ADA-ES, INC.
8100 SOUTHPARK WAY B
LITTLETON, COLORADO
Telephone: (303) 734-1727
Fax: (303) 734-0330
April 14, 2005
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: ADA-ES, Inc.; Proxy Materials
Gentlemen and Ladies:
On behalf of ADA-ES, Inc. (the Company), we file with you herewith pursuant
to Rule 14a-6(a) under the Securities Exchange Act of 1934, as amended, the
proxy material which the Company is mailing in definitive form on or about April
14, 2005, to its shareholders in connection with the solicitation of proxies for
a May 12, 2005 annual meeting of shareholders.
In connection with the foregoing, we deliver to you the following:
1. A copy of the Notice of an Annual Meeting of Shareholders and Proxy
Statement (the Notice), including the cover page required by Rule 14a-6(m); and
2. A form of Proxy.
The Company will take appropriate action to comply with the broker, bank
and nominee notification requirements set forth by Rule 14a-13 regarding the
forwarding of definitive proxy and other soliciting materials. The shares of
Common Stock issuable pursuant to the ADA-ES, Inc. 2004 Stock Compensation Plan
#2 were registered with the U.S. Securities and Exchange on Form S-8 filed
December 14, 2004, File No. 333-121234. Upon shareholder approval we plan to
file an S-8 registering the shares underlying the 2005 Directors' Compensation
Plan. Both Plans are attached as appendicies to the proxy materials being filed
electronically with the Commission.
Very truly yours,
ADA-ES, Inc.
/s/ Mark H. McKinnies
---------------------
Mark H. McKinnies
Secretary
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Sec. 240.14a-12
ADA-ES, INC.
...............................................................................
(Name of Registrant as Specified In Its Charter)
N/A
...............................................................................
(Name of Persons(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
..........................................................................
2) Aggregate number of securities to which transaction applies:
..........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
..........................................................................
4) Proposed maximum aggregate value of transaction:
..........................................................................
5) Total fee paid:
..........................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, of
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..........................................................................
2) Form, Schedule or Registration Statement No.:
..........................................................................
3) Filing Party:
..........................................................................
4) Date Filed:
..........................................................................
ADA-ES, INC.
8100 SouthPark Way, B
Littleton, CO 80120
(303) 734-1727
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 2005
To Our Shareholders:
An Annual Meeting (the "Meeting") of Shareholders of ADA-ES, Inc. ("ADA-ES" or
the "Company"), a Colorado corporation, will be held at 9:00 a.m. (local time)
on May 12, 2005 at the offices of the Company located at 8100 SouthPark Way,
Unit B, Littleton, Colorado, for the following purposes:
1. To approve the ADA-ES 2004 Stock Compensation Plan #2;
2. To approve the ADA-ES 2005 Directors' Compensation Plan;
3. To elect nine (9) directors of the Company; and
4. To consider and vote upon such other matters as may properly come
before the Meeting or any adjournment thereof.
Shareholders of record at the close of business on April 11, 2005 are entitled
to notice of and to vote at the Meeting.
The Board of Directors of the Company extends a cordial invitation to all
shareholders to attend the Meeting in person. Whether or not you plan to attend
the Meeting, please fill in, date, sign and mail the enclosed proxy in the
return envelope as promptly as possible. Your proxy may be revoked at any time
prior to the Meeting. The prompt return of your completed proxy will assist the
Company in obtaining a quorum of shareholders for the Meeting, but will not
affect your ability to change your vote by subsequent proxy or by attending the
Meeting and voting in person. If you are unable to attend, your written proxy
will assure that your vote is counted.
Please call on our toll-free number (800-822-8617) if you require directions or
have other questions concerning the Meeting.
By Order of the Board of Directors
/s/ Mark H. McKinnies
---------------------
Mark H. McKinnies
Secretary
April 14, 2005
PROXY STATEMENT
ADA-ES, INC.
8100 SouthPark Way, Unit B
Littleton, CO 80120
Telephone: (303) 734-1727
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 2005
This Proxy Statement is furnished to the shareholders of ADA-ES, Inc. (the
"Company"), a Colorado corporation, in connection with the solicitation of
proxies by the Company's Management and Board of Directors (collectively, the
"Board"), to be voted at the ANNUAL MEETING OF SHAREHOLDRS (the "Meeting") of
the Company to be held on Wednesday, May 12, 2005, at the offices of the Company
at 8100 SouthPark Way, Unit B, Littleton, Colorado. The Company anticipates that
this Proxy Statement and accompanying form of proxy will be first mailed or
given to Shareholders of the Company on our about April 14, 2005. The shares
represented by all proxies that are properly executed and submitted will be
voted at the meeting in accordance with the instructions indicated thereon, and
if no instructions are given then in the discretion of the proxy holder.
VOTING RIGHTS AND VOTE REQUIRED
The Board of Directors of the Company has fixed the close of business on April
11, 2005 as the record date for determination of Shareholders entitled to notice
of and to vote at the Meeting. As of April 11, 2005 there were 4,834,887 shares
of the Company's common stock issued and outstanding (hereinafter referred to as
the "Common Stock"), each of which entitles the holder thereof to one vote on
all matters, which may come before the meeting. The Company has no class of
voting securities other than Common Stock. An abstention or withholding
authority to vote will be counted as present for determining whether the quorum
requirement is satisfied. If a quorum exists, actions or matters other than the
election of the Board of Directors are approved if the votes cast in favor of
the action exceed the votes cast opposing the action unless a greater number is
required by the Colorado Business Corporations Act or the Company's Articles of
Incorporation. Abstentions will be treated as abstentions and not as a vote
against the proposal. A broker non-vote occurs when a nominee holding shares for
a beneficial holder does not have discretionary voting power and does not
receive voting instructions from the beneficial owner. Broker non-votes on a
particular proposal will not be treated as shares present and entitled to vote
on the proposal.
A minimum of one-third of the shares of Common Stock issued and outstanding must
be represented at the Meeting, in person or by proxy, in order to constitute a
quorum. Cumulative voting is not allowed for any purpose. Assuming a quorum is
present, (1) the affirmative votes cast must exceed the opposing votes cast to
approve (a) the ADA-ES 2004 Stock Compensation Plan #2 , and (b) the ADA-ES 2005
Directors' Compensation Plan, and (2) the nine nominees receiving the highest
number of votes cast will be elected as Directors.
Unless specified otherwise, each proxy submitted will be voted FOR the proposal
to approve the ADA-ES 2004 Stock Compensation Plan #2, and the ADA-ES 2005
Directors' Compensation Plan, and FOR the persons nominated by Management for
directors of the Company, being Ramon E. Bisque, Duane N. Bloom, Michael D.
Durham, John W. Eaves, Ronald B. Johnson, Robert H. Lowdermilk, Mark H.
McKinnies, Rollie J. Peterson, and Jeffrey C. Smith.
Management knows of no other matter or motion to be presented at the Meeting. If
any other matter or motion should be presented at the Meeting upon which a vote
must be properly taken, it is the intention of the person named in the
accompanying form of proxy to vote such proxy in accordance with that person's
judgment, including any matter or motion dealing with the conduct of the
Meeting.
Any shareholder who completes a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company (c/o
Mark H. McKinnies, Secretary) 8100 SouthPark Way Unit B, Littleton, Colorado,
80120, by submitting a new proxy executed at a later date, or by requesting, in
person, at the Meeting that the proxy be returned.
The Company will pay solicitation expenses. In addition to solicitation by mail,
directors, officers and other employees of the Company may, without additional
compensation, solicit proxies by mail, in person or by telecommunication.
1
PROPOSAL TO APPROVE THE ADA-ES 2004 STOCK COMPENSATION PLAN #2
The Company's 2004 Stock Compensation Plan #2 (the "2004 Plan") was adopted by
the Board on November 4, 2004 and authorized the issuance of shares of Common
Stock and/or the grant of options to purchase shares of the Company's Common
Stock to our non-management directors, executive officers and certain employees
and consultants. Pursuant to NASDAQ Marketplace Rule 4350 the grant of shares
and options to our non-management directors, which occurred subsequent to our
NASDAQ listing on October 14, 2004, requires shareholder approval, and
therefore, we are seeking shareholder approval of the 2004 Plan. Regardless of
whether the shareholders approve the 2004 Plan or not, the grant of options
pursuant to the 2004 Plan to our executive officers and certain employees and
consultants will not be effected.
The purpose of the 2004 Plan is to compensate executive officers, certain
employees and consultants, and non-management directors of the Company by
awarding shares and options to purchase shares for services they have and will
render during calendar 2004 and in later years. The 2004 Plan provides for (1)
the award of stock of 603 shares per individual non-management director or 4,221
shares in total, and the grant of options of 5,000 per individual non-management
director or 35,000 in total, (2) the grant of options for a total of 200,000
shares to executive officers of the Company, and (3) the grant of options for a
total of 80,995 shares to certain employees and consultants of the Company. As
noted above, the equity awards and grants to the non-management directors were
made subject to shareholder approval of the 2004 Plan. Options granted under the
2004 Plan to non-management directors may not be exercised, and shares awarded
to non-management directors may not be issued until such shareholder approval
has been obtained, and such options and awards will be null and void if such
shareholder approval is not obtained. The aggregate number of shares of Common
Stock reserved for issuance to non-management directors under the 2004 Plan
totals 39,221 shares (4,221 in the form of stock awards and 35,000 in the form
of options). The grant of options to executive officers, employees and
consultants totaling 280,995 shares pursuant to the 2004 Plan did not require
shareholder approval of the 2004 Plan.
The stock awards and vested portion of the stock option grants to non-management
directors are intended to be a portion of compensation for services performed
from October 2004 through September 2005. The option exercise price of $13.60
per share for the stock options granted on November 4, 2004 was the market price
on the date of the grant. The market price of the Common Stock as of April 1,
2005 was approximately $ 24.00 per share. The options are exercisable over a
period of five years and will vest over a three-year period, one-third each year
for continued service on the Board. If such service is terminated, the
non-vested portion of the option will be forfeited. The 35,000 shares of Common
Stock underlying the options granted and 4,221 shares approved for issuance
pursuant to the Board action of November 4, 2004 were registered with the U.S.
Securities and Exchange on Form S-8 filed December 14, 2004, File No.
333-121234.
The 2004 Plan is contained in a document entitled "ADA-ES, Inc. 2004 Stock
Compensation Plan #2." The continuation of the 2004 Plan is not assumed as a
contractual obligation of the Company, and the right is reserved to the Company,
by action of its Board of Directors, to discontinue the 2004 Plan at any time.
If the 2004 Plan is discontinued, no additional Awards may be made under the
2004 Plan after the date of discontinuance, but the 2004 Plan will continue to
be operated in accordance with its terms, as they may be amended, with respect
to any Awards made prior to the date of discontinuance. Nevertheless, options
granted and shares awarded under the Plan to non-management directors will be
null and void if shareholder approval is not obtained.
The Company, by action of its Board of Directors, has the right at any time,
whether before or after discontinuance of the 2004 Plan, to amend all or any of
the provisions of the 2004 Plan in any manner. Any such amendment may prohibit
or postpone the issuance of any shares of Common Stock even though such shares
may have become issuable after the effective date of the amendment pursuant to
any Award granted before the effective date of the amendment. The 2004 Plan is
administered by the Board of Directors.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and therefore is not qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The Board recommends that Shareholders vote FOR approval of the ADA-ES 2004
Stock Compensation Plan #2. Assuming a quorum is present at the Meeting, the
affirmative votes cast must exceed the opposing votes cast for the approval of
the ADA-ES 2004 Stock Compensation Plan #2.
THE SHARES OF COMMON STOCK REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL
BE VOTED FOR THE APPROVAL OF THE ADA-ES 2004 STOCK COMPENSATION PLAN #2 UNLESS A
CONTRARY DIRECTION IS INDICATED.
2
PROPOSAL TO APPROVE THE ADA-ES 2005 DIRECTORS' COMPENSATION PLAN
The Company's 2005 Directors' Compensation Plan (the "2005 Plan") was adopted by
the Board on March 17, 2005 and authorized the issuance of shares of Common
Stock and the grant of options to purchase shares of the Company's Common Stock
to non-management directors, all subject to shareholder approval.
The purpose of the 2005 Plan is to advance the interests of the Company by
providing eligible non-management directors an opportunity to acquire or
increase an equity interest in the Company, which thereby will create a stronger
incentive to expend maximum effort for the growth and success of the Company and
will encourage such eligible individuals to continue to service the Company. The
2005 Plan provides a portion of the annual compensation to non-management
directors of the Company in the form of awards of shares of Common Stock and
vesting of options to purchase Common Stock of the Company for services
performed for the Company. Under the 2005 Plan, the award of stock is limited to
not more than 1,000 shares per individual per year, and the grant of options is
limited to 5,000 per individual in total. The 2005 Plan is subject to
shareholder approval. Options granted under the 2005 Plan may not be exercised,
and shares awarded may not be issued until such shareholder approval has been
obtained, and such options and awards will be null and void if such shareholder
approval is not obtained. The aggregate number of shares of Common Stock
reserved for issuance under the 2005 Plan totals 90,000 shares (50,000 in the
form of stock awards and 40,000 in the form of options), and it is the Company's
expectation that such reserved shares will provide an adequate amount to provide
for the anticipated equity compensation portion of non-management director
compensation through 2014.
On March 17, 2005 the Board approved the future issuance of an additional 50,000
shares of Common Stock and options to purchase an additional 40,000 shares to
non-management directors, all under the 2005 Plan. The exercise price shall be
the market price on the date of grant, the shares of Stock underlying the Option
will vest for exercise at a rate of no more than 1,667 shares per annual period
per individual, and any unvested shares of Stock that are outstanding at the
date the individual is no longer is a Director will be forfeited. Shares may be
issued and options may be granted under the Plan only to non-management
directors of the Company or its subsidiaries. There are currently 7 persons who
are eligible for participation in the Plan.
The Plan is contained in a document entitled "ADA-ES, Inc. 2005 Directors'
Compensation Plan." The Plan, if not terminated earlier by the Board, will
terminate ten years after the date of its adoption. It may be amended, modified
or terminated at any time if and when it is advisable in the absolute discretion
of the Board, although certain amendments are subject to approval of regulatory
bodies and the Company's shareholders. No such amendment may adversely affect
any options previously granted under the Plan without the consent of the
recipient(s). Nevertheless, options granted and shares awarded under the Plan
will be null and void if shareholder approval is not obtained. The Plan is
administered by a committee appointed by the Board, which currently consists of
all Board members.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and therefore is not qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The Board recommends that Shareholders vote FOR approval of the ADA-ES 2005
Directors' Compensation Plan. Assuming a quorum is present at the Meeting, the
affirmative votes cast must exceed the opposing votes cast for the approval of
the ADA-ES 2005 Directors' Compensation Plan
THE SHARES OF COMMON STOCK REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL
BE VOTED FOR THE APPROVAL OF THE ADA-ES 2005 DIRECTORS' COMPENSATION PLAN UNLESS
A CONTRARY DIRECTION IS INDICATED.
Tax Considerations with Respect to the Plans
--------------------------------------------
Shares of Common Stock Issued for Services
------------------------------------------
There are immediate tax consequences of the issuance of shares for services
performed for the Company. The fair value of the shares received is taxable as
ordinary income to the recipients and the Company receives a deduction for
compensation expense of a like amount. Shares to be issued to non-management
directors are subject to shareholder approval and such grants will be rescinded
in the event such approval is not obtained.
ISO Grants
----------
Certain options granted to employees under the 2004 Plan are intended to qualify
as incentive stock options under the Company's existing 2003 Stock Option Plan.
For such options, the employee does not recognize ordinary income at option
grant or exercise (although the spread between the option price and the option
stock's fair market value at the time of exercise constitutes an item of
adjustment for alternative minimum tax purposes), and the Company cannot deduct
the related compensation expense. The employee is taxed only upon disposition of
3
the option stock. A qualifying disposition occurs when an employee disposes of
incentive stock option stock after completion of the holding period (after two
years of the employee's receipt of the option or after one year of his receipt
of the stock); other dispositions are generally disqualifying dispositions. The
gain is all capital gain for a qualifying disposition. For a disqualifying
disposition, the employee may recognize ordinary income as well as capital gain.
