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UQM TECHNOLOGIES, INC.

2002 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT

 

THIS AGREEMENT made as of this 21st day of February, 2003, between UQMTECHNOLOGIES, INC., a Colorado corporation (together with its Affiliated Corporations,except where the context requires otherwise, the "Company"), and William G.Rankin (the "Option Holder").

1. **Grant of Option**. Pursuant to the UQM Technologies,Inc. 2002 Equity Incentive Plan (the "Plan") and subject to the terms andconditions of this Agreement, the Company hereby grants to the Option Holder an incentivestock option (the "Option") to purchase 36,000 shares of the common stock of theCompany (the "Stock") at an exercise price per share of $2.75 (the "OptionPrice"). The Option grant shall be effective as of February 14, 2003 (the"Effective Date"). The Option is intended to qualify as an incentive stockoption under Section 422 of the Internal Revenue Code of 1986, as amended (the"Code").

2. **Requirements for Exercise; Vesting**.

(a) **In General**. Except as provided otherwise in thisAgreement, the Option shall not become exercisable until the Option Holder has completedone full year of continuous employment after the Effective Date. Upon the completion ofone full year of continuous employment after the Effective Date, the Option shall becomevested and exercisable in increments, if the Option Holder is still in the employ of theCompany on the dates indicated in the following schedule:

Percentage of OptionThat Shall Become Vestedand Exercisable on Each Date
February 21, 200433.3%February 21, 2005an additional 33.3%February 21, 2006an additional 33.4%
Except as set forth in Section 5 of this Agreement, the Optionshall not be exercisable as to any shares of Stock as to which the vesting requirements ofthis Section 2 shall not be satisfied, regardless of the circumstances under which theOption Holder’s employment by the Company shall be terminated. The number of sharesof Stock as to which the Option may be exercised shall be cumulative, so that once theOption shall become vested and exercisable as to any shares of Stock it shall continue tobe vested and exercisable as to such shares, until expiration or termination of the Optionas provided in Section 6 hereof. If at any time the number of shares of Stock thatare covered by the vested and exercisable portion of the Option includes a fractionalshare, the number of shares of Stock as to which the Option shall be actually vested andexercisable shall be rounded down to the next whole share of Stock.

(b) **Accelerated Vesting in Certain Circumstances**. TheOption Holder shall become 100% vested with respect to the entire Option, and the entireOption shall become exercisable, upon a reorganization or change in control of the Company(as defined in Section 5(b) below).

3. **Method for Exercising the Option**. The Option may beexercised only by delivery of written notice of exercise, together with payment of theOption Price as provided below, in person or through certified or registered mail, fax orovernight delivery to the Company at the following address: UQM Technologies, Inc.,Attention: Corporate Secretary, 425 Corporate Circle, Golden, Colorado 80401, or suchother address as shall be furnished in writing to the Option Holder by the Company. Suchwritten notice shall specify that the Option is being exercised, and the number of sharesof Stock with respect to which the Option is exercised, the Option Price shall be paid nolater than 30 days after the notice of exercise is delivered. The Option shall beexercised only when the Option Price is paid in full.

The Company intends to register the shares of Stock subject to thisOption and this Option on a Form S-8 Registration Statement (or any successor orreplacement Form). Notwithstanding such registration, the Company may require the OptionHolder, as a condition of exercise of this Option, to give written assurance in substanceand form satisfactory to the Company and its counsel to the effect that the Option Holderis acquiring the Stock for his own account for investment and not with any presentintention of selling or otherwise distributing the same, and to such other effects as theCompany deems necessary or appropriate in order to comply with federal and statesecurities laws. Legends evidencing such restrictions may be placed on the Stockcertificates.

The purchase of such Stock shall take place at the address of theCompany set forth above upon delivery of a notice of exercise that specifies the number ofshares with respect to which the Option is being exercised and payment of the Option Pricefor the Stock in full, within 30 days of the delivery of the notice of exercise, (i) bycertified or cashier’s check payable to the Company’s order, or (ii) by wiretransfer to such account as may be specified by the Company for this purpose, or (iii) bydelivery to the Company of certificates representing the number of shares of Stock thenowned by the Option Holder, the Fair Market Value of which equals the Option Price of theStock to be purchased pursuant to the Option, properly endorsed for transfer to theCompany; provided, however, that no Option may be exercised by delivery to the Company ofcertificates representing Stock, unless such Stock has been held by the Option Holder formore than six (6) months, or (iv) by delivery to the Company of a properly executed noticeof exercise together with irrevocable instructions to a broker to deliver to the Companypromptly the amount of the proceeds of the sale of all or a portion of the Stock or of aloan from the broker to the Option Holder required to pay the Option Price; provided,however, that if the Option Holder is subject to the Sarbanes-Oxley Act of 2002, theOption Price shall not be paid with the proceeds of a loan. For purposes of this Option,the Fair Market Value of any shares of Stock delivered in payment of the Option Price uponexercise of the Option shall be the Fair Market Value as of the exercise date; theexercise date shall be the day of delivery of the certificates for the Stock used aspayment of the Option Price.

