Document:

exv10w3

 

Exhibit
10.3

INTERNATIONAL FUEL TECHNOLOGY, INC.

AMENDED AND RESTATED 2001 LONG TERM INCENTIVE PLAN

Adopted: October 22, 2006

Termination Date: October 21, 2016

1. PURPOSES.

     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are the
Employees, Directors and Consultants of the Company and its Affiliates.

     (b) Available Stock Awards. The purpose of the Plan is to provide a means by which eligible
recipients of Stock Awards may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards: (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Performance Awards and (v)
Restricted Stock.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of the
group of persons eligible to receive Stock Awards, to secure and retain the services of new members
of this group and to provide incentives for such persons to exert maximum efforts for the success
of the Company and its Affiliates.

2. DEFINITIONS.

     (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of
the Code.

     (b) “Award Date” means the date established by the Committee for the grant of a Stock Award.

     (c) “Base Price” means a price fixed by the Committee, which shall not be less than the Fair
Market Value of a share of Common Stock on the date of grant of a Stock Award with respect to such
Stock.

     (d) “Board” means the Board of Directors of the Company.

     (e) “Cause” means, with respect to any Participant: (i) any fraud, embezzlement or other
dishonesty of the Participant that materially and adversely affects the Company’s business or
reputation; (ii) the Participant’s conviction for a felony or entering into a plea of nolo
contendere with respect to a felony; (iii) disclosure to any party outside the Company any of the
confidential information; (iv) the determination by a medical expert that the Participant has an
addiction to alcohol, controlled or prescription medications or illegal drugs; (v) the refusal by
the Participant to perform material duties and obligations hereunder; (vi) or the Participant’s
willful and intentional misconduct in the performance of material duties and obligations.

 

 

     (f) “Change of Control” means (i) a merger or consolidation of the Corporation with or into
another entity, or the exchange of securities (other than a merger or consolidation) by the holders
of the voting securities of the Corporation and the holders of voting securities of any other
entity, in which the shareholders of the Corporation immediately before the transaction do not own
50% or more of the combined voting power of the voting securities of the surviving entity or its
parent immediately after the transaction; (ii) a dissolution of the Corporation; (iii) a transfer
of all or substantially all of the assets of the Corporation in one transaction or a series of
transactions occurring within a twelve month period to a “Person” or “Group” (as defined below);
(iv) a transaction or a series of transactions occurring in which a Person or Group becomes the
beneficial owner, directly or indirectly, of securities of the Corporation representing more than
50% of the combined voting power of the Corporation’s then outstanding securities; or (v) a
majority of the members of the Corporation’s Board is replaced during any twelve month period by
directors whose appointment or election is not endorsed by a majority of the Corporation’s Board
prior to the date of the appointment or election; provided, however, that a “Change of Control”
shall not be deemed to have occurred if the ownership of 50% or more of the combined voting power
of the surviving corporation, asset transferee, or Corporation (as the case may be), after giving
effect to the transaction or series of transactions, is directly or indirectly held by (A) a
trustee or other fiduciary under an employee benefit plan maintained by the Corporation or any
Subsidiary, (B) one or more of the “executive officers” of the Corporation that held such positions
prior to the transaction or series of transactions, or any entity, Person or Group under their
control, or (C) one or more members of “senior management” as designated by the Chief Executive
Officer from time to time, that held such positions prior to the transaction or series of
transactions, or any entity, Person or Group under their control. As used herein, “Person” and
“Group” shall have the meanings set forth in Sections 13(d)(3) and/or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (“1934 Act”), and “executive officer” shall have the meaning set
forth in Rule 3b-7 promulgated under the 1934 Act. “Group” shall further be determined by the Plan
Administrator to constitute “more than one person acting as a group.”

     (g) “Code” means the Internal Revenue Code of 1986, as amended.

     (h) “Committee” means the committee or committees established by the Board in accordance with
Section 3(c). All references herein to “Committee” shall be deemed to be to the Board when the
Board has not established the Committee pursuant to Section 3(c).

     (i) “Common Stock” means authorized and unissued shares of the $.01 par value common stock of
the Company or reacquired shares of the Company’s $.01 par value common stock held in its Treasury.

     (j) “Company” means International Fuel Technology, Inc.

     (k) “Consultant” means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for such services or
(ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant”
shall not include either Directors who are not compensated by the Company for their services as
Directors or Directors who are merely paid a Director’s fee by the Company for their services as
Directors.

 

 

     (l) “Director” means a member of the Board.

     (m) “Disability” means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code, as determined by the Committee in good faith, upon receipt of and
reliance on sufficient competent medical advice.

     (n) “Employee” means any person employed by the Company or an Affiliate. Mere service as a
Director or payment of a Director’s fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.

     (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (p) “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

          (i) If the Common Stock is listed on the OTC Bulletin Board, any established stock exchange or
traded on the Nasdaq National Market, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the mean between the bid and asked prices, if no closing
price is reported) as quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as the Board deems
reliable. If fair market value is to be determined as of a day when the securities markets are not
open, the Fair Market Value on that day shall be the Fair Market Value on the preceding day when
the markets were open.

          (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Committee.

