EXHIBIT 4.1
AMENDED
DCH TECHNOLOGY, INC.
2001 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN
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The purposes of this 2001 Stock Option Plan (the "Plan") of DCH Technology,
Inc., a Delaware corporation (the "Company") are to:
(i) Encourage selected officers, directors, key employees and
consultants to improve operations and increase profits of the Company or its
Affiliates;
(ii) Encourage selected officers and key employees to accept or continue
employment with the Company or its Affiliates; and
(iii) Increase the interest of selected officers, directors, key
employees and consultants in the Company's welfare through participation in the
growth in value of the common stock of the Company ("Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
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Every person who at the date of grant of an Option is a key employee of the
Company or of any Affiliate (as defined below) (including employees who are also
officers or directors of the Company or of any Affiliate) is eligible to receive
NQOs or ISOs under this Plan. The term "Affiliate" as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code. Every person who
is a director of or consultant to the Company or any Affiliate at the date of
grant of an Option is eligible to receive NQOs under this Plan.
3. STOCK SUBJECT TO THIS PLAN
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Subject to the provisions of Section 6.1.1 of the Plan, the maximum
aggregate number of shares of stock which may be granted pursuant to this Plan
is five million (5,000,000) shares of Common Stock. The shares unexercised
shall become available again for grants under the Plan.
4. ADMINISTRATION
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4.1 Option Committee. This Plan shall be administered by the Board of
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Directors of the Company (the "Board") or by the Compensation Committee or some
other committee of at least two Board members, one of whom will serve as
Chairman (hereinafter referred to as the "Committee Chairman"), to which
administration of the Plan is delegated (in either case, the "Option
Committee"). No member of the Option Committee shall be liable for any
decision, action, or omission respecting the Plan, any options, or any option
shares.
4.2 Disinterested Administration. From and after such time as the
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Company registers a class of equity securities under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan
shall be administered in accordance with the disinterested administrative
requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission
("Rule 16b-3"), or any successor rule thereto.
4.3 Authority of the Option Committee. Subject to the other provisions
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of this Plan, the Options Committee shall have the authority, in its discretion:
(i) to grant Options; (ii) to determine the fair market of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and regulations
relating to this Plan; (vii) to determine the terms and provisions of each
Option granted (which need not be identical), including but not limited to, the
time or times at which Options shall be exercisable; (viii) with the consent of
the optionee, to modify or amend any Option; (ix) to defer (with the consent of
the optionee) or accelerate the exercise date or vesting of any Option; (x) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option; and (xi) to make all other determinations
deemed necessary or advisable for the administration of this Plan. The Option
Committee may delegate nondiscretionary administrative duties to such employees
of the Company as it deems proper.
4.4 Determinations Final. All questions of interpretation,
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implementation, and application of this Plan shall be determined by the Board or
the Option Committee. Such determinations shall be final and binding on all
persons.
5. GRANTING OF OPTIONS: OPTION AGREEMENT
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5.1 Ten-Year Term. No Options shall be granted under this Plan after
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ten years from the date of adoption of this Plan by the Board.
5.2 Option Agreement. Each Option shall be evidenced by a written
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stock option agreement, in form satisfactory to the Company, executed by the
Company and the person to whom such Option is granted; provided, however, that
the failure by the Company, the optionee, or both to execute such an agreement
shall not invalidate the granting of any Option.
5.3 Designation as ISO or NQO. The agreement shall specify whether
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each Option it evidences is a NQO or an ISO. Notwithstanding designation of any
Option as an ISO or a NQO, if the aggregate fair market value of the shares
under Options designated as ISOs which would become exercisable for the first
time by any Optionee at a rate in excess of $100,000 in any calendar year (under
all plans of the Company), then unless otherwise provided in the stock option
agreement or by the Option Committee, such Options shall be NQOs to the extent
of the excess above $100,000. For purposes of this Section 5.3, Options shall
be taken into account in the order in which they were granted, and the fair
market value of the shares shall be determined as of the time the Option, with
respect to such shares, is granted.
5.4 Grant to Prospective Employees. The Option Committee or the
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Committee Chairman may approve the grant of Options under this Plan to persons
who are expected to become employees of the Company, but who are not employees
at the date of approval. In such cases, the Option shall be deemed granted,
without further approval, on the date the optionee is first treated as an
employee for payroll purposes.
