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., aColorado corporation, effective April 3, 2002, hereby establishes the UQMTechnologies, Inc. 2002 Equity Incentive Plan (the "Plan") for certain employeesof the Company (as defined in subsection 2.1(g)) and certain consultants to theCompany. The Plan permits the grant of incentive stock options within themeaning of Section 422 of the Internal Revenue Code of 1986, as amended, andnon-qualified stock options to certain key employees of the Company and tocertain consultants to the Company.

1.2 ***Purposes***. The purposes of the Plan are toprovide those who are selected for participation in the Plan with addedincentives to continue in the long-term service of the Company and to create insuch persons a more direct interest in the future success of the operations ofthe Company by relating incentive compensation to increases in shareholdervalue, so that the income of those participating in the Plan is more closelyaligned with the income of the Company's shareholders. The Plan is also designedto provide a financial incentive that will help the Company attract, retain andmotivate the most qualified employees and consultants.

1.3 ***Effective Date**.* The initial effective dateof the Plan is April 3, 2002. No Option shall be granted to any individual whois 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 Planshall be approved the Company's shareholders to the extent and in the mannersuch approval is required by applicable law or the rules of the exchange orother market on which the Company's stock is traded.
** 

ARTICLE II

DEFINITIONS**
2.1 ***Definitions***. The following terms shall havethe meanings set forth below:

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

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

(c) "***Code***" means the Internal Revenue Code of1986, as it may be amended from time to time.

(d) "***Committee***" means a committee consisting ofmembers of the Board who are empowered hereunder to take actions in theadministration of the Plan. If applicable, the Committee shall be so constitutedat all times as to permit the Plan to comply with Rule 16b-3 or any successorrule promulgated under the Exchange Act. Except as provided in Section 3.2, theCommittee shall select Participants from Eligible Employees and EligibleConsultants of the Company and shall determine the Options to be grantedpursuant to the Plan and the terms and conditions thereof.

(e) ***"Company"*** means UQM Technologies, Inc. andthe 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 originaleffective date of the Plan, April 3, 2002.

(h) ***"Eligible Consultants"*** means thoseconsultants to the Company who are determined, by the Committee, to beindividuals whose services are important to the Company and who are eligible toreceive 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 thesuccessful conduct of its business. For purposes of the Plan, an employee is anyindividual who provides services to the Company or any subsidiary or divisionthereof as a common law employee and whose remuneration is subject to thewithholding of federal income tax pursuant to section 3401 of the Code. Employeeshall not include any individual (A) who provides services to the Company or anysubsidiary or division thereof under an agreement, contract, or any otherarrangement pursuant to which the individual is initially classified as anindependent contractor or (B) whose remuneration for services has not beentreated initially as subject to the withholding of federal income tax pursuantto section 3401 of the Code even if the individual is subsequently reclassifiedas a common law employee as a result of a final decree of a court of competentjurisdiction 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 SecuritiesExchange Act of 1934, as it may be amended from time to time.

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

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

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

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

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

(p) ***"Option Holder"*** means a Participant who hasbeen 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 theOption Holder.

(r) ***"Option Price"*** means the price at whicheach share of Stock subject to an Option may be purchased, determined inaccordance with subsection 7.2(b).

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

(t) ***"Securities Act"*** means the Securities Actof 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 commonstock of UQM Technologies, Inc.

(w) ***"UQM"*** means UQM Technologies, Inc., aColorado corporation, and any successor thereto.

2.2 ***Gender and Number***. Except when otherwiseindicated by the context, the masculine gender shall also include the femininegender, and the definition of any term herein in the singular shall also includethe plural.

