Exhibit 10.7

 

QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.

 

2002 STOCK INCENTIVE PLAN

 

(as amended on June 30, 2005)

 

1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants, to issue Options in connection with the
Spin-Off pursuant to the Employee Benefit Matters Agreement and to promote the
success of the Company’s business.

 

2. Definitions. As used herein, the following definitions shall apply:

 

(a) “Administrator” means the Board or any of the Committees appointed to
administer the Plan.

 

(b) “Applicable Laws” means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.

 

(c) “Assumed” means that (i) pursuant to a Corporate Transaction defined in
Section 2(n)(i), 2(n)(ii) or 2(n)(iii) or a Related Entity Disposition, the
contractual obligations represented by the Award are expressly assumed (and not
simply by operation of law) by the successor entity or its Parent in connection
with the Corporate Transaction or Related Entity Disposition or (ii) pursuant to
a Corporate Transaction defined in Section 2(n)(iv) or 2(n)(v), the Award is
expressly affirmed by the Company. The Award shall not be deemed “Assumed” for
purposes of terminating the Award (in the case of a Corporate Transaction) and
the termination of the Continuous Service of the Grantee (in the case of a
Related Entity Disposition) if pursuant to a Corporate Transaction or a Related
Entity Disposition the Award is replaced with a comparable award with respect to
shares of capital stock of the successor entity of its Parent. The determination
of Award comparability shall be made by the Administrator and its determination
shall be final, binding and conclusive.

 

(d) “Award” means the grant of an Option, Restricted Stock, or other right or
benefit under the Plan.

 

(e) “Award Agreement” means the written agreement evidencing the grant of an
Award executed by the Company and the Grantee, including any amendments thereto.

 

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

 

(g) “Cause” means, with respect to the termination by the Company, a Related
Entity, IMPCO or a Subsidiary of IMPCO of the Grantee’s Continuous Service, that
such termination is for “Cause” as such term is expressly defined in a
then-effective written agreement between the Grantee and the Company, such
Related Entity, IMPCO or such Subsidiary of IMPCO, or in the absence of such
then-effective written agreement and definition, is based on, in

 

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the determination of the Administrator, the Grantee’s: (i) performance of any
act or failure to perform any act in bad faith and to the detriment of the
Company, a Related Entity, IMPCO or a Subsidiary of IMPCO; (ii) dishonesty,
intentional misconduct or material breach of any agreement with the Company, a
Related Entity, IMPCO or a Subsidiary of IMPCO; or (iii) commission of a crime
involving dishonesty, breach of trust, or physical or emotional harm to any
person.

 

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

 

(i) “Committee” means any committee appointed by the Board to administer the
Plan.

 

(j) “Common Stock” means the common stock of the Company.

 

(k) “Company” means Quantum Fuel Systems Technologies Worldwide, Inc., a
Delaware corporation.

 

(l) “Consultant” means any person (other than an Employee or a Director, solely
with respect to rendering services in such person’s capacity as a Director) who
is engaged by the Company or any Related Entity to render consulting or advisory
services to the Company, or such Related Entity so long as such person (i)
renders bona fide services that are not in connection with the offer and sale of
the Company’s securities in a capital raising transaction and (ii) does not
directly or indirectly promote or maintain a market for the Company’s
securities.

 

(m) “Continuous Service” means that the provision of services to the Company, a
Related Entity, IMPCO or a Subsidiary of IMPCO in any capacity of Employee,
Director or Consultant, is not interrupted or terminated. Continuous Service
shall not be considered interrupted in the case of (i) any approved leave of
absence, (ii) transfers among the Company, any Related Entity, IMPCO, any
Subsidiary of IMPCO or any successor, in any capacity of Employee, Director or
Consultant, or (iii) any change in status as long as the individual remains in
the service of the Company, a Related Entity, IMPCO or a Subsidiary of IMPCO in
any capacity of Employee, Director or Consultant (except as otherwise provided
in the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave. For purposes of each
Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90)
days, and reemployment upon expiration of such leave is not guaranteed by
statute or contract, then the Incentive Stock Option shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following
the expiration of such ninety (90) day period.