6. TERMS AND CONDITIONS OF OPTIONS
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Each Option granted under this Plan shall be designated as a NQO or an ISO.
Each Option shall be subject to the terms and conditions set forth in Section
6.1. NQOs shall be also subject to the terms and conditions set forth in
Section 6.2, but not those set forth in Section 6.3. ISOs shall also be subject
to the terms and conditions set forth in Section 6.3, but not those set forth in
Section 6.2.
6.1 Terms and Conditions to Which Options Are Subject. Options granted
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under this Plan shall, as provided in Section 6, be subject to the following
terms and conditions:
6.1.1 Changes in Capital Structure. The existence of outstanding
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Options shall not affect the Company's right to effect adjustments,
recapitalizations, reorganizations, or other changes in its or any other
corporation's capital structure or business, any merger or consolidation, any
issuance of bonds, debentures, preferred, or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company's or any
other corporation's assets or business or any other corporate act whether
similar to the events described above or otherwise. Subject to Section 6.1.2,
if the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, recapitalization, or other event, or converted into or
exchanged for other securities as a result of a merger, consolidation,
reorganization, or other event, appropriate adjustments shall
be made in (i) the number and class of shares of stock subject to this Plan and
each outstanding Option; provided, however, that the Company shall not be
required to issue fractional shares as a result to any such adjustments. Each
such adjustment shall be subject to approval by the Option Committee in its sole
discretion, and may be made without regard to any resulting tax consequence to
the optionee.
6.1.2 Corporate Transactions. In connection with (i) any merger,
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consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of the shares of the Company outstanding immediately before
such event are converted into cash or into another security, (ii) any
dissolution or liquidation of the Company or any partial liquidation involving
fifty percent (50%) or more of the assets of the Company, (iii) any sale of more
than fifty percent (50%) of the Company's assets, or (iv) any like occurrence in
which the Company is involved, the Option Committee may, in its absolute
discretion, do one or more of the following upon ten days' prior written notice
to all optionees; (a) accelerate any vesting schedule to which an Option is
subject; (b) cancel Options upon payment to each optionee in cash, with respect
to each Option to the extent then exercisable, of any amount which, in the
absolute discretion of the Option Committee, is determined to be equivalent to
any excess of the market value (at the effective time of such event) of the
consideration that such optionee would have received if the Option had been
exercised before the effective time over the exercise price of the Option; (c)
shorten the period during which such Options are exercisable (provided they
remain exercisable, to the extent otherwise exercisable, for at least ten days
after the date the notice is given); or (d) arrange that new option rights be
substituted for the option rights granted under this Plan, or that the Company's
obligations as to Options outstanding under this Plan be assumed, by an employer
corporation other than the Company or by a parent or subsidiary of such employer
corporation. The actions described in this Section 6.1.2 may be taken without
regard to any resulting tax consequence to the optionee.
6.1.3 Time of Option Exercise. Except as necessary to satisfy the
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requirements of Section 422 of the Code and subject to Section 5, Options
granted under this Plan shall be exercisable at such times as are specified in
the written stock option agreement relating to such Option: provided, however,
that so long as the optionee is a director or officer, as those terms are used
in Section 16 of the Exchange Act, such Option may not be exercisable, in whole
or in part, at any time prior to the six-month anniversary of the date of the
Option grant, unless the Option Committee determines that the foregoing
provision is not necessary to comply with the provisions of Rule 16b-3 or that
Rule 16b-3 is not applicable to the Plan. No Option shall be exercisable,
however, until a written stock option agreement in form satisfactory to the
Company is executed by the Company and the optionee. The Option Committee, in
its absolute discretion, may later waive any limitations respecting the time at
which an Option or any portion of an Option first becomes exercisable.
6.1.4 Option Grant Date. Except as provided in Section 5.4 or as
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otherwise specified by the Option Committee, the date of grant of an Option
under this Plan shall be the date as of which the Option Committee approves the
grant.
6.1.5 Nonassignability of Option Rights. No Option granted under
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this Plan shall be assignable or otherwise transferable by the optionee except
by will, by the laws of descent and
distribution, or pursuant to a qualified domestic relations order (limited in
the case of an ISO, to a qualified domestic relations order that effects a
transfer of an ISO that is community property as part of a division of community
property). During the life of the optionee, an Option shall be exercisable only
by the optionee.
