ADA-ES, INC. PROJECT CROWFOOT INCENTIVE PROGRAM AS AMENDED AND RESTATED

Exhibit 10.38

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

ADA-ES, INC.

PROJECT CROWFOOT INCENTIVE PROGRAM

AS AMENDED AND RESTATED

ON AUGUST 13, 2008 AND OCTOBER 15, 2008

The program described herein (the “ Program ”) is established pursuant to Section 6(e) of ADA-ES, Inc.’s (the “ Company ”) 2007 Equity Incentive Plan (the “ Plan ”).

Establishment of the Program . The Administrator ¹ hereby establishes the Program for the purpose of reserving shares and granting Awards to the grantees named herein (each a “ Grantee ” and collectively the “ Grantees ”), to incent and reward them for their work for the Company in reaching certain defined milestones (the “ Milestones ”) in connection with the development and putting into commercial operation of the Company’s planned “Greenfield” activated carbon (“ AC ”) manufacturing facility, which the Company refers to as “ Project Crowfoot .”

Shares Reserved . There is hereby reserved within the Plan a total of 172,500 shares of restricted Company common stock (the “ Shares ”) for awards to be issued in accordance with the terms hereof, to Grantees, as follows:

Michael Durham (57,500Shares);

Mark McKinnies (46,000 Shares);

Jean Bustard (46,000 Shares);

Richard Miller (11,500 Shares); and

Jim Kelly (11,500 Shares);

to be awarded in the discretion of the Administrator in accordance with the terms hereof, with reverse vesting in accordance with the schedule (“ Vesting Schedule” ) set forth herein, and in accordance with the Plan.

Limitation on Awards . Section 6(f) of the Plan sets forth the maximum number of Shares which may underlie Awards made to any individual grantee under the Plan in any fiscal year (the “ Individual Annual Plan Maximum ”). As of the date of the Program, the Individual Annual Plan Maximum is 30,000. During any fiscal year, the Shares awarded to a Grantee under the Program shall be such as shall assure that all Awards made to any Grantee for that year under the Plan shall not exceed the Individual Annual Plan Maximum, as the same may be amended from time to time in the future.

Awards to Grantees Durham, McKinnies and Bustard . In the sole discretion of the Administrator, and subject to the other requirements set forth herein, Durham, McKinnies and Bustard ( i.e. , those Grantees for whom more than 30,000 Shares are reserved under the Program) shall be awarded Shares in the following manner: in FY2008, they shall each be awarded Shares in the amount of the Individual Annual Plan Maximum less the number of other Shares underlying Awards previously granted to them under the Plan in FY2008; in FY2009 and in any subsequent fiscal year, they shall each receive that number of Shares equal to any remaining Shares reserved for them under the Program but not more than the Individual Annual Plan Maximum less the number of Shares underlying Awards previously granted to them under the Plan in that fiscal year. In the sole discretion of the Administrator, Shares shall be awarded annually (at the first regular meeting of the Administrator occurring in a fiscal year) to each Grantee in this manner, subject to the other requirements of the Program, until all Shares reserved under the Program have been awarded to such Grantees.

1	The terms “Administrator,” “Awards,” “Grantees” and “Shares” shall each have the meaning given to them in the Plan.

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

Exhibit 10.38 to Form 10-Q for the Quarter Ended September 30, 2008 filed by ADA-ES, Inc. (File No. 000-50216) on

November 7, 2008

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

 

Awards to Grantees Miller and Kelly . In the sole discretion of the Administrator, and subject to the other requirements set forth herein, Miller and Kelly shall be awarded Shares in an amount up to the number of Shares reserved for them under the Program, but not more than the Individual Annual Plan Maximum less the number of Shares underlying Awards previously granted to them under the Plan in that fiscal year. In the event the total number of Shares reserved for either Grantee Miller or Kelly cannot be awarded in the first year, Shares shall be awarded in subsequent years, in the same manner and subject to the same conditions as Awards to be made to Grantees Durham, McKinnies and Bustard.

Conditions to be Met by Grantee at Time of Award . Each Grantee shall meet all conditions required of a grantee under the Plan at the time of any Award hereunder. In addition, as of such time, each Grantee shall meet the following additional conditions: (1) Grantee must be meaningfully involved in Project Crowfoot in some capacity; and (2) Grantee must be employed by, or contracted with, the Company or one of its subsidiaries. Notwithstanding the satisfaction of the foregoing conditions, the Administrator may, in its sole discretion, determine not to make an Award to a Grantee hereunder for any reason, and Grantee shall have no claim against the Company or the Administrator for the Shares that would have otherwise been the subject of an Award hereunder.

