UQM TECHNOLOGIES, INC.

 

2002 EQUITY INCENTIVE PLAN

(

effective April 3, 2002)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UQM TECHNOLOGIES, INC.

2002 EQUITY INCENTIVE PLAN

 

ARTICLE I

INTRODUCTION

1.1 Establishment. UQM Technologies, Inc., a Colorado corporation, effective
April 3, 2002, hereby establishes the UQM Technologies, Inc. 2002 Equity
Incentive Plan (the "Plan") for certain employees of the Company (as defined in
subsection 2.1(g)) and certain consultants to the Company. The Plan permits the
grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and non-qualified stock options to
certain key employees of the Company and to certain consultants to the Company.

1.2 Purposes. The purposes of the Plan are to provide those who are selected for
participation in the Plan with added incentives to continue in the long-term
service of the Company and to create in such persons a more direct interest in
the future success of the operations of the Company by relating incentive
compensation to increases in shareholder value, so that the income of those
participating in the Plan is more closely aligned with the income of the
Company's shareholders. The Plan is also designed to provide a financial
incentive that will help the Company attract, retain and motivate the most
qualified employees and consultants.

1.3 Effective Date. The initial effective date of the Plan is April 3, 2002. No
Option shall be granted to any individual who is or who may be covered by
Section 162(m) of the Internal Revenue Code of 1986, as amended, until the Plan
has approved by the Company's shareholders. The Plan shall be approved the
Company's shareholders to the extent and in the manner such approval is required
by applicable law or the rules of the exchange or other market on which the
Company's stock is traded.

 

ARTICLE II

DEFINITIONS

2.1 Definitions. The following terms shall have the meanings set forth below:

(a) "Affiliated Corporation" means any corporation or other entity that is
affiliated with UQM through stock ownership or otherwise and is designated as an
"Affiliated Corporation" by the Board, provided, however, that for purposes of
Incentive Options granted pursuant to the Plan, an "Affiliated Corporation"
means any parent or subsidiary of the Company as defined in Section 424 of the
Code.

(b) "Board" means the Board of Directors of UQM.

(c) "Code" means the Internal Revenue Code of 1986, as it may be amended from
time to time.

(d) "Committee" means a committee consisting of members of the Board who are
empowered hereunder to take actions in the administration of the Plan. If
applicable, the Committee shall be so constituted at all times as to permit the
Plan to comply with Rule 16b-3 or any successor rule promulgated under the
Exchange Act. Except as provided in Section 3.2, the Committee shall select
Participants from Eligible Employees and Eligible Consultants of the Company and
shall determine the Options to be granted pursuant to the Plan and the terms and
conditions thereof.

(e) "Company" means UQM Technologies, Inc. and the Affiliated Corporations.

(f) "Disabled" or "Disability" shall have the meaning given to such terms in
Section 22(e)(3) of the Code.

(g) "Effective Date" means the original effective date of the Plan, April 3,
2002.

(h) "Eligible Consultants" means those consultants to the Company who are
determined, by the Committee, to be individuals whose services are important to
the Company and who are eligible to receive Non-Qualified Options under the
Plan.

(i) "Eligible Employees" means those employees (including, without limitation,
officers and directors who are also employees) of the Company or any subsidiary
or division thereof, upon whose judgment, initiative and efforts the Company is,
or will become, largely dependent for the successful conduct of its business.
For purposes of the Plan, an employee is any individual who provides services to
the Company or any subsidiary or division thereof as a common law employee and
whose remuneration is subject to the withholding of federal income tax pursuant
to section 3401 of the Code. Employee shall not include any individual (A) who
provides services to the Company or any subsidiary or division thereof under an
agreement, contract, or any other arrangement pursuant to which the individual
is initially classified as an independent contractor or (B) whose remuneration
for services has not been treated initially as subject to the withholding of
federal income tax pursuant to section 3401 of the Code even if the individual
is subsequently reclassified as a common law employee as a result of a final
decree of a court of competent jurisdiction or the settlement of an
administrative or judicial proceeding. Leased employees shall not be treated as
employees under this Plan.

(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as it may be
amended from time to time.