 
**ARTICLE III

PLAN ADMINISTRATION**
3.1 ***General***. The Plan shall be administered bythe Committee. In accordance with the provisions of the Plan, the Committeeshall, in its sole discretion, select the Participants from among the EligibleEmployees and Eligible Consultants, determine the Options to be granted pursuantto the Plan, fix the Option Price, Option Period and manner in which an Optionbecomes exercisable, as the Committee may deem necessary or desirable andconsistent with the terms of the Plan. The Committee shall determine the form orforms of the agreements with Participants that shall evidence the particularprovisions, terms, conditions, rights and duties of the Company and theParticipants with respect to Options granted pursuant to the Plan, whichprovisions need not be identical except as may be provided herein; provided,however, that Eligible Consultants shall not be eligible to receive IncentiveOptions. The Committee may from time to time adopt such rules and regulationsfor carrying out the purposes of the Plan as it may deem proper and in the bestinterests of the Company. The Committee may correct any defect, supply anyomission or reconcile any inconsistency in the Plan or in any agreement enteredinto hereunder in the manner and to the extent it shall deem expedient and itshall be the sole and final judge of such expediency. No member of the Committeeshall be liable for any action or determination made in good faith. Thedeterminations, interpretations and other actions of the Committee pursuant tothe provisions of the Plan shall be binding and conclusive for all purposes andon 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 ofEligible Employees and Eligible Consultants, subject to such restrictions andconditions as the Committee, in its sole discretion, may impose. The delegationshall be as broad or as narrow as the Committee shall determine. To the extentthat the Committee has delegated the authority to determine certain terms andconditions of an Option, all references in the Plan to the Committee's exerciseof authority in determining such terms and conditions shall be construed toinclude the officer or officers to whom the Committee has delegated the powerand authority to make such determination. The power and authority to grantOptions to any Eligible Employee or Eligible Consultant who is covered bySection 16(b) of the Exchange Act or who is, or is expected to be, covered bySection 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 aggregatenumber of Shares that may be issued under the Plan pursuant to Options is1,500,000 Shares. The maximum number of Shares that may be issued underIncentive Options is 1,500,000 Shares. The Shares may be either authorized andunissued Shares or previously issued Shares acquired by the Company. Suchmaximum numbers may be increased from time to time by approval of the Board andby the stockholders of the Company if, in the opinion of counsel for theCompany, stockholder approval is required. The Company shall at all times duringthe term of the Plan and while any Options are outstanding retain as authorizedand unissued Stock at least the number of Shares from time to time requiredunder the provisions of the Plan, or otherwise assure itself of its ability toperform its obligations hereunder.

4.2 ***Limit on Option Grants***. The maximum numberof Shares with respect to which a Participant may receive Options under the Planin any calendar year is 500,000 Shares. The maximum number may be increased fromtime to time by approval of the Board and by the stockholders of the Company. NoOptions may be granted with respect to any increased number of Shares until suchincrease has been approved by the stockholders. Stockholder approval shall notbe required for increases solely pursuant to Section 4.4 below.

4.3 ***Other Shares of Stock***. Any Shares that aresubject 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 aspayment of the exercise price of an Option shall automatically become availablefor use under the Plan, provided, however, that no more than 1,500,000 Sharesmay 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 itsoutstanding Shares or change in any way the rights and privileges of such Sharesby means of the payment of a stock dividend or any other distribution upon suchShares payable in Stock, or through a stock split, subdivision, consolidation,combination, reclassification or recapitalization involving the Stock, then inrelation to the Stock that is affected by one or more of the above events, thenumbers, rights and privileges of the following shall be increased, decreased orchanged in like manner as if they had been issued and outstanding, fully paidand nonassessable at the time of such occurrence: (i) the Shares as to whichOptions may be granted under the Plan, (ii) the Shares then included in eachoutstanding Option granted hereunder, (iii) the maximum number of Sharesavailable for grant to any one person in a calendar year pursuant toSection 4.2, (iv) the maximum number of Shares available for grant pursuant toIncentive Options, and (v) the number of Shares subject to a delegation ofauthority 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 tothe Stock assets or securities of persons other than the Company (excluding cashor distributions referred to in Section 4.4), or

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

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

and if the Committee shall in its discretion determine thatthe event described in subsection (a), (b), or (c) above equitably requires anadjustment in the number or kind of Shares subject to an Option, an adjustmentin the Option Price or the taking of any other action by the Committee,including without limitation, the setting aside of any property for delivery tothe 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 theCommittee and shall be effective for all purposes of the Plan and for eachoutstanding Option that involves the particular type of stock for which a changewas effected. 

4.6 ***General Adjustment Rules***. No adjustment orsubstitution provided for in this Article IV shall require the Company to sell afractional Share under any Option, or otherwise issue a fractional Share, andthe total substitution or adjustment with respect to each Option shall belimited by deleting any fractional Share. In the case of any such substitutionor adjustment, the aggregate Option Price for the total number of Shares thensubject to an Option shall remain unchanged but the Option Price per Share undereach such Option shall be equitably adjusted by the Committee to reflect thegreater or lesser number of Shares or other securities into which the Stocksubject 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, whosedeterminations with regard thereto shall be final and binding upon all partiesthereto.