If stock acquired under an incentive stock option is used to acquire stock in
connection with the exercise of an incentive stock option and the transferred
stock has not met the minimum holding period requirements, ordinary income may
be recognized. For a disqualifying dispositions, the Company will receive a tax
deduction for additional compensation to the extent the exercise price is lower,
if at all, than the market price at the date of exercise.
Non-Qualified Stock Options (NQSO)
----------------------------------
Certain options granted to executive officers and options granted to
non-management directors, which are subject to shareholder approval, are
intended to be NQSOs. A individual receiving a NQSO realizes no income upon its
receipt, because the exercise price at the date of grant was equal to the fair
market value at that date. Instead, the recipient may be taxed upon both the
exercise and disposition of the stock acquired pursuant to a NQSO. Options
granted under the Plan to non-management directors may not, in any case, be
exercised until shareholder approval has been obtained and such options will be
null and void if such shareholder approval is not obtained. The Company will
receive a tax deduction for additional compensation to the extent the exercise
price is lower, if at all, than the market price at the date of exercise.
1. Tax Implications Upon NQSO Exercise
A recipient is required to pay ordinary income tax on the difference, or
"spread," between the grant price and the stock's market value when he
purchases ("exercise") the shares. A loss may not be recognized if the
grant price is greater than the exercise price. The greater of the grant
price or the market value at the exercise date (the amount used for
calculating the amount of ordinary income to be taxed, if any) becomes the
tax basis of the stock for calculating future gains and losses upon
disposition or transfer of the stock.
2. Tax Implications Upon Disposition of the NQSO Shares
A disposition of NQSO stock generally refers to any sale, exchange, gift or
transfer of legal title of stock, including a transfer from a decedent who
held NQSO stock to an estate, a transfer by a bequest or inheritance, or
any transfer of NQSO stock between spouses or incident to a divorce. Any
subsequent appreciation or decline in the stock is taxed at capital
gains/loss rates when the stock is disposed of. If the NQSO stock is held
for more than a year, the long-term capital gain/loss rate will apply. If
the NQSO stock is held for one year or less, any gain or loss is short-term
and generally taxed as ordinary income.
Benefit Information with Respect to Plans
-----------------------------------------
The following table summarizes the stock awards and stock options to be issued
pursuant to the ADA-ES, 2004 and 2005 Plans as of March 31, 2005:
-------------------------------------------------------------- ---------------------------------- -------------------------------
2004 Plan 2005 Plan
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Name or Group Stock Award Stock Options Stock Award Stock Options
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Jonathan S. Barr, VP Sales and Marketing -0- 42,600 (1)(2) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
C. Jean Bustard, Chief Operating Officer -0- 33,900(2) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Michael D. Durham, President and Director -0- 59,000(2) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Mark H. McKinnies, , CFO and Director -0- 44,400(2) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Richard J. Schlager, VP Contract R&D -0- 32,100(2) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
All current executive officers as a group (5 individuals) -0- 212,000(2) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
All employees who are not executive officers -0- 68,995 (3) -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
All current directors, who are not executive officers 4,221 35,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
------------------------------------------------------------------------------------------------- ----------------- -------------
Each of the nine nominees for director (all of whom are current directors of the Company)(4):
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Ramon E. Bisque 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Duane N. Bloom 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Michael D. Durham -0- -0- -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
John W. Eaves (5) 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Ronald B. Johnson 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Robert H. Lowdermilk 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Mark H. McKinnies -0- -0- -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Rollie J. Peterson 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Jeffrey C. Smith 603 5,000 -0- -0-
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
Amounts available for future awards (assuming shareholder
approval of the Plans) -0- -0- 50,000 40,000
-------------------------------------------------------------- ----------------- ---------------- ----------------- -------------
4
Notes:
(1) Of the options shown 12,000 are ISOs and were awarded to Mr. Barr as a
result of his hiring by the Company in 2004.
(2) All of the options shown are not subject to shareholder approval.
(3) All of the options shown are ISOs and are not subject to shareholder
approval.
(4) All of the shares and options shown for directors who are nominees are
subject to shareholder approval.
(5) Mr. Eaves is the Board designee of Arch Coal Company as explained below,
and Mr. Eaves assigns all equity and cash compensation upon receipt to
Arch.
ELECTION OF DIRECTORS
At the Meeting, the shareholders will elect nine directors of the Company. Each
director will hold office until the next Annual Meeting of Shareholders and
thereafter until a successor is elected and has qualified. Cumulative voting is
not permitted in the election of directors. IN THE ABSENCE OF INSTRUCTIONS TO
THE CONTRARY, THE PERSON NAMED IN THE ACCOMPANYING PROXY WILL VOTE IN FAVOR OF
THE ELECTION OF THE FOLLOWING PERSONS NAMED AS THE COMPANY'S NOMINEES FOR
DIRECTORS OF THE COMPANY: RAMON E. BISQUE, DUANE N. BLOOM, MICHAEL D. DURHAM,
JOHN W. EAVES, RONALD B. JOHNSON, ROBERT H. LOWDERMILK, MARK H. MCKINNIES,
ROLLIE J. PETERSON and JEFFREY C. SMITH. All of the nominees are currently
members of the Board of Directors. Each of the nominees has consented to be
named herein and to serve if elected. It is not anticipated that any nominee
will become unable or unwilling to accept nomination or election, but if such
should occur, the person named in the proxy intends to vote for the election in
his stead of such other person as the Management of the Company may recommend.
The following table sets forth certain information as to each director of the
Company, all of whose terms expire upon their successor's election:
Positions with Director
Name Age the Company Since
---- --- ----------- -----
Ramon E. Bisque 73 Chairman of the Board of Directors 1998
Duane N. Bloom 71 Director 1998
Michael D. Durham 55 Director, President 1997
John W. Eaves 47 Director, Member of the Audit, Governance and 2003
Compensation Committees
Ronald B. Johnson 73 Director, Chairman of the Audit, Governance and 2003
Compensation Committees Director, Chairman of
the Audit Committee
Robert H. Lowdermilk 68 Director 2003
Mark H. McKinnies 53 Director, Chief Financial Officer 1998
Rollie J. Peterson 57 Director, Member of the Audit, Governance and 2003
Compensation Committees
Jeffrey C. Smith 52 Director, Member of the Audit, Governance and 2003
Compensation Committees
All of the current nominees are presently members of the Company's Board of
Directors. The appointment of Mr. Eaves to the Board was made pursuant to the
investment agreement with Arch Coal, Inc. whereby the management of the Company
has agreed to make available one seat on the Board so long as Arch continues to
hold no less than 100,000 shares. There are no other arrangements or
understandings between any directors and any other person or persons pursuant to
which they were selected as director.
The Company was incorporated under the laws of the State of Colorado in 1997 to
serve as the holding company for ADA-ES, LLC. In May 1997, Earth Sciences, Inc.
("ESI") acquired a 51% equity position in ADA-ES, LLC. In May 1998, ESI acquired
the remaining interest in ADA-ES LLC. As of January 1, 2003, Earth Sciences
transferred all of its ownership in ADA-ES, LLC into ADA-ES. In March 2003
ADA-ES and ESI entered into an agreement for the pro rata distribution of all
the common stock of ADA-ES to the shareholders of ESI. The distribution occurred
in September 2003. The distribution resulted in ADA-ES being a separate company
operated apart from ESI.
Drs. Bisque and Bloom and Mr. McKinnies continue as Directors of Earth Sciences,
Inc. ("ESI"). None of the other individuals named above are directors of any
other public companies.
5
Dr. Bisque is Professor Emeritus at the Colorado School of Mines, Golden,
Colorado and was a co-founder of Earth Sciences, Inc. in 1963. Dr. Bisque was
Chairman of the Board of Directors and a full or part-time employee of Earth
Sciences from 1974 through 2003.
Dr. Bloom was a co-founder of Earth Sciences, Inc. in 1963. Dr. Bloom was
employed full time by Earth Sciences from that time through 1999. Dr. Bloom has
been retired since that time. Dr. Bloom also remains a director of Earth
Sciences.
Dr. Durham was a co-founder in 1985 of ADA Technologies, Inc., an Englewood,
Colorado private company which contracts to the Federal government and others
for development of emission technologies. Dr. Durham has been president of
ADA-ES since 1996.
Mr. Eaves is currently Executive Vice President and Chief Operating Officer,
Arch Coal, Inc. Mr. Eaves had held the position of vice president of marketing
for Arch Coal since that company was formed on July 1, 1997. Prior to that time,
he served as president of the marketing subsidiary of Arch Mineral Corporation,
one of Arch Coal's predecessor companies. He has also held various positions in
sales and administration with Diamond Shamrock Company and Natomas Coal Company.
Mr. Johnson has been involved in all phases of the chemical industry:
production, compounding and distribution both domestically and internationally
for 47 years. He has held management and marketing positions with Dupont,
Industrial and Biochemical Department in strategic planning, Gamlen Chemical, a
international compounding company as manager of worldwide development and Vice
President of Univar, a North American chemical distributor. Further, he has been
a Board Member with Charter National Bank and Trust from 1987-2000. Currently,
he is Chairman of Twin-Kem International, Inc., a distributor of agricultural
industrial chemicals, since 1984 and Chairman of ExecuVest, Inc., an oil & gas
exploration company, since 1987.
Mr. Lowdermilk has been president of Tectonic Construction Company, a producer
of washed aggregates and specialty sands since 1986. Mr. Lowdermilk has a long
history in construction and engineering projects. Mr. McKinnies is a CPA and
worked for Peat, Marwick, Mitchell & Co. before commencing employment at Earth
Sciences in 1978 and was employed there through 2000. Mr. McKinnies was
President of Earth Sciences since 1983 and remains a director of Earth Sciences.
Mr. Peterson is a self-employed businessman and president and co-owner of
Cobblestone Development Co., a commercial land development company in Minnesota
that he helped found in 1987.
Mr. Smith was appointed a director of the Company in August 2003 and is a
self-employed lawyer in the Law Office of Jeffrey C. Smith. Mr. Smith is the
past Executive Director of the Institute of Clean Air Companies where he served
for 17 years.
No family relationship exists between any individuals named above.
BOARD OF DIRECTORS
The Board of Directors is responsible for establishing broad corporate policies
and monitoring the overall performance of the Company. However, in accordance
with corporate legal principles, the Board of Directors is not involved in
day-to-day operating matters. Members of the Board are kept informed of the
Company's business by participating in Board and committee meetings, by
reviewing analyses and reports sent to them each week and each month, and
through discussions with the President and other officers.
THE AUDIT, COMPENSATION AND GOVERNANCE COMMITTEES
The Board of Directors maintains standing audit, compensation and governance
committees.
In calendar 2004 the audit committee was composed of John W. Eaves, Ronald B.
Johnson, Rollie J. Peterson and Jeffrey C. Smith, all of who are "independent
directors" as defined in NASD Rule 4200(a)(15). The functions of the audit
committee are set out in the Audit Committee Charter, adopted by the Company's
Board of Directors on October 28, 2003, and include the following: (1) reviewing
and assessing the Audit Committee Charter annually; (2) reviewing the Company's
relationships with its outside auditors and assessing the impact such
relationships may have on the auditors' objectivity and independence; (3) taking
other appropriate action to oversee the independence of the outside auditors;
(4) reviewing and considering the matters identified in Statement on Auditing
Standards No. 61 with the outside auditors and management; (5) reviewing and
discussing the Company's financial statements with the outside auditors and
management; (6) recommending whether the Company's audited financial statements
should be included in the Company's Form 10-KSB for filing with the Securities
and Exchange Commission; and (7) reporting to the Board of Directors on all such
matters. The audit committee met eight times during calendar 2004. The Audit
Committee charter is attached hereto as Appendix A.
6
The Audit Committee members also serve as the members of the Compensation
Committee and the Governance Committee. The Compensation Committee reviews and
makes recommendations to the Company's Board of Directors concerning the
salaries paid to the Company's executive officers. The Governance Committee
reviews and makes recommendations to the Company's Board of Directors concerning
the corporate governance practices of the Company and nominees for directors.
Mr. Johnson serves as the chairman for all such committees. The Governance
Committee charter is available for viewing on the Company's web site at
www.adaes.com.
DIRECTORS MEETINGS AND COMMITTEE MEETINGS
The Board of Directors met seven times in 2004. The Audit Committee met eight
times in 2004. The Compensation Committee met four times in 2004 and the
Governance Committee met two times in 2004. All of the directors were present
for more than 75% of the meetings of Board of Directors and committees of which
they were members held during their individual incumbencies. It is the policy
and practice of the Company that all candidates for election at the Annual
Meeting of Shareholders attend the meeting and it is strongly encouraged that
all directors also attend the Annual Meeting. This is the first Annual Meeting
of the Company.
REPORT OF THE AUDIT COMMITTEE
The role of the Company's Audit Committee, which is composed of four independent
non-employee directors, is one of oversight of the Company's management and the
Company's outside auditors in regard to the Company's financial reporting and
the Company's controls respecting accounting and financial reporting. In
performing its oversight function, the Audit Committee relied upon advice and
information received in its discussions with the Company's management and
independent auditors.
The Audit Committee has (i) reviewed and discussed the Company's audited
financial statements for the fiscal year ended December 31, 2004 with the
Company's management; (ii) discussed with the Company's independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61
regarding communication with audit committees (Codification of Statements on
Auditing Standards, AU sec. 380); and (iii) received the written disclosures and
the letter from the Company's independent accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and has discussed with the Company's independent accountants the independent
accountants' independence.
Based on the review and discussions with management and the Company's
independent auditors referred to above, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
2004 for filing with the Securities and Exchange Commission.
The Audit Committee: Ronald B. Johnson, Chairman John W. Eaves
Rollie J. Peterson Jeffrey C. Smith
GOVERNANCE and NOMINATING COMMITTEE
The Governance Committee also performs the functions of the nominating committee
and consists of Messrs. Eaves, Johnson, Peterson and Smith. Mr. Johnson serves
as the chairman. The Governance Committee selects and recommends nominees to the
Board of Directors to be elected by shareholder vote at the Annual Meeting of
Shareholders. The Governance Committee also selects and recommends nominees to
be elected by the Board of Directors to fill any Board vacancies. The Company
has adopted a Governance Committee Charter which is available on the Company's
website at www.adaes.com under the Investor Relations section. Criteria
established for the selection of candidates for the Board of Directors include:
independence, integrity, understanding and acceptance of the Company's corporate
philosophy, commitment to representing the long-term interest of the
shareholders and relevant experience and expertise in technical, financial,
operational or management areas which would be beneficial to the Company and its
shareholders. The Governance Committee will consider for nomination to become
directors any persons recommended by shareholders. Recommendations of
individuals that meet the criteria set forth in the Governance Committee Charter
may be submitted to the Governance Committee in care of the Secretary of the
Corporation at 8100 SouthPark Way, Unit B, Littleton, Colorado 80120. The
Governance Committee has recommended to the Board the slate of directors for the
2005 Annual Meeting of the Company as set forth above. Member of the Governance
Committee all meet the independence requirements set forth in NASD Rule
4200(a)(15).
DIRECTOR COMPENSATION
The compensation plan for our non-management directors is reviewed annually. In
addition to the 2004 and 2005 Plans set out above for shareholder approval,
under the existing compensation arrangement, each non-management director is
7
paid a fee of $620 per regular meeting, $310 per committee or telephonic meeting
or $518 per committee meeting for serving as chairman of the committee. The
Chairman of the Audit Committee is paid the greater of $3,000 per month or the
per meeting fee amounts. In November 2004, the Board of Directors approved the
issuance of 603 shares of common stock and the grant of 5,000 options (1,000
shares of which vest in 2005) to non-management directors as part of their
compensation for services for the period from October 2004 through September
2005 (these are included in the 2004 Plan set forth above). The issuance of such
shares and the grant of such options are subject to shareholder approval, as set
forth above.