(k) "Fair Market Value" means, as of a given date, (i) the closing price of a
Share on the principal stock exchange on which Shares are then trading, if any
(or as reported on any composite index that includes such principal exchange) on
such date, or if Shares were not traded on such date, then on the next preceding
date on which a trade occurred; or (ii) if the Stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation system, the mean
between the closing representative bid and asked prices for the Stock on such
date as reported by Nasdaq or such successor quotation system; or (iii) if the
Stock is not publicly traded on an exchange and not quoted on Nasdaq or a
successor quotation system, the Fair Market Value of a Share shall be determined
by the Committee acting in good faith. If, upon exercise of an Option, the
exercise price is paid by a broker's transaction as provided in
subsection 7.2(g)(ii)(E), Fair Market Value, for purposes of the exercise, shall
be the price at which the Stock is sold by the broker.

(l) "Incentive Option" means an Option designated as such and granted in
accordance with Section 422 of the Code.

(m) "Non-Qualified Option" means any Option other than an Incentive Option.

(n) "Option" means a right to purchase Stock at a stated or formula price for a
specified period of time. Options granted under the Plan shall be either
Incentive Options or Non-Qualified Options.

(o) "Option Agreement" shall have the meaning given to such term in Section 7.2
hereof.

(p) "Option Holder" means a Participant who has been granted one or more Options
under the Plan.

(q) "Option Period" means the period of time, determined by the Committee,
during which an Option may be exercised by the Option Holder.

(r) "Option Price" means the price at which each share of Stock subject to an
Option may be purchased, determined in accordance with subsection 7.2(b).

(s) "Participant" means an Eligible Employee or Eligible Consultant designated
by the Committee from time to time during the term of the Plan to receive one or
more Options under the Plan.

(t) "Securities Act" means the Securities Act of 1933, as it may be amended from
time to time.

(u) "Share" means one whole share of Stock.

(v) "Stock" means the $0.01 par value common stock of UQM Technologies, Inc.

(w) "UQM" means UQM Technologies, Inc., a Colorado corporation, and any
successor thereto.

2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.

 

ARTICLE III

PLAN ADMINISTRATION

3.1 General. The Plan shall be administered by the Committee. In accordance with
the provisions of the Plan, the Committee shall, in its sole discretion, select
the Participants from among the Eligible Employees and Eligible Consultants,
determine the Options to be granted pursuant to the Plan, fix the Option Price,
Option Period and manner in which an Option becomes exercisable, as the
Committee may deem necessary or desirable and consistent with the terms of the
Plan. The Committee shall determine the form or forms of the agreements with
Participants that shall evidence the particular provisions, terms, conditions,
rights and duties of the Company and the Participants with respect to Options
granted pursuant to the Plan, which provisions need not be identical except as
may be provided herein; provided, however, that Eligible Consultants shall not
be eligible to receive Incentive Options. The Committee may from time to time
adopt such rules and regulations for carrying out the purposes of the Plan as it
may deem proper and in the best interests of the Company. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any agreement entered into hereunder in the manner and to the extent
it shall deem expedient and it shall be the sole and final judge of such
expediency. No member of the Committee shall be liable for any action or
determination made in good faith. The determinations, interpretations and other
actions of the Committee pursuant to the provisions of the Plan shall be binding
and conclusive for all purposes and on all persons.

3.2 Delegation by Committee. The Committee may, from time to time, delegate, to
a specified officer or officers of the Company, the power and authority to grant
Options under the Plan to specified groups of Eligible Employees and Eligible
Consultants, subject to such restrictions and conditions as the Committee, in
its sole discretion, may impose. The delegation shall be as broad or as narrow
as the Committee shall determine. To the extent that the Committee has delegated
the authority to determine certain terms and conditions of an Option, all
references in the Plan to the Committee's exercise of authority in determining
such terms and conditions shall be construed to include the officer or officers
to whom the Committee has delegated the power and authority to make such
determination. The power and authority to grant Options to any Eligible Employee
or Eligible Consultant who is covered by Section 16(b) of the Exchange Act or
who is, or is expected to be, covered by Section 162(m) of the Code shall not be
delegated by the Committee.