 

(n) “Corporate Transaction” means any of the following transactions:

 

(i) a merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the state
in which the Company is incorporated;

 

(ii) the sale, transfer or other disposition of all or substantially all of the
assets of the Company (including the capital stock of the Company’s subsidiary
corporations);

 

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(iii) the complete liquidation or dissolution of the Company;

 

(iv) any reverse merger in which the Company is the surviving entity but in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company’s outstanding securities are transferred to a person
or persons different from those who held such securities immediately prior to
such merger; or

 

(v) acquisition in a single or series of related transactions by any person or
related group of persons (other than the Company or by a Company-sponsored
employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company’s outstanding securities but
excluding any such transaction or series of related transactions that the
Administrator determines shall not be a Corporate Transaction.

 

(o) “Covered Employee” means an Employee who is a “covered employee” under
Section 162(m)(3) of the Code.

 

(p) “Director” means a member of the Board or the board of directors of any
Related Entity, IMPCO or a Subsidiary of IMPCO.

 

(q) “Disability” means as defined under the long-term disability policy of the
Company, IMPCO or Subsidiary of IMPCO or the Related Entity to which the Grantee
provides services regardless of whether the Grantee is covered by such policy.
If the Company, IMPCO or Subsidiary of IMPCO or the Related Entity to which the
Grantee provides service does not have a long-term disability plan in place,
“Disability” means that a Grantee is unable to carry out the responsibilities
and functions of the position held by the Grantee by reason of any medically
determinable physical or mental impairment. A Grantee will not be considered to
have incurred a Disability unless he or she furnishes proof of such impairment
sufficient to satisfy the Administrator in its discretion.

 

(r) “Employee” means any person, including an Officer or Director, who is in the
employ of the Company, any Related Entity, IMPCO or a Subsidiary of IMPCO
subject to the control and direction of the Company, any Related Entity, IMPCO
or a Subsidiary of IMPCO as to both the work to be performed and the manner and
method of performance. The payment of a director’s fee by the Company, a Related
Entity, IMPCO or a Subsidiary of IMPCO shall not be sufficient to constitute
“employment” by the Company.

 

(s) “Employee Benefit Matters Agreement” means the Employee Benefit Matters
Agreement dated July 23, 2002, between IMPCO and the Company.

 

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

 

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

 

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation The Nasdaq National Market
or The

 

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Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system on the date of determination (or,
if no closing sales price or closing bid was reported on that date, as
applicable, on the last trading date such closing sales price or closing bid was
reported), as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

 

(ii) If the Common Stock is regularly quoted on an automated quotation system
(including the OTC Bulletin Board) or by a recognized securities dealer, but
selling prices are not reported, the Fair Market Value of a Share shall be the
mean between the high bid and low asked prices for the Common Stock on date of
determination (or, if no such prices were reported on that date, on the last
date such prices were reported), as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or

 

(iii) In the absence of an established market for the Common Stock of the type
described in (i) and (ii), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.

 

(v) “Grantee” means an Employee, Director or Consultant who receives an Award
under the Plan.

 

(w) “Immediate Family” means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee’s household (other than a tenant or employee), a trust in which these
persons (or the Grantee) have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.

 

(x) “IMPCO” means IMPCO Technologies, Inc., a Delaware corporation.

 

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

 

(z) “Non-Qualified Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

 

(aa) “Officer” means a person who is an officer of the Company, a Related
Entity, IMPCO or a Subsidiary of IMPCO within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

 

(bb) “Option” means an option to purchase Shares pursuant to an Award Agreement
granted under the Plan.

 

(cc) “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.

 

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(dd) “Performance-Based Compensation” means compensation qualifying as
“performance-based compensation” under Section 162(m) of the Code.

 

(ee) “Plan” means this 2002 Stock Incentive Plan.