     (q) “Good Reason” means with respect to any Participant: (i) the assignment to the
Participant of any duties or any other action by the Company which results in a significant
diminution in the Participant’s position, authority, duties or responsibilities, excluding for this
purpose an isolated, unsubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company within fifteen (15) days after receipt of notice thereof given by the
Participant; (ii) any material reduction in the Participant’s compensation from the Company,
opportunity to earn annual bonuses, or other compensation or employee benefits, other than as a
result of an isolated and inadvertent action not taken in bad faith and which is remedied by the
Company within fifteen (15) days after receipt of notice thereof given by the Participant; (iii)
the occurrence of a Non-Negotiated Change in Control of the Company; or (iv) the elimination of the
Participant’s position with the Company which results in a significant diminution of the
Participant’s authority, duties or responsibilities.

     (r) “Group” has the meaning set forth in Section 13(d)(3) and/or 14(d)(2) of the Exchange Act
and shall be further determined by the plan administrator to constitute “more than one person
acting as a group.”

     (s) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

 

 

     (t) “Non-Negotiated Change in Control” means (i) any individual, corporation (other than the
Company, any trustees or other beneficiary holding securities under any employee benefit plan of
the Company, or any Company owned, directly or indirectly, by the Stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons acting in concert becomes
the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934)
of securities of the Company possessing more than one-half (1/2) of the voting power for the
election of Directors of the Company; (ii) there shall be consummated any consolidation, merger, or
other business combination involving the Company or the securities of the Company in which holders
of voting securities of the Company immediately prior to such consummation own, as a group,
immediately after such consummation, voting securities of the Company (or, if the Company does not
survive such transaction, voting securities of the entity surviving such transaction) having less
than one-half (1/2) of the total voting power in an election of Directors of the Company (or such
other surviving corporation); (iii) there shall be consummated any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all, or substantially all, of
the assets of the Company (on a consolidated basis) to a party which is not controlled by or under
common control with the Company; (iv) a majority of the members of the Company’s Board is replaced
during any twelve (12) month period by Directors whose appointment or election is not endorsed by a
majority of the Company’s Board prior to the date of the appointment or election; provided,
however, that a “Non-Negotiated Change in Control” shall not be deemed to have occurred if the
ownership of fifty percent (50%) or more of the combined voting power of the surviving corporation,
asset transferee, or Company (as the case may be), after giving effect to the transaction or series
of transactions, is directly or indirectly held by (A) a trustee or other fiduciary under an
employee benefit plan maintained by the Company or any Subsidiary, (B) one or more of the
“executive officers” of the Company that held such positions prior to the transaction or series of
transactions, or any entity, Person or Group under their control, or (C) one or more members of
“senior management” as designated by the Chief Executive Officer from time to time, that held such
positions prior to the transaction or series of transactions, or any entity, Person or Group under
their control; or (v) a dissolution of the Company.

     (u) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.

     (v) “Officer” means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

     (w) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.

     (x) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option granted pursuant to a Stock Award.
Each Option Agreement shall be subject to the terms and conditions of the Plan. References to
Option Agreement shall also include the following ancillary documents, Notice of Exercise and Grant
Notice.

 

 

     (y) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

     (z) “Outside Director” means a Director who either (i) is not a current Employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former Employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits under a tax qualified
pension plan), was not an Officer of the Company or an “affiliated corporation” at any time and is
not currently receiving direct or indirect remuneration from the Company or an “affiliated
corporation” for services in any capacity other than as a Director or (ii) is otherwise considered
an “outside director” for purposes of Section 162(m) of the Code.

     (aa) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     (bb) “Performance Award” means a right to receive a payment equal to the value of a unit or
other measure as determined by the Committee based on performance during a Performance Period.

     (cc) “Performance Period” means a period of not more than five years established by the
Committee during which certain performance goals set by the Committee are to be met.

     (dd) “Person” has the meaning set forth in Section 13(d)(3) and/or 14(d)(2) of the Exchange
Act.

     (ee) “Plan” means this International Fuel Technology, Inc. Amended and Restated 2001 Long Term
Incentive Plan.

     (ff) “Reporting Person” means any person who is required to file reports pursuant to the
provisions of Section 16 of the Exchange Act and Rule 16a-2 promulgated thereunder.

     (gg) “Restricted Stock” means shares of Common Stock, which may be subject to certain
restrictions, which are granted pursuant to a Stock Award.

     (hh) Restricted Stock Awards” means a Stock Award granted to a Participant to receive or
purchase shares of Restricted Stock.

     (ii) “Retirement” means termination of employment with eligibility for normal, early or
disability retirement benefits under the terms of any pension plan adopted by the Company and
specified by the Committee, as amended and in effect at the time of such termination of employment.

     (jj) “Stock Appreciation Right” or “SAR” means the right to receive a payment from the Company
equal to the excess of the Fair Market Value of a share of Common Stock at the date of exercise
over the Base Price. In the case of a Stock Appreciation Right which is granted in conjunction
with an Option, the Base Price shall be the Option exercise price.

 

 

     (kk) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

     (ll) “Securities Act” means the Securities Act of 1933, as amended.

     (mm) “Stock Award” means any right granted under the Plan, including an Option, Stock
Appreciation Right, Performance Award, and Restricted Stock.

     (nn) “Stock Award Agreement” means a written agreement between the Company and a holder of a
Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock
Award Agreement shall be subject to the terms and conditions of the Plan.

     (oo) “Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates.

3. ADMINISTRATION.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in Section 3(c).

     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (i) To determine from time to time which of the persons eligible under the Plan shall be
granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of
types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not
be identical), including the time or times when a person shall be permitted to receive Common Stock
pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock
Award shall be granted to each such person.

          (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

          (iii) To amend the Plan or a Stock Award as provided in Section 12.