SHAREHOLDER COMMUNICATIONS TO DIRECTORS
Any shareholder may communicate directly with the Board of Directors (or any
individual director) by writing to the Chairman of the Board, ADA-ES, Inc., 8100
SouthPark Way, Unit B, Littleton, Colorado 80120. Any such communication should
state the number of shares beneficially owned by the shareholder making the
communication. Provided that such communication addresses a legitimate business
issue, the Company or the Chairman will forward the shareholder's communication
to the appropriate director. For any communication relating to accounting,
auditing or fraud, such communication will be forwarded immediately to the
Chairman of the Audit Committee.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table provides information with respect to the beneficial
ownership of the Company's common stock by (1) each of our stockholders whom we
believe are beneficial owners of more than 5% of our outstanding common stock,
(2) each of our directors and executive officers and (3) all of our directors
and executive officers as a group. We base the share amounts shown on each
person's beneficial ownership as of March 31, 2004, unless we indicate some
other basis for the share amounts. Except as described below, each of the
individuals named below has sole voting and investment power for the respective
shares.
------------------------------------------------------- ---------------------------------- -----------------
Amount and Nature of Beneficial Percent of Class
Name and Address Ownership
------------------------------------------------------- ---------------------------------- -----------------
Jonathan S. Barr (VP Sales and Marketing
8100 SouthPark Way, Littleton, CO 1,800(1) *
------------------------------------------------------- ---------------------------------- -----------------
Ramon E. Bisque (Chairman of the Board of Directors)
9113 Fern Way, Golden, CO 71,350(2) 1.5%
------------------------------------------------------- ---------------------------------- -----------------
Duane N. Bloom (Director)
5565 Pine Ridge Rd. Golden, CO 53,766(3) 1.1%
------------------------------------------------------- ---------------------------------- -----------------
C. Jean Bustard (Chief Operating Officer)
9193 Buffalo Drive, Littleton, CO 20,087(4) *
------------------------------------------------------- ---------------------------------- -----------------
Michael D. Durham (Director and President)
5252 Lariat Drive, Castle Rock, CO 150,538(5) 3.1%
------------------------------------------------------- ---------------------------------- -----------------
John W. Eaves (Director)1
CityPlace One, Suite 300St. Louis, MO 1,000 *
------------------------------------------------------- ---------------------------------- -----------------
Hummingbird Value Funds
153 East 53rd Street, 55th Floor. New York, NY 229,457 4.8%
------------------------------------------------------- ---------------------------------- -----------------
Ronald B. Johnson (Director)
4220 S. Allison St., Littleton, CO 8,100 *
------------------------------------------------------- ---------------------------------- -----------------
Robert H. Lowdermilk (Director)
100 Cherry St.,Denver, CO 183,335(6) 3.8%
------------------------------------------------------- ---------------------------------- -----------------
Mark H. McKinnies (Director, Secretary and CFO)
27638 Pine Grove Trail, Conifer, CO 71,595(7) 1.9%
------------------------------------------------------- ---------------------------------- -----------------
Rollie J. Peterson (Director)
22486 County Road 73, Big Lake, MN 27,644 *
------------------------------------------------------- ---------------------------------- -----------------
Richard J. Schlager (VP of Contract R&D)
16242 E. Prentice Lane, Centennial, CO 21,473(8) *
------------------------------------------------------- ---------------------------------- -----------------
Jeffrey C. Smith (Director)
7272 Wisconsin Avenue, Suite 300, Bethesda, MD 6,200 *
------------------------------------------------------- ---------------------------------- -----------------
Tontine Capital Partners, L.P
31 West 52nd ST, 17th Floor, New York, NY 257,000 5.4%
------------------------------------------------------- ---------------------------------- -----------------
Wellington Management Company
75 State Street, Boston, MA 561,900 11.7%
------------------------------------------------------- ---------------------------------- -----------------
------------------------------------------------------- ---------------------------------- -----------------
Directors and Officers as a Group (12 individuals) 616,888(9) 12.8%
------------------------------------------------------- ---------------------------------- -----------------
* Less than 1%.
8
Notes:
(1) Included in the amount shown are 1,800 shares to which Mr. Barr has the
right to acquire beneficial ownership through stock options.
(2) Included in the amount shown are 100 shares registered in the name of Dr.
Bisque's wife and 16,281 shares held in Dr. Bisque's pension fund account.
(3) Included in the amount shown are 773 shares registered in the name of Dr.
Bloom's wife and 20,416 shares held in Dr. Bloom's pension fund account.
(4) Included in the amount shown are 10,933 shares held in Ms. Bustard's
pension fund account.
(5) Included in the amount shown are 45,852 shares held in Dr. Durham's pension
fund account.
(6) Included in the amount shown are 13,000 shares registered in the name of
Mr. Lowdermilk's wife, and 109,000 shares held by Tectonic Construction Co.
("TCC"). Mr. Lowdermilk is the president and majority shareholder of TCC.
(7) Included in the amount shown are 32,976 shares held in Mr. McKinnies'
pension fund account.
(8) Included in the amount shown are 12,086 shares held in Mr. Schlager's
pension fund account.
(9) The amount shown includes 1,800 shares to which individuals in the group
have the right to acquire beneficial ownership through stock options.
Executive Compensation.
The following tables show compensation during the fiscal years ended December
31, 2004, 2003 and 2002, and option grants and option exercises during the
fiscal years ended December 31, 2004 and 2003, of those persons who were, at
December 31, 2004 the four most highly compensated executive officers of ADA-ES
whose total compensation exceeded $100,000.
Summary Compensation Table
Annual Compensation
Name of Individual and Principal ------------------------ Long Term Compensation Awards
Position Year Salary Pension(1) Securities Underlying Options (#) (2)
-------- ---- ------ ---------- -------------------------------------
C. Jean Bustard 2004 $119,565 $28,919 33,900
Chief Operating Officer 2003 $107,244 $28,885 -
2002 $97,170 $26,633 -
Michael D. Durham 2004 $173,781 $39,579 59,000
President, CEO and 2003 $155,137 $38,351 -
Director 2002 $150,652 $35,742 -
Mark H. McKinnies 2004 $163,137 $38,747 44,400
Director and Chief 2003 $156,468 $36,351 14,500
Financial Officer 2002 $149,156 $35,628 -
Richard J. Schlager 2004 $112,901 $32,811 32,100
Vice President of Contract Research 2003 $104,328 $30,827 -
& Development 2002 $92,041 $25,335 -
----------
(1) Amounts represent pension and profit sharing contributions, 401(k)
deferrals, and matching payments made or accruing to a qualified plan by
the Company for the benefit of the named individual. In 2002 such amounts
include stock issued by Earth Sciences, Inc. for the discretionary pension
contribution portion of such payments. Amounts paid by stock average 40% of
the amounts shown for 2002.
(2) The securities shown for 2003 represent options to acquire shares granted
pursuant to the Company's ISO Plan. The securities shown for 2004 represent
options to acquire shares granted pursuant to the Company's Executive Stock
Option Plan described below, none of which were vested as of 12/31/2004.
Options/SAR Grants in Last Fiscal Year
Individual Grants
Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date
-----------------------------------------------------------------------------------------------
C. Jean Bustard 33,900 12.3% $8.60 8/24/2014
Michael D. Durham 59,000 21.4% $8.60 8/24/2014
Mark H. McKinnies 44,400 16.1% $8.60 8/24/2014
Richard J. Schlager 32,100 11.6% $8.60 8/24/2014
9
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of securities
underlying unexercised options Value of unexercised options
Shares acquired Value at FY-end(#) (1) at FY-End
Name on exercise (#) realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ------------ ------------------------- -------------------------
C. Jean Bustard 4,695 $30,283 4,695/ 33,900 $100,989 /$522,399
Michael D. Durham 14,550 $84,390 -0-/ 59,000 -0- /$909,190
Mark H. McKinnies 14,500 $75,980 -0-/ 44,400 -0- /$684,204
Richard J. Schlager 9,390 $53,054 -0-/ 32,100 -0- /$494,661
(1) The securities shown as "Unexercisable" as of December 31, 2004
represent options to acquire shares granted pursuant to the Company's
Executive Stock Option Plan described below, none of which were vested
as of 12/31/2004.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has executed employment agreements with every fulltime employee,
including all executive officers, that contain the following standard
provisions:
1. Automatic extensions for one-year periods.
2. Three month written notice of intent to terminate by either the
Company of the employee.
3. Description of position, duties, authority, compensation, benefits and
obligation of the employee to devote fulltime to the fulfillment of
his/her obligations under the agreement
4. Disclosure/ownership of inventions and confidential subject matter.
5. Assignment of inventions and confidential subject
matter/documentation/commercialization.
6. Copyright works and written records.
7. Restrictive obligations relating to confidential subject matter.
8. Conflicting obligations and obligations upon termination of
employment.
The compensation amounts included in the employment agreements are subject to
annual adjustment and the 2004 compensation levels are shown in the tables
above. None of the Company's employment contracts nor other agreements contain
any provisions for the payment of any amounts that result from or will result
from the resignation, retirement or any other termination of any executive
officer's employment with the Company or from a change-in-control of the Company
or a change in the named executive officer's responsibilities following a
change-in-control.
Equity Compensation Plan Information as of December 31, 2004
------------------------------------------------------------
Number of securities remaining
Number of securities to available for future issuance
be issued upon exercise Weighted-average exercise under equity compensation plans
of outstanding options, price of outstanding options, (excluding securities reflected
Plan category warrants and rights warrants and rights in column (a))
------------- ------------------- ------------------- --------------
(a) (b) (c)
Equity compensation plans approved
by security holders 93,115 $9.12 195,530
Equity compensation plans not
approved by security holders 200,000 $8.60 0
------- ----- -------
Total 293,115 $8.76 195,530
======= ===== =======
Stock Option Plans
During 2003 the Company adopted the 2003 ADA-ES, Inc. Stock Option Plan. One
purpose of the plan was to duplicate the options previously awarded by Earth
Sciences that have been cancelled. Otherwise, the plan is intended to serve to
encourage our key employees, through their individual efforts, to improve our
overall performance and to promote profitability by providing them an
opportunity to participate in the increased value they help create. Options
granted under the plan may be in the form of "incentive stock options" as
defined under section 422 of the Internal Revenue Code of 1986, as amended, or
options that are not incentive stock options. The plan is administered by the
Compensation committee of the Board of Directors. The plan was approved by ESI
as the sole shareholder of ADAES prior to the spin-off distribution of ADA-ES
shares. We reserved 400,000 shares of our common stock for issuance under the
plan. In general, all options granted under the plan will lapse ten years from
the date of grant (five years in the case of a 10% stockholder of our company,
10
our parent or one of our subsidiaries). In general, the exercise price of an
option will be determined by the compensation committee of the board of
directors at the time the option is granted and will not be less than 100% of
the fair market value of a share of our common stock on the date the option is
granted. The compensation committee may provide in the option agreement that an
option may be exercised in whole immediately or is exercisable in increments
through a vesting schedule. During 2004, 75,995 options were granted under the
plan.
During 2004 the Company adopted the 2004 Executive Stock Option Plan (as part of
the ADA-ES 2004 Stock Compensation Plan #2), which did not require shareholder
approval. The plan authorized the grant of up to 200,000 options to purchase
shares of the Company's Common Stock to executive officers of the Company. The
purpose of the plan is to promote the growth and profitability of the Company by
awarding options to purchase Common Stock of the Company for services performed
and to be performed in the future. Options granted under the plan are generally
intended to be non-qualified stock options ("NQSO") for federal income tax
purposes. The plan is administered by the Compensation committee of the Board of
Directors. In each case, the option exercise price is the market price on the
date of the grant. The options are exercisable over a 10-year period based on a
vesting schedule that may be accelerated based on performance of the individual
recipients as determined by the Board of Directors. Options were granted under
the Plan to five executive officers, who are also full-time employees of the
Company. During 2004, 200,000 options were granted under the plan, none of which
were vested at December 31, 2004. In January 2005 the Board of Directors
authorized the vesting of 27,080 options under the plan.
Certain Relationships and Related Transactions.
In 2000, Earth Sciences re-negotiated a convertible debenture in the amount of
$1,000,000 (the "Debenture") with Tectonic Construction Co. ("TCC") and a note
in the amount of $250,000 (the "Note") from TCC to extend the due dates and
clarify certain collateral. Mr. Lowdermilk, a director of the Company, is the
president and majority shareholder of TCC. The Debenture and the Note bore
interest at the greater of prime plus two points or 10% which interest was
payable quarterly. As required under the Distribution Agreement with Earth
Sciences, in September 2003 the Company assumed the remaining balance of the
notes payable to Tectonic Construction Co. totaling $1,150,000. Of that amount
$300,000 was paid off with proceeds of a convertible debenture sold to Arch in a
like amount as noted below. Also in September 2003, Tectonic converted $210,000
of the remaining debt into 100,000 shares of the Company's stock pursuant to the
terms of the debt assumed from Earth Sciences. The remaining $640,000 was also
paid-off in September 2003 with the proceeds from a term loan of the same amount
obtained from a commercial bank. At that date the Company also assumed other
indebtedness from ESI in the amount of $130,000 related to past service
obligations ($77,000 payable for the benefit of Mr. McKinnies and $44,200
payable for the benefit of Dr. Bisque, both Directors of the Company).
The Company executed a Securities Subscription and Investment Agreement with
Arch Coal, Inc. in July 2003. Pursuant to the investment agreement, in September
2003 Arch purchased a $300,000 convertible debenture from the Company, purchased
137,741 shares of the Company's Common stock and was also granted an option to
purchase 50,000 shares. The Company also co-markets its ADA-249 product under an
agreement with Arch as described above. Under that arrangement, the Company has
recorded revenue of $60,000 and $150,000 in 2002 and 2003, respectively. The
Company also granted Arch certain "piggyback" rights in the event the Company
registers certain other equity securities and certain demand registration rights
as part of the transaction. A designee of Arch, John W. Eaves, has been
appointed a seat on the Company's Board of Directors and management of the
Company has agreed in the future to nominate and to vote all proxies and other
shares of stock in the Company which they are entitled to vote in favor of that
designee so long as Arch holds no less 100,000 shares of the Company's common
stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Registrant's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, Registrant believes that
during the fiscal year ended December 31, 2004, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were met.
Code of Ethics
The Company has adopted a Code of Ethics for Senior Financial Officers that is
applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. A copy of our Code of Ethics for Senior Financial Officers is filed
as an exhibit to the Company's annual report on Form 10KSB for 2003 and is
posted on the Company's website at www.adaes.com.
11
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Hein & Associates, LLP has been the independent accounting firm that audits the
financial statements of ADA-ES, Inc. and its subsidiary since 2003. In
accordance with standing policy, Hein & Associates, LLP periodically changes the
personnel who work on the audit.
The Audit Committee of the Board of Directors of the Company anticipates
engaging Hein & Associates, LLP as the independent auditors for the fiscal year
ending December 31, 2005 subject to determination of the terms of that
engagement towards the end of 2005. The Company anticipates that a
representative of Hein & Associates, LLP, who conducted the audit for the year
ended December 31, 2004, will be present at the Annual Meeting of Shareholders.
There have been no disagreements on matters of accounting principles or
practices, financial statement disclosures nor of audit scope or procedures
between the Company and Hein & Associates, LLP during the two most recent fiscal
years nor any subsequent interim periods. The representative of Hein &
Associates, LLP will be available to respond to appropriate shareholder
questions and will have the opportunity to make a statement at that time if the
representative desires to do so.
In addition to performing the audit of the Company's annual consolidated
financial statements, Hein & Associates, LLP provided other services during
2004. The aggregate fees billed in 2003 and 2004 for each of the following
categories of services are set forth below:
Fiscal Year
----------- 2003 2004
---- ----
Audit Fees $66,267 $58,513
Audit-Related Fees -- $ 1,896
Tax Fees (1) -- --
All Other Fees (2) $19,021 --
The above amounts include combined services provided for Registrant and Earth
Sciences for a portion of 2003, where such services could not be divided into
their components.
(1) Registrant's principal accountant provided review and consulting services
related to the filing of the Company's 2003 Federal Income Tax returns.