 

ARTICLE IV

STOCK SUBJECT TO THE PLAN

4.1 Number of Shares. The maximum aggregate number of Shares that may be issued
under the Plan pursuant to Options is 1,500,000 Shares. The maximum number of
Shares that may be issued under Incentive Options is 1,500,000 Shares. The
Shares may be either authorized and unissued Shares or previously issued Shares
acquired by the Company. Such maximum numbers may be increased from time to time
by approval of the Board and by the stockholders of the Company if, in the
opinion of counsel for the Company, stockholder approval is required. The
Company shall at all times during the term of the Plan and while any Options are
outstanding retain as authorized and unissued Stock at least the number of
Shares from time to time required under the provisions of the Plan, or otherwise
assure itself of its ability to perform its obligations hereunder.

4.2 Limit on Option Grants. The maximum number of Shares with respect to which a
Participant may receive Options under the Plan in any calendar year is
500,000 Shares. The maximum number may be increased from time to time by
approval of the Board and by the stockholders of the Company. No Options may be
granted with respect to any increased number of Shares until such increase has
been approved by the stockholders. Stockholder approval shall not be required
for increases solely pursuant to Section 4.4 below.

4.3 Other Shares of Stock. Any Shares that are subject to an Option that expires
or for any reason is terminated unexercised, and any Shares withheld for the
payment of taxes or received by the Company as payment of the exercise price of
an Option shall automatically become available for use under the Plan, provided,
however, that no more than 1,500,000 Shares may be issued under Incentive
Options.

4.4 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at
any time increase or decrease the number of its outstanding Shares or change in
any way the rights and privileges of such Shares by means of the payment of a
stock dividend or any other distribution upon such Shares payable in Stock, or
through a stock split, subdivision, consolidation, combination, reclassification
or recapitalization involving the Stock, then in relation to the Stock that is
affected by one or more of the above events, the numbers, rights and privileges
of the following shall be increased, decreased or changed in like manner as if
they had been issued and outstanding, fully paid and nonassessable at the time
of such occurrence: (i) the Shares as to which Options may be granted under the
Plan, (ii) the Shares then included in each outstanding Option granted
hereunder, (iii) the maximum number of Shares available for grant to any one
person in a calendar year pursuant to Section 4.2, (iv) the maximum number of
Shares available for grant pursuant to Incentive Options, and (v) the number of
Shares subject to a delegation of authority under Section 3.2 of this Plan.

4.5 Other Distributions and Changes in the Stock. If

(a) The Company shall at any time distribute with respect to the Stock assets or
securities of persons other than the Company (excluding cash or distributions
referred to in Section 4.4), or

(b) The Company shall at any time grant to the holders of its Stock rights to
subscribe pro rata for additional shares thereof or for any other securities of
the Company, or

(c) There shall be any other change (except as described in Section 4.4) in the
number or kind of outstanding Shares or of any stock or other securities into
which the Stock shall be changed or for which it shall have been exchanged,

and if the Committee shall in its discretion determine that the event described
in subsection (a), (b), or (c) above equitably requires an adjustment in the
number or kind of Shares subject to an Option, an adjustment in the Option Price
or the taking of any other action by the Committee, including without
limitation, the setting aside of any property for delivery to the Participant
upon the exercise of an Option or the full vesting of an Option, then such
adjustments shall be made, or other action shall be taken, by the Committee and
shall be effective for all purposes of the Plan and for each outstanding Option
that involves the particular type of stock for which a change was effected.

4.6 General Adjustment Rules. No adjustment or substitution provided for in this
Article IV shall require the Company to sell a fractional Share under any
Option, or otherwise issue a fractional Share, and the total substitution or
adjustment with respect to each Option shall be limited by deleting any
fractional Share. In the case of any such substitution or adjustment, the
aggregate Option Price for the total number of Shares then subject to an Option
shall remain unchanged but the Option Price per Share under each such Option
shall be equitably adjusted by the Committee to reflect the greater or lesser
number of Shares or other securities into which the Stock subject to the Option
may have been changed.

4.7 Determination by the Committee, Etc. Adjustments under this Article IV shall
be made by the Committee, whose determinations with regard thereto shall be
final and binding upon all parties thereto.

 

ARTICLE V

CORPORATE REORGANIZATION; CHANGE IN CONTROL

5.1 Vesting and Termination of Options. Unless the Committee provides otherwise
at the time an Option is granted, upon the occurrence of a Corporate Transaction
(as defined in Section 5.3), all Options shall become fully exercisable
regardless of whether all conditions of exercise relating to length of service,
attainment of financial performance goals or otherwise have been satisfied. The
Committee may also provide for the assumption or substitution of any or all
Awards as described in Section 5.2 and make any other provision for outstanding
Awards as the Committee deems appropriate. The Committee may provide that any
Options that are outstanding at the time the Corporate Transaction is closed
shall expire at the time of the closing. The Committee need not take the same
action with respect to all outstanding Options.