 

(ff) “Registration Date” means the first to occur of (i) the closing of the
first sale to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, of (A) the Common Stock or (B) the same
class of securities of a successor corporation (or its Parent) issued pursuant
to a Corporate Transaction in exchange for or in substitution of the Common
Stock; (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of the
successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, on or prior to the date of
consummation of such Corporate Transaction; and (iii) the effective date of a
registration statement on Form 10 under the Exchange Act of any class of
securities of the Company.

 

(gg) “Related Entity” means any Parent or Subsidiary of the Company and any
business, corporation, partnership, limited liability company or other entity in
which the Company or a Parent or a Subsidiary of the Company holds a substantial
ownership interest, directly or indirectly.

 

(hh) “Related Entity Disposition” means the sale, distribution or other
disposition by the Company or a Parent or a Subsidiary of the Company of all or
substantially all of the interests of the Company or a Parent or a Subsidiary of
the Company in any Related Entity effected by a sale, merger or consolidation or
other transaction involving that Related Entity or the sale of all or
substantially all of the assets of that Related Entity, other than any Related
Entity Disposition to the Company or a Parent or a Subsidiary of the Company.

 

(ii) “Restricted Stock” means Shares issued under the Plan to the Grantee for
such consideration, if any, and subject to such restrictions on transfer, rights
of first refusal, repurchase provisions, forfeiture provisions, and other terms
and conditions as established by the Administrator.

 

(jj) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor thereto.

 

(kk) “Share” means a share of the Common Stock.

 

(ll) “Spin-Off” means the distribution by IMPCO to its stockholders of all or
any portion of the securities of the Company.

 

(mm) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

 

(nn) “Tax Matters Agreement” means the Tax Allocation and Indemnification
Agreement dated July 23, 2002, between IMPCO and the Company.

 

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3. Stock Subject to the Plan.

 

(a) Subject to the provisions of Section 10, below, the maximum aggregate number
of Shares which may be issued pursuant to all Awards (including Incentive Stock
Options) is three million five hundred thousand (3,500,000) Shares, plus an
annual increase to be added on the first day of each fiscal year of the Company,
beginning with its 2004 fiscal year, equal to three percent (3%) of the number
of Shares outstanding as of such first day of each fiscal year or a lesser
number of Shares determined by the Administrator. Notwithstanding the foregoing,
subject to the provisions of Section 10, below, of the number of Shares
specified above, the maximum aggregate number of Shares available for grant of
Incentive Stock Options shall be three million five hundred thousand (3,500,000)
Shares, plus an annual increase to be added on the first day of each fiscal year
of the Company, beginning with its 2004 fiscal year, equal to the lesser of (x)
one million (1,000,000) Shares, (y) three percent (3%) of the number of Shares
outstanding as of such first day of each fiscal year, or (z) a lesser number of
Shares determined by the Administrator. The shares to be issued pursuant to
Awards may be authorized, but unissued, or reacquired Common Stock.

 

(b) Any Shares covered by an Award (or portion of an Award) which is forfeited,
canceled or expires, shall be deemed not to have been issued for purposes of
determining the maximum aggregate number of Shares which may be issued under the
Plan. Shares that actually have been issued under the Plan pursuant to an Award
shall not be returned to the Plan and shall not become available for future
issuance under the Plan, except that if unvested Shares are forfeited, or
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.

 

4. Administration of the Plan.

 

(a) Plan Administrator.

 

(i) Administration With Respect to Directors and Officers. With respect to
grants of Awards to Directors or Employees who are also Officers or Directors of
the Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be constituted in such a manner
as to satisfy the Applicable Laws and to permit such grants and related
transactions under the Plan to be exempt from Section 16(b) of the Exchange Act
in accordance with Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.

 

(ii) Administration With Respect to Consultants and Other Employees. With
respect to grants of Awards to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. The Board may authorize one or more Officers to
grant such Awards and may limit such authority as the Board determines from time
to time.

 

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(iii) Administration With Respect to Covered Employees. Notwithstanding the
foregoing, grants of Awards to any Covered Employee intended to qualify as
Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more Directors
of the Company eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered
Employees, references to the “Administrator” or to a “Committee” shall be deemed
to be references to such Committee or subcommittee.