Upon such notice to the Company and payment of the Option Price, theexercise of the Option shall be deemed to be effective, and a properly executedcertificate or certificates representing the Stock so purchased shall be issued by theCompany and delivered to the Option Holder.

4. **Adjustment of the Option**.

(a) **Adjustment by Stock Split, Stock Dividend, Etc**. If atany time the Company increases or decreases the number of its outstanding shares of Stock,or changes in any way the rights and privileges of such shares, by means of the payment ofa stock dividend or the making of any other distribution on such shares payable in Stock,or through a Stock split or subdivision of shares, or a consolidation or combination ofshares, or through a reclassification or recapitalization involving the Stock, thenumbers, rights and privileges of the shares of Stock included in the Option shall beincreased, decreased or changed in like manner as if such shares had been issued andoutstanding, fully paid and non- assessable at the time of such occurrence.

(b) **Other Distributions and Changes in the Stock.**If theCompany shall at any time distribute with respect to the Stock assets or securities ofpersons other than the Company (excluding cash or distributions referred to in subsection(a)) or grant to the holders of its Stock rights to subscribe *pro rata* foradditional shares thereof or for any other securities of the Company or there shall be anyother change (except as described in subsection (a)) in the number or kind of outstandingshares of Stock or of any stock or other securities into which the Stock shall be changedor for which it shall have been exchanged, and if the Committee shall in its discretiondetermine that the event equitably requires an adjustment in the number or kind of sharessubject to the Option, an adjustment to the Option Price, or the taking of any otheraction by the Committee, including without limitation, the setting aside of any propertyfor delivery to the Option Holder upon the exercise of the Option, then such adjustmentshall be made, or other actions taken, by the Committee and shall be effective for allpurposes of this Agreement.

(c) **Apportionment of Option Price**. Upon any occurrencedescribed in the preceding subsections (a) and (b), the aggregate Option Price for theshares of Stock then subject to the Option shall remain unchanged and shall be apportionedratably over the increased or decreased number or changed kinds of securities or otherproperties subject to the Option. Any fractional shares resulting from any of theforegoing adjustments shall be disregarded and eliminated from this Option.

5. **Reorganization and Change in Control.**

(a) **Full Vesting; Termination; Assumption or Substitution.**Upon the occurrence of a Corporate Transaction (as defined in subsection 5(c)), the Optionshall become fully exercisable regardless of whether all conditions of exercise relatingto length of service have been satisfied. The Committee may also provide for theassumption or substitution of the Option by the surviving entity as described insubsection 5(b) and make any other provision for the Option as the Committee deemsappropriate in its sole discretion. The Committee may provide that any portion of theOption that outstanding at the time the Corporate Transaction is closed shall expire atthe time of the closing, as the Committee determines in its sole discretion.

(b) **Assumption or Substitution.****The Company, orthe successor or purchaser, as the case may be, may make adequate provision for theassumption of the Option or the substitution of a new option for the outstanding Option onterms comparable to the Option.

(c) **Corporate Transaction.**A Corporate Transaction shallinclude the following:

(i) ***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); or

(ii) ***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; or

(iii) ***Liquidation:*** the dissolution or liquidation of the    Company; or

(iv) ***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 of the Plan), 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 (2/3) 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 of all directors at    any time during such period; or

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

Notwithstanding anything to the contrary in this Section 5 to thecontrary, no Option or other Award will become exercisable and/or vested by virtue of theoccurrence of a Corporate Transaction if the Participant or any group of which suchParticipant is a member of the person whose acquisition constituted the CorporateTransaction.

6. **Expiration and Termination of the Option**. The Optionshall expire on the tenth (10th) anniversary of the Effective Date, (the periodfrom the Effective Date to the expiration date is the "Option Period") or priorto such time as follows:

(a) **Termination for Cause.**If the Option Holder’semployment by the Company is terminated for "cause," as determined by theCompany, within the Option Period, the entire Option, whether or not vested, shall becomevoid, shall be forfeited and shall terminate immediately upon the termination ofemployment of the Option Holder. For this purpose, "cause" shall mean a grossviolation, as determined by the Company, of the Company’s established policies andprocedures.

(b) **Termination on Account of Disability**. If the OptionHolder becomes Disabled, the Option may be exercised by the Option Holder within one yearfollowing the Option Holder’s termination of services on account of Disability(provided that such exercise must occur within the Option Period), but not thereafter. Inany such case, the Option may be exercised only as to the shares as to which the Optionhad become exercisable on or before the date of the Option Holder’s termination ofservices.

(c) **Death**. If the Option Holder dies during the OptionPeriod while still employed by or performing services for the Company or within the oneyear period referred to in (b) above or the three (3) month period referred to in (d)below, the Option may be exercised by those entitled to do so under the OptionHolder’s will or by the laws of descent and distribution within one year followingthe Option Holder’s death (provided that such exercise must occur within the OptionPeriod), but not thereafter. In any such case, the Option may be exercised only as to theshares as to which the Option had become exercisable on or before the date of the OptionHolder’s death.