5.2 Assumption or Substitution of Options. The Company, or the successor or
purchaser, as the case may be, may make adequate provision for the assumption of
the outstanding Options or the substitution of new options for the outstanding
Options on terms comparable to the outstanding Options.

5.3 Corporate Transaction. A Corporate Transaction shall include the following:

(a) Merger; Reorganization: the merger or consolidation of the Company with or
into another corporation or other reorganization (other than a reorganization
under the United States Bankruptcy Code) of the Company (other than a
consolidation, merger, or reorganization in which the Company is the continuing
corporation and which does not result in any reclassification or change of
outstanding shares of Stock); or

(b) Sale: the sale or conveyance of the property of the Company as an entirety
or substantially as an entirety (other than a sale or conveyance in which the
Company continues as a holding company of an entity or entities that conduct the
business or businesses formerly conducted by the Company) or the sale of more
than 50% of the outstanding voting stock of the Company;

(c) Liquidation: the dissolution or liquidation of the Company;

(d) Change in Control: A "Change in Control" shall be deemed to have occurred if
at any time during any period of two consecutive years (including any period
prior to the Effective Date), individuals who at the beginning of such period
constitute the Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority thereof; or

(e) Other Transactions: any other transaction that the Board determines by
resolution to be a Corporate Transaction.

 

ARTICLE VI

PARTICIPATION

Participants in the Plan shall be those Eligible Employees who, in the judgment
of the Committee, are performing, or during the term of their incentive
arrangement will perform, vital services in the management, operation and
development of the Company, and significantly contribute, or are expected to
significantly contribute, to the achievement of long-term corporate economic
objectives. Eligible Consultants shall be selected from those non-Employee
consultants to the Company who are performing services important to the
operation and growth of the Company. Participants may be granted from time to
time one or more Options; provided, however, that the grant of each such Option
shall be separately approved by the Committee and receipt of one such Award
shall not result in automatic receipt of any other Option. Upon determination by
the Committee that an Option is to be granted to a Participant, written notice
shall be given to such person, specifying the terms, conditions, rights and
duties related thereto. Each Participant shall, if required by the Committee,
enter into an agreement with the Company, in such form as the Committee shall
determine and which is consistent with the provisions of the Plan, specifying
such terms, conditions, rights and duties. Options shall be deemed to be granted
as of the date specified in the grant resolution of the Committee, which date
shall be the date of any related agreement with the Participant. In the event of
any inconsistency between the provisions of the Plan and any such agreement
entered into hereunder, the provisions of the Plan shall govern.

 

ARTICLE VII

OPTIONS

7.1 Grant of Options. Coincident with or following designation for participation
in the Plan, a Participant may be granted one or more Options. The Committee in
its sole discretion shall designate whether an Option is an Incentive Option or
a Non-Qualified Option; provided, however, that Eligible Consultants may not be
granted Incentive Options. The Committee may grant both an Incentive Option and
a Non-Qualified Option to an Eligible Employee at the same time or at different
times. Incentive Options and Non-Qualified Options, whether granted at the same
time or at different times, shall be deemed to have been awarded in separate
grants and shall be clearly identified, and in no event shall the exercise of
one Option affect the right to exercise any other Option or affect the number of
shares for which any other Option may be exercised. An Option shall be
considered as having been granted on the date specified in the grant resolution
of the Committee.

7.2 Stock Option Agreements. Each Option granted under the Plan shall be
evidenced by a written stock option certificate or agreement (an "Option
Agreement"). An Option Agreement shall be issued by the Company in the name of
the Participant to whom the Option is granted and in such form as may be
approved by the Committee. The Option Agreement shall incorporate and conform to
the conditions set forth in this Section 7.2 as well as such other terms and
conditions that are not inconsistent as the Committee may consider appropriate
in each case.

(a) Number of Shares. Each Option Agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.

(b) Price. The price at which each share of Stock covered by an Option may be
purchased shall be determined in each case by the Committee and set forth in the
Option Agreement, but, in the case of an Incentive Option, in no event shall the
price be less than 100 percent of the Fair Market Value of the Stock on the date
the Incentive Option is granted.