 
**ARTICLE V

CORPORATE REORGANIZATION; CHANGE IN CONTROL**
5.1 ***Vesting and Termination of Options.*** Unlessthe Committee provides otherwise at the time an Option is granted, upon theoccurrence of a Corporate Transaction (as defined in Section 5.3), all Optionsshall become fully exercisable regardless of whether all conditions of exerciserelating to length of service, attainment of financial performance goals orotherwise have been satisfied. The Committee may also provide for the assumptionor substitution of any or all Awards as described in Section 5.2 and make anyother provision for outstanding Awards as the Committee deems appropriate. TheCommittee may provide that any Options that are outstanding at the time theCorporate Transaction is closed shall expire at the time of the closing. TheCommittee need not take the same action with respect to all outstanding Options.

5.2 ***Assumption or Substitution of Options.***TheCompany, or the successor or purchaser, as the case may be, may make adequateprovision for the assumption of the outstanding Options or the substitution ofnew options for the outstanding Options on terms comparable to the outstandingOptions.

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

(a) ***Merger; Reorganization:*** the merger orconsolidation of the Company with or into another corporation or otherreorganization (other than a reorganization under the United States BankruptcyCode) of the Company (other than a consolidation, merger, or reorganization inwhich the Company is the continuing corporation and which does not result in anyreclassification or change of outstanding shares of Stock); or

(b) ***Sale:*** the sale or conveyance of theproperty of the Company as an entirety or substantially as an entirety (otherthan a sale or conveyance in which the Company continues as a holding company ofan entity or entities that conduct the business or businesses formerly conductedby the Company) or the sale of more than 50% of the outstanding voting stock ofthe Company;

(c) ***Liquidation:*** the dissolution or liquidationof the Company;

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

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

 
**ARTICLE VI

PARTICIPATION**
Participants in the Plan shall be those Eligible Employeeswho, in the judgment of the Committee, are performing, or during the term oftheir incentive arrangement will perform, vital services in the management,operation and development of the Company, and significantly contribute, or areexpected to significantly contribute, to the achievement of long-term corporateeconomic objectives. Eligible Consultants shall be selected from thosenon-Employee consultants to the Company who are performing services important tothe operation and growth of the Company. Participants may be granted from timeto time one or more Options; provided, however, that the grant of each suchOption shall be separately approved by the Committee and receipt of one suchAward shall not result in automatic receipt of any other Option. Upondetermination 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 theCommittee, enter into an agreement with the Company, in such form as theCommittee shall determine and which is consistent with the provisions of thePlan, specifying such terms, conditions, rights and duties. Options shall bedeemed to be granted as of the date specified in the grant resolution of theCommittee, which date shall be the date of any related agreement with theParticipant. In the event of any inconsistency between the provisions of thePlan and any such agreement entered into hereunder, the provisions of the Planshall govern.

 
**ARTICLE VII

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

7.2 ***Stock Option Agreements***. Each Optiongranted under the Plan shall be evidenced by a written stock option certificateor agreement (an "Option Agreement"). An Option Agreement shall be issued by theCompany in the name of the Participant to whom the Option is granted and in suchform as may be approved by the Committee. The Option Agreement shall incorporateand conform to the conditions set forth in this Section 7.2 as well as suchother terms and conditions that are not inconsistent as the Committee mayconsider appropriate in each case.

(a) ***Number of Shares.*** Each Option Agreementshall state that it covers a specified number of shares of Stock, as determinedby the Committee.

(b) ***Price.*** The price at which each share ofStock covered by an Option may be purchased shall be determined in each case bythe Committee and set forth in the Option Agreement, but, in the case of anIncentive Option, in no event shall the price be less than 100 percent of theFair 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. TheOption Agreement shall also set forth any installment or other restrictions onexercise of the Option during such period, if any, as may be determined by theCommittee. Each Option shall become exercisable and vest over such period oftime, 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, duringwhich an Option may be exercised following termination of the Option Holder'sservices. The effect of this subsection 7.2(d) shall be limited to determiningthe consequences of a termination and nothing in this subsection 7.2(d) shallrestrict or otherwise interfere with the Company's discretion with respect tothe termination of any individual's services. If the Committee does nototherwise specify, the following shall apply:

(i) If the services of the Option Holder are terminatedwithin the Option Period for "cause", as determined by the Company, the Optionshall 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 theCompany's established policies and procedures.