(d) **Termination for Other Reasons**. If the services of theOption Holder are terminated (which for this purpose means that the Option Holder is nolonger employed by the Company or performing services for the Company) within the OptionPeriod for any reason other than cause, Disability, or death, the Option may be exercisedby the Option Holder within three (3) months following the date of such termination(provided that such exercise must occur within the Option Period), but not thereafter. Inany such case, the Option may be exercised only as to the shares as to which the Optionhad become exercisable on or before the date of termination of services.

7. **Transferability**. The Option may not be transferredexcept by will or pursuant to the laws of descent and distribution, and it shall beexercisable during the Option Holder’s life only by him, or in the event ofDisability or incapacity, by his guardian or legal representative, and after his death,only by those entitled to do so under his will or the applicable laws of descent anddistribution. Upon any attempt to transfer, assign, pledge, hypothecate or otherwisedispose of the Option or any right or privilege granted hereunder, or upon the levy of anyattachment or similar process upon the rights and privileges herein conferred, the Optionand the rights and privileges hereunder shall become immediately null and void.

8. **Limitation of Rights.** The Option Holder or hissuccessor shall have no rights as a stockholder with respect to the shares of Stockcovered by this Option until the Option Holder or his successors become the holder ofrecord of such shares. 

9. **Stock Reserve.** The Company shall at all times duringthe term of this Agreement reserve and keep available such number of shares of Stock aswill be sufficient to satisfy the requirements of this Agreement, and the Company shallpay all original issue taxes (if any) on the exercise of the Option, and all other feesand expenses necessarily incurred by the Company in connection therewith. 

10. **Withholding**. The issuance of Stock pursuant to theexercise of this Option shall be subject to the requirement that the Option Holder shallmake appropriate arrangements with the Company to provide for the amount of additionalincome and other tax withholding applicable to the exercise of the Option.
**11. **Miscellaneous.**

(a) **Notices**. Any notice required or permitted to be givenunder this Agreement shall be in writing and shall be given by first class registered orcertified mail, postage prepaid, or by personal delivery to the appropriate party,addressed:

(i) If to the Company, to UQM Technologies, Inc., Attention: Corporate    Secretary, 7501 Miller Drive, Frederick, Colorado 80530, or at such other address as may    have been furnished to the Option Holder in writing by the Company; or

(ii) If to the Option Holder, to the Option Holder at UQM Technologies,    Inc., 7501 Miller Drive, Frederick, Colorado 80530, or at other address as may have been    furnished to the Company by the Option Holder. 

Any such notice shall be deemed to have been given as of the second dayafter deposit in the United States mails, postage prepaid, properly addressed as set forthabove, in the case of mailed notice, or as of the date delivered in the case of personaldelivery.

(b) **Amendment**. Except as provided herein, this Agreementmay not be amended or otherwise modified unless evidenced in writing and signed by theCompany and the Option Holder.

(c) **Defined Terms**. Capitalized terms shall have themeaning set forth in the Plan or herein, as the case may be.

(d) **Compliance with Securities Laws**. This Agreement shallbe subject to the requirement that if at any time counsel to the Company shall determinethat the listing, registration or qualification of the shares of Stock subject to theOption upon any securities exchange or under any state or federal law, or the consent orapproval of any governmental or regulatory body, is necessary as a condition of, or inconnection with, the issuance or purchase of such shares thereunder, the Option may not beexercised in whole or in part unless such listing, registration, qualification, consent orapproval 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 obtain such listing,registration or qualification.

(e) **Construction; Severability**. The section headingscontained herein are for reference purposes only and shall not in any way affect themeaning or interpretation of this Agreement. The invalidity or unenforceability of anyprovision of this Agreement shall not affect the validity or enforceability of any otherprovision of this Agreement, and each other provision of this Agreement shall be severableand enforceable to the extent permitted by law.

(f) **Waiver**. Any provision contained in this Agreement maybe waived, either generally or in any particular instance, by the Committee appointedunder the Plan, but only to the extent permitted under the Plan.

(g) **Binding Effect**. This Agreement shall be binding uponand inure to the benefit of the Company and the Option Holder and their respective heirs,executors, administrators, legal representatives, successors and assigns.

(h) **Rights to Employment**. Nothing contained in thisAgreement shall be construed as giving the Option Holder any right to be retained in theemploy of the Company and this Agreement is limited solely to governing the rights andobligations of the Option Holder with respect to the Stock and the Option.

(i) **Governing Law**. This Agreement shall be governed byand construed in accordance with the laws of the State of Colorado.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of theday and year first above written.

 

 

**UQM TECHNOLOGIES, INC.**

 

By /s/ Donald A. FrenchDonald A. French, Treasurer

 

**OPTION HOLDER**

 

/s/ William G. RankinWilliam G. Rankin

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