(c) Duration of Options; Restrictions on Exercise. Each Option Agreement shall
state the Option Period. The Option Period must end, in all cases, not more than
ten years from the date the Option is granted. The Option Agreement shall also
set forth any installment or other restrictions on exercise of the Option during
such period, if any, as may be determined by the Committee. Each Option shall
become exercisable and vest over such period of time, if any, or upon such
events, as determined by the Committee.

(d) Eligible Employees: Termination of Services, Death, Disability, Etc. The
Committee may specify the period, if any, during which an Option may be
exercised following termination of the Option Holder's services. The effect of
this subsection 7.2(d) shall be limited to determining the consequences of a
termination and nothing in this subsection 7.2(d) shall restrict or otherwise
interfere with the Company's discretion with respect to the termination of any
individual's services. If the Committee does not otherwise specify, the
following shall apply:

(i) If the services of the Option Holder are terminated within the Option Period
for "cause", as determined by the Company, the Option shall thereafter be void
for all purposes. As used in this subsection 7.2(d), "cause" shall mean a gross
violation, as determined by the Company, of the Company's established policies
and procedures.

(ii) If the Option Holder becomes Disabled, the Option may be exercised by the
Option Holder within one year following the Option Holder's termination of
services on account of Disability (provided that such exercise must occur within
the Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable on
or before the date of the Option Holder's termination of services because of
Disability.

(iii) If the Option Holder dies during the Option Period while still performing
services for the Company or within the one year period referred to in (ii) above
or the three-month period or, in the case of Non-Qualified Options, the
twelve-month period, referred to in (iv) below, the Option may be exercised by
those entitled to do so under the Option Holder's will or by the laws of descent
and distribution within one year following the Option Holder's death, (provided
that such exercise must occur within the Option Period), but not thereafter. In
any such case, the Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date of the Option Holder's
death.

(iv) If the services of the Option Holder are terminated (which for this purpose
means that the Option Holder is no longer employed by the Company or performing
services for the Company) by the Company within the Option Period for any reason
other than cause, Disability, or death, the Option may be exercised by the
Option Holder as follows: (A) in the case of an Incentive Option, within three
(3) months following the date of such termination (provided that such exercise
must occur within the Option Period), but not thereafter and (B) in the case of
a Non-Qualified Option, within twelve (12) months following the date of such
termination (provided that such exercise must occur within the Option Period),
but not thereafter. In any such case, the Option may be exercised only as to the
Shares as to which the Option had become exercisable on or before the date of
termination of services.

(e) Eligible Independent Contractors: Termination of Services, Death. Each
Option agreement shall provide as follows with respect to the exercise of the
Option:

(i) If the services of the Option Holder terminate within the Option Period
other than on account of cause or the Option Holder's death, the Option may be
exercised during the remainder of the Option Period. In any such case, the
Option may be exercised only as to the Shares as to which the Option had become
exercisable on or before the date of termination of services.

(ii) If the services of the Option Holder terminate within the Option Period for
"cause," as determined by the Company, the Option shall thereafter be void for
all purposes; provided however, that if the agreement between the Company and an
Independent Contractor provides for termination of the agreement for "cause,"
the term "cause" for purposes of this subsection shall have the same meaning as
in such agreement.

(iii) If the Option Holder dies during the Option Period, the Option may be
exercised by those entitled to do so under the Option Holder's will or by the
laws of descent and distribution for fifteen (15) months after the Option
Holder's death (if otherwise in the Option Period), but not thereafter. In any
such case, the Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date of the Option Holder's
death.

(f) Consideration for Grant of Option. Each Option Holder agrees to remain in
the employment of the Company or to continue providing consulting services to
the Company, as the case may be, at the pleasure of the Company, for a
continuous period of at least one year after the date the Option is granted, at
the rate of compensation in effect on the date of such agreement or at such
changed rate as may be fixed, from time to time, by the Company. Nothing in this
paragraph shall limit or impair the Company's right to terminate the employment
of any employee or to terminate the consulting services of any consultant.

(g) Exercise, Payments, Etc.

