
number of shares (the “ Option Shares ”) of its
common stock, par value $.001 per share (“ Common
Stock ”), set forth on each of Schedule 1 and
Schedule 2 attached hereto (collectively, the “
Schedules ”), at the initial option exercise price of
$4.00 per share (such price, as it may be adjusted hereunder from
time to time, the “ Exercise Price ”).
Capitalized terms used but not otherwise defined herein shall have
the meanings set forth in the Employment Agreement between the
Corporation and the Optionee, as such agreement may be amended,
supplemented, amended and restated or otherwise modified from time
to time.
2.
Acceptance by
Optionee . The exercise of the Option or any portion
thereof is conditioned upon acceptance by the Optionee of the terms
and conditions of this Agreement, as evidenced by the
Optionee’s execution and delivery of the Schedules to this
Agreement to the Corporation.
3.
Vesting of
Option . The Options shall vest in the tranches as set
forth in the Schedules and such vested Options shall be exercisable
in accordance with this Agreement.
4.
Expiration of
Option . The Options shall expire on the expiration
date set forth in the Schedules (the “ Expiration Date
”) unless earlier terminated as set forth in Section 6
below, and may not be exercised after such date.
5.
Conditions to
Exercise of Option. Except as otherwise set forth in
Section 6 , the Optionee may exercise the Option or any
portion thereof to the extent then vested at any time or from time
to time during the period commencing on the grant date set forth on
the Schedules and ending on the Expiration Date. The Option may be
exercised only by the Optionee or, in the event of his death or
incompetence, his personal representative or heirs, as the case may
be.
6.
Termination of
Employment . (a) Upon termination of the
Optionee’s employment by the Corporation or any of its
subsidiaries due to the death of the Optionee, any vested Options
may be exercised on or before the Expiration Date.
(b) Upon termination of the Optionee’s
employment by the Corporation or any of its subsidiaries due to a
Disability, the next unvested tranche of performance options set
forth on Schedule 2 hereto (the “ Performance
Options ”) will vest if the applicable Performance
Targets are actually met and any vested Options may be exercised on
or before the Expiration Date.
(c) Upon termination of the Optionee’s
employment by the Corporation or any of its subsidiaries for Cause,
any vested Option may be exercised at any time or from time to time
until and including the 30th day after such termination.
(d) Subject to Section 6(e) below, upon
termination of the Optionee’s employment by the Corporation
or any of its subsidiaries without Cause or for Good Reason, then
all of the unvested time based options set forth on Schedule
1 hereto (the “ Time Based Options ”) will
vest and the next tranche of unvested Performance Options will vest
as if the applicable Performance Targets had been met.
Additionally, such vested portions of the Options may be exercised
on or before the Expiration Date.
(e) If there is a Change of Control in the
Corporation and within twelve (12) months thereafter the
Optionee’s employment by the Corporation or any of its
subsidiaries is terminated without Cause or for Good Reason, then
all unvested Time Based Options and all unvested Performance
Options will vest and may be exercised on or before the Expiration
Date.
(f) Notwithstanding anything in this Agreement
to the contrary, in no event may any Option be exercised following
the Expiration Date nor may any Option be exercised with respect to
the unvested portion thereof.
7.
Procedure for
Exercise . (a) The vested portion of the Options may
be exercised for the number of Option Shares specified in a written
notice delivered to the Corporation at least five days prior to the
date on which purchase is requested (such notice, an “
Exercise Notice ”), accompanied by full payment in
cash of the aggregate Exercise Price in respect of such Option
Shares. If specified in the Exercise Notice, payment of such
Exercise Price may also be made by means of the Corporation
retaining from the Option Shares to be delivered upon exercise of
the Option, or portion thereof, that number of Option Shares having
an aggregate Fair Market Value (as defined below) on the date that
the Exercise Notice is delivered to the Corporation (the date that
the Exercise Notice is delivered to the Corporation being referred
to as the “ Valuation Date ”; provided,
however , that if such date is not a day on which
securities markets are open for trading, then the Valuation Date
shall be the first succeeding date that such markets are open)
equal to the aggregate Exercise Price of the total number of Option
Shares with respect to which the Optionee shall then be exercising
the Option. If upon exercise of all or a portion of the Option
there shall be payable by the Corporation or a subsidiary any
amount for withholding taxes, then, at the Corporation’s
election and as a condition to such exercise, either (i) the
Corporation shall reduce the number of Option Shares to be issued
to the Optionee by a number of Option Shares of Common Stock having
an aggregate Fair Market Value on the Valuation Date equal to the
amount of such withholding tax or (ii) the Optionee shall pay such
amount to the Corporation or its subsidiary, as
applicable.
(b) If any applicable law requires the
Corporation to take any action with respect to the Option Shares
specified in the Exercise Notice, or if any action remains to be
taken under the Certificate of Incorporation or Bylaws of the
Corporation, as in effect at the time, to effect due issuance of
Option Shares, then the Corporation shall take such action and the
day for delivery of such Option Shares shall be extended for the
period necessary to take such action. The Optionee shall not have
any of the rights of a shareholder of the Corporation under the
Option.
(c) As used herein, the phrase “Fair
Market Value” shall mean (i) if the Common Stock is
listed or admitted for trading on a national securities exchange,
an automated quotation system or the Over-the-Counter Bulletin
Board, the last reported sale price per share of the Common Stock
on the Valuation Date, or, in case no such reported sale takes
place on such day or is reported, then the average of the last
reported per share bid and ask prices for shares of the Common
Stock on such date (or if such bid and ask prices are not available
on such date, the most recent preceding date), in either case as
officially reported by such securities exchange, quotation system
or Bulletin Board on which the Common Stock is listed or admitted
to trading, (ii) if not so listed or admitted for trading, the
fair market value of a share of the Common Stock as determined by
the Corporation’s board of directors in good faith, or (iii)
if such exercise is in connection with a merger or consolidation of
the Corporation in which the Corporation is not the survivor or in
which the Common Stock is exchanged for cash or other securities or
a sale of all or substantially all of the assets of the Corporation
(collectively, a “Sale”), the implied price