          (iv) To terminate or suspend the Plan as provided in Section 13.

          (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in conflict with the
provisions of the Plan.

 

 

     (c) Delegation to Committee.

          (i) General. The Board may delegate administration of the Plan to a Committee or Committees.
The term “Committee” shall apply to any person, persons, committee or committees to whom such
authority has been delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be
to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The Board may from time
to time in its discretion, fix and change the number of members of a Committee, remove members of a
Committee, appoint members of a Committee in substitution for or in addition to members previously
appointed; and fill vacancies however caused in a Committee. The Board may abolish a Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding the foregoing,
any grant of an Option, Performance, SAR or Restricted Stock Award to a Reporting Person must be
made by the Board or a Committee comprised solely of two or more Outside Directors.

     (d) Effect of Board’s Decision. All determinations, interpretations and constructions made by
the Board or the Committee in good faith shall not be subject to review by any person and shall be
final, binding and conclusive on all persons.

4. SHARES SUBJECT TO THE PLAN.

     (a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in Common Stock, the Common Stock that may be issued pursuant to Stock Awards shall not
exceed in the aggregate seventeen million five hundred thousand (17,500,000) shares of Common
Stock.

     (b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, the shares of
Common Stock not acquired under such Stock Award shall revert to and again become available for
issuance under the Plan.

     (c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors
and Consultants.

     (b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock at the date of grant.

 

 

     (c) Award Date. All Stock Awards granted under the Plan shall be granted as of an Award Date.
All Stock Awards are subject to the terms and conditions set forth in the applicable Stock Award
Agreement. Within thirty (30) days after each Award Date, the Company shall notify the Participant
of the grant of the Stock Award, and shall hand deliver or mail to the Participant a Stock Award
Agreement, duly executed by and on behalf of the Company, with the request that the Participant
execute the Agreement within thirty (30) days after the date of mailing or delivery by the Company
of the Agreement to the Participant. If the Participant shall fail to execute the written Stock
Award Agreement within said thirty-day period, the Participant’s Stock Award shall be automatically
terminated.

6. OPTION PROVISIONS.

     Each Option shall be in such form and shall contain such terms and conditions as the Committee
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common Stock purchased on exercise of each
type of Option. The provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option Agreement or
otherwise) the substance of each of the following provisions:

     (a) Term. No Option shall be exercisable after the expiration of five (5) years from the date
it was granted.

     (b) Exercise Price of an Option. Subject to the provisions of Section 5(b) regarding Ten
Percent Stockholders, the exercise price of each Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than
that set forth in the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section 424(a) of the
Code.

     (c) Consideration. The purchase price of Common Stock acquired pursuant to an Option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the
time the Option is exercised or (ii) at the discretion of the Committee at the time of the grant of
the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) pursuant to a deferred payment or other similar arrangement with
the Optionholder, or (3) in any other form of legal consideration that may be acceptable to the
Committee. Unless otherwise specifically provided in the Option, the purchase price of Common
Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such longer or shorter period
of time required to avoid a charge to earnings for financial accounting purposes).

     In the case of any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as

 

 

interest, under any applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.

     (d) Delivery of Certificate. After the exercise of an Option, as provided above, the Company
shall within a reasonable time deliver to the person exercising the Option a certificate or
certificates issued in the name of the person who exercised the Option and such additional name, or
names, if any, as may be requested (subject to the general policy of the Company as to registration
of shares), for the appropriate number of shares of Common Stock, without liability to the person
exercising the Option for any transfer or issue tax, state or Federal, then payable. Each Option
granted under the Plan shall be subject to the requirement that, if at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification of the shares of
Common Stock subject to such Option upon any securities exchange or under any state or Federal law,
or the consent or approval of any governmental regulatory body, is necessary or desirable, as a
condition of, or in connection with, the granting of such Option or the issue or purchase of shares
of Common Stock thereunder, no such Option may be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee.

     An Optionholder under an Option granted under the Plan shall have no rights as a shareholder
with respect to any shares of Common Stock covered by an Option except to the extent that one or
more certificates for such shares shall have been delivered to the Optionholder upon due exercise
of an Option as above provided.

     (e) Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing,
the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

     (f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall be
transferable to the extent provided in the Option Agreement. If the Option Agreement does not
provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise
the Option.

     (g) Vesting Generally. The total number of shares of Common Stock subject to an Option shall
become exercisable as follows:

	 	 	 
	Period of Time 

from Date of Grant
	 	Percentage of Shares Subject to

Options which are Exercisable
	 
	 	 
	Six months from date of grant
	 	33 1/3 percent
	Twelve months from date of grant
	 	66 2/3 percent
	Eighteen months from date of grant
	 	100 percent

 

 

The Option may be subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Committee may deem
appropriate except that Options shall not vest earlier than specified above. The provisions of
this Section 6(g) are subject to any Option provisions governing the minimum number of shares of
Common Stock as to which an Option may be exercised.

     (h) Termination of Option.

          (i) Unvested Options. If the Optionholder ceases to be an Employee or Consultant of the
Company due to termination by the Company for Cause or termination by the Optionholder for other
than Good Reason (other than upon the Optionholder’s Disability or death), all non-vested Options
will automatically expire. If termination of employment by the Company is not for Cause or
termination by Optionholder is for Good Reason (other than upon the Optionholder’s Disability or
death), all Options vest immediately. Such vested options will then expire according to the
provisions set forth in Section 6(h)(ii) below.