(i) Manner of Exercise. The method for exercising each Option granted hereunder
shall be by delivery to the Company of written notice specifying the number of
Shares with respect to which such Option is exercised. The purchase of such
Shares shall take place at the principal offices of the Company within thirty
(30) days following delivery of such notice, at which time the Option Price of
the Shares shall be paid in full by any of the methods set forth below or a
combination thereof. Except as set forth in the next sentence, the Option shall
be exercised when the Option Price for the number of shares as to which the
Option is exercised is paid to the Company in full. If the Option Price is paid
by means of a broker's transaction described in subsection 7.2(g)(ii)(D), in
whole or in part, the closing of the purchase of the Stock under the Option
shall take place (and the Option shall be treated as exercised) on the date on
which, and only if, the sale of Stock upon which the broker's transaction was
based has been closed and settled, unless the Option Holder makes an irrevocable
written election, at the time of exercise of the Option, to have the exercise
treated as fully effective for all purposes upon receipt of the Option Price by
the Company regardless of whether or not the sale of the Stock by the broker is
closed and settled. A properly executed certificate or certificates representing
the Shares shall be delivered to or at the direction of the Option Holder upon
payment therefor. If Options on less than all shares evidenced by an Option
Certificate are exercised, the Company shall deliver a new Option Certificate
evidencing the Option on the remaining shares upon delivery of the Option
Certificate for the Option being exercised.

(ii) The exercise price shall be paid by any of the following methods or any
combination of the following methods at the election of the Option Holder, or by
any other method approved by the Committee upon the request of the Option
Holder:

(A) in cash;

(B) by certified check, cashier's check or other check acceptable to the
Company, payable to the order of the Company;

(C) by delivery to the Company of certificates representing the number of shares
then owned by the Option Holder, the Fair Market Value of which equals the
purchase price of the Stock purchased pursuant to the Option, properly endorsed
for transfer to the Company; provided however, that no Option may be exercised
by delivery to the Company of certificates representing Stock, unless such Stock
has been held by the Option Holder for more than six (6) months; for purposes of
this Plan, the Fair Market Value of any shares of Stock delivered in payment of
the purchase price upon exercise of the Option shall be the Fair Market Value as
of the exercise date; the exercise date shall be the day of delivery of the
certificates for the Stock used as payment of the Option Price;

(D) by delivery to the Company of a promissory note, which shall be in a
principal amount equal to the Option Price plus any federal and state income tax
required to be withheld; which shall be full recourse and secured by all or a
portion of the Stock acquired pursuant to the exercise of the Option; which
shall bear interest at a rate determined by the Committee, but not lower than
the rate required to avoid the imputation of interest under the Code; which
shall provide for level quarterly payments of interest and principal over its
term; which shall become payable in full upon the first to occur of the fifth
anniversary of the date the Option is exercised, failure to pay any payment of
principal and interest within five days after it is due or termination of the
Option Holder's employment or service for any reason; and which shall contain
such other terms and conditions including the provision of security in addition
to the Stock that the Company, in its sole discretion, deems necessary or
appropriate; or

(E) by delivery to the Company of a properly executed notice of exercise
together with irrevocable instructions to a broker to deliver to the Company
promptly the amount of the proceeds of the sale of all or a portion of the Stock
or of a loan from the broker to the Option Holder required to pay the Option
Price.

(h) Date of Grant. An Option shall be considered as having been granted on the
date specified in the grant resolution of the Committee.

(i) Withholding.

(i) Non-Qualified Options. Upon exercise of an Option, the Option Holder shall
make appropriate arrangements with the Company to provide for the amount of
additional withholding required by Sections 3102 and 3402 of the Code and
applicable state and local tax laws, including payment of such taxes through
delivery of shares of Stock or by withholding Stock to be issued under the
Option, as provided in Article XII.

(ii) Incentive Options. Upon exercise of an Incentive Option, the Option Holder
shall make appropriate arrangements with the Company to provide for the amount
of withholding required by applicable federal, state, and local tax laws. If an
Option Holder makes a disposition (as defined in Section 424(c) of the Code) of
any Stock acquired pursuant to the exercise of an Incentive Option prior to the
expiration of two years from the date on which the Incentive Option was granted
or prior to the expiration of one year from the date on which the Option was
exercised, the Option Holder shall send written notice to the Company at the
Company's principal place of business of the date of such disposition, the
number of shares disposed of, the amount of proceeds received from such
disposition and any other information relating to such disposition as the
Company may reasonably request. The Option Holder shall, in the event of such a
disposition, make appropriate arrangements with the Company to provide for the
amount of additional withholding, if any, required by Sections 3102 and 3402 of
the Code and applicable state income tax laws.