6.1.6 Payment. Except as provided below, payment in full shall be
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made for all stock purchased at the time written notice of exercise of an Option
is given to the Company, and proceeds of any payment shall constitute general
funds of the Company. Payment may be made in cash, by promissory note, by
delivery to the Company of shares of Common Stock owned by the optionee (duly
endorsed in favor of the Company or accompanied by a duly endorsed stock power),
or by any other form of consideration and method of payment to the extent
permitted under applicable law. Any shares delivered shall be valued as of the
date of exercise of the Option in the manner set forth in Section 6.1.12.
Optionees may not exercise Options by delivery of shares more frequently than at
six-month intervals.
6.1.7 Termination of Employment. Unless determined otherwise by
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the Option Committee in its absolute discretion to the extent not already
expired or exercised, every Option granted under this Plan shall terminate at
the earlier of (a) the Expiration Date (as defined in Section 6.1.12) or (b)
three months after termination of employment with the Company or any Affiliate;
provided, that an Option shall be exercisable after the date of termination of
employment only to the extent exercisable on the date of termination; and
provided further, that if termination of employment is due to the optionee's
"disability" (as determined in accordance with Section 22(e)(3) of the Code),
the optionee, or the optionee's personal representative, may at any time within
one (1) year after the termination of employment (or such lesser period as is
specified in the option agreement but in no event after the Expiration Date of
the Option), exercise the option to the extent it was exercisable at the date of
termination; and provided further that if termination of employment is due to
the Optionee's death, the Optionee's estate or a legal representative thereof,
may at any time within and including six (6) months after the date of death of
Optionee (or such lesser period as is specified in the option agreement but in
no event after the Expiration Date of the Option), exercise the option to the
extent it was exercisable at the date of termination. Transfer of an optionee
from the Company to an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence due to sickness, military service, or other cause
duly approved by the Company, shall not be deemed a termination of employment
for purposes of this Plan. For the purpose of this Section 6.1.7, "employment"
means engagement with the Company or any Affiliate of the Company either as an
employee, as a director, or as a consultant.
6.1.8 Repurchase of Stock. At the time it grants Options under
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this Plan, the Company may retain, for itself or others, rights to purchase the
shares acquired under the Option or impose other restrictions on the transfer of
such shares. The terms and conditions of any such rights or other restrictions
shall be set forth in the option agreement evidencing the Option.
6.1.9 Withholding and Employment Taxes. At the time of exercise
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of an Option (or at such later time(s) as the Company may prescribe), the
optionee shall remit to the Company in cash all applicable (as determined by the
Company in its sole discretion) federal and state withholding taxes. The Option
Committee may, in the exercise of its sole discretion, permit an
optionee to pay some or all of such taxes by means of a promissory note on such
terms as the Option Committee deems appropriate. If authorized by the Option
Committee in its sole discretion, and if the Option has been held for six months
or more, an optionee may elect to have shares of Common Stock which are acquired
upon exercise of the Option withheld by the Company or to tender to the Company
other shares of Common Stock or other securities of the Company owned by the
optionee on the date of determination of the amount of tax to be withheld as a
result of the exercise of such Option (the "Tax Date") to pay the amount of tax
that is required by law to be withheld by the Company as a result of the
exercise of such Option, provided that the election satisfies the following
requirements:
(i) the election shall be irrevocable, shall be made at least
six months before the Option exercise, and shall be subject to the disapproval
of the Option Committee at any time before consummation of the Option exercise;
or
(ii) the election shall be made in advance to take effect in a
subsequent "window period" (as defined below) in which the Option is exercised,
and the Option Committee shall approve the election when it is made or at any
time thereafter up to consummation of the Option exercise; or
(iii) the election shall be made in a window period and the
approval of the Option Committee shall be given after the election is made and
within the same window period, and the Option exercise shall be consummated
within such window period; or
(iv) shares or other previously owned securities shall be
tendered (but stock shall not be withheld) at any time up to the consummation of
the Option exercise (in which event, neither a prior irrevocable election nor
window period timing shall be required).