          (ii) Vested Options.

1. Nonstatutory Stock Options: In the event that an Optionholder of
a Nonstatutory Stock Option ceases to be an Employee or Consultant of the
Company for any reason (other than upon such Optionholder’s death), the
Optionholder may exercise all vested Options (to the extent that the
Optionholder was entitled to exercise such Options as of the date of
termination) within the expiration of the term of the Options as set forth
in the Option Agreement. If, however, the Optionholder is terminated for
Cause, the Optionholder may exercise all vested Options only within such
period of time ending on the earlier of (i) the date three (3) months
following such termination or (ii) the expiration of the term of the Options
as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise the Options within the time period specified
herein, the Options shall terminate.

2. Incentive Stock Options: In the event that an Optionholder of an
Incentive Stock Option ceases to be an Employee or Consultant of the Company
for any reason (other than upon such Optionholder’s death), the Optionholder
may exercise all vested Options only within such period of time ending on
the earlier of (i) the date three (3) months following such termination or
(ii) the expiration of the term of the Options as set forth in the Option
Agreement. If, after termination, the Optionholder does not exercise the
Options within the time period specified herein, the Options shall
terminate.

     (i) Disability of Optionholder. In the event that an Optionholder ceases to be an Employee or
Consultant of the Company as a result of the Optionholder’s Disability, the Optionholder may
exercise the Option (to the extent that the Optionholder was entitled to

 

 

exercise such Option as of the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such termination (or such longer
or shorter period as may be specified in the Option Agreement) or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise the Option within the time specified herein, the Option shall terminate.

     (j) Death of Optionholder of a Stock Option. In the event (i) the Optionholder ceases to be
an Employee or Consultant of the Company as a result of such Optionholder’s death or (ii) such
Optionholder dies within three months after the termination of such Optionholder’s service with
the Company for a reason other than death, then the Option may be exercised (to the extent such
Optionholder was entitled to exercise such Option as of the date of death) by such Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon such Optionholder’s death pursuant to Section 6(e) or
6(f), but only within the period ending on the earlier of (i) the date twelve (12) months following
the date of the Optionholder’s death in the case of an Optionholder of a Nonstatutory Stock Option,
and six (6) months following the date of the Optionholder’s death in the case of an Optionholder of
an Incentive Stock Option or (ii) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate.

     (k) Cancellation and Rescission of Stock Awards. Unless the Award Agreement specifies
otherwise, the Committee may cancel any unexpired, unpaid, or deferred Stock Awards at any time if
the Participant is not in compliance with all other applicable provisions of the Stock Award
Agreement, the Plan and with the following conditions:

          (i) A Participant, within one year following termination of employment with the Company, shall
not, within the geographical areas where the Company does business, render services for any
organization or engage directly or indirectly in any business which, in the judgment of the
Committee, is or becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise prejudicial to or
in conflict with the interests of the Company. For Participants whose employment has terminated,
the determination shall be based on the Participant’s position and responsibilities while employed
by the Company, the Participant’s post-employment responsibilities and position with the other
organization or business, the extent of past, current and potential competition or conflict between
the Company and the other organization or business, the effect on the Company’s customers,
suppliers and competitors and such other considerations as are deemed relevant given the applicable
facts and circumstances. A Participant who has retired shall be free, however, to purchase as an
investment or otherwise, stock or other securities of such organization or business so long as they
are listed upon a recognized securities exchange or traded over-the-counter, and such investment
does not represent a substantial investment to the Participant or a greater than ten (10) percent
equity interest in the organization or business.

          (ii) A Participant shall not, without prior written authorization from the Company, disclose
to anyone outside the Company, or use in other than the Company’s business, any confidential
information or material, as defined in the Company’s policy regarding

 

 

confidential information and intellectual property, relating to the business of the Company,
acquired by the Participant either during or after employment with the Company.

          (iii) A Participant, pursuant to the Company’s policy regarding confidential information and
intellectual property, shall disclose promptly and assign to the Company all right, title and
interest in any invention or idea, patentable or not, made or conceived by the Participant during
employment by the Company, relating in any manner to the actual or anticipated business, research
or development work of the Company and shall do anything reasonably necessary to enable the Company
to secure a patent where appropriate in the United States and in foreign countries.

          (iv) Upon exercise, payment or delivery pursuant to a Stock Award, the Participant shall, upon
request by the Company, certify on a form acceptable to the Committee that he or she is in
compliance with the terms and conditions of the Plan. Failure to comply with all of the provisions
of this Section 6(k) and any provisions regarding non-competition in any other agreement(s) between
the Participant and the Company prior to and during the time period specified by such other
agreement(s), or the twelve month period following the Participant’s termination of employment with
the Company if no such time period is specified, shall cause such exercise, payment or delivery to
be rescinded. Should the Company become aware that the Participant is not in compliance with this
Section 6(k) and any provisions regarding non-competition in any other agreement(s) between the
Participant and the Company, the Company shall notify the Participant of its intention to rescind
the Stock Award. Within ten days after receiving such a notice from the Company, the Participant
shall pay to the Company the amount of any gain realized or payment received as a result of the
rescinded exercise, payment or delivery pursuant to a Stock Award. Such payment shall be made
either in cash or by returning to the Company the number of shares of Common Stock that the
Participant received in connection with the rescinded exercise, payment or delivery.

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

     (a) Stock Appreciation Rights.