Awards of Shares under the Program are illustrated in the following table:

Award Table ²

 

2

For each fiscal year, the number of Shares awarded under the Program to any Grantee may not exceed the Individual Annual Plan Maximum less the number of shares underlying other Awards previously granted to that Grantee under the Plan during that fiscal year. This Table, which is for illustrative purposes, shows only Awards made through 2010. However, depending on the number of reserved Shares awarded in prior years, in the discretion of the Administrator, Awards under the Program may be made beyond 2010.

 

3

For purposes of this table, it is assumed that the Awards for Grantees Miller and Kelly can be made in their entirety in FY 2008 without exceeding the Individual Annual Plan Maximum, and will therefore be made in their entirety in FY 2008. In no event however, shall the Award of Shares to either of them hereunder be made in an amount which exceeds the Individual Annual Plan Maximum, and any Award hereunder shall be reduced in such a manner as to assure compliance with this requirement.

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

2

Exhibit 10.38 to Form 10-Q for the Quarter Ended September 30, 2008 filed by ADA-ES, Inc. (File No. 000-50216) on November 7, 2008

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

 

Notes:

Plan Max = the Individual Annual Plan Maximum as defined in Section 6(f) of the Plan

 

a = shares underlying Awards previously made to Durham in FY2008

 

b = shares underlying Awards previously made to McKinnies in FY2008

 

c = shares underlying Awards previously made to Bustard in FY2008

 

d = shares underlying Awards previously made to Durham in FY2009

 

e = shares underlying Awards previously made to McKinnies in FY2009

 

f = shares underlying Awards previously made to Bustard in FY2009

 

A = any remaining Shares to be awarded under the Program

Execution of Restricted Stock Agreements . Each Grantee shall timely enter into a Restricted Stock Purchase Agreement (the “ RSPA Agreement ”) in the form substantially as attached hereto, as required under the Plan, as to those Shares accepted by the Grantee as an Award hereunder.

Purchase of Shares by Grantees; Lapse of Company’s Repurchase Rights . Shares awarded hereunder shall be purchased by the Grantees for the cash purchase price of $.01 per Share. The Shares shall remain the property of the Grantee in accordance with the Plan, subject at all times to the Company’s repurchase rights under the RSPA Agreement which may be exercised in accordance with the terms of the RSPA Agreement until such time as the Shares vest in accordance with the provisions of the Plan, the RSPA Agreement and the Program.

Vesting of Shares . The repurchase rights of the Company shall lapse with respect to that percentage of the total Shares reserved for the Grantee hereunder according to the Vesting Schedule below, following the occurrence of a specific Milestone, so long as the following conditions are met by the Grantee at the time of vesting: (1) Grantee remains meaningfully involved in Project Crowfoot; and (2) Grantee remains employed by, or contracted with, the Company or one of its subsidiaries. Following the occurrence of a Milestone and as of the next open trading window for the Company’s stock in accordance with the Company’s insider trading policy, the Shares attributable to that Milestone shall vest, and the Company’s repurchase rights shall lapse, as of such date (the “ Vesting Date ”).

Vesting Schedule

 

4	The Milestones are defined in Exhibit 1.

 

5

If a Milestone is met, and vesting for that Milestone thereafter occurs, but less than that number of Shares has theretofore been granted to the Grantee, then the balance of Shares vested shall vest immediately upon the next grant, up to that number necessary to vest the number vested in accordance with Milestones previously met.

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

3

Exhibit 10.38 to Form 10-Q for the Quarter Ended September 30, 2008 filed by ADA-ES, Inc. (File No. 000-50216) on November 7, 2008

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

 

 

*	Mr. McKinnies and Ms. Bustard are each entitled to the number of Shares specified in the table, for a total of 92,000 Shares between them.

Request to Exchange Vested Shares for Cash . In order to assist the Grantee with minimum statutory withholding obligations that may be owing at the time of vesting of the Shares, the Company shall have the option, at the request of the Grantee, to repurchase that portion of the Shares (up to 35% of the Shares vesting at the time of a Vesting Event) necessary to satisfy the minimum statutory withholding obligation of the Grantee, for an amount equal to the Fair Market Value (as such term is defined in the Plan) of the Shares to be so purchased, as of the Vesting Date. The Grantee shall notify the Company in writing as to his or her request, including therein a statement as to the number of Shares requested to be repurchased by the Company, not later than 10 days after the Vesting Date of each Milestone and the Company will promptly thereafter inform the Grantee whether it elects to make such repurchase. If and to the extent the Company agrees to repurchase any of such Shares, the Grantee shall promptly transfer the Shares to be so purchased to the Company and the Company will pay the minimum statutory withholding obligations to the appropriate authorities.