 

(iv) Administration Errors. In the event an Award is granted in a manner
inconsistent with the provisions of this subsection (a), such Award shall be
presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

 

(b) Powers of the Administrator. Subject to Applicable Laws and the provisions
of the Plan (including any other powers given to the Administrator hereunder),
and except as otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:

 

(i) to select the Employees, Directors and Consultants to whom Awards may be
granted from time to time hereunder;

 

(ii) to determine whether and to what extent Awards are granted hereunder;

 

(iii) to determine the number of Shares or the amount of other consideration to
be covered by each Award granted hereunder;

 

(iv) to approve forms of Award Agreements for use under the Plan;

 

(v) to determine the terms and conditions of any Award granted hereunder;

 

(vi) to amend the terms of any outstanding Award granted under the Plan,
provided that any amendment that would adversely affect the Grantee’s rights
under an outstanding Award shall not be made without the Grantee’s written
consent;

 

(vii) to construe and interpret the terms of the Plan and Awards, including
without limitation, any notice of award or Award Agreement, granted pursuant to
the Plan;

 

(viii) to establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable foreign jurisdictions and to afford
Grantees favorable treatment under such rules or laws; provided, however, that
no Award shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan; and

 

(ix) to take such other action, not inconsistent with the terms of the Plan, as
the Administrator deems appropriate.

 

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5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company or a Parent or a Subsidiary of the Company. An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards. Awards may be granted to such Employees,
Directors or Consultants who are residing in foreign jurisdictions as the
Administrator may determine from time to time.

 

6. Terms and Conditions of Awards.

 

(a) Type of Awards. The Administrator is authorized under the Plan to award any
type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of Shares or an Option.

 

(b) Designation of Award. Each Award shall be designated in the Award Agreement.
In the case of an Option, the Option shall be designated as either an Incentive
Stock Option or a Non-Qualified Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary of the Company) exceeds
$100,000, such excess Options, to the extent of the Shares covered thereby in
excess of the foregoing limitation, shall be treated as Non-Qualified Stock
Options. For this purpose, Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the grant date of the relevant Option.

 

(c) Conditions of Award. Subject to the terms of the Plan, the Administrator
shall determine the provisions, terms, and conditions of each Award including,
but not limited to, the Award vesting schedule, repurchase provisions, rights of
first refusal, forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, increase in
share price, earnings per share, total stockholder return, return on equity,
return on assets, return on investment, net operating income, cash flow,
revenue, economic value added, personal management objectives, or other measure
of performance selected by the Administrator. Partial achievement of the
specified criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement. With respect to any
Award intended to qualify as Performance-Based Compensation, the Committee shall
certify in writing that any performance criteria have been satisfied to the
extent necessary to comply with Section 162(m) of the Code and the regulations
thereunder. Notwithstanding the foregoing, Options granted pursuant to the
Employee Benefit Matters Agreement shall contain terms that are substantially
the same as the terms contained in the IMPCO options to which they relate.

 

(d) Acquisitions and Other Transactions. The Administrator may issue Awards
under the Plan in settlement, assumption or substitution for, outstanding awards
or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction. In addition, the

 

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Administrator may issue Options under the Plan in connection with the Spin-Off,
and the terms of such Options, including the exercise price and the number of
Shares subject to the Option, shall be determined pursuant to the Employee
Benefit Matters Agreement.

 

(e) Deferral of Award Payment. The Administrator may establish one or more
programs under the Plan to permit selected Grantees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Grantee to payment or receipt of Shares or other consideration under an Award
(but only to the extent that such deferral programs would not result in an
accounting compensation charge unless otherwise determined by the
Administrator). The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.

 

(f) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.