Notwithstanding the foregoing, clauses (ii) and (iii) shall not be
available until the Company has been subject to the reporting requirements of
the Securities Exchange Act of 1934 for at least one year.
A "window period" is the period beginning on the third business day
following the date of release for publication of quarterly or annual summary
statements of sales and earnings and ending on the 12th business day following
such date. Any securities so withheld or tendered shall be valued by the
Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan may
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contain such other terms, provisions, and conditions not consistent with this
Plan as may be determined by the Option Committee, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code.
6.1.11 Determination of Value. For purposes of the Plan, the
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value of Common Stock or other securities of the Company shall be determined as
follows:
(i) If the stock of the Company is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers
Automated Quotation System, its fair market value shall be the closing sales
price for such stock or the closing bid if no sale was reported, as quoted on
such system or exchange (or the largest such exchange) for the date the value is
to be determined (or if there is no sale for such date, then for the last
preceding business day on which there was at least one sale), as reported in the
Wall Street Journal.
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(ii) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there is no quoted price
for the date of grant, then for the last preceding business day on which there
was a quoted price).
(iii) If the stock of the Company is as described in Section
6.1.11(i) or (ii), but is restricted by law, contract, market conditions, or
otherwise as to salability or transferability, its fair market value shall be as
set forth in Section 6.1.11(i) or (ii), as appropriate, less, as determined by
the Option Committee, an appropriate discount, based on the nature and terms of
the restrictions.
(iv) In the absence of an established market for the stock, the
fair market value thereof shall be determined by the Option Committee, with
reference to the Company's net worth, prospective earning power, dividend-paying
capacity, and other relevant factors, including the goodwill of the Company, the
economic outlook in the Company's industry, the Company's position in the
industry and its management, and the values of stock of other corporations in
the same or a similar line of business.
6.1.12 Option Term. No Option shall be exercisable more than ten
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years after the date of grant, or such lesser period of time as set forth in the
option agreement (the end of the maximum exercise period stated in the option
agreement is referred to in this Plan as the "Expiration Date"). No ISO granted
to any person who owns, directly or by attribution, stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company of any Affiliate ( a "Ten Percent Stockholder") shall be exercisable
more than five years after the date of grant.
6.1.13 Exercise Price. The exercise price of any Option granted
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to any Ten Percent Stockholder shall in no event be less than 110 percent of the
fair market value (determined in accordance with Section 6.1.11) of the stock
covered by the Option at the time the Option is granted.
6.1.14 Compliance with Securities Laws. The Company shall not be
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obligated to offer or sell any shares upon exercise of an Option unless the
shares are at that time effectively registered or exempt from registration under
the federal securities laws and the offer and sale of the shares are otherwise
in compliance with all applicable state and local securities laws. The Company
shall have no obligation to register the shares under the federal securities
laws or take whatever
other steps may be necessary to enable the shares to be offered and sold under
federal or other securities laws. Upon exercising all or any portion of an
Option, an optionee may be required to furnish representations or undertakings
deemed appropriate by the Company to enable the offer and sale of the Option
shares or subsequent transfers of any interest in the shares to comply with
applicable securities laws. Stock certificates evidencing shares acquired upon
exercise of options shall bear any legend required by, or useful for purposes of
compliance with, applicable securities laws, this Plan, or the option agreement
evidencing the Option.
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options
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granted under this Plan which are designated as NQOs shall be subject to the
following additional terms and conditions:
6.2.1 Exercise Price. Except as set forth in Section 6.1.13,
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the exercise price of a NQO shall not be less than 55 percent of the fair market
value (determined in accordance with Section 6.1.11) of the stock subject to the
Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
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granted under this Plan which are designated as ISOs shall be subject to the
following additional terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13,
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the exercise price of an ISO shall be determined in accordance with the
applicable provisions of the Code and shall in no event be less than the fair
market value (determined in accordance with Section 6.1.11) of the stock covered
by the Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired upon
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exercise of an ISO is disposed of in a "disqualifying disposition" within the
meaning of Section 422 of the Code, the holder of the stock immediately before
the disposition shall notify the Company in writing of the date and terms of the
disposition and comply with any other requirements imposed by the Company in
order to enable the Company to secure any related income tax deduction to which
it is entitled.
7. MANNER OF EXERCISE
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7.1