(2) Registrant's principal accountant provided review and consulting services
related to the filing of a Form 10SB with the SEC to effect the spin-off from
Earth Sciences in 2003, filing of a Form S-3 in 2004 and review of preliminary
Sarbanes-Oxley Section 404 documentation in 2004.
Audit Committee Approval of Services
It is the policy of the Audit Committee of the Company to approve the engagement
to render audit or non-audit services before the accountant is engaged by the
Company. The Audit Committee approved of 100% of the services provided by the
independent accountant in 2004.The Audit Committee reviews summaries of the
services provided by Hein & Associates, LLP and the related fees and has
considered the independence of Hein & Associates, LLP.
PROPOSALS OF SHAREHOLDERS FOR PRESENTATION AT THE NEXT ANNUAL
MEETING OF SHAREHOLDERS
The Company anticipates that the next Annual Meeting of Shareholders will be
held in May 2006. Any Shareholder of record of the Company who desires to submit
a proper proposal for inclusion in the proxy material related to the net Annual
Meeting of Shareholders must do so in writing and it must be received at the
Company's principal executive officers on or before December 12, 2005. If a
shareholder intends to submit a proposal at the meeting that is not included in
the Company's proxy statement, and the Shareholder fails to notify the Company
prior to February 25, 2006 of such proposal, then the proxies appointed by the
Company's management would be allowed to use their discretionary voting
authority when the proposal is raised at the annual meeting, without any
discussion of the matter in the proxy statement. The proponent must own 1% or
more of the outstanding shares or $2,000 in market value, of the Company's
Common Stock and must have owned such shares for one year in order to present a
shareholder proposal to the Company.
ANNUAL REPORT ON FORM 10-KSB
The Annual Report on Form 10-KSB concerning the operation of the Company during
the calendar year ended December 31, 2004, including certified financial
statements for the year then ended, is available upon request to shareholders of
the Company. Exhibits listed in Form 10-KSB are available upon request to
shareholders at a nominal charge for printing and mailing.
12
OTHER MATTERS
The Board knows of no other business to be presented at the Annual Meeting of
Shareholders. If other matters properly come before the Meeting, the persons
named in the accompanying form of Proxy intend to vote on such other matters in
accordance with their best judgment.
13
APPENDIX A
ADA-ES INC.
BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
1. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other information provided by the Company to any governmental body or the
public; the Company's system of internal controls regarding finance, accounting,
and ethics that management and the Board have established; and the Company's
auditing, accounting and financial reporting processes on a general basis.
Consistent with this function, the Audit Committee should encourage continuous
improvement of and foster adherence to, the Company's policies, procedures and
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
o Review and appraise the audit efforts of the Company's independent
accountants.
o Provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of
Directors.
2. MEMBERSHIP
The Audit committee will be comprised of not less than three members of the
Board. They will be selected by the Board, taking into account prior experience
in matters to be considered by the Committee, probable availability at times
required for consideration of such matters, and their individual independence
and objectivity.
All members will be directors free from relationships that, in the opinion of
the Board of Directors, would interfere with the exercise of independent
judgment as a committee member.
The Audit committee will select a chairperson from among its members. The
chairperson will serve for a term of not less then one year and shall have the
responsibility of establishing times of meeting and agenda items for the
Committee.
Officers or employees of the Company or any of its subsidiaries may serve on the
Committee. However, a majority of the Committee will be directors who are not
currently, nor were formerly officers of the Company or any of its subsidiaries.
When considering relationships that might affect independence, including
possible affiliate status, the Board of Directors will give appropriate
consideration, in addition to its Audit Committee policy, to guidelines issued
by the National Association of Securities Dealers (NASD), which were provided to
assist Board of Directors in observing the spirit of the NASD policy on audit
committee requirements.
3. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its chairperson should participate with the
independent accounts and management quarterly to review the Company's financial
statements.
4. ACTIONS OF THE COMMITTEE
The Committee's activities will include the following actions:
o Oversight of the financial statements and relations with the
independent accountants.
1. Instruct the independent accountants that the Board of Directors
is the client in its capacity as the shareholders'
representative.
1
2. Expect the independent accountants to meet with the Board of
Directors at least annually so the Board has a basis on which to
recommend the independent accountants' appointment to the
shareholders or to ratify its selection of the independent
accountants.
3. Expect financial management and the independent accountants to
analyze significant financial report issues and practices on a
timely basis.
4. Expect financial management and the independent accountants to
discuss with the Audit Committee:
o Qualitative judgments about whether current or proposed
accounting principles and disclosures are appropriate, not
just acceptable.
o Aggressiveness or conservatism of accounting principles and
financial estimates.
5. Expect the independent accountants to provide the Audit Committee
with:
o Independent judgments about the appropriateness of the
Company's current or proposed accounting principles and
whether current or proposed financial disclosures are clear.
o Views on whether the accounting principles chosen by
management are conservative, moderate, or aggressive as they
relate to income, asset, and liability recognition, and
whether these accounting principles are commonly used.
o Reasons why accounting principles and disclosure practices
used for new transactions or events are appropriate.
o Reasons for accepting or questioning significant estimates
made by management.
o Views on how selected accounting principles and disclosure
practices affect shareholder and public attitudes about the
Company.
o Actions taken on the Board's behalf that require Board
notification but not Board approval:
1. Review and approve the scope of the Company's audit and that of
its subsidiaries as recommended by the independent accountants
and the president.
2. Review and approve the scope of the Company's annual profit and
pension trust audits.
3. Answer questions raised by shareholders during an annual
shareholders' meeting on matters relating to the Committee's
activities if asked to do so by the Board of Directors.
o Matters requiring the Committee's review and study before making a
recommendation for the Board of Directors' action:
1. Appointment of the independent accountants.
2. Implementation of major accounting policy changes.
3. SEC registration statements to be signed by the Board of
Directors or a majority thereof.
4. The independent accountants' reports and financial statements
prior to publication in the annual report.
o Matters requiring the Committee's review and study before providing
summary information to the Board of Directors:
1. Accounting policy changes proposed or adopted by organizations
such as the Financial Accounting Standards Board (FASB), the
Securities and Exchange Commission (SEC), and the American
Institute of Certified Public Accountants (AICPA), or by any
comparable bodies outside the U.S.
2. The independent accountants' assessment of the strength and
weaknesses of the Company's financial staff, systems, controls
and other factors that might be relevant to the integrity of the
financial statements.
3. Quarterly financial statements review before earnings release or
publication.
4. Administration of the Company's "conflict of interest" policy.
5. The performance of management and operating personnel under the
Company's code of ethics.
6. Gaps and exposures in insurance programs.
7. Reports about the Company or its subsidiaries submitted by
agencies of governments in countries in which the Company or its
subsidiaries operate.
8. Periodic SEC filings and the adequacy of programs and procedures
to assure compliance with SEC regulations and applicable
regulations of the NASD.
2
ADA-ES, INC.
2005 Directors' Compensation Plan
ADA-ES, INC., a Colorado corporation (the "Corporation"), sets forth herein
the terms of the 2005 Directors Compensation Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation by
providing eligible directors (as designated pursuant to Section 5 hereof) an
opportunity to acquire or increase a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and will encourage such eligible
individuals to continue to service the Corporation.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Option Agreements), the following definitions shall apply:
2.1 "Affiliate" means any company or other trade or business that is
controlled by or under common control with the Corporation,
(determined in accordance with the principles of Section 414(b) and
414(c) of the Code and the regulations thereunder) or is an affiliate
of the Corporation within the meaning of Rule 405 of Regulation C
under the 1933 Act.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Cause" means, unless otherwise defined in an Option Agreement, (i)
gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a criminal offense (other
than minor traffic offenses); or (iii) material breach of any term of
any employment, consulting or other services, confidentiality,
intellectual property or non-competition agreements, if any, between
Optionee and the Corporation or any of its Subsidiaries or Affiliates.
2.4 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.5 "Committee" means the Compensation Committee of the Board, which must
consist of no fewer than two members of the Board and shall be
appointed by the Board.
2.6 "Corporation" means ADA-ES, INC.
2.7 "Director" means a member of Board of Directors of the Corporation.
2.8 "Effective Date" means the date of adoption of the Plan by the Board.
2.9 "Employer" means ADA-ES, INC. or the Subsidiary or Affiliate of the
Corporation, which employs the designated recipient of an Option.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.11 "Fair Market Value" means the value of each share of Stock subject to
the Plan determined as follows: if on the Grant Date or other
determination date the shares of Stock are listed on an established
national or regional stock exchange, are admitted to quotation on the
National Association of Securities Dealers Automated Quotation System,
or are publicly traded on an established securities market, the Fair
Market Value of the shares of Stock shall be the closing bid price of
the shares of Stock on such exchange or in such market (the highest
such closing price if there is more than one such exchange or market)
on the trading day immediately preceding the Grant Date (or on the
Grant Date, if so specified by the Committee or the Board) or such
other determination date or, if no sale of the shares of Stock is
reported for such trading day, on the next preceding day on which any
sale shall have been reported. If the shares of Stock are not listed
on such an exchange, quoted on such System or traded on such a market,
Fair Market Value shall be determined by the Board in good faith.
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2.12 "Family Member" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, 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, of
the Optionee, any person sharing the Optionee's household (other than
a tenant or employee), a trust in which these persons (or the
Optionee) have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the Optionee) control the
management of assets, and any other entity in which these persons (or
the Optionee) own more than fifty percent of the voting interests.
2.13 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.14 "Option Agreement" means the written agreement evidencing the grant of
an Option hereunder.
2.15 "Option Grant Date" means the later of (i) November 4, 2004 and (ii)
the date as of which the Optionee and the Corporation, Subsidiary or
Affiliate enter the relationship resulting in the Optionee being
eligible for grants.
2.16 "Optionee" means a person who holds an Option under the Plan.
2.17 "Option Period" means the period during which Options may be exercised
as defined in Section 11.
2.18 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.19 "Plan" means the ADA-ES, INC. 2005 Director Compensation Plan.
2.20 "1933 Act" means the Securities Act of 1933, as now in effect or as
hereafter amended.
2.21 "Service Relationship" means the provision of bona fide services to
the Corporation, a Subsidiary, or an Affiliate as a director, employee
or consultant.
2.22 "Stock" means the shares of Common Stock, no par value, of the
Corporation.
2.23 "Stock Award" means the award of shares of Common Stock, no par value,
of the Corporation under the Plan.
2.24 "Stock Award Date" means the later of (i) March 17, 2005 and (ii) the
date as of which the Stock Recipient is awarded the right to receive
Stock.
2.25 "Stock Recipient" means a person who receives an award of Stock
subject to the Plan.
2.26 "Subsidiary" means any "subsidiary corporation" of the Corporation
within the meaning of Section 425(f) of the Code.
3. ADMINISTRATION
3.1. Committee
The Plan shall be administered by the Committee appointed by the Board,
which shall have the full power and authority to take all actions and to make
all determinations required or provided for under the Plan or any Stock Award or
Option granted or Option Agreement entered into hereunder and all such other
actions and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Committee to be necessary or appropriate to
the administration of the Plan or any Stock Award or any Option granted or
Option Agreement entered into hereunder. The interpretation and construction by
the Committee of any provision of the Plan or of any Stock Award or any Option
granted or Option Agreement entered into hereunder shall be final and
conclusive.
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3.2. No Liability
No member of the Board or of the Committee shall be liable for any action
or determination made, or any failure to take or make an action or
determination, in good faith with respect to the Plan or any Stock Award or any
Option granted or Option Agreement entered into hereunder.
4. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be Stock, which shares may be treasury shares or authorized but unissued
shares. The number of shares of Stock that may be issued pursuant to Options
granted under the Plan shall not exceed in the aggregate 40,000 shares of Stock,
which number of shares is subject to adjustment as provided in Section 19
hereof. If any Option or portion thereof is unearned, expires, terminates or is
terminated for any reason prior to exercise in full, the shares of Stock that
were subject to the unexercised portion of such Option shall be available for
future Options granted under the Plan. The number of shares of Stock that may be
issued pursuant to Stock Awards under the Plan shall not exceed in the aggregate
50,000 shares of Stock, which number of shares is subject to adjustment as
provided in Section 19 hereof. If any Stock Award or portion thereof is
unearned, expires, terminates or is terminated for any reason prior to issuance
in full, the shares of Stock of such portion of such Stock Award shall be
available for future Stock Award under the Plan.
5. ELIGIBILITY
Stock Awards and Options may be granted under the Plan to any
non-management Director of the Corporation. An individual may not hold more than
one Option, subject to such restrictions as are provided herein.
6. EFFECTIVE DATE AND TERM
6.1. Effective Date
The Plan shall become effective as of March 17, 2005, the date of adoption
of the final Plan by the Board, subject to stockholders' approval of the Plan;
provided, however, that upon approval of the Plan by the stockholders of the
Corporation, all Stock Awards and Options granted under the Plan on or after the
effective date shall be fully effective as if the stockholders of the
Corporation had approved the Plan on the effective date. If the stockholders
fail to approve the Plan, any Stock Awards and Options granted hereunder shall
be null, void and of no effect.
6.2. Term
If not sooner terminated by the Board, the Plan shall terminate on the date
10 years after the effective date.
7. STOCK AWARDS AND ANNUAL LIMITATION
Subject to the terms and conditions of the Plan, the Committee may, at any
time and from time to time prior to the date of termination of the Plan, issue
to such eligible Directors a Stock Award. Such Stock Awards will be limited to
not more than 1,000 shares of Stock for any annual period of service per
individual, which number of shares is subject to adjustment as provided in
Section 19 hereof. The Corporation may or may not register the Stock so issued
for sale with the U.S. Securities and Exchange Commission and is under no
obligation to do so.
8. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Committee may, at any
time and from time to time prior to the date of termination of the Plan, grant
to such eligible Directors Options to purchase such number of shares of Stock
with the following terms and conditions: the exercise price shall be the market
price on the date of grant, the shares of Stock underlying the Option will vest
for exercise at a rate of no more than 1,000 shares per annual period, and any
unvested shares of Stock that are outstanding at the date the Optionee no longer
is a Director of the Corporation or in a Service Relationship will be forfeited.
Without limiting the foregoing, the Committee may at any time, with the consent
of the Optionee, amend the terms of outstanding Options or issue new Options in
exchange for the surrender and cancellation of outstanding Options. The date on
which the Committee approves the grant of an Option (or such later date as is
specified by the Committee) shall be considered the date on which such Option is
granted. The maximum number of shares of Stock subject to Options that can be
awarded under the Plan to any person is 5,000 shares, which number of shares is
subject to adjustment as provided in Section 19 hereof.
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9. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements to be executed by the Corporation and the Optionee, in such form or
forms as the Committee shall from time to time determine. Option Agreements
covering Options granted from time to time or at the same time need not contain
similar provisions; provided, however, that all such Option Agreements shall
comply with all terms of the Plan.
10. OPTION PRICE
The purchase price of each share of Stock subject to an Option shall be
fixed by the Committee and stated in each Option Agreement. As provided in
Section 8 above, the Option Price shall be not less than the fair market value
of a share of the Stock covered by the Option on the date the Option is granted
(as determined in good faith by the Committee).
11. TERM AND EXERCISE OF OPTIONS
11.1. Term
Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of 10 years from the
date such Option is granted, or on such date prior thereto as may be fixed by
the Committee and stated in the Option Agreement relating to such Option.
11.2. Exercise by Optionee
Only the Optionee receiving an Option or a transferee of an Option pursuant
to Section 12 (or, in the event of the Optionee's legal incapacity or
incompetency, the Optionee's guardian or legal representative, and in the case
of the Optionee's death, the Optionee's estate) may exercise the Option.
11.3. Option Period and Limitations on Exercise
Each Option granted under the Plan shall be exercisable in whole or in part
at any time and from time to time over a period commencing on or after the date
of grant of the Option and ending upon the expiration or termination of the
Option, as the Committee shall determine and set forth in the Option Agreement
relating to such Option, but at no greater rate of vesting than set forth in
Section 8 above. Without limitation of the foregoing, the Committee, subject to
the terms and conditions of the Plan, may in its sole discretion provide that an
Option may not be exercised in whole or in part for any period or periods of
time during which such Option is outstanding as the Committee shall determine
and set forth in the Option Agreement relating to such Option. Any such
limitation on the exercise of an Option contained in any Option Agreement may be
rescinded, modified or waived by the Committee, in its sole discretion, at any
time and from time to time after the date of grant of such Option.