 

(g) Individual Option Limit. The maximum number of Shares with respect to which
Options may be granted to any Grantee in any fiscal year of the Company shall be
six hundred thousand (600,000) Shares. In connection with a Grantee’s
commencement of Continuous Service, a Grantee may be granted Options for up to
an additional four hundred thousand (400,000) Shares which shall not count
against the limit set forth in the previous sentence. The foregoing limitations
shall be adjusted proportionately in connection with any change in the Company’s
capitalization pursuant to Section 10, below. To the extent required by Section
162(m) of the Code or the regulations thereunder, in applying the foregoing
limitations with respect to a Grantee, if any Option is canceled, the canceled
Option shall continue to count against the maximum number of Shares with respect
to which Options may be granted to the Grantee. For this purpose, the repricing
of an Option shall be treated as the cancellation of the existing Option and the
grant of a new Option.

 

(h) Early Exercise. The Award Agreement may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or
Consultant to exercise any part or all of the Award prior to full vesting of the
Award. Any unvested Shares received pursuant to such exercise may be subject to
a repurchase right in favor of the Company or a Related Entity or to any other
restriction the Administrator determines to be appropriate.

 

(i) Term of Award. The term of each Award shall be the term stated in the Award
Agreement, provided, however, that the term of an Incentive Stock Option shall
be no more than ten (10) years from the date of grant thereof. However, in the
case of an Incentive Stock Option granted to a Grantee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Award Agreement.

 

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(j) Transferability of Awards. Incentive Stock Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Grantee, only by the Grantee; provided, however, that the
Grantee may designate a beneficiary of the Grantee’s Incentive Stock Option in
the event of the Grantee’s death on a beneficiary designation form provided by
the Administrator. Other Awards may be transferred by will and by the laws of
descent and distribution, and during the lifetime of the Grantee, by gift or
pursuant to a domestic relations order to members of the Grantee’s Immediate
Family to the extent and in the manner determined by the Administrator.

 

(k) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to grant
such Award, or such other date as is determined by the Administrator. Notice of
the grant determination shall be given to each Employee, Director or Consultant
to whom an Award is so granted after the date of such grant.

 

7. Award Exercise or Purchase Price, Consideration and Taxes.

 

(a) Exercise or Purchase Price. The exercise or purchase price, if any, for an
Award shall be as follows:

 

(i) In the case of an Incentive Stock Option:

 

(A) granted to an Employee who, at the time of the grant of such Incentive Stock
Option owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant; or

 

(B) granted to any Employee other than an Employee described in the preceding
paragraph, the per Share exercise price shall be not less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii) In the case of a Non-Qualified Stock Option, the per Share exercise price
shall be not less than eighty-five percent (85%) of the Fair Market Value per
Share on the date of grant unless otherwise determined by the Administrator.

 

(iii) In the case of Awards intended to qualify as Performance-Based
Compensation, the exercise or purchase price, if any, shall be not less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iv) In the case of other Awards, such price as is determined by the
Administrator.

 

(v) Notwithstanding the foregoing provisions of this Section 7(a), in the case
of an Award issued pursuant to Section 6(d), above, the exercise or purchase
price for the Award shall be determined in accordance with the provisions of the
relevant instrument evidencing the agreement to issue such Award.

 

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(b) Consideration. Subject to Applicable Laws, the consideration to be paid for
the Shares to be issued upon exercise or purchase of an Award, including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following, provided that the portion of the consideration
equal to the par value of the Shares must be paid in cash or other legal
consideration permitted by the Delaware General Corporation Law:

 

(i) cash;

 

(ii) check;

 

(iii) delivery of Grantee’s promissory note with such recourse, interest,
security, and redemption provisions as the Administrator determines as
appropriate (but with such interest rate that would not result in an accounting
compensation charge with respect to the use of a promissory note unless
otherwise determined by the Administrator);

 

(iv) if the exercise or purchase occurs on or after the Registration Date,
surrender of Shares or delivery of a properly executed form of attestation of
ownership of Shares as the Administrator may require (including withholding of
Shares otherwise deliverable upon exercise of the Award) which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
exercise price of the Shares as to which said Award shall be exercised (but only
to the extent that such exercise of the Award would not result in an accounting
compensation charge with respect to the Shares used to pay the exercise price
unless otherwise determined by the Administrator);

 

(v) with respect to Options, if the exercise occurs on or after the Registration
Date, payment through a broker-dealer sale and remittance procedure pursuant to
which the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction; or

 

(vi) any combination of the foregoing methods of payment.