[EXHIBIT DOCUMENTS FOLLOW ON NEXT PAGE]

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

4

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

ADA-ES, Inc.

Crowfoot Incentive Program under the 2007 Equity Incentive Plan

(As Amended and Restated on August 13, 2008 and October 15, 2008)

Exhibit 1

Milestone Definitions

 

1.

Strategic Partner Plus Promote – This Milestone shall be deemed satisfied as of the date on which the Company enters into a binding, definitive agreement with a strategic partner for Project Crowfoot by which the partner commits to contribute no less than $60 million of equity to the project and, as part of that agreement, or in an agreement whereby the partner agrees to purchase an equity interest in the Company, commits to pay the Company no less than One Million Dollars ($1,000,000) in recognition of the advancement of the project to date (or for any other reason). The total amount of this incentive decreases by 5% of the Shares reserved for the Grantee entitled to such Shares for this Milestone* per month as of each monthly anniversary after April 30, 2008, during which this Milestone remains unfulfilled**.

 

2.

Off-Take Contracts – This Milestone shall be deemed satisfied as of the date on which the Company has entered into definitive contracts which provide for the sale of a total 200 million pounds of AC over a period of no more than ten (10) years, with pricing within the range set forth in the financial model for the project as of the time of Financial Close (as defined in Milestone #3). The total amount of this incentive decreases by 5% of the Shares reserved for the Grantee entitled to such Shares for this Milestone* per month as of each monthly anniversary after Financial Close (as defined in Milestone #3), during which this Milestone remains unfulfilled**.

 

3.

Financial Close – This Milestone shall be deemed satisfied as of the date on which the Company has entered into definitive contracts which provide for the date on which debt financing sufficient to assure construction of the first facility (including all items necessary to complete the facility and the first AC production line) is irrevocably committed, subject only to customary funding conditions. The total amount of this incentive decreases by 5% of the Shares reserved for the Grantee entitled to such Shares for this Milestone* per month as of each monthly anniversary after ##, during which this Milestone remains unfulfilled**.

 

4.

Project Schedule – Plant Start Up – This Milestone shall be deemed satisfied as of the date on which the first production line in the facility is placed into commercial service with an output capacity of no less than ## million pounds of AC per year. The total amount of this incentive decreases by 5% of the Shares reserved for the Grantee entitled to such Shares for this Milestone* per month as of each monthly anniversary after ##, during which this Milestone remains unfulfilled**

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

Exhibit 10.38 to Form 10-Q for the Quarter Ended September 30, 2008 filed by ADA-ES, Inc. (File No. 000-50216) on November 7, 2008

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

 

5.

Commercial Production/Profitability – This Milestone shall be deemed satisfied as of the date, which shall be no sooner than one year after Plant Start Up (as defined in Milestone #4), when for a six month average consecutive period, the plant has produced AC with an output capacity of greater than ## million pounds of AC per year, at a cost that is within 10% of budgeted operating cost per the financial model in effect as of Financial Close (as defined in Milestone #3). The total amount of this incentive decreases by 5% of the Shares reserved for the Grantee entitled to such Shares for this Milestone* per month as of each monthly anniversary after ## during which this Milestone remains unfulfilled**.

With respect to Shares awarded to Executives other than Mr. Miller:

*, ** If a Milestone is unfulfilled as of a particular date resulting in a decrease in the amount of an incentive for a certain Milestone, the number of Shares otherwise allocated to such Milestone resulting from such decrease shall be reallocated to the next Milestone until the Share cap for such Milestone is reached. Such reallocation shall automatically take place as of the beginning of the day immediately following the deadline for each Milestone that remains unfulfilled. For example, as of July 1, 2008, the “Strategic Partner Plus Promote” Milestone had not been fulfilled, resulting in a decrease in the number of Shares reserved for each Grantee for such Milestone in the amount of 10% total. Accordingly, as of July 1, the Shares would be reallocated as shown on the attached Schedule 1. Once the Share caps for every Milestone are reached, any Shares that would have otherwise been re-allocated shall be forfeited and permanently restricted from vesting, and the Company shall be entitled to repurchase such Shares at that time or any time thereafter, notwithstanding anything to the contrary in the RSPA or the Plan.