Notwithstanding any other provisions of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the stockholders
of the Corporation as provided in Section 6.1 hereof.
11.4. Method of Exercise
An Option that is exercisable hereunder may be exercised by delivery to the
Corporation on any business day, at its principal office addressed to the
attention of the Committee, of written notice of exercise, which notice shall
specify the number of shares for which the Option is being exercised, and shall
be accompanied by payment in full of the Option Price of the shares for which
the Option is being exercised. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made, as
determined by the Committee and set forth in the Option Agreement pertaining to
an Option by cash or by certified check payable to the order of the Corporation.
Payment in full of the Option Price need not accompany the written notice of
exercise provided the notice directs that the Stock certificate or certificates
for the shares for which the Option is exercised be delivered to a licensed
broker acceptable to the Corporation as the agent for the individual exercising
the Option and, at the time such Stock certificate or certificates are
4
delivered, the broker tenders to the Corporation cash (or cash equivalents
acceptable to the Corporation) equal to the Option Price plus the amount (if
any) of federal and/or other taxes which the Corporation may, in its judgment,
be required to withhold with respect to the exercise of the Option. An attempt
to exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Promptly after the exercise of an Option and
the payment in full of the Option Price of the shares of Stock covered thereby,
the individual exercising the Option shall be entitled to the issuance of a
Stock certificate or certificates evidencing such individual's ownership of such
shares. An individual holding or exercising an Option shall have none of the
rights of a stockholder until the shares of Stock covered thereby are fully paid
and issued to such individual and, except as provided in Section 19 hereof, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance.
12. TRANSFERABILITY OF OPTIONS
12.1. Transferability of Options
Except as provided in Section 12.2, during the lifetime of an Optionee,
only the Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise an Option. Except as
provided in Section 12.2, no Option shall be assignable or transferable by the
Optionee to whom it is granted, other than by will or the laws of descent and
distribution.
12.2. Family Transfers.
Subject to the terms of the applicable Option Agreement, an Optionee may
transfer all or part of an Option to any Family Member; provided that subsequent
transfers of transferred Options are prohibited except those in accordance with
this Section 12.2 or by will or the laws of descent and distribution; and,
provided further, that, except with the consent of the Board or the Committee,
there may be no consideration for any transfer made pursuant to this section.
Following transfer, any such Option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
that for purposes of Section 12.2 hereof the term "Optionee" shall be deemed to
refer to the transferee. The events of termination of the Service Relationship
of Sections 13 and 14 hereof shall continue to be applied with respect to the
original Optionee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods, specified in Section 11.3.
13. TERMINATION OF SERVICE RELATIONSHIP
Upon the termination of the Service Relationship of an Optionee with the
Corporation, a Subsidiary or an Affiliate, other than by reason of the death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee or for Cause, any Option granted to an Optionee pursuant
to the Plan shall continue to be exercisable only to the extent that it was
exercisable immediately before such termination; provided, however, such Option
shall terminate thirty (30) days after the date of such termination of Service
Relationship, unless earlier terminated pursuant to Section 11.1 hereof, and
such Optionee shall have no further right to purchase shares of Stock pursuant
to such Option; and provided further, that the Committee may provide, by
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of termination of the Service Relationship of the Optionee
with the Corporation, a Subsidiary or an Affiliate, exercise an Option, in whole
or in part, at any time subsequent to such termination of Service Relationship
and prior to termination of the Option pursuant to Section 11.1 hereof, either
subject to or without regard to any installment limitation on exercise imposed
pursuant to Section 11.3 hereof, as the Committee, in its sole and absolute
discretion, shall determine and set forth in the Option Agreement. Upon the
termination of the Service Relationship of an Optionee with the Corporation, a
Subsidiary or an Affiliate for Cause, any Option granted to an Optionee pursuant
to the Plan shall terminate and such Optionee shall have no further right to
purchase shares of Stock pursuant to such Option; and provided however, that the
Committee may provide, by inclusion of appropriate language in any Option
Agreement, that an Optionee may (subject to the general limitations on exercise
set forth in Section 11.3 hereof), in the event of termination of the Service
Relationship of the Optionee with the Corporation, a Subsidiary or an Affiliate
for Cause, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 11.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a leave of absence or leave on military
or government service shall constitute a termination of Service Relationship for
purposes of the Plan shall be determined by the Committee, which determination
shall be final and conclusive. For purposes of the Plan, including without
limitation this Section 13 and Section 14, unless otherwise provided in an
Option Agreement, a termination of Service Relationship with the Corporation, a
Subsidiary or an Affiliate shall not be deemed to occur if the Optionee
immediately thereafter has a Service Relationship with the Corporation, any
other Subsidiary or any other Affiliate.
5
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
14.1. Death
If an Optionee dies while in a Service Relationship with the Corporation, a
Subsidiary or an Affiliate or within the period following the termination of
such Service Relationship during which the Option is exercisable under Section
13 or 14.2 hereof, the executors, administrators, legatees or distributees of
such Optionee's estate shall have the right (subject to the general limitations
on exercise set forth in Section 11.3 hereof), at any time within one year after
the date of such Optionee's death and prior to termination of the Option
pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such Optionee's death, whether or not such
Option was exercisable immediately prior to such Optionee's death; provided,
however, that the Committee may provide by inclusion of appropriate language in
any Option Agreement that, in the event of the death of an Optionee, the
executors, administrators, legatees or distributees of such Optionee's estate
may exercise an Option (subject to the general limitations on exercise set forth
in Section 11.3 hereof), in whole or in part, at any time subsequent to such
Optionee's death and prior to termination of the Option pursuant to Section 11.1
hereof, either subject to or without regard to any installment limitation on
exercise imposed pursuant to Section 11.3 hereof, as the Committee, in its sole
and absolute discretion, shall determine and set forth in the Option Agreement.
14.2. Disability
If an Optionee terminates a Service Relationship with the Corporation, a
Subsidiary or an Affiliate by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 11.3 hereof), at any time within one year after such
termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of Service Relationship,
whether or not such Option was exercisable immediately prior to such termination
of Service Relationship; provided, however, that the Committee may provide, by
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of the termination of the Service Relationship of the
Optionee with the Corporation or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 11.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a termination of a Service Relationship
is to be considered by reason of "permanent and total disability" for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive.
15. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of the
Corporation.
16. SECURITIES LAWS
The Corporation shall not be required to sell or issue any shares of Stock
under any Stock Award or Option if the sale or issuance of such shares would
constitute a violation by the individual receiving the Stock Award or exercising
the Option or by the Corporation of any provisions of any law or regulation of
any governmental authority, including, without limitation, any federal or state
securities laws or regulations. If at any time the Corporation shall determine,
in its discretion, that the listing, registration or qualification of any shares
subject to the Stock Award or the Option upon any securities exchange or under
any state or federal law, or the consent of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares, the Stock Award may not be issued or the Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
6
not acceptable to the Corporation, and any delay caused thereby shall in no way
affect the date of termination of the Option. Specifically in connection with
the Securities Act, upon exercise of any Option or issuance of any Stock Award,
unless a registration statement under the Securities Act is in effect with
respect to the shares of Stock covered by such Option or Stock Award, the
Corporation shall not be required to sell or issue such shares unless the
Corporation has received evidence satisfactory to the Corporation that the
Optionee or Stock Recipient may acquire such shares pursuant to an exemption
from registration under the Securities Act. Any determination in this connection
by the Corporation shall be final and conclusive. The Corporation may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Corporation shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto or pursuant to a Stock Award to comply with any law
or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an issuance of a Stock Award or an Option
shall not be exercisable unless and until the shares of Stock covered by such
Stock Award or Option are registered or are subject to an available exemption
from registration, the Stock Award or exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.
17. EXCHANGE ACT: RULE 16b-3
17.1. General
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") (and any
successor thereto) under the Exchange Act. Any provision inconsistent with Rule
16b-3 shall, to the extent permitted by law and determined to be advisable by
the Committee (constituted in accordance with Section 17.2 hereof), be
inoperative and void.
17.2. Compensation Committee
The Committee appointed in accordance with Section 3.1 hereof shall consist
of not fewer than two members of the Board each of whom shall qualify (at the
time of appointment to the Committee and during all periods of service on the
Committee) in all respects as a "non-employee director" as defined in Rule
16b-3.
17.3. Restriction on Transfer of Stock
No Stock Recipient or Optionee who is considered an "insider" of the
Corporation subject to Section 16 of the Exchange Act shall be permitted to sell
Stock (which such "insider" had received in a Stock Award or upon exercise of an
Option) during the three months immediately following such Stock Award or the
grant of such Option.
18. AMENDMENT AND TERMINATION
The Board may, at any time and from time to time, suspend or terminate the
Plan and make such changes in or additions to the Plan as it may deem proper,
provided that, if and to the extent provided by applicable law or regulation, no
such suspension or termination of, change in or addition to the Plan shall be
made unless such suspension or termination of, or change in or addition to the
Plan is authorized by the Company's stockholders. Except as permitted under
Section 19 hereof, no suspension or termination of the Plan or any change in or
addition to the Plan shall, without the consent of any Optionee who is adversely
affected thereby, alter any Options previously granted to the Optionee pursuant
to the Plan.
19. EFFECT OF CHANGES IN CAPITALIZATION
19.1. Changes in Stock
If the number of outstanding shares of Stock is increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, a proportionate and
appropriate adjustment shall be made by the Corporation in the number and kind
of shares issuable and exercisable under the Plan and for which Options are
7
outstanding, so that the proportionate interest of the Optionee immediately
following such event shall, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in outstanding Options
shall not change the aggregate Option Price payable with respect to shares
subject to the unexercised portion of the Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price per share.
Notwithstanding the foregoing, in the event of a spin-off that results in no
change in the number of outstanding shares of Stock of the Corporation, the
Corporation may, in such manner as the Corporation deems appropriate, adjust (i)
the number and kind of shares of Stock subject to outstanding Options and/or
(ii) the exercise price of outstanding Options.
19.2. Reorganization With Corporation Surviving
Subject to Section 19.3 hereof, if the Corporation shall be the surviving
entity in any reorganization, merger or consolidation of the Corporation with
one or more other entities, any Option theretofore granted pursuant to the Plan
shall pertain to and apply to the securities to which a holder of the number of
shares of Stock subject to such Option would have been entitled immediately
following such reorganization, merger or consolidation, with a corresponding
proportionate adjustment of the Option Price per share so that the aggregate
Option Price thereafter shall be the same as the aggregate Option Price of the
shares remaining subject to the Option immediately prior to such reorganization,
merger or consolidation.
19.3. Other Reorganizations; Sale of Assets or Stock
Upon the dissolution or liquidation of the Corporation, or upon a merger,
consolidation or reorganization of the Corporation with one or more other
entities in which the Corporation is not the surviving entity, or upon a sale of
substantially all of the assets of the Corporation to another person or entity,
or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving entity) approved by the
Board that results in any person or entity (other than persons who are holders
of stock of the Corporation at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined voting
power of all classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent provision is made in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. In the
event of any such termination of the Plan, each Optionee shall have the right
(subject to the general limitations on exercise set forth in Section 11.3 hereof
and except as otherwise specifically provided in the Option Agreement relating
to such Option), immediately prior to the occurrence of such termination and
during such period occurring prior to such termination as the Committee in its
sole discretion shall designate, to exercise such Option in whole or in part,
whether or not such Option was otherwise exercisable at the time such
termination occurs, but subject to any additional provisions that the Committee
may, in its sole discretion, include in any Option Agreement. The Committee
shall send written notice of an event that will result in such a termination to
all Optionees not later than the time at which the Corporation gives notice
thereof to its stockholders.
19.4. Adjustments
Adjustments under this Section 19 relating to stock or securities of the
Corporation shall be made by the Committee, whose determination in that respect
shall be final and conclusive. No fractional shares of Stock or units of other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.
19.5. No Limitations on Corporation
The grant of an Option pursuant to the Plan shall not affect or limit in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
20. WITHHOLDING
The Corporation or a Subsidiary may be obligated to withhold federal and
local income taxes and Social Security taxes to the extent that an Optionee or
Stock Recipient realizes ordinary income in connection with a Stock Award or the
exercise of an Option. The Corporation or a Subsidiary may withhold amounts
needed to cover such taxes from payments otherwise due and owing to a Stock
Recipient or an Optionee, and upon demand the Stock Recipient or Optionee will
promptly pay to the Corporation or a Subsidiary having such obligation any
additional amounts as may be necessary to satisfy such withholding tax
obligation. Such payment shall be made in cash or cash equivalents.
8
21. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Corporation, any Subsidiary
or any Affiliate, or to interfere in any way with the right and authority of the
Corporation, any Subsidiary or any Affiliate either to increase or decrease the
compensation of any individual at any time, or to terminate any employment or
other relationship between any individual and the Corporation, any Subsidiary or
any Affiliate. The obligation of the Corporation to pay any benefits pursuant to
the Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed
herein. The Plan shall in no way be interpreted to require the Corporation to
transfer any amounts to a third party trustee or otherwise hold any amounts in
trust or escrow for payment to any participant or beneficiary under the terms of
the Plan.
22. NONEXCLUSIVITY
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
23. GOVERNING LAW
This Plan and all Options to be granted hereunder shall be governed by the
laws of the State of Colorado (but not including the choice of law rules
thereof).
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer
to execute this Plan as of the 17th day of March, 2005 to evidence its adoption
of this Plan.
ADA-ES, INC.
By: /s/ Michael D. Durham
-------------------------
Michael D. Durham
President
9
Exhibit 99.3
ADA-ES, INC.
2004 Stock Compensation Plan #2
ARTICLE I
Purpose of Plan
The purpose of this Plan is to compensate executive officers, employees,
consultants and outside directors of ADA-ES, Inc. by awarding shares and options
to purchase shares of the Common Stock of the corporation to such individuals
for services they have and will render during calendar 2004 and in later years
to the corporation and its subsidiary. In the case of the outside directors, the
shares to be issued are for their annual service for the period from October 1,
2004 through September 30, 2005.
The Board of Directors of the Corporation have also adopted, as of August 23,
2003, a stock option plan entitled the "ADA-ES, Inc. 2004 Executive Stock Option
Plan," (the "Executive SO Plan"), a copy of which is attached hereto and made a
part hereof (Attachment #1). The award of options and the underlying shares to
the executive officers pursuant to the Executive SO Plan and noted below is made
a part of this Plan.
The Board of Directors and the then shareholder of the Corporation have also
adopted, as of February 21, 2003, a stock option plan entitled the "ADA-ES, Inc.
2003 Stock Option Plan," (the "Employee SO Plan"). The award to employees of
options and the underlying shares pursuant to the Employee SO Plan and noted
below is made a part of this Plan.
The Board of Directors of the Corporation has ratified the award of qualified
and non-qualified options to certain employees and a consultant on August 23,
2004 and on November 4, 2004. On November 4, 2004 the Board of Directors elected
to make the award of those options and the underlying shares a part of this
Plan.
ARTICLE II
Definitions
2.1 "Award" means a grant to an executive officer, employee, consultant or
outside director of the Corporation of a right to be issued shares of Common
Stock under this Plan.
2.2 "Board of Directors" means the board of directors of the Corporation.
2.3 "Common Stock" means the no par value common stock of the Corporation.
2.4 "Corporation" means ADA-ES, Inc., and any corporate successor thereto
(whether by merger, acquisition, consolidation, liquidation or other
reorganization) which has adopted this Plan and assumed the Corporation's
obligations hereunder.
2.5 "Date of Award" means the date on which the Board of Directors authorizes an
Award to a Participant under this Plan.
2.6 "Participant" means an outside director of the Corporation who has been
granted an Award pursuant to this Plan.