 

(c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other
person until such Grantee or other person has made arrangements acceptable to
the Administrator for the satisfaction of any foreign, federal, state, or local
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Subject
to the Tax Matters Agreement, upon exercise of an Award the Company shall
withhold or collect from Grantee an amount sufficient to satisfy such tax
obligations.

 

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8. Exercise of Award.

 

(a) Procedure for Exercise; Rights as a Stockholder.

 

(i) Any Award granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator under the terms of the Plan
and specified in the Award Agreement.

 

(ii) An Award shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the Award
by the person entitled to exercise the Award and full payment is received for
the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to pay
the purchase price as provided in Section 7(b)(v). Notwithstanding the
foregoing, an Option issued pursuant to the Employee Benefit Matters Agreement
shall be deemed to be exercised in accordance with the procedures outlined in
the Employee Benefit Matters Agreement. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to Shares subject to an Award, notwithstanding the exercise of an
Option or other Award. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Award. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in the Award Agreement
or Section 10, below.

 

(b) Exercise of Award Following Termination of Continuous Service.

 

(i) An Award may not be exercised after the termination date of such Award set
forth in the Award Agreement and may be exercised following the termination of a
Grantee’s Continuous Service only to the extent provided in the Award Agreement.

 

(ii) Where the Award Agreement permits a Grantee to exercise an Award following
the termination of the Grantee’s Continuous Service for a specified period, the
Award shall terminate to the extent not exercised on the last day of the
specified period or the last day of the original term of the Award, whichever
occurs first.

 

(iii) Any Award designated as an Incentive Stock Option to the extent not
exercised within the time permitted by law for the exercise of Incentive Stock
Options following the termination of a Grantee’s Continuous Service shall
convert automatically to a Non-Qualified Stock Option and thereafter shall be
exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.

 

9. Conditions Upon Issuance of Shares.

 

(a) Shares shall not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all Applicable Laws, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.

 

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(b) As a condition to the exercise of an Award, the Company may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any Applicable
Laws.

 

10. Adjustments Upon Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
may be granted to any Grantee in any fiscal year of the Company, as well as any
other terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar transaction affecting
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to Common Stock including a corporate merger, consolidation, acquisition
of property or stock, separation (including a spin-off or other distribution of
stock or property), reorganization, liquidation (whether partial or complete) or
any similar transaction; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been “effected without
receipt of consideration.” Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.

 

11. Corporate Transactions/Related Entity Dispositions.

 

(a) Termination of Award to Extent Not Assumed.

 

(i) Corporate Transaction. Effective upon the consummation of a Corporate
Transaction, all outstanding Awards under the Plan shall terminate. However, all
such Awards shall not terminate to the extent they are Assumed in connection
with the Corporate Transaction.

 

(ii) Related Entity Disposition. Effective upon the consummation of a Related
Entity Disposition, for purposes of the Plan and all Awards, there shall be a
deemed termination of Continuous Service of each Grantee who is at the time
engaged primarily in service to the Related Entity involved in such Related
Entity Disposition and each Award of such Grantee which is at the time
outstanding under the Plan shall be exercisable in accordance with the terms of
the Award Agreement evidencing such Award. However, such Continuous Service
shall not be deemed to terminate as to the portion of any such award that is
Assumed.

 

(b) Acceleration of Award Upon Corporate Transaction /Related Entity
Disposition. The Administrator shall have the authority, exercisable either in
advance of any

 

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actual or anticipated Corporate Transaction or Related Entity Disposition or at
the time of an actual Corporate Transaction or Related Entity Disposition and
exercisable at the time of the grant of an Award under the Plan or any time
while an Award remains outstanding, to provide for the full or partial automatic
vesting and exercisability of one or more outstanding unvested Awards under the
Plan and the release from restrictions on transfer and repurchase or forfeiture
rights of such Awards in connection with a Corporate Transaction or Related
Entity Disposition, on such terms and conditions as the Administrator may
specify. The Administrator also shall have the authority to condition any such
Award vesting and exercisability or release from such limitations upon the
subsequent termination of the Continuous Service of the Grantee within a
specified period following the effective date of the Corporate Transaction or
Related Entity Disposition. The Administrator may provide that any Awards so
vested or released from such limitations in connection with a Related Entity
Disposition, shall remain fully exercisable until the expiration or sooner
termination of the Award.