With respect to Shares awarded to Messrs. Miller and Kelly:

 

*	For clarification purposes, the parties acknowledge that the failure to achieve a milestone within twenty (20) months after the initial date specified for the Milestone will divest the Grantee to all rights to the Shares to have vested for attainment of that Milestone.

 

**

If a Milestone is unfulfilled as of a particular date, thereby leading to a forfeiture of the percentage of Shares specified in the Milestone, the Shares representing that percentage so forfeited shall be permanently restricted from vesting with the Grantee, and the Company shall be entitled to repurchase such Shares at that time or any time thereafter, notwithstanding any contrary provision of the RSPA or the Plan.

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

2

Exhibit 10.38 to Form 10-Q for the Quarter Ended September 30, 2008 filed by ADA-ES, Inc. (File No. 000-50216) on November 7, 2008

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

 

SCHEDULE 1

ADA-ES, Inc.

Crowfoot Project

Management Incentives

2008 Awards

 

 

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

3

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

PROJECT CROWFOOT INCENTIVE PROGRAM

UNDER THE

ADA-ES, INC. 2007 EQUITY INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK PURCHASE AWARD

 

You have been granted the right to purchase shares of Common Stock of the Company, subject to the terms and conditions of this Notice of Restricted Stock Purchase Award (the “ Notice ”), under the Project Crowfoot Incentive Program, as amended and restated on August 13, 2008 and October 15, 2008 (the “ Program ”) under the ADA-ES, INC. 2007 Equity Incentive Plan, as amended from time to time (the “ Plan ”) and the Restricted Stock Purchase Award Agreement (the “ Agreement ”) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.

 

Vesting Schedule :

Subject to Grantee’s Continuous Service and other limitations set forth in the Program, this Notice, the Agreement and the Plan, the Shares will “vest” in accordance with the following schedule:

The Vesting Schedule applicable to the Shares granted hereunder is set forth in the Program, a copy of which Grantee, by execution of this Notice, acknowledges as having been received by Grantee. Grantee acknowledges that unvested Shares may be reallocated to other Milestones on the terms described in the Program.

For purposes of this Notice and the Agreement, the term “vest” shall mean, with respect to any Shares, that such Shares are no longer subject to repurchase at the Purchase Price per Share; provided, however, that such Shares shall remain subject to other restrictions on transfer set forth in the Agreement or the Plan. Shares that have not vested are deemed “Restricted

 

Restricted Stock Purchase Agreement for the

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

Exhibit 10.38 to Form 10-Q for the Quarter Ended September 30, 2008 filed by ADA-ES, Inc. (File No. 000-50216) on November 7, 2008

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public information has been filed with the Commission.

 

Shares.” If the Grantee would become vested in a fraction of a Restricted Share, such Restricted Share shall not vest until the Grantee becomes vested in the entire Share. Notwithstanding the foregoing, the Shares subject to this Notice will be subject to the provisions of the Agreement and Section 11 of the Plan relating to the release of repurchase and forfeiture provisions in the event of a Corporate Transaction or Change in Control.

IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Award is to be governed by the terms and conditions of this Notice, the Plan, and the Agreement, and that signed copies of this Notice and the Agreement (including signed copies of Exhibits A, B and C thereto, as applicable) have been exchanged between the parties.

 

ADA-ES, INC.
By:
Title:

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE AGREEMENT, NOR IN THE PROGRAM OR PLAN, SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE GRANTEE’S CONTINUOUS SERVICE AT ANY TIME, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, GRANTEE’S STATUS IS AT WILL.

The Grantee acknowledges receipt of a copy of the Program, the Plan and the Agreement (including Exhibits A, B & C thereto) and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Agreement, the Program and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and the Agreement and fully understands all provisions of this Notice, the Agreement, the Program and the Plan. The Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Program, the Plan and the Agreement shall be resolved in accordance with Section 21 of the Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

 

Dated:						Signed:
						Print Name:

 

Restricted Stock Purchase Agreement for the

Project Crowfoot Incentive Program under the

ADA-ES, Inc. 2007 Equity Incentive Plan

2

## indicates portions of the exhibit that have been omitted pursuant to a request for confidential information. The non-public

information has been filed with the Commission.

ADA-ES INC. 2007 EQUITY INCENTIVE PLAN

PROJECT CROWFOOT INCENTIVE PROGRAM

RESTRICTED STOCK PURCHASE AWARD AGREEMENT

1. Purchase of Shares . ADA-ES INC., a Colorado corporation (the