7.3 Restrictions on Incentive Options.

(a) Initial Exercise. The aggregate Fair Market Value of the Shares with respect
to which Incentive Options are exercisable for the first time by an Option
Holder in any calendar year, under the Plan or otherwise, shall not exceed
$100,000. For this purpose, the Fair Market Value of the Shares shall be
determined as of the date of grant of the Option and Incentive Options shall be
taken into account in the order granted.

(b) Ten Percent Stockholders. Incentive Options granted to an Option Holder who
is the holder of record of 10% or more of the outstanding Stock of the Company
shall have an Option Price equal to 110% of the Fair Market Value of the Shares
on the date of grant of the Option and the Option Period for any such Option
shall not exceed five years.

7.4 Transferability.

(a) General Rule: No Lifetime Transfers. An Option shall not be transferable by
the Option Holder except by will or pursuant to the laws of descent and
distribution. An Option shall be exercisable during the Option Holder's lifetime
only by him or her, or in the event of Disability or incapacity, by his or her
guardian or legal representative. The Option Holder's guardian or legal
representative shall have all of the rights of the Option Holder under this
Plan.

(b) InterVivos Transfer to Certain Family Members. The Committee may, however,
provide at the time of grant or thereafter that the Option Holder may transfer a
Non-Qualified Option to a member of the Option Holder's immediate family, a
trust of which members of the Option Holder's immediate family are the only
beneficiaries, or a partnership of which members of the Option Holder's
immediate family or trusts for the sole benefit of the Option Holder's immediate
family are the only partners (the "InterVivos Transferee"). Immediate family
means the Option Holder's spouse, issue (by birth or adoption), parents,
grandparents, siblings (including half brothers and sisters and adopted
siblings) and nieces and nephews. No transfer shall be effective unless the
Option Holder shall have notified the Company of the transfer in writing and has
furnished a copy of the documents that effect the transfer to the Company. The
InterVivos Transferee shall be subject to all of the terms of this Plan and the
Option, including, but not limited to, the vesting schedule, termination
provisions, and the manner in which the Option may be exercised. The Committee
may require the Option Holder and the InterVivos Transferee to enter into an
appropriate agreement with the Company providing for, among other things, the
satisfaction of required tax withholding with respect to the exercise of the
transferred Option and the satisfaction of any Stock retention requirements
applicable to the Option Holder, together with such other terms and conditions
as may be specified by the Committee. Except to the extent provided otherwise in
such agreement, the InterVivos Transferee shall have all of the rights and
obligations of the Option Holder under this Plan; provided that the InterVivos
Transferee shall not have any Stock withheld to pay withholding taxes pursuant
to Section 17.2 unless the agreement referred to in the preceding sentence
specifically provides otherwise.

(c) No Transfer of ISOs. During the Option Holder's lifetime the Option Holder
may not transfer an Incentive Option under any circumstances.

(d) No Assignment. No right or interest of any Option Holder in an Option
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Option Holder, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy, except as set forth above.

7.5 Shareholder Privileges. No Option Holder shall have any rights as a
shareholder with respect to any shares of Stock covered by an Option until the
Option Holder becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to which
there is a record date preceding the date such Option Holder becomes the holder
of record of such Stock, except as provided in Article IV.

 

ARTICLE VIII

RIGHTS OF PARTICIPANTS

8.1 Service. Nothing contained in the Plan or in any Option granted under the
Plan shall confer upon any Participant any right with respect to the
continuation of his employment by, or consulting relationship with, the Company,
or interfere in any way with the right of the Company, subject to the terms of
any separate employment agreement or other contract to the contrary, at any time
to terminate such services or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Option.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute a termination of service shall be determined by the
Committee at the time.

8.2 No Plan Funding. Obligations to Participants under the Plan will not be
funded, trusteed, insured or secured in any manner. The Participants under the
Plan shall have no security interest in any assets of the Company, and shall be
only general creditors of the Company.

 

ARTICLE IX

GENERAL RESTRICTIONS

9.1 Investment Representations. The Company may require any person to whom an
Option is granted, as a condition of exercising such Option, to give written
assurances in substance and form satisfactory to the Company and its counsel to
the effect that such person is acquiring the Stock for his own account for
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with Federal and applicable state securities
laws. Legends evidencing such restrictions may be placed on the Stock
certificates.