 

(c) Effect of Acceleration on Incentive Stock Options. The portion of any
Incentive Stock Option accelerated under this Section 11 in connection with a
Corporate Transaction or Related Entity Disposition shall remain exercisable as
an Incentive Stock Option under the Code only to the extent the $100,000 dollar
limitation of Section 422(d) of the Code is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated excess portion of such Option
shall be exercisable as a Non-Qualified Stock Option.

 

12. Effective Date and Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

 

13. Amendment, Suspension or Termination of the Plan.

 

(a) The Board may at any time amend, suspend or terminate the Plan. To the
extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.

 

(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.

 

(c) Any amendment, suspension or termination of the Plan (including termination
of the Plan under Section 12, above) shall not affect Awards already granted,
and such Awards shall remain in full force and effect as if the Plan had not
been amended, suspended or terminated, unless mutually agreed otherwise between
the Grantee and the Administrator, which agreement must be in writing and signed
by the Grantee and the Company.

 

14. Reservation of Shares.

 

(a) The Company, during the term of the Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

 

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(b) The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

 

15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not
confer upon any Grantee any right with respect to the Grantee’s Continuous
Service, nor shall it interfere in any way with his or her right or the right of
the Company or IMPCO to terminate the Grantee’s Continuous Service at any time,
with or without cause, and with or without notice.

 

16. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company, a Related Entity,
IMPCO, or a Subsidiary of IMPCO, Awards shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of the
Company, a Related Entity, IMPCO, or a Subsidiary of IMPCO, and shall not affect
any benefits under any other benefit plan of any kind or any benefit plan
subsequently instituted under which the availability or amount of benefits is
related to level of compensation. The Plan is not a “Retirement Plan” or
“Welfare Plan” under the Employee Retirement Income Security Act of 1974, as
amended.

 

17. Stockholder Approval. The grant of Incentive Stock Options under the Plan
shall be subject to approval by the stockholders of the Company within twelve
(12) months before or after the date the Plan is adopted excluding Incentive
Stock Options issued in substitution for outstanding Incentive Stock Options
pursuant to Section 424(a) of the Code. Such stockholder approval shall be
obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.

 

18. Effect of Section 162(m) of the Code. Following the Registration Date, the
Plan, and all Awards issued thereunder, are intended to be exempt from the
application the stockholder approval requirements of Section 162(m) of the Code,
which restricts under certain circumstances the Federal income tax deduction for
compensation paid by a public company to named executives in excess of $1
million per year. The exemption is based on Treasury Regulation Section
1.162-27(f)(4)(iii), in the form existing on the effective date of the Plan,
with the understanding that such regulation generally exempts from the
application of the stockholder approval requirements of Section 162(m) of the
Code compensation paid pursuant to a plan of a subsidiary of a public company
that becomes publicly held. Under Treasury Regulation Section
1.162-27(f)(4)(iii), and in the event of a Registration Date, this exemption is
available to the Plan for the duration of the period that lasts until the first
regularly scheduled meeting of the stockholders of the Company that occurs more
than 12 months after the Registration Date. The Committee may, without
stockholder approval, amend the Plan retroactively and/or prospectively to the
extent it determines such amendment is necessary in order to comply with any
subsequent clarification of Section 162(m) of the Code required to preserve the
Company’s Federal income tax deduction for compensation paid pursuant to the
Plan. To the extent that the Administrator determines as of the date of grant of
an Award that (i) the Award is intended to qualify as Performance-Based
Compensation and (ii) the exemption described above is no longer available with
respect to such Award, such Award shall not be effective until any stockholder
approval required under Section 162(m) of the Code has been obtained.

 

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