ARTICLE III
Award of Common Stock and Grant of Options
3.1 Award of Options to Executive Officers.
On August 23, 2004, the Board of Directors after due consideration of past
service and future requirements, granted non-qualified options pursuant to the
Executive SO Plan as follows:
1
Name of Executive Officer Options
------------------------- ---------
Jonathan Barr 30,600
C. Jean Bustard 33,900
Michael D. Durham 59,000
Mark H. McKinnies 44,400
Richard J. Schlager 32,100
for a total of 200,000 shares of Common Stock. The options are exercisable at a
price of $8.60 per share, the closing price on August 23, 2004. The options
generally vest over a 10-year period at a rate of 5% per year during the first 5
years, and 15% per year for the remaining term. Such vesting may be accelerated
based on performance criteria measured by the Compensation Committee and /or the
Company's Board of Directors. The grant of the options are made pursuant to
individual agreements the form of which is attached hereto as Exhibit 1.
3.2 Grant of Options.
On August 23, 2004 and November 4, 2004, the Board of Directors, after due
consideration of past service and future requirements, granted options pursuant
to the Employee SO Plan or otherwise as follows:
Options Granted
Name 8/23/04 11/4/04 Capacity
----------------- -------- ------- -----------------
Gerald T. Amrhein - 1,937 (1) Employee of ADAES
Kenneth E. Baldrey - 2,417 (1) Employee of ADAES
Jonathan Barr 12,000 - (1) Employee of ADAES
Edmond P. Brignac, Jr. - 1,291 (1) Employee of ADAES
Thomas Campbell - 2,000 (1) Employee of ADAES
Brian T. Donnelly - 2,125 (2) Consultant of ADAES
Shelia Glesmann - 2,500 (2) Consultant of ADAES
David Graham - 1,802 (1) Employee of ADAES
Cynthia Larson - 1,162 (1) Employee of ADAES
Charles Lindsey - 1,523 (1) Employee of ADAES
Kathy Lowsley - 884 (1) Employee of ADAES
Rebecca Magill - 937 (1) Employee of ADAES
Cameron E. Martin - 2,417 (1) Employee of ADAES
Thomas J. Millar, Jr. - 1,819 (1) Employee of ADAES
Derrick Moss - 1,258 (1) Employee of ADAES
David Muggli 9,750 2,438 (1) Employee of ADAES
Chad Sapp 5,000 1,250 (1) Employee of ADAES
Sharon Sjostrom - 7,363 (1) Employee of ADAES
Travis Starns - 1,625 (1) Employee of ADAES
Beth Turner-Graziano - 1,175 (1) Employee of ADAES
Cody Wilson - 1,443 (1) Employee of ADAES
Carol Wood 5,866 1,466 (1) Employee of ADAES
Eric Zipp 5,000 1,250 (1) Employee of ADAES
Ronda Zivalich - 1,297 (1) Employee of ADAES
for a total of 80,995 shares of Common Stock. The options granted August 23,
2004 are exercisable at a price of $8.60 per share, the closing price on August
23, 2004. Such options are exercisable over 10 years and vest over a 4-year
period at a rate of 25% per year. The grant of the options are made pursuant to
individual agreements the form of which is attached hereto as Exhibit 2. The
options granted November 4, 2004 are exercisable at a price of $13.80 per share,
the closing price on November 3, 2004. Such options are exercisable over 10
years and vest at the end of a 2-year period. The grant of the options are made
pursuant to individual agreements the form of which is attached hereto as
Exhibit 3.
2
Notes: (1) Award of qualified options made pursuant to the Employee SO Plan
and are intended to qualify as incentive stock options.
(2) Award of non-qualified options.
3.3 Award of Common Stock and Grant of Options to Outside Directors.
On November 4, 2004, the Board of Directors, after due consideration of the
service being provided by each outside director and its previous deliberations
wherein it determined that an annual retainer fee and option was appropriate,
which amount is to be paid in stock. Subject to shareholder approval, the Board
approved the issuance of 603 shares of the Company's common stock to each
non-management director, for a total of 4,221 shares for service on the Board
from October 1, 2003 through September 30, 2004. The Board also approved,
subject to shareholder approval, the grant of options to acquire 5,000 shares of
the Company's common stock to each non-management director, for a total of
35,000 shares, at an exercise price of $13.80, the closing price of the stock on
November 3, 2004. The options, if approved, will be exercisable over a period of
five years and will vest over a three- year period, one-third each year for
continued service on the Board. If such service is terminated, the non-vested
portion of the option will be forfeited. Options and shares were granted as
follows:
Name of Director # of Shares Options
----------------- ----------- ---------
Ramon E. Bisque 603 5,000
Duane N. Bloom 603 5,000
John W. Eaves 603 5,000
Ronald B. Johnson 603 5,000
Robert H. Lowdermilk 603 5,000
Rollie J. Peterson 603 5,000
Jeffrey C. Smith 603 5,000
for a total of 39,221 shares of Common Stock.
ARTICLE IV
Miscellaneous
4.1 Adjustment in Number of Shares.
In the event of any change in the number of outstanding shares of Common
Stock by reason of any stock split, stock dividend, or other capital
transaction, the Board of Directors shall determine, in its absolute discretion,
whether such change equitably requires an adjustment in the aggregate number of
shares of Common Stock which are the subject of an Award, but which have not yet
been issued. If the Board of Directors determines that an adjustment is
required, it shall make such adjustments as it deems appropriate. The Board of
Directors shall not, however, award any fractional shares as a result of any
adjustment made under this Section 4.1.
4.2 Non-Alienation of Benefits.
No Award or other right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void. Except with respect to any indebtedness owed by the
Participant to the Corporation, no Award or other right or benefit hereunder
shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of any Participant. If any Participant hereunder should
become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any Award, right or benefit hereunder, then such Award, right
or benefit shall, in the discretion of the Board of Directors, cease and, in
such event, the Corporation may hold or apply the same or any part thereof for
the benefit of the Participant, his or her spouse, children or other dependents,
or any of them, in such manner and in such proportion as the Board of Directors
may deem appropriate.
4.3 Effect of Plan.
Neither the establishment of this Plan, the granting of any Award, nor the
issuance of any shares of Common Stock thereunder, shall be construed as giving
any employee, Participant, or any other person, any legal right, except as
expressly provided herein, against the Corporation, its Subsidiaries,
shareholders, directors or officers, or the Board of Directors. Nothing
contained in this Plan shall be construed as a contract of employment between
the Corporation (or its Subsidiaries) and any employee or Participant, as a
right of any employee or Participant to be continued in the employ of the
Corporation (or its Subsidiaries), or as a limitation on the right of the
Corporation (or its Subsidiaries) to employ, discipline or discharge any
employee or Participant. No Participant shall acquire any rights as a
shareholder of the Corporation except to the extent that shares of Common Stock
have been issued to him. The rights of any Participant shall be limited to the
right to receive shares of Common Stock, if and when such shares become issuable
under the terms and conditions of this Plan.
3
4.4 Withholding of Taxes.
The Corporation shall have the right to deduct from any salary or bonuses
payable to any Participant any and all income or payroll taxes required by law
to be withheld from the compensation, whether in cash or shares of Common Stock,
payable to such Participant.
ARTICLE V
Continuation and Amendment of Plan
5.1 Discontinuance of Plan.
The continuation of this plan is not assumed as a contractual obligation of
the Corporation, and the right is reserved to the Corporation, by action of its
Board of Directors, to discontinue the Plan at any time. If the Plan shall be
discontinued, no additional Awards shall be made under the Plan after the date
of discontinuance, but the Plan shall continue to be operated in accordance with
its terms, as they may hereafter be amended, with respect to any Awards made
prior to the date of discontinuance.
5.2 Amendment.
The Corporation, by action of its Board of Directors, shall have the right
at any time, whether before or after discontinuance of the Plan, to amend all or
any of the provisions of the Plan in any manner. Any such amendment may prohibit
or postpone the issuance of any shares of Common Stock even though such shares
may have become issuable after the effective date of the amendment pursuant to
any Award granted before the effective date of the amendment.
ARTICLE VI
Acceptance
6.1 Acceptance of Plan.
By accepting any Award, a Participant shall be deemed to have accepted all
the terms and conditions of this Plan.
6.2 Transfer Restrictions.
Each Participant upon receiving any shares of Common Stock shall represent
in writing to the Corporation that, if such is the case, the Common Stock so
acquired has not been registered under the Securities Act of 1933 or any state
"Blue Sky" or securities law, that such Common Stock is not freely transferable
and that such Common Stock cannot be offered, sold or transferred in whole or in
part except in compliance with such laws. Such Participant shall also represent
in writing that he is acquiring such Common Stock for his own account, without
any intention to make an unregistered distribution thereof within the meaning of
the Securities Act of 1933 and that any certificate representing such Common
Stock shall bear an appropriate legend to such effect and the transfer agent for
the Common Stock shall be instructed to enter suitable "stop-transfer" notations
in its records to reflect the foregoing.
4
EXHIBIT 1
TO
2004 STOCK COMPENSATION PLAN #2
ADA-ES, Inc.
STOCK OPTION AGREEMENT
Stock Option Agreement made as of this 23rd day of August 2004 between
ADA-ES, Inc., a Colorado corporation, (hereinafter called the "Company") and
______________________________________________, (hereinafter referred to as
"Holder").
WHEREAS, Holder is an employee of the Company,
WHEREAS, on August 23, 2004 the Company's Board of Directors approved the
"ADA-ES, Inc. 2004 Executive Stock Option Plan" (the "SO Plan"),
WHEREAS, on November 4, 2004 the Company's Board of Directors approved the
"ADA-ES, Inc. Executive Compensation Plan" (the "Comp Plan"), and
WHEREAS, on August 23, 2004 the Company's Board of Directors approved and
specifically authorized the granting of the stock option hereinafter described
as a continuing incentive for the services of Holder.
NOW THEREFORE, in consideration of the premises, the mutual covenants,
hereinafter set forth, and other good and valuable considerations, the Company
and Holder agree as follows:
1. The Company hereby grants to Holder, pursuant to the SO Plan and
effective this date, as a matter of separate inducement and agreement, the
Option to Purchase (hereinafter the "Option") no more than the aggregate of
______ shares of the Company's Common Stock, no par value, on the terms and
conditions hereinafter set forth, at the purchase price of $8.60 per share. The
number of shares eligible for exercise shall be further limited to the minimum
and maximum vesting schedule set forth below, which schedule is subject to
modification by the Compensation Committee and/or the Company's Board of
Directors.
(a) Vesting Schedule:
Period Minimum Maximum
------ ------- --------
Years ended 12/31/04 through '14 5% or _____ shares 20% or ______ shares
(b) Exercise of the Option shall be governed by Section 10.4 of the SO
Plan, a copy of which is attached hereto and made a part hereof.
(c) To the extent not exercised, the remaining shares, to the extent
they have vested, shall be exercisable, in whole or in part, at any time not
later than December 31, 2015.
2. (a) During the lifetime of Holder, the Option shall be exercisable
only to the extent it has vested and only by Holder and any eligible transferee
as set forth in the SO Plan.
(b) If Holder shall die and not have fully exercised the Option, the
Option, to the extent vested, may be exercised, subject to the provisions of
Section 13 of the SO Plan.
5
(c) In the event that employment with the Company is terminated for
any reason, any remaining shares which have vested and are eligible for exercise
under the Option will expire within 30 days from the date of termination.
(d) In the event that another company or individual acquires a 50% or
greater interest in the Company, any remaining shares eligible for exercise
under the Option will expire within 30 days from the date of such acquisition.
3. Holder shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock certificate to
him for such shares.
4. (a) Holder acknowledges that any purchase of stock under the Option
shall be for investment purposes, and not with a view to resale or distribution
except that in the event the stock subject to such Option is registered under
the Securities Act of 1933, as amended or in the event a resale of such stock
without such registration would otherwise be permissible, such condition shall
be inoperative if, in the opinion of counsel for the Company, such condition is
not required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency.
(b) Holder acknowledges that any subsequent sale of stock acquired
under the Option is subject to the stock ownership provisions of the Comp Plan,
a copy of which is attached hereto and made a part hereof, and agrees to abide
by such provisions unless a written waiver is obtained from the Company's
Compensation Committee and/or the Company's Board of Directors.
5. The laws of the State of Colorado shall govern this agreement.
6. Other applicable sections of the SO Plan not specifically set forth
herein shall determine the remaining terms and conditions of the Option.
7. This agreement shall inure to the benefit of and be binding upon each
successor and assign of the Company as set forth in the SO Plan. All obligations
imposed upon Holder and all rights granted to the Company, hereunder, in the
Comp Plan and in the SO Plan shall be binding upon Holder's heirs, legal
representatives and successors.
IN WITNESS WHEREOF, the Company and Holder have caused this Stock Option
Agreement to be executed as of this 23rd day of August 2004.
ADA-ES, Inc.
By: Holder:
------------------------------- ---------------------------
Michael D. Durham, President & CEO (Name and Address)
Attest:
-------------------------------
Mark H. McKinnies, Chief Financial
Officer
6
EXHIBIT 2
TO
2004 ADA-ES, INC. STOCK COMPENSATION PLAN #2
STOCK OPTION AGREEMENT
Stock Option Agreement made as of this 23rd day of August 2004 between
ADA-ES, Inc., a Colorado corporation, (hereinafter called the "Company") and
_____________________________________, (hereinafter referred to as "Holder").
WHEREAS, Holder is an employee of the Company,
WHEREAS, on February 21, 2003 the Company's Board of Directors approved the
"ADA-ES, Inc. 2003 Stock Option Plan" (the "Plan"), and
WHEREAS, on August 23, 2004 the Company's Board of Directors approved and
specifically authorized the granting of the stock option hereinafter described
as a continuing incentive for the services of Holder.
NOW THEREFORE, in consideration of the premises, the mutual covenants,
hereinafter set forth, and other good and valuable considerations, the Company
and Holder agree as follows:
1. The Company hereby grants to Holder, pursuant to the Plan and effective
this date, as a matter of separate inducement and agreement, the Option to
Purchase (hereinafter the "Option") no more than the aggregate of _______ shares
of the Company's Common Stock, no par value, on the terms and conditions
hereinafter set forth, at the purchase price of $8.60 per share. The number of
shares eligible for exercise shall be further limited to the number of shares
earned on a semi-annual basis through out the two calendar years ended December
31, 2006, based upon meeting specific objectives outlined in a separate
agreement with the Holder's supervisor.
(a) Exercise of the Option shall be governed by Section 11.4 of the
Plan, a copy of which is attached hereto and made a part hereof.
(b) To the extent not exercised, the remaining shares shall be
exercisable, in whole or in part, at any time not later than August 22, 2014.
2. (a) During the lifetime of Holder, the Option shall be exercisable only
by Holder and any eligible transferee as set forth in the Plan..
(b) If Holder shall die and not have fully exercised the Option, the
Option may be exercised, subject to the provisions of Section 14 of the Plan.
(c) In the event that employment with the Company is terminated for
any reason, any remaining shares eligible for exercise under the Option will
expire within 30 days from the date of termination.
(d) In the event that another company or individual acquires a 50% or
greater interest in the Company, any remaining shares eligible for exercise
under the Option will expire within 30 days from the date of such acquisition.
3. Holder shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock certificate to
him for such shares.
7
4. Holder acknowledges that any purchase of stock under the Option shall be
for investment purposes, and not with a view to resale or distribution except
that in the event the stock subject to such Option is registered under the
Securities Act of 1933, as amended or in the event a resale of such stock
without such registration would otherwise be permissible, such condition shall
be inoperative if, in the opinion of counsel for the Company, such condition is
not required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency.
5. The laws of the State of Colorado shall govern this agreement.
6. Other applicable sections of the Plan not specifically set forth herein
shall determine the remaining terms and conditions of the Option.
7. This agreement shall inure to the benefit of and be binding upon each
successor and assign of the Company as set forth in the Plan. All obligations
imposed upon Holder and all rights granted to the Company, hereunder and in the
Plan shall be binding upon Holder's heirs, legal representatives and successors.
IN WITNESS WHEREOF, the Company and Holder have caused this Stock Option
Agreement to be executed as of this 23rd day of August 2004.