9.2 Compliance with Securities Laws. Each Option grant shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the shares subject to such Option
grant upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such Option grant may not be accepted or exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained on conditions acceptable to the Committee.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration or qualification.

9.3 Changes in Accounting Rules. Except as provided otherwise at the time an
Option is granted, notwithstanding any other provision of the Plan to the
contrary, if, during the term of the Plan, any changes in the financial or tax
accounting rules applicable to Options shall occur which, in the sole judgment
of the Committee, may have a material adverse effect on the reported earnings,
assets or liabilities of the Company, the Committee shall have the right and
power to modify as necessary, any then outstanding and unexercised Options as to
which the applicable services or other restrictions have not been satisfied.

 

ARTICLE X

OTHER EMPLOYEE BENEFITS

The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option shall not constitute "earnings" or
"compensation" with respect to which any other employee benefits of such
employee are determined, including without limitation benefits under any
pension, profit sharing, 401(k), life insurance or salary continuation plan.

 

ARTICLE XI

PLAN AMENDMENT, MODIFICATION AND TERMINATION

The Board may at any time terminate, and from time to time may amend or modify
the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that shareholder approval is otherwise necessary or
desirable.

No amendment, modification or termination of the Plan shall in any manner
adversely affect any Options theretofore granted under the Plan, without the
consent of the Participant holding such Options.

 

ARTICLE XII

WITHHOLDING

12.1 Withholding Requirement. The Company's obligations to deliver shares of
Stock upon the exercise of any Option shall be subject to the Participant's
satisfaction of all applicable federal, state and local income and other tax
withholding requirements.

12.2 Withholding With Stock. At the time the Committee grants an Option or at
any time thereafter, it may, in its sole discretion, grant the Participant an
election to pay all such amounts of tax withholding, or any part thereof, by
electing (a) to have the Company withhold from shares otherwise issuable to the
Participant, shares of Stock having a value equal to the amount required to be
withheld or such lesser amount as may be elected by the Participant; provided
however, that the amount of Stock so withheld shall not exceed the minimum
amount required to be withheld under the method of withholding that results in
the smallest amount of withholding, or (b) to transfer to the Company a number
of shares of Stock that were acquired by the Participant more than six (6)
months prior to the transfer to the Company and that have a value equal to the
amount required to be withheld or such lesser amount as may be elected by the
Participant. All elections shall be subject to the approval or disapproval of
the Committee. The value of shares of Stock to be withheld shall be based on the
Fair Market Value of the Stock on the date that the amount of tax to be withheld
is to be determined (the "Tax Date"). Any such elections by Participants to have
shares of Stock withheld for this purpose will be subject to the following
restrictions:

(a) All elections must be made prior to the Tax Date.

(b) All elections shall be irrevocable.

(c) If the Participant is an officer or director of the Company within the
meaning of Section 16 of the Exchange Act ("Section 16"), the Participant must
satisfy the requirements of such Section 16 and any applicable Rules thereunder
with respect to the use of Stock to satisfy such tax withholding obligation.

 

ARTICLE XIII

REQUIREMENTS OF LAW

13.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant
to the Plan shall be subject to all applicable laws, rules and regulations.

13.2 Federal Securities Law Requirements. If a Participant is an officer or
director of the Company within the meaning of Section 16, Options granted
hereunder shall be subject to all conditions required under Rule 16b-3, or any
successor rule promulgated under the Exchange Act, to qualify the Option for any
exception from the provisions of Section 16(b) of the Exchange Act available
under that Rule. Such conditions shall be set forth in the agreement with the
Participant which describes the Option or other document evidencing or
accompanying the Option.

13.3 Governing Law. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Colorado.

 

ARTICLE XIV

DURATION OF THE PLAN

Unless sooner terminated by the Board of Directors, the Plan shall terminate at
the close of business on April 2, 2012 and no Option shall be granted, or offer
to purchase Stock made, after such termination. Options outstanding at the time
of the Plan termination may continue to be exercised, or become free of
restrictions, or paid, in accordance with their terms.

Dated: April 3, 2002, 2002

UQM TECHNOLOGIES, INC.

a Colorado corporation

 

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