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

(iii) If the Option Holder dies during the Option Periodwhile still performing services for the Company or within the one year periodreferred to in (ii) above or the three-month period or, in the case ofNon-Qualified Options, the twelve-month period, referred to in (iv) below, theOption may be exercised by those entitled to do so under the Option Holder'swill or by the laws of descent and distribution within one year following theOption Holder's death, (provided that such exercise must occur within the OptionPeriod), but not thereafter. In any such case, the Option may be exercised onlyas to the Shares as to which the Option had become exercisable on or before thedate 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 bythe Company or performing services for the Company) by the Company within theOption Period for any reason other than cause, Disability, or death, the Optionmay be exercised by the Option Holder as follows: (A) in the case of anIncentive Option, within three (3) months following the date of such termination(provided that such exercise must occur within the Option Period), but notthereafter and (B) in the case of a Non-Qualified Option, within twelve (12)months following the date of such termination (provided that such exercise mustoccur within the Option Period), but not thereafter. In any such case, theOption may be exercised only as to the Shares as to which the Option had becomeexercisable on or before the date of termination of services.

(e) ***Eligible Independent Contractors: Termination ofServices, Death.*** Each Option agreement shall provide as follows withrespect to the exercise of the Option:

(i) If the services of the Option Holder terminate within theOption Period other than on account of cause or the Option Holder's death, theOption may be exercised during the remainder of the Option Period. In any suchcase, 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.

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

(iii) If the Option Holder dies during the Option Period, theOption may be exercised by those entitled to do so under the Option Holder'swill or by the laws of descent and distribution for fifteen (15) months afterthe Option Holder's death (if otherwise in the Option Period), but notthereafter. In any such case, the Option may be exercised only as to the Sharesas to which the Option had become exercisable on or before the date of theOption Holder's death.

(f) ***Consideration for Grant of Option.*** EachOption Holder agrees to remain in the employment of the Company or to continueproviding consulting services to the Company, as the case may be, at thepleasure of the Company, for a continuous period of at least one year after thedate the Option is granted, at the rate of compensation in effect on the date ofsuch agreement or at such changed rate as may be fixed, from time to time, bythe Company. Nothing in this paragraph shall limit or impair the Company's rightto terminate the employment of any employee or to terminate the consultingservices of any consultant.

(g) ***Exercise, Payments, Etc.***
(i) ***Manner of Exercise.*** The method forexercising each Option granted hereunder shall be by delivery to the Company ofwritten notice specifying the number of Shares with respect to which such Optionis exercised. The purchase of such Shares shall take place at the principaloffices of the Company within thirty (30) days following delivery of suchnotice, at which time the Option Price of the Shares shall be paid in full byany of the methods set forth below or a combination thereof. Except as set forthin the next sentence, the Option shall be exercised when the Option Price forthe number of shares as to which the Option is exercised is paid to the Companyin full. If the Option Price is paid by means of a broker's transactiondescribed in subsection 7.2(g)(ii)(D), in whole or in part, the closing of thepurchase of the Stock under the Option shall take place (and the Option shall betreated as exercised) on the date on which, and only if, the sale of Stock uponwhich the broker's transaction was based has been closed and settled, unless theOption Holder makes an irrevocable written election, at the time of exercise ofthe Option, to have the exercise treated as fully effective for all purposesupon receipt of the Option Price by the Company regardless of whether or not thesale of the Stock by the broker is closed and settled. A properly executedcertificate or certificates representing the Shares shall be delivered to or atthe direction of the Option Holder upon payment therefor. If Options on lessthan all shares evidenced by an Option Certificate are exercised, the Companyshall deliver a new Option Certificate evidencing the Option on the remainingshares upon delivery of the Option Certificate for the Option being exercised.