          (i) General. The Committee may grant Stock Appreciation Rights, including a concurrent grant
of Stock Appreciation Rights in tandem with any Stock Option grant. Each Stock Appreciation Right
shall be subject to such terms and conditions, including vesting, as the Committee shall impose
from time to time.

          (ii) Exercise Period. Stock Appreciation Rights granted under the Plan shall be exercisable
at such time or times and subject to such terms and conditions, including vesting, as shall be
determined by the Committee; provided, however, that no Stock Appreciation Rights shall be
exercisable later than ten (10) years after the date it is granted except in the event of a
Participant’s death, in which case, the exercise period of such participant’s Stock Appreciation
Rights may be extended beyond such period but no later than one (1) year after the Participant’s
death. All Stock Appreciation Rights shall terminate at such earlier times and upon such conditions
or circumstances as the Committee shall in its discretion set forth in such right at the date of
grant.

 

 

     (b) Restricted Stock Awards. Each Restricted Stock Award shall be in such form and shall
contain such terms and conditions as the Committee shall deem appropriate. The terms and
conditions of the Restricted Stock Award Agreements may change from time to time, and the terms and
conditions of separate Restricted Stock Award Agreements need not be identical, but each Restricted
Stock Award Agreement shall include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

          (i) Purchase Price. The purchase price, if any, under each Restricted Stock Award Agreement
shall be such amount as the Committee shall determine and designate in such Restricted Stock Award
Agreement;

          (ii) Consideration. The purchase price of Common Stock acquired pursuant to a Restricted
Stock Award Agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the
discretion of the Committee, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be acceptable to the
Committee in its discretion; provided, however, that at any time that the Company is incorporated
in Delaware, then payment of the Common Stock’s “par value,” as defined in the Delaware General
Corporation Law, shall not be made by deferred payment;

          (iii) Vesting. Shares of Common Stock acquired under a Restricted Stock Award Agreement may,
but need not, be subject to a repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Committee.;

          (iv) Restrictions. Restricted Stock received or acquired pursuant to a Restricted Stock Award
Agreement may be subject to (i) restrictions on the sale or other disposition thereof; (ii) rights
of the Company to reacquire such Restricted Stock at the purchase price, if any, originally paid
therefor upon either termination of the Participant’s status as an Employee, Director or Consultant
within specified periods or failure of the Company to achieve performance goals (which may include
any one or more of the following: return on total capital employed, earnings per share, return on
stockholders’ equity, and other appropriate criteria) established by the Committee; (iii)
representation by the employee that he or she intends to acquire Restricted Stock for investment
and not for resale; and (iv) such other restrictions, conditions and terms as the Committee deems
appropriate.

          (v) Dividends. The Participant shall be entitled to all dividends paid with respect to
Restricted Stock during any period the Restricted Stock is subject to restrictions and shall not be
required to return any such dividends to the Company in the event of the forfeiture of the
Restricted Stock.

          (vi) The Participant shall be entitled to vote the Restricted Stock during any period the
Restricted Stock is subject to restrictions.

          (vii) The Committee shall determine whether Restricted Stock is to be delivered to the
Participant with an appropriate legend imprinted on the certificate of if the shares of such stock
are to be deposited in escrow pending removal of the restrictions.

 

 

          (viii) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock
Agreement shall be transferable by the Participant only upon such terms and conditions as are set
forth in the Restricted Stock Agreement, as the Committee shall determine in its discretion, so
long as Common Stock awarded under the Restricted Stock Agreement remains subject to the terms of
the Restricted Stock Agreement.

     (c) Performance Awards. Performance Awards shall consist of Common Stock, monetary units or
some combination thereof, to be issued without any payment therefor, in the event that certain
performance goals established by the Committee are achieved during a specified period of time. The
goals established by the Committee may include any one or more of the following: return on average
total capital employed, earnings per share, return on stockholders’ equity, and such other goals as
may be established by the Committee. In the event the minimum Corporate goal is not achieved at
the conclusion of the specified time period, no payment shall be made to the Participant. Actual
payment of the award earned shall be in cash or in Common Stock or in a combination of both, in a
single sum or in periodic installments, all as the Committee in its sole discretion determines. If
Common Stock is used, the Participant shall not have the right to vote and receive dividends until
the goals are achieved and the actual shares of Common Stock are issued.

8. COVENANTS OF THE COMPANY.

     (a) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained.

9. USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds
of the Company.

10. MISCELLANEOUS.

     (a) Acceleration of Exercisability and Vesting. The Committee shall have the power to
accelerate the time at which a Stock Award may first be exercised or the time during which a Stock
Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in
the Stock Award stating the time at which it may first be exercised or the time during which it
will vest.

     (b) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Stock

 

 

Award unless and until such Participant has satisfied all requirements for exercise of the
Stock Award pursuant to its terms.

     (c) No Employment or other Service Rights. Nothing in the Plan or any instrument executed or
Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted
or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and for any reason, (ii) the service of a Consultant pursuant to
the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a
Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of
the corporate law of the state in which the Company or the Affiliate is incorporated, as the case
may be.

     (d) Incentive Stock Option Limitation. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionholder during any calendar year (under all Incentive
Stock Option plans of the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), or such higher limit as set forth by applicable law, the Options or portions thereof
which exceed such limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.

     (e) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement,
the Participant may satisfy any federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under a Stock Award by any of the following means (in
addition to the Company’s right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to
the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award,
provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.