ADA-ES, Inc. Holder:
By:
---------------------------------- ------------------------------
Michael D. Durham, President & CEO (Name and Address)
Attest:
-----------------------------------
Mark H McKinnies, Chief Financial Officer
8
EXHIBIT 3
TO
2004 ADA-ES, INC. STOCK COMPENSATION PLAN #2
STOCK OPTION AGREEMENT
Stock Option Agreement made as of this 4th day of November 2004 between
ADA-ES, Inc., a Colorado corporation, (hereinafter called the "Company") and
_____________________________________, (hereinafter referred to as "Holder").
WHEREAS, Holder is an employee of the Company,
WHEREAS, on February 21, 2003 the Company's Board of Directors approved the
"ADA-ES, Inc. 2003 Stock Option Plan" (the "Plan"), and
WHEREAS, on November 4, 2004 the Company's Board of Directors approved and
specifically authorized the granting of the stock option hereinafter described
as a continuing incentive for the services of Holder.
NOW THEREFORE, in consideration of the premises, the mutual covenants,
hereinafter set forth, and other good and valuable considerations, the Company
and Holder agree as follows:
1. The Company hereby grants to Holder, pursuant to the Plan and effective
this date, as a matter of separate inducement and agreement, the Option to
Purchase (hereinafter the "Option") no more than the aggregate of _______ shares
of the Company's Common Stock, no par value, on the terms and conditions
hereinafter set forth, at the purchase price of $13.80 per share.
(a) Exercise of the Option shall be governed by Section 11.4 of the
Plan, a copy of which is attached hereto and made a part hereof.
(b) To the extent not exercised, the remaining shares shall be
exercisable, in whole or in part, at any time not later than November 3, 2014.
2. (a) During the lifetime of Holder, the Option shall be exercisable only
by Holder and any eligible transferee as set forth in the Plan..
(b) If Holder shall die and not have fully exercised the Option, the
Option may be exercised, subject to the provisions of Section 14 of the Plan.
(c) In the event that employment with the Company is terminated for
any reason, any remaining shares eligible for exercise under the Option will
expire within 30 days from the date of termination.
(d) In the event that another company or individual acquires a 50% or
greater interest in the Company, any remaining shares eligible for exercise
under the Option will expire within 30 days from the date of such acquisition.
3. Holder shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock certificate to
him for such shares.
4. (a) Holder acknowledges that any purchase of stock under the Option
shall be for investment purposes, and not with a view to resale or distribution
except that in the event the stock subject to such Option is registered under
the Securities Act of 1933, as amended or in the event a resale of such stock
without such registration would otherwise be permissible, such condition shall
be inoperative if, in the opinion of counsel for the Company, such condition is
not required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency.
(b) Holder acknowledges and agrees that any stock purchased under the
Option may not be sold until after November 4, 2006 (a two-year period from the
date of grant).
5. The laws of the State of Colorado shall govern this agreement.
6. Other applicable sections of the Plan not specifically set forth herein
shall determine the remaining terms and conditions of the Option.
9
7. This agreement shall inure to the benefit of and be binding upon each
successor and assign of the Company as set forth in the Plan. All obligations
imposed upon Holder and all rights granted to the Company, hereunder and in the
Plan shall be binding upon Holder's heirs, legal representatives and successors.
IN WITNESS WHEREOF, the Company and Holder have caused this Stock Option
Agreement to be executed as of this 4th day of November 2004.
ADA-ES, Inc. Holder:
By:
---------------------------------- ------------------------------
Michael D. Durham, President & CEO (Name and Address)
Attest:
-----------------------------------
Mark H McKinnies, Chief Financial Officer
10
ATTACHMENT 1
2004 STOCK COMPENSATION PLAN #2
ADA-ES, Inc.
2004 EXECUTIVE STOCK OPTION PLAN
TABLE OF CONTENTS
1. PURPOSE................................................................ 1
2. DEFINITIONS............................................................ 1
3. ADMINISTRATION......................................................... 3
3.1. Committee.............................................................. 3
3.2. No Liability........................................................... 3
4. STOCK.................................................................. 3
5. ELIGIBILITY............................................................ 4
6. EFFECTIVE DATE AND TERM................................................ 4
6.1. Effective Date......................................................... 4
6.2. Term................................................................... 4
7. GRANT OF OPTIONS....................................................... 4
8. OPTION AGREEMENTS...................................................... 4
9. OPTION PRICE........................................................... 5
10. TERM AND EXERCISE OF OPTIONS........................................... 5
10.1. Term................................................................... 5
10.2. Exercise by Optionee................................................... 5
10.3. Option Period and Limitations on Exercise.............................. 5
10.4. Method of Exercise..................................................... 5
10.5. Parachute Limitations.................................................. 6
11. TRANSFERABILITY OF OPTIONS............................................. 7
11.1. Transferability of Options............................................. 7
11.2. Family Transfers....................................................... 7
12. TERMINATION OF SERVICE RELATIONSHIP.................................... 8
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY............................. 8
13.1. Death.................................................................. 9
13.2. Disability............................................................. 9
14. USE OF PROCEEDS........................................................ 9
15. SECURITIES LAWS........................................................ 10
16. EXCHANGE ACT: RULE 16b-3............................................... 10
16.1. General................................................................ 10
16.2. Compensation Committee................................................. 10
16.3. Restriction on Transfer of Stock....................................... 11
17. AMENDMENT AND TERMINATION.............................................. 11
18. EFFECT OF CHANGES IN CAPITALIZATION.................................... 11
18.1. Changes in Stock....................................................... 11
18.2. Reorganization With Corporation Surviving.............................. 12
18.3. Other Reorganizations; Sale of Assets or Stock......................... 12
18.4. Adjustments............................................................ 12
18.5. No Limitations on Corporation.......................................... 13
19. WITHHOLDING............................................................ 13
20. DISCLAIMER OF RIGHTS................................................... 13
21. NONEXCLUSIVITY......................................................... 13
22. GOVERNING LAWS......................................................... 13
ADA-ES, INC.
2004 Executive Stock Option Plan
ADA-ES, INC., a Colorado corporation (the "Corporation"), sets forth herein
the terms of the 2004 Executive Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation by
providing eligible individuals (as designated pursuant to Section 5 hereof) an
opportunity to acquire or increase a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and its subsidiaries and will encourage
such eligible individuals to continue in long-term service to the Corporation.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Option Agreements), the following definitions shall apply:
2.1 "Affiliate" means any company or other trade or business that is
controlled by or under common control with the Corporation, (determined in
accordance with the principles of Section 414(b) and 414(c) of the Code and the
regulations thereunder) or is an affiliate of the Corporation within the meaning
of Rule 405 of Regulation C under the 1933 Act.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Cause" means, unless otherwise defined in an Option Agreement,
(i) gross negligence or willful misconduct in connection with the performance of
duties; (ii) conviction of a criminal offense (other than minor traffic
offenses); or (iii) material breach of any term of any employment, consulting or
other services, confidentiality, intellectual property or non-competition
agreements, if any, between Optionee and the Corporation or any of its
Subsidiaries or Affiliates.
2.4 "Code" means the Internal Revenue Code of 1986, as now in effect
or as hereafter amended.
2.5 "Committee" means the Compensation Committee of the Board, which
must consist of no fewer than two members of the Board and shall be appointed by
the Board.
2.6 "Corporation" means ADA-ES, INC.
2.7 "Effective Date" means the date of adoption of the Plan by the
Board.
2.8 "Employer" means ADA-ES, INC. or a Subsidiary or Affiliate of the
Corporation, which employs the designated recipient of an Option.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.
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2.10 "Fair Market Value" means the value of each share of Stock
subject to the Plan determined as follows: if on the Grant Date or other
determination date the shares of Stock are listed on an established national or
regional stock exchange, are admitted to quotation on the National Association
of Securities Dealers Automated Quotation System, or are publicly traded on an
established securities market, the Fair Market Value of the shares of Stock
shall be the closing bid price of the shares of Stock on such exchange or in
such market (the highest such closing price if there is more than one such
exchange or market) on the trading day immediately preceding the Grant Date (or
on the Grant Date, if so specified by the Committee or the Board) or such other
determination date or, if no sale of the shares of Stock is reported for such
trading day, on the next preceding day on which any sale shall have been
reported. If the shares of Stock are not listed on such an exchange, quoted on
such System or traded on such a market, the Board in good faith shall determine
Fair Market Value.
2.11 "Grant Date" means the later of (i) August 23, 2004 and (ii) the
date as of which the Optionee and the Corporation, Subsidiary or Affiliate enter
the relationship resulting in the Optionee being eligible for grants.
2.12 "Family Member" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, 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, of the Optionee, any person
sharing the Optionee's household (other than a tenant or employee), a trust in
which these persons (or the Optionee) have more than fifty percent of the
beneficial interest, a foundation in which these persons (or the Optionee)
control the management of assets, and any other entity in which these persons
(or the Optionee) own more than fifty percent of the voting interests.
2.13 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.14 "Option Agreement" means the written agreement evidencing the
grant of an Option hereunder.
2.15 "Optionee" means a person who holds an Option under the Plan.
2.16 "Option Period" means the period during which Options may be
exercised as defined in Section 10.
2.17 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.18 "Plan" means the ADA-ES, INC. 2004 Executive Stock Option Plan.
2.19 "1933 Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.20 "Service Relationship" means the provision of bona fide services
to the Corporation, a Subsidiary, or an Affiliate as an employee or consultant.
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2.21 "Stock" mean the shares of Common Stock, no par value, of the
Corporation.
2.22 "Subsidiary" means any "subsidiary corporation" of the
Corporation within the meaning of Section 425(f) of the Code.
3. ADMINISTRATION
3.1. Committee
The Plan shall be administered by the Committee appointed by the
Board, which shall have the full power and authority to take all actions and to
make all determinations required or provided for under the Plan or any Option
granted or Option Agreement entered into hereunder and all such other actions
and determinations not inconsistent with the specific terms and provisions of
the Plan deemed by the Committee to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted or Option Agreement entered into
hereunder shall be final and conclusive.
3.2. No Liability
No member of the Board or of the Committee shall be liable for any
action or determination made, or any failure to take or make an action or
determination, in good faith with respect to the Plan or any Option granted or
Option Agreement entered into hereunder.
4. STOCK
The stock that may be issued pursuant to Options granted under the
Plan shall be Stock, which shares may be treasury shares or authorized but
unissued shares. The initial number of shares of Stock that may be issued
pursuant to Options granted under the Plan shall not exceed in the aggregate
200,000 shares of Stock, which number of shares is subject to adjustment as
provided in Section 18 hereof. If any Option or portion thereof is unearned,
expires, terminates or is terminated for any reason prior to exercise in full,
the shares of Stock that were subject to the unexercised portion of such Option
shall be available for future Options granted under the Plan.
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5. ELIGIBILITY
Options may be granted under the Plan to (i) any executive officer of
the Corporation, any Subsidiary, any Affiliate (including any such officer who
is also a director of the Corporation, any Subsidiary, any Affiliate) or (ii)
any other individual whose participation in the Plan is determined to be in the
best interests of the Corporation by the Committee. An individual may hold more
than one Option, subject to such restrictions as are provided herein.
6. EFFECTIVE DATE AND TERM
6.1. Effective Date
The Plan shall become effective as of August 23, 2004, the date of
adoption by the Board.
6.2. Term
If not sooner terminated by the Board, the Plan shall terminate on the
date 10 years after the effective date.
7. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Committee may, at
any time and from time to time prior to the date of termination of the Plan,
grant to such eligible individuals as the Committee may determine Options to
purchase such number of shares of Stock on such terms and conditions as the
Committee may determine. Without limiting the foregoing, the Committee may at
any time, with the consent of the Optionee, amend the terms of outstanding
Options or issue new Options in exchange for the surrender and cancellation of
outstanding Options. The date on which the Committee approves the grant of an
Option (or such later date as is specified by the Committee) shall be considered
the date on which such Option is granted. The maximum number of shares of Stock
subject to Options that can be awarded under the Plan to any person is 60,000
shares, which number of shares is subject to adjustment as provided in Section
19 hereof.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements to be executed by the Corporation and the Optionee, in such form or
forms as the Committee shall from time to time determine. Option Agreements
covering Options granted from time to time or at the same time need not contain
similar provisions; provided, however, that all such Option Agreements shall
comply with all terms of the Plan.
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9. OPTION PRICE
The purchase price of each share of Stock subject to an Option shall
be fixed by the Committee and stated in each Option Agreement. The Option Price
shall be not less than the greater of par value or 100 percent of the fair
market value of a share of the Stock covered by the Option on the date the
Option is granted (as determined in good faith by the Committee.
10. TERM AND EXERCISE OF OPTIONS
10.1. Term
Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of 10 years from the
date such Option is granted, or on such date prior thereto as may be fixed by
the Committee and stated in the Option Agreement relating to such Option.
10.2. Exercise by Optionee
Only the Optionee receiving an Option or a transferee of an Option
pursuant to Section 11 (or, in the event of the Optionee's legal incapacity or
incompetency, the Optionee's guardian or legal representative, and in the case
of the Optionee's death, the Optionee's estate) may exercise the Option.
10.3. Option Period and Limitations on Exercise
Each Option granted under the Plan shall be exercisable in whole or in
part at any time and from time to time over a period commencing on or after the
date of grant of the Option and ending upon the expiration or termination of the
Option, as the Committee shall determine and set forth in the Option Agreement
relating to such Option. Without limitation of the foregoing, the Committee,
subject to the terms and conditions of the Plan, may in its sole discretion
provide that an Option may not be exercised in whole or in part for any period
or periods of time during which such Option is outstanding as the Committee
shall determine and set forth in the Option Agreement relating to such Option.
Any such limitation on the exercise of an Option contained in any Option
Agreement may be rescinded, modified or waived by the Committee, in its sole
discretion, at any time and from time to time after the date of grant of such
Option.
10.4. Method of Exercise
An Option that is exercisable hereunder may be exercised by delivery
to the Corporation on any business day, at its principal office addressed to the
attention of the Committee, of written notice of exercise, which notice shall
specify the number of shares for which the Option is being exercised, and shall
be accompanied by payment in full of the Option Price of the shares for which
the Option is being exercised. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made, as
determined by the Committee and set forth in the Option Agreement pertaining to
an Option, (a) in cash or by certified check payable to the order of the
Corporation; (b) through the tender to the Corporation of shares of Stock which,
if acquired from the Company, have been owned by the Optionee no less than six
(6) months and which shares shall be valued, for purposes of determining the
extent to which the Option Price has been paid thereby, at their Fair Market
Value on the date of exercise; (c) to the extent permitted by applicable law and
under the terms of the Option Agreement with respect to such Option, by causing
the Corporation to withhold shares of Stock otherwise issuable pursuant to the
exercise of an Option equal in value to the Option Price or portion thereof to
be satisfied pursuant to this clause (c); or (d) by a combination of the methods
described in Sections 10.4(a), 10.4(b) and 10.4(c) hereof; provided, however,
that the Committee may in its discretion impose and set forth in the Option
Agreement pertaining to an Option such limitations or prohibitions on the use of
shares of Stock to exercise Options as it deems appropriate. Payment in full of
the Option Price need not accompany the written notice of exercise provided the
notice directs that the Stock certificate or certificates for the shares for
which the Option is exercised be delivered to a licensed broker acceptable to
the Corporation as the agent for the individual exercising the Option and, at
the time such Stock certificate or certificates are delivered, the broker
tenders to the Corporation cash (or cash equivalents acceptable to the
Corporation) equal to the Option Price plus the amount (if any) of federal
and/or other taxes which the Corporation may, in its judgment, be required to
5
withhold with respect to the exercise of the Option. An attempt to exercise any
Option granted hereunder other than as set forth above shall be invalid and of
no force and effect. Promptly after the exercise of an Option and the payment in
full of the Option Price of the shares of Stock covered thereby, the individual
exercising the Option shall be entitled to the issuance of a Stock certificate
or certificates evidencing such individual's ownership of such shares. A
separate Stock certificate or certificates shall be issued for any shares
purchased pursuant to the exercise of an Option which is an Incentive Stock
Option, which certificate or certificates shall not include any shares which
were purchased pursuant to the exercise of an Option which is not an Incentive
Stock Option. An individual holding or exercising an Option shall have none of
the rights of a stockholder until the shares of Stock covered thereby are fully
paid and issued to such individual and, except as provided in Section 18 hereof,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.
