**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 additionalincentive 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” meansthe 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 andsecurities 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 aCorporate 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 itsParent 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 aRelated 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 determinationshall 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 theGrantee, 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 ofthe 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 ofIMPCO, 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 theCompany, 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 involvingdishonesty, 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 stockof 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 insuch 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 inconnection 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 theprovision 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 individualremains 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 orcontract, 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 ofthe following transactions: 

 

(i) a merger orconsolidation 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 thesurviving 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 securitiesimmediately 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 ExchangeAct) 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 shallnot 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 ofIMPCO. 

 

(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 orSubsidiary 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 positionheld 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 inits 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 ora 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 anydate, 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 saleswere 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 recognizedsecurities 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, onthe 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 Valuethereof 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 inwhich 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 ofSection 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 withinthe 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 “parentcorporation,” 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 toa 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 thesuccessor 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 theSecurities 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” meansany 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 orindirectly. 

 

(hh) “Related EntityDisposition” 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 RelatedEntity 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 Parentor 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 otherterms 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 portionof 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 IMPCOand 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 beissued 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 fiscalyear, 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 firstday 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) alesser 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, shallbe 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 andshall 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 andOfficers. 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 beconstituted 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 shallcontinue 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 Consultantswho 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. Onceappointed, 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 totime. 

 

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(iii) Administration With Respect to Covered Employees. Notwithstanding theforegoing, 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 eligibleto 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 referencesto 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 towhom 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 thePlan; 

 

(v) to determine the terms andconditions 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 writtenconsent; 

 

(vii) to construe and interpret theterms 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 jurisdictionsand 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 theprovisions of the Plan; and 

 

(ix) to take suchother 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, Directorsand 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 additionalAwards. 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 arrangementto 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 anOption, 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 asIncentive 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 Sharescovered 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 theShares 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 criteriaestablished 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 achievementas 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 withSection 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 IMPCOoptions 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 Entityacquiring 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 ofShares 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 theopportunity 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 anAward (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 theadministration 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 determinedby 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 aGrantee’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 limitationsshall 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 foregoinglimitations 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 anOption 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 anEmployee, 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 orto 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 ofgrant 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 anyParent 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 maydesignate 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 anddistribution, 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 anAward 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 orConsultant 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 anEmployee 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 thaneighty-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 notless 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 Section7(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 forthe 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 anyother 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 theShares 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 Administratordetermines 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 theRegistration 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 aFair 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 accountingcompensation 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 remittanceprocedure 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 onthe 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 firmin 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 anyforeign, 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 StockOption. 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 suchtimes 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 theterms 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 topay 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 EmployeeBenefit 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 receivedividends 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 uponexercise 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 ContinuousService. 

 

(i) An Award may not beexercised 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 exercisean 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 Awarddesignated 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 aNon-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 ofsuch 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 personexercising 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 theCompany, 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 forissuance 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 grantedto 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 astock 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 ofconsideration 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 aspin-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 havebeen “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 sharesof 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. Effectiveupon 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 theconsummation 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 suchRelated 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 bedeemed 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 andexercisable 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 therelease 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 alsoshall 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 theCorporate 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 orsooner 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 IncentiveStock 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 aNon-Qualified Stock Option. 

 

12. Effective Date and Term ofPlan. 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 toSection 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 Companyshall 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 otherwisebetween 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 tosatisfy the requirements of the Plan. 

 

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(b) The inability of the Company to obtain authority from any regulatory body havingjurisdiction, 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 towhich 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 theright 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, aRelated 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 notaffect 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 Companywithin 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 beobtained 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 beexercisable. 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 RegistrationDate, 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 forcompensation 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 understandingthat 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 TreasuryRegulation 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 thatoccurs 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 subsequentclarification 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 Section162(m) of the Code has been obtained. 

 

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