11. ADJUSTMENTS UPON CHANGES IN STOCK.

     (a) Capitalization Adjustments. If any change is made in, or other event occurs with respect
to, the Common Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4(a) and 4(b) and the maximum number of securities subject to award to any
person pursuant to Section 5(c), and the outstanding Stock Awards will be appropriately adjusted in
the class(es) and number of securities and price per share of Common Stock subject to such
outstanding Stock Awards. The Committee shall make such adjustments, and its determination shall
be final, binding and conclusive. (The conversion of any convertible securities of the

 

 

Company shall not be treated as a transaction “without receipt of consideration” by the
Company.)

     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company,
then all outstanding Stock Awards shall terminate immediately prior to the completion of such
dissolution or liquidation.

     (c) Change of Control. In the event the Company undergoes a Change of Control, then all
outstanding Stock Awards will vest immediately and be exercisable for a period of one year from the
date upon which the Change of Control occurs.

     In the event of a Corporate Change of Control, any surviving corporation or acquiring
corporation may assume any or all Stock Awards outstanding under the Plan or may substitute similar
stock awards for Stock Awards outstanding under the Plan (it being understood that similar stock
awards include awards to acquire the same consideration paid to the stockholders or the Company, as
the case may be, pursuant to the Change of Control). Notwithstanding the preceding, the Committee
shall in any event, retain the discretion to take any other action with respect to such Stock
Awards as it may equitably determine.

12. AMENDMENT OF THE PLAN AND STOCK AWARDS.

     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan.

     (b) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

     (c) No Impairment of Rights. Rights under any Stock Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent
of the Participant and (ii) the Participant consents in writing.

     (d) Amendment of Stock Awards. The Committee at any time, and from time to time, may amend
the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award
shall not be impaired by any such amendment unless (i) the Committee requests the consent of the
Participant and (ii) the Participant consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

     (a) Plan Termination. The Board may suspend or terminate the Plan at any time. Unless sooner
terminated by the Board, the Plan shall terminate on the day before the tenth (10th) anniversary of
the date the Plan is adopted by the Board. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.

 

 

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights
and obligations under any Stock Award granted while the Plan is in effect except with the written
consent of the Participant.

14. EFFECTIVE DATE OF PLAN.

     The Plan, as amended, shall become effective October 22, 2006.

15. CHOICE OF LAW.

     The law of the State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.

     This Plan is hereby adopted on behalf of the Company this 22nd day of October, 2006.

	 	 	 	 	 	 	 
	 	 	   
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	          Chief Executive Officerexv10w4

 

Exhibit
10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between INTERNATIONAL
FUEL TECHNOLOGY, INC., a Nevada corporation (the “Company”), and JONATHAN R. BURST (the
“Employee”), and is dated as of the first day of January, 2002.

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best
interests of the Company and its shareholders to employ the Employee in the position set forth
below, and the Employee desires to serve in that capacity.

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and promises
herein contained, and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and Employee hereby agree as follows:

	 	1.	 	Employment Period. The Company shall employ the Employee, and the Employee
shall serve the Company, on the terms and conditions set forth in this Agreement, for the
period commencing on January 1, 2002 and ending on December 31, 2004 (“Employment
Period”).

     2. Position and Duties.

          (a) The Employee shall serve as President and Chief Executive Officer of the Company,
reporting to the board of directors, with such duties and responsibilities as are customarily
assigned to such position, and such other duties and responsibilities not inconsistent therewith as
may be assigned to him from time to time by the board.

          (b) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Employee is entitled, the Employee shall devote his full-time efforts to the business and
affairs of the Company and use his best efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of the foregoing for the Employee to (i) serve
on corporate, civic or charitable boards or committees, (ii) deliver lectures or fulfill speaking
engagements or (iii) manage personal investments so long as such activities do not interfere with
the performance of his responsibilities as an employee of the Company in accordance with this
Agreement or violate the provisions of Section 7 of this Agreement.

     3. Compensation.

          (a) Base Salary. During the Initial Term, the Employee shall receive an annual base salary
(the “Annual Base Salary”) at the minimum rate of $250,000.00. In the event of any Renewal Term,
the Annual Base Salary shall be renegotiated by the parties hereto, but in no event shall the
Annual Base Salary during any such Renewal Term be less than $250,000.00. The Annual Base Salary
shall be payable in accordance with the Company’s payroll practices as in effect from time to time.
The Board of Directors of the Company may increase the Annual Base Salary above the foregoing
amounts at its discretion.

1

 

          (b) Bonus. In addition to the Annual Base Salary, the Employee shall be awarded
bonuses (the “Bonus”) at such times and in such amounts as are deemed appropriate by the Board of
Directors of the Company.

          (c) Stock Options. Employee shall receive 250,000 options to purchase shares of the
Company’s common stock at $0.14 per share (the “Stock Compensation”). The 250,000 options for the
first year of this Employment Agreement shall vest on the last day of the first year of the
Employment Period, unless the Employee is terminated by the Company for Cause (as hereinafter
defined) or the Employee terminates his employment without Good Reason (as hereinafter defined), in
which case Employee shall be entitled to only that portion of Stock Compensation which has accrued
hereunder as of the Date of Termination. The 250,000 options for 2003 and 2004 shall vest on the
last day of this Employment Period.

          (d) Insurance. The Company will provide Employee, subject to applicable waiting
periods, with term life insurance in the amount of Two Million Dollars ($2,000,000.00); Employee
will cooperate with the Company in obtaining such policies.