10.5. Parachute Limitations
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Optionee with the Corporation or any Subsidiary, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary) for the direct or
indirect provision of compensation to the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any Option
held by that Optionee and any right to receive any payment or other benefit
under this Plan shall not become exercisable or vested (i) to the extent that
such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Optionee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Optionee under this Plan to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code as then in effect (a
"Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment,
the aggregate after-tax amounts received by the Optionee from the Corporation
under this Plan, all Other Agreements, and all Benefit Arrangements would be
less than the maximum after-tax amount that could be received by Optionee
without causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all other rights,
payments, or benefits to or for the Optionee under any Other Agreement or any
Benefit Arrangement would cause the Optionee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after- tax amount received by the Optionee as described in clause (ii) of the
preceding sentence, then the Optionee shall have the right, in the Optionee's
sole discretion, to designate those rights, payments, or benefits under this
Plan, any Other Agreements, and any Benefit Arrangements that should be reduced
or eliminated so as to avoid having the payment or benefit to the Optionee under
this Plan be deemed to be a Parachute Payment.
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11. TRANSFERABILITY OF OPTIONS
11.1. Transferability of Options
Except as provided in Section 11.2, during the lifetime of an
Optionee, only the Optionee (or, in the event of legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise an
Option. Except as provided in Section 11.2, no Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution.
11.2. Family Transfers.
Subject to the terms of the applicable Option Agreement, an Optionee
may transfer all or part of an Option to any Family Member; provided that
subsequent transfers of transferred Options are prohibited except those in
accordance with this Section 11.2 or by will or the laws of descent and
distribution; and, provided further, that, except with the consent of the Board
or the Committee, there may be no consideration for any transfer made pursuant
to this section. Following transfer, any such Option shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Section 11.2 hereof the term "Optionee"
shall be deemed to refer to the transferee. The events of termination of the
Service Relationship of Sections 12 and 13 hereof shall continue to be applied
with respect to the original Optionee, following which the Option shall be
exercisable by the transferee only to the extent, and for the periods, specified
in Section 10.3.
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12. TERMINATION OF SERVICE RELATIONSHIP
Upon the termination of the Service Relationship of an Optionee with
the Corporation, a Subsidiary or an Affiliate, other than by reason of the death
or "permanent and total disability" (within the meaning of Section 21(e)(3) of
the Code) of such Optionee or for Cause, any Option granted to an Optionee
pursuant to the Plan shall continue to be exercisable only to the extent that it
was exercisable immediately before such termination; provided, however, such
Option shall terminate thirty (30) days after the date of such termination of
Service Relationship, unless earlier terminated pursuant to Section 10.1 hereof,
and such Optionee shall have no further right to purchase shares of Stock
pursuant to such Option; and provided further, that the Committee may provide,
by inclusion of appropriate language in any Option Agreement, that an Optionee
may (subject to the general limitations on exercise set forth in Section 10.3
hereof), in the event of termination of the Service Relationship of the Optionee
with the Corporation, a Subsidiary or an Affiliate, exercise an Option, in whole
or in part, at any time subsequent to such termination of Service Relationship
and prior to termination of the Option pursuant to Section 10.1 hereof, either
subject to or without regard to any installment limitation on exercise imposed
pursuant to Section 10.3 hereof, as the Committee, in its sole and absolute
discretion, shall determine and set forth in the Option Agreement. Upon the
termination of the Service Relationship of an Optionee with the Corporation, a
Subsidiary or an Affiliate for Cause, any Option granted to an Optionee pursuant
to the Plan shall terminate and such Optionee shall have no further right to
purchase shares of Stock pursuant to such Option; and provided however, that the
Committee may provide, by inclusion of appropriate language in any Option
Agreement, that an Optionee may (subject to the general limitations on exercise
set forth in Section 10.3 hereof), in the event of termination of the Service
Relationship of the Optionee with the Corporation, a Subsidiary or an Affiliate
for Cause, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 10.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 10.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a leave of absence or leave on military
or government service shall constitute a termination of Service Relationship for
purposes of the Plan shall be determined by the Committee, which determination
shall be final and conclusive. For purposes of the Plan, including without
limitation this Section 12 and Section 13, unless otherwise provided in an
Option Agreement, a termination of Service Relationship with the Corporation, a
Subsidiary or an Affiliate shall not be deemed to occur if the Optionee
immediately thereafter has a Service Relationship with the Corporation, any
other Subsidiary or any other Affiliate.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
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13.1. Death
If an Optionee dies while in a Service Relationship with the
Corporation, a Subsidiary or an Affiliate or within the period following the
termination of such Service Relationship during which the Option is exercisable
under Section 12 or 13.2 hereof, the executors, administrators, legatees or
distributees of such Optionee's estate shall have the right (subject to the
general limitations on exercise set forth in Section 10.3 hereof), at any time
within one year after the date of such Optionee's death and prior to termination
of the Option pursuant to Section 10.1 hereof, to exercise, in whole or in part,
any Option held by such Optionee at the date of such Optionee's death, whether
or not such Option was exercisable immediately prior to such Optionee's death;
provided, however, that the Committee may provide by inclusion of appropriate
language in any Option Agreement that, in the event of the death of an Optionee,
the executors, administrators, legatees or distributees of such Optionee's
estate may exercise an Option (subject to the general limitations on exercise
set forth in Section 10.3 hereof), in whole or in part, at any time subsequent
to such Optionee's death and prior to termination of the Option pursuant to
Section 10.1 hereof, either subject to or without regard to any installment
limitation on exercise imposed pursuant to Section 10.3 hereof, as the
Committee, in its sole and absolute discretion, shall determine and set forth in
the Option Agreement.
13.2. Disability
If an Optionee terminates a Service Relationship with the Corporation,
a Subsidiary or an Affiliate by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 10.3 hereof), at any time within one year after such
termination of Service Relationship and prior to termination of the Option
pursuant to Section 10.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of Service Relationship,
whether or not such Option was exercisable immediately prior to such termination
of Service Relationship; provided, however, that the Committee may provide, by
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 10.3
hereof), in the event of the termination of the Service Relationship of the
Optionee with the Corporation or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 10.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 10.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a termination of a Service Relationship
is to be considered by reason of "permanent and total disability" for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive.
14. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Corporation.
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15. SECURITIES LAWS
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the individual exercising the Option or by the Corporation of any
provisions of any law or regulation of any governmental authority, including,
without limitation, any federal or state securities laws or regulations. If at
any time the Corporation shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to the Option upon any
securities exchange or under any state or federal law, or the consent of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of shares, the Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Corporation, and any delay caused thereby shall in no way
affect the date of termination of the Option. Specifically in connection with
the Securities Act, upon exercise of any Option, unless a registration statement
under the Securities Act is in effect with respect to the shares of Stock
covered by such Option, the Corporation shall not be required to sell or issue
such shares unless the Corporation has received evidence satisfactory to the
Corporation that the Optionee may acquire such shares pursuant to an exemption
from registration under the Securities Act. Any determination in this connection
by the Corporation shall be final and conclusive. The Corporation may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Corporation shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
16. EXCHANGE ACT: RULE 16b-3
16.1. General
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") (and any
successor thereto) under the Exchange Act. Any provision inconsistent with Rule
16b-3 shall, to the extent permitted by law and determined to be advisable by
the Committee (constituted in accordance with Section 16.2 hereof), be
inoperative and void.
16.2. Compensation Committee
The Committee appointed in accordance with Section 3.1 hereof shall
consist of not fewer than two members of the Board each of whom shall qualify
(at the time of appointment to the Committee and during all periods of service
on the Committee) in all respects as a "non-employee director" as defined in
Rule 16b-3.
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16.3. Restriction on Transfer of Stock
No director, officer or other "insider" of the Corporation subject to
Section 16 of the Exchange Act shall be permitted to sell Stock (which such
"insider" had received upon exercise of an Option) during the six months
immediately following the grant of such Option.
17. AMENDMENT AND TERMINATION
The Board may, at any time and from time to time, suspend or terminate
the Plan and make such changes in or additions to the Plan as it may deem
proper, provided that, if and to the extent provided by applicable law or
regulation, no such suspension or termination of, change in or addition to the
Plan shall be made unless such suspension or termination of, or change in or
addition to the Plan is authorized by the Company's stockholders. Except as
permitted under Section 18 hereof, no suspension or termination of the Plan or
any change in or addition to the Plan shall, without the consent of any Optionee
who is adversely affected thereby, alter any Options previously granted to the
Optionee pursuant to the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.1. Changes in Stock
If the number of outstanding shares of Stock is increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, a proportionate and
appropriate adjustment shall be made by the Corporation in the number and kind
of shares issuable under the Plan and for which Options are outstanding, so that
the proportionate interest of the Optionee immediately following such event
shall, to the extent practicable, be the same as immediately prior to such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised portion
of the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share. Notwithstanding the foregoing, in the
event of a spin-off that results in no change in the number of outstanding
shares of Stock of the Corporation, the Corporation may, in such manner as the
Corporation deems appropriate, adjust (i) the number and kind of shares of Stock
subject to outstanding Options and/or (ii) the exercise price of outstanding
Options.
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18.2. Reorganization With Corporation Surviving
Subject to Section 18.3 hereof, if the Corporation shall be the
surviving entity in any reorganization, merger or consolidation of the
Corporation with one or more other entities, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.
18.3. Other Reorganizations; Sale of Assets or Stock
Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other entities in which the Corporation is not the surviving entity, or upon a
sale of substantially all of the assets of the Corporation to another person or
entity, or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving entity) approved by the
Board that results in any person or entity (other than persons who are holders
of stock of the Corporation at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined voting
power of all classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent provision is made in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. In the
event of any such termination of the Plan, each Optionee shall have the right
(subject to the general limitations on exercise set forth in Section 10.3 hereof
and except as otherwise specifically provided in the Option Agreement relating
to such Option), immediately prior to the occurrence of such termination and
during such period occurring prior to such termination as the Committee in its
sole discretion shall designate, to exercise such Option in whole or in part,
whether or not such Option was otherwise exercisable at the time such
termination occurs, but subject to any additional provisions that the Committee
may, in its sole discretion, include in any Option Agreement. The Committee
shall send written notice of an event that will result in such a termination to
all Optionees not later than the time at which the Corporation gives notice
thereof to its stockholders.
18.4. Adjustments
Adjustments under this Section 18 relating to stock or securities of
the Corporation shall be made by the Committee, whose determination in that
respect shall be final and conclusive. No fractional shares of Stock or units of
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.
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18.5. No Limitations on Corporation
The grant of an Option pursuant to the Plan shall not affect or limit
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
19. WITHHOLDING
The Corporation or a Subsidiary may be obligated to withhold federal
and local income taxes and Social Security taxes to the extent that an Optionee
realizes ordinary income in connection with the exercise of an Option. The
Corporation or a Subsidiary may withhold amounts needed to cover such taxes from
payments otherwise due and owing to an Optionee, and upon demand the Optionee
will promptly pay to the Corporation or a Subsidiary having such obligation any
additional amounts as may be necessary to satisfy such withholding tax
obligation. Such payment shall be made in cash or cash equivalents.
20. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Corporation, any Subsidiary
or any Affiliate, or to interfere in any way with the right and authority of the
Corporation, any Subsidiary or any Affiliate either to increase or decrease the
compensation of any individual at any time, or to terminate any employment or
other relationship between any individual and the Corporation, any Subsidiary or
any Affiliate. The obligation of the Corporation to pay any benefits pursuant to
the Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed
herein. The Plan shall in no way be interpreted to require the Corporation to
transfer any amounts to a third party trustee or otherwise hold any amounts in
trust or escrow for payment to any participant or beneficiary under the terms of
the Plan.
21. NONEXCLUSIVITY
The adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
22. GOVERNING LAWS.
The laws of the State of Colorado shall govern this Plan and all
Options to be granted hereunder (but not including the choice of law rules
thereof).
IN WITNESS WHEREOF, the Corporation has caused its duly authorized
officer to execute this Plan as of the 23rd day of August 2004 to evidence its
adoption of this Plan.
ADA-ES, INC.
By: /s/ Michael D. Durham
-----------------------------
Michael D. Durham, President
13
PROXY For an Annual Meeting of Stockholders of PROXY
ADA-ES, INC.
Proxy Solicited on Behalf of the Board of Directors
THIS PROXY WILL BE VOTED FOR OR AGAINST OR WITHHELD OR ABSTAINED IN RESPECT OF
THE MATTERS LISTED IN ACCORDANCE WITH THE CHOICE, IF ANY, INDICATED IN THE
SPACES PROVIDED. IF NO CHOICE IS INDICATED, THE PROXY WILL BE VOTED FOR SUCH
MATTER.
IF ANY AMENDMENTS OR VARIATIONS ARE TO BE VOTED ON, OR ANY FURTHER MATTER COMES
BEFORE THE MEETING, THIS PROXY WILL BE VOTED ACCORDING TO THE BEST JUDGMENT OF
THE PERSON VOTING THE PROXY AT THE MEETING; PROVIDED, THAT IF THE UNDERSIGNED
INDICATES AN AGAINST CHOICE FOR MATTER NO. 1 OR NO. 2 BELOW, THEN THIS PROXY MAY
NOT BE VOTED FOR ANY ADJOURNMENT OF THE MEETING. THIS FORM SHOULD BE READ IN
CONJUNCTION WITH THE ACCOMPANYING NOTICE OF MEETING AND PROXY STATEMENT.
NOTES:
1. Please date and sign (exactly as the shares represented by this Proxy are
registered) and return promptly. Where the instrument is signed by a
corporation, its corporate seal must be affixed and execution must be made by an
officer or attorney thereof duly authorized. If no date is stated by the
Shareholder(s), the Proxy is deemed to bear the date upon which it was mailed by
management to the Shareholder(s).
2. To be valid, this Proxy form, duly signed and dated, must arrive at the
office of the Company's transfer agent, Computershare Investor Services, 350
Indiana Street, Suite 800, Golden, Colorado 80401, not less than forty-eight
(48) hours (excluding Saturdays, Sundays and holidays) before the day of the
Meeting or any adjournment thereof.
The undersigned shareholder of ADA-ES, Inc. (the "Company") hereby appoints
Michael D. Durham and Rollie J. Peterson or, failing them, Mark H. McKinnies as
nominee of the undersigned to attend, vote and act for and in the name of the
undersigned at the Annual Meeting of the Shareholders of the Company (the
"Meeting") to be held at the offices of the Company, 8100 SouthPark Way, Unit B,
Littleton, Colorado on Thursday, May 12, 2005, at the hour of 9:00 a.m. (local
time),and at every adjournment thereof, and the undersigned hereby revokes any
former proxy given to attend and vote at the meeting.
THE NOMINEE IS HEREBY INSTRUCTED TO VOTE AS FOLLOWS WITH RESPECT TO THE
FOLLOWING MATTER:
1. FOR [ ] AGAINST [ ] ABSTAIN [ ] To approve the ADA-ES 2004 Stock Compensation
Plan #2.
2. FOR [ ] AGAINST [ ] ABSTAIN [ ] To approve the ADA-ES, Inc. 2005 Directors'
Compensation Plan.
3. FOR [ ] WITHELD [ ] Election of Directors.
Nominees:
Ramon E. Bisque
Duane N. Bloom
Michael D. Durham
John W. Eaves
Ronald B. Johnson
Robert H. Lowdermilk
Mark H. McKinnies
Rollie J. Peterson
Jeffrey C. Smith
[ ] For all nominees, except the following:
---------------------------------------------
Dated this _____ day of ________________, 2005.
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Signature of Shareholder(s) (Please sign exactly
as your name(s) appear on the mailing label below.)
---------------------------------------------
(Please print name of Shareholder[s])