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

(A) in cash;

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

(C) by delivery to the Company of certificates representingthe number of shares then owned by the Option Holder, the Fair Market Value ofwhich equals the purchase price of the Stock purchased pursuant to the Option,properly endorsed for transfer to the Company; provided however, that no Optionmay 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 Stockdelivered in payment of the purchase price upon exercise of the Option shall bethe Fair Market Value as of the exercise date; the exercise date shall be theday of delivery of the certificates for the Stock used as payment of the OptionPrice;

(D) by delivery to the Company of a promissory note, whichshall be in a principal amount equal to the Option Price plus any federal andstate income tax required to be withheld; which shall be full recourse andsecured by all or a portion of the Stock acquired pursuant to the exercise ofthe Option; which shall bear interest at a rate determined by the Committee, butnot lower than the rate required to avoid the imputation of interest under theCode; which shall provide for level quarterly payments of interest and principalover its term; which shall become payable in full upon the first to occur of thefifth anniversary of the date the Option is exercised, failure to pay anypayment of principal and interest within five days after it is due ortermination of the Option Holder's employment or service for any reason; andwhich shall contain such other terms and conditions including the provision ofsecurity 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 noticeof exercise together with irrevocable instructions to a broker to deliver to theCompany promptly the amount of the proceeds of the sale of all or a portion ofthe Stock or of a loan from the broker to the Option Holder required to pay theOption Price.

(h) ***Date of Grant.*** An Option shall beconsidered as having been granted on the date specified in the grant resolutionof the Committee.

(i) ***Withholding.***
(i) *Non-Qualified Options.* Upon exercise of an Option,the Option Holder shall make appropriate arrangements with the Company toprovide for the amount of additional withholding required by Sections 3102 and3402 of the Code and applicable state and local tax laws, including payment ofsuch taxes through delivery of shares of Stock or by withholding Stock to beissued under the Option, as provided in Article XII.

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

7.3 ***Restrictions on Incentive Options***.

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

(b) ***Ten Percent Stockholders.*** Incentive Optionsgranted to an Option Holder who is the holder of record of 10% or more of theoutstanding Stock of the Company shall have an Option Price equal to 110% of theFair Market Value of the Shares on the date of grant of the Option and theOption 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 orpursuant to the laws of descent and distribution. An Option shall be exercisableduring the Option Holder's lifetime only by him or her, or in the event ofDisability or incapacity, by his or her guardian or legal representative. TheOption Holder's guardian or legal representative shall have all of the rights ofthe 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 theOption Holder may transfer a Non-Qualified Option to a member of the OptionHolder's immediate family, a trust of which members of the Option Holder'simmediate family are the only beneficiaries, or a partnership of which membersof the Option Holder's immediate family or trusts for the sole benefit of theOption Holder's immediate family are the only partners (the "InterVivosTransferee"). Immediate family means the Option Holder's spouse, issue (by birthor adoption), parents, grandparents, siblings (including half brothers andsisters and adopted siblings) and nieces and nephews. No transfer shall beeffective unless the Option Holder shall have notified the Company of thetransfer in writing and has furnished a copy of the documents that effect thetransfer to the Company. The InterVivos Transferee shall be subject to all ofthe terms of this Plan and the Option, including, but not limited to, thevesting schedule, termination provisions, and the manner in which the Option maybe exercised. The Committee may require the Option Holder and the InterVivosTransferee to enter into an appropriate agreement with the Company providingfor, among other things, the satisfaction of required tax withholding withrespect to the exercise of the transferred Option and the satisfaction of anyStock retention requirements applicable to the Option Holder, together with suchother terms and conditions as may be specified by the Committee. Except to theextent provided otherwise in such agreement, the InterVivos Transferee shallhave 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 paywithholding taxes pursuant to Section 17.2 unless the agreement referred to inthe preceding sentence specifically provides otherwise.

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

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

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

 
**ARTICLE VIII

RIGHTS OF PARTICIPANTS**
8.1 ***Service***. Nothing contained in the Plan orin any Option granted under the Plan shall confer upon any Participant any rightwith respect to the continuation of his employment by, or consultingrelationship with, the Company, or interfere in any way with the right of theCompany, subject to the terms of any separate employment agreement or othercontract to the contrary, at any time to terminate such services or to increaseor decrease the compensation of the Participant from the rate in existence atthe time of the grant of an Option. Whether an authorized leave of absence, orabsence in military or government service, shall constitute a termination ofservice shall be determined by the Committee at the time.