          (e) Other Benefits. During the Employment Period: (i) the Employee shall be entitled
to participate in all benefit programs of the Company, including, but not limited to, health
insurance coverage or reimbursement of the Employee’s cost to maintain same; and (ii) the Employee
and/or the Employee’s family, as the case may be, shall be eligible for participation in, and shall
receive all benefits under, all welfare benefit plans, practices, policies and programs provided by
the Company, including, but not limited to any comprehensive dental plan, retirement plans and
profit sharing programs the Company may provide to any other employees from time to time.

          (f) Expenses. During the Employment Period, the Employee shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the Employee in carrying out
the Employee’s duties under this Agreement, provided that the Employee complies with the policies,
practices and procedures of the Company for submission of expense reports, receipt and similar
documentation of such expenses.

          (g) Fringe Benefits. During the Employment Period, the Employee shall be entitled to
paid vacation and other fringe benefits, in each case on such terms and conditions as are
determined by the Board of Directors of the Company.

     4. Termination of Employment.

          (a) Death or Disability. The Employee’s employment shall terminate automatically upon the
Employee’s death during the Employment Period. The Company shall be entitled to terminate the
Employee’s employment because of the Employee’s Disability during the Employment Period.
“Disability” means that (i) the Employee has been unable, for a period of six months, or for a
total of 90 days in any given period, to perform the Employee’s duties under this Agreement, as a
result of physical or mental illness or injury, and (ii) a physician selected by the Company or its
insurers, and acceptable to the Employee or the Employee’s guardian or legal

2

 

representative, has determined that the Employee’s incapacity is total and permanent. A termination
of the Employee’s employment by the Company for Disability shall be communicated to the Employee by
written notice, and shall be effective on the 30th day after receipt of such notice by the Employee
(the “Disability Effective Date”), unless the Employee is able to, and does, return to full-time
performance of the Employee’s duties before the Disability Effective Date.

          (b) By the Company.

               (i) The Company may terminate the Employee’s employment during the Employment Period for Cause or
without Cause. “Cause” means:

                 A. any fraud, embezzlement or other dishonesty of the Employee that materially and adversely
affects the Company’s business or reputation; or

                 B. the Employee’s conviction for a felony or entering into a plea of nolo contendere with
respect to a felony.

               (ii) A termination of employment by the Company for Cause shall be effectuated by giving the
Employee written notice (“Notice of Termination for Cause”) of the termination, setting forth the
conduct of the Employee that constitutes Cause. Termination of employment by the Company for Cause
shall be effective on the date when the Notice of Termination for Cause is given, unless the notice
sets forth a later date (which date shall in no event be later than 30 days after the notice is
given).

               (iii) A termination of the Employee’s employment by the Company without Cause shall be effected by
giving the Employee written notice of the termination at least thirty (30) days prior to the
termination date.

          (c) By the Employee.

               (i) The Employee may terminate employment in the event of a Good Reason. “Good Reason” means:

                 A. the assignment to the Employee of any duties inconsistent in any respect with paragraph
(a) of Section 2 of this Agreement, other than actions that are not taken in bad faith and are
remedied by the Company within fifteen (15) days after receipt of notice thereof from the Employee;

                 B. any failure by the Company to comply with any provision of Section 3 of this Agreement,
other than failures that are not taken in bad faith and are remedied by the Company within fifteen
(15) days after receipt of notice thereof from the Employee; or

                 C. the occurrence of a Non-Negotiated Change in Control of the Company (as defined below).

3

 

For purposes of this Agreement, “Non-Negotiated Change in Control” means any one or more of the
following occurrences:

               (x) Any individual, corporation (other than the Company, any trustees or other beneficiary holding
securities under any employee benefit plan of the Company, or any Company owned, directly or
indirectly, by the Stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), partnership, trust, association, pool, syndicate, or any other
entity or any group of persons acting in concert becomes the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934) of securities of the Company possessing
more than one-half (1/2) of the voting power for the election of directors of the Company;

               (y) There shall be consummated any consolidation, merger, or other business combination involving
the Company or the securities of the Company in which holders of voting securities of the Company
immediately prior to such consummation own, as a group, immediately after such consummation, voting
securities of the Company (or, if the Company does not survive such transaction, voting securities
of the entity surviving such transaction) having less than one-half (1/2) of the total voting power
in an election of directors of the Company (or such other surviving corporation); or

               (z) There shall be consummated any sale, lease, exchange, or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets of the Company (on a
consolidated basis) to a party which is not controlled by or under common control with the Company.

               (ii) A termination of employment by the Employee for Good Reason shall be effectuated by giving the
Company written notice (“Notice of Termination for Good Reason”) of the termination, setting forth
the conduct of the Company that constitutes Good Reason. A termination of employment by the
Employee for Good Reason shall be effective on the fifth business day following the date when the
Notice of Termination for Good Reason is given, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is given).

               (iii) A termination of the Employee’s employment by the Employee without Good Reason shall be
effected by giving the Company written notice of the termination at least thirty (30) days prior to
the termination date.

4

 

          (d) No Waiver. The failure to set forth any fact or circumstance in a Notice of
Termination for Cause or a Notice of Termination for Good Reason shall not constitute a
waiver of the right to assert, and shall not preclude the party giving notice from
asserting, such fact or circumstance in an attempt to enforce any right under or
provision of this Agreement.

          (e) Date of Termination. The “Date of Termination” means the date of the
Employee’s death, the Disability Effective Date, the date on which the termination of the
Employee’s employment by the Company for Cause or by the Employee for Good Reason is effective, or
the date on which the Company gives the Employee notice of a termination of employment without
Cause or the Employee gives the Company notice of a termination of employment without Good Reason,
as the case may be.

