2005 Stock Option Plan

AMERICAN SOIL TECHNOLOGIES, INC.


2005 STOCK OPTION/STOCK ISSUANCE PLAN


ARTICLE ONE


GENERAL PROVISIONS


I. PURPOSE OF THE PLAN


This 2005 Stock Option/Stock Issuance Plan is intended to promote the interests of American Soil Technologies, Inc., a Nevada corporation, by providing eligible persons in the Corporation's employ or service with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to continue in such employ or service.


Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix.


II. STRUCTURE OF THE PLAN


A. The Plan shall be divided into two (2) separate equity programs:


(i) the Option Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock, and


(ii) the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a
bonus for services rendered the Corporation (or any Parent or Subsidiary).


B. The provisions of Articles One and Four shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan.


III. ADMINISTRATION OF THE PLAN


A. The Plan shall be administered by the Board. However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.


B. The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may


1 deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any option grant or stock issuance thereunder.


IV. ELIGIBILITY


A. The persons eligible to participate in the Plan are as follows:


(i) Employees,


(ii) non-employee members of the Board or the non-employee members of
the board of directors of any Parent or Subsidiary, and


(iii) consultants and other independent advisors who provide services
to the Corporation (or any Parent or Subsidiary).


B. The Plan Administrator shall have full authority to determine, (i) with respect to the grants made under the Option Grant Program, which eligible persons are to receive such grants, the time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding, and (ii) with respect to stock issuances made under the Stock Issuance Program, which eligible persons are to receive such issuances, the time or times when those issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to be paid by the Participant for such shares.


C. The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program.


V. STOCK SUBJECT TO THE PLAN


A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed ten million (10,000,000) shares.


B. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent: (i) the options expire or terminate for any reason prior to exercise in full; or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of Article Two. Unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the option exercise or direct issue price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan.


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C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to: (i) the maximum number and/or class of securities issuable under the Plan; and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation's preferred stock into shares of Common Stock.


ARTICLE TWO


OPTION GRANT PROGRAM


I. OPTION TERMS


Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options.


A. EXERCISE PRICE.


1. The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions:


(i) The exercise price per share shall not be less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.


(ii) If the person to whom the option is granted is a 10% Stockholder,
then the exercise price per share shall not be less than one hundred ten
percent (110%) of the Fair Market Value per share of Common Stock on the
option grant date.


2. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in cash or check made payable to the Corporation. Should the Common Stock be registered under Section 12 of the 1934 Act at the time the option is exercised, then the exercise price may also be paid as follows:


(i) in shares of Common Stock held for the requisite period necessary
to avoid a charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date; or


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(ii) to the extent the option is exercised for vested shares, through
a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable instructions (A) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (B) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.


Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.


B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option grant. However, no option shall have a term in excess of ten (10) years measured from the option grant date.


C. EFFECT OF TERMINATION OF SERVICE.


1. The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:


(i) Should the Optionee cease to remain in Service for any reason
other than death, Disability or Misconduct, then the Optionee shall have a
period of three (3) months following the date of such cessation of Service
during which to exercise each outstanding option held by such Optionee.


(ii) Should Optionee's Service terminate by reason of Disability, then
the Optionee shall have a period of twelve (12) months following the date
of such cessation of Service during which to exercise each outstanding
option held by such Optionee.


(iii) If the Optionee dies while holding an outstanding option, then
the personal representative of his or her estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or the
laws of inheritance or the Optionee's designated beneficiary or
beneficiaries of that option shall have a twelve (12) month period
following the date of the Optionee's death to exercise such option.


(iv) Under no circumstances, however, shall any such option be
exercisable after the specified expiration of the option term.


(v) During the applicable post-Service exercise period, the option may
not be exercised in the aggregate for more than the number of vested shares
for which the option is exercisable on the date of the Optionee's cessation


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of Service. Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding with
respect to any and all option shares for which the option is not otherwise
at the time exercisable or in which the Optionee is not otherwise at that
time vested.


(vi) Should Optionee's Service be terminated for Misconduct or should
Optionee otherwise engage in Misconduct while holding one or more
outstanding options under the Plan, then all those options shall terminate
immediately and cease to remain outstanding.


2. The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:


(i) extend the period of time for which the option is to remain
exercisable following Optionee's cessation of Service or death from the
limited period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term; and/or


(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested under the
option had the Optionee continued in Service.


D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become the recordholder of the purchased shares.


E. UNVESTED SHARES. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. The Plan Administrator may not impose a vesting schedule upon any option grant or the shares of Common Stock subject to that option which is more restrictive than twenty percent (20%) per year vesting, with the initial vesting to occur not later than one (1) year after the option grant date. However, such limitation shall not be applicable to any option grants made to individuals who are officers of the Corporation, non-employee Board members or independent consultants.


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F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first registered under Section 12 of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Optionee (or any successor in interest) of any shares of Common Stock issued under the Plan. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right.


G. LIMITED TRANSFERABILITY OF OPTIONS. An Incentive Stock Option shall be exercisable only by the Optionee during his or her lifetime and shall not be assignable or transferable other than by will or by the laws of inheritance following the Optionee's death. A Non-Statutory Option may be assigned in whole or in part during the Optionee's lifetime to one or more mem ...