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

 
**ARTICLE IX

GENERAL RESTRICTIONS**
9.1 ***Investment Representations***. The Company mayrequire any person to whom an Option is granted, as a condition of exercisingsuch Option, to give written assurances in substance and form satisfactory tothe Company and its counsel to the effect that such person is acquiring theStock for his own account for investment and not with any present intention ofselling or otherwise distributing the same, and to such other effects as theCompany deems necessary or appropriate in order to comply with Federal andapplicable state securities laws. Legends evidencing such restrictions may beplaced on the Stock certificates.

9.2 ***Compliance with Securities Laws***. EachOption grant shall be subject to the requirement that, if at any time counsel tothe Company shall determine that the listing, registration or qualification ofthe shares subject to such Option grant upon any securities exchange or underany state or federal law, or the consent or approval of any governmental orregulatory body, is necessary as a condition of, or in connection with, theissuance or purchase of shares thereunder, such Option grant may not be acceptedor exercised in whole or in part unless such listing, registration,qualification, consent or approval shall have been effected or obtained onconditions acceptable to the Committee. Nothing herein shall be deemed torequire the Company to apply for or to obtain such listing, registration orqualification.

9.3 ***Changes in Accounting Rules***. Except asprovided otherwise at the time an Option is granted, notwithstanding any otherprovision of the Plan to the contrary, if, during the term of the Plan, anychanges in the financial or tax accounting rules applicable to Options shalloccur which, in the sole judgment of the Committee, may have a material adverseeffect on the reported earnings, assets or liabilities of the Company, theCommittee shall have the right and power to modify as necessary, any thenoutstanding and unexercised Options as to which the applicable services or otherrestrictions have not been satisfied.

 
**ARTICLE X

OTHER EMPLOYEE BENEFITS**
The amount of any compensation deemed to be received by aParticipant as a result of the exercise of an Option shall not constitute"earnings" or "compensation" with respect to which any other employee benefitsof such employee are determined, including without limitation benefits under anypension, 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 timemay amend or modify the Plan provided, however, that no amendment ormodification may become effective without approval of the amendment ormodification by the shareholders if shareholder approval is required to enablethe Plan to satisfy any applicable statutory or regulatory requirements, or ifthe Company, on the advice of counsel, determines that shareholder approval isotherwise necessary or desirable.

No amendment, modification or termination of the Plan shallin 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'sobligations to deliver shares of Stock upon the exercise of any Option shall besubject to the Participant's satisfaction of all applicable federal, state andlocal income and other tax withholding requirements.

12.2 ***Withholding With Stock***. At the time theCommittee grants an Option or at any time thereafter, it may, in its solediscretion, grant the Participant an election to pay all such amounts of taxwithholding, or any part thereof, by electing (a) to have the Company withholdfrom shares otherwise issuable to the Participant, shares of Stock having avalue equal to the amount required to be withheld or such lesser amount as maybe elected by the Participant; provided however, that the amount of Stock sowithheld shall not exceed the minimum amount required to be withheld under themethod 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 bythe Participant more than six (6) months prior to the transfer to the Companyand that have a value equal to the amount required to be withheld or such lesseramount as may be elected by the Participant. All elections shall be subject tothe approval or disapproval of the Committee. The value of shares of Stock to bewithheld shall be based on the Fair Market Value of the Stock on the date thatthe amount of tax to be withheld is to be determined (the "Tax Date"). Any suchelections by Participants to have shares of Stock withheld for this purpose willbe 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 theCompany within the meaning of Section 16 of the Exchange Act ("Section 16"), theParticipant must satisfy the requirements of such Section 16 and any applicableRules thereunder with respect to the use of Stock to satisfy such taxwithholding obligation.

 
**ARTICLE XIII

REQUIREMENTS OF LAW**
13.1 ***Requirements of Law***. The issuance of Stockand the payment of cash pursuant to the Plan shall be subject to all applicablelaws, rules and regulations.

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

13.3 ***Governing Law***. The Plan and all agreementshereunder shall be construed in accordance with and governed by the laws of theState of Colorado.

 
**ARTICLE XIV

DURATION OF THE PLAN**
Unless sooner terminated by the Board of Directors, the Planshall terminate at the close of business on April 2, 2012 and no Option shall begranted, or offer to purchase Stock made, after such termination. Optionsoutstanding at the time of the Plan termination may continue to be exercised, orbecome free of restrictions, or paid, in accordance with their terms.

Dated: April 3, 2002, 2002

**UQM TECHNOLOGIES, INC.**
a Colorado corporation

 

By:   /s/
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