     5. Obligations of the Company upon Termination.

          (a) Other Than for Cause, Death or Disability; Good Reason. If, during the
Employment Period, the Company terminates the Employee’s employment, other than for Cause, Death or
Disability, or the Employee terminates his employment for Good Reason, the Company shall (i) pay
the Employee’s accrued but unpaid portion of the Annual Base Salary (the “Accrued Obligations”) to
the Employee in a lump sum in cash within 30 days after the Date of Termination, (ii) continue to
pay the Annual Base Salary for the remainder of the term hereof, (iii) issue the accrued Stock
Compensation (the “Accrued Stock Compensation”), and (iv) issue the Stock Compensation for the
remainder of the term hereof. If the Company does not extend Employee’s contract beyond the terms
of this agreement, Employee shall be paid his current salary over the 1 (one) year period after
this agreement expires. The payments provided pursuant to this paragraph (a) of Section 5 are
intended as liquidated damages for a termination of the Employee’s employment by the Company other
than for Cause or Disability or for the actions of the Company leading to a termination of the
Employee’s employment by the Employee for Good Reason, and shall be the sole and exclusive remedy
therefor.

          (b) Death or Disability. If the Employee’s employment is terminated by reason of the
Employee’s death or Disability during the Employment Period, (i) the Company shall pay the Accrued
Obligations to the Employee or the Employee’s estate or legal representative, as applicable, in a
lump sum in cash within 30 days after the Date of Termination and (ii) the Company shall issue the
Accrued Stock Compensation to the Employee or the Employee’s estate or legal representative. In
addition, if the Employee’s employment is terminated by reason of Disability, the Company will
continue to pay to Employee until the earlier of: (i) expiration of the Employment Period, or (ii)
the date of Employee’s death, the Annual Base Salary, less any amounts received by Employee under
any disability insurance coverage maintained for Employee by the Company.

          (c) Cause; Other than for Good Reason. If the Employee’s employment is terminated
by the Company for Cause during the Employment Period, or if the Employee terminates his employment
during the Employment Period other than for Good Reason, the Company shall pay Employee the Accrued
Obligations and the Company shall issued the Accrued Stock Compensation.

5

 

     6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Employee’s continuing or future participation in any plan, program, policy or practice provided by
the Company or any of its affiliated companies for which the Employee may qualify, nor, subject to
paragraph (f) of Section 11, shall anything in this Agreement limit or otherwise affect such rights
as the Employee may have under any contract or agreement with the Company or any of its affiliated
companies. Vested benefits and other amounts that the Employee is otherwise entitled to receive
under any plan, policy, practice or program of, or any contract or agreement with, the Company or
any of its affiliated companies on or after the Date of Termination shall be payable in accordance
with such plan, policy, practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.

     7. Confidential Information. The Employee shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies and their respective businesses that the Employee
obtains during the Employee’s employment by the Company or any of its affiliated companies and that
is not public knowledge (other than as a result of the Employee’s violation of this paragraph (a)
of Section 7) (“Confidential Information”). The Employee shall not communicate, divulge or
disseminate Confidential Information at any time during the Employee’s employment with the Company,
except with the prior written consent of the Company or as otherwise required by law or legal
process.

     8. No Mitigation. In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement and such amounts shall not be reduced, regardless of
whether the Employee obtains other employment.

     9. Successors.

          (a) This Agreement is personal to the Employee and, without the prior written consent of the
Company, shall not be assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee’s
legal representatives.

          (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

     10. Miscellaneous.

          (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of
Missouri, without reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.

6

 

          (b) All notices and other communications under this Agreement shall be in writing and shall
be given by hand delivery to the other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

If
to the Employee:

Jonathan R. Burst

3 Warridge Dr.

St. Louis, Missouri 63124

If
to the Company:
 

International Fuel Technology, Inc.

7777 Bonhomme, Suite 1920

St. Louis, Missouri 63105

Attention: Mr. Michael F. Obertop

or to such other address as either party furnishes to the other in writing in accordance with this
paragraph (b) of Section 10. Notices and communications shall be effective when actually received
by the addressee.

          (c) The invalidity or unenforceability of any provision of this Agreement shall not affect
the validity or enforceability of any other provision of this Agreement. If any provision of this
Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.

          (d) Notwithstanding any other provision of this Agreement, the Company may withhold from
amounts payable under this Agreement all federal, state, local and foreign taxes that are required
to be withheld by applicable laws or regulations.

          (e) The failure of the Employee or the Company to insist upon strict compliance with any
provision of, or to assert any right under, this Agreement shall not be deemed to be a waiver of
such provision or right or of any other provision of or right under this Agreement.

          (f) The Employee and the Company acknowledge that this Agreement supersedes any other
agreement between them concerning the subject matter hereof.

          (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed
an original, and which together shall constitute one instrument.

7

 

     IN WITNESS WHEREOF, the Employee has hereunto set the Employee’s hand and, pursuant to the
authorization of its Board of Directors, the Company has caused this Agreement to be executed in
its name on its behalf, all as of the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	JONATHAN R. BURST	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	INTERNATIONAL FUEL TECHNOLOGY, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	 	 	   
	 	 	Name:	 	 	 	 
	 	 	 	 	   
	 	 	Title:	 	 	 	 
	 	 	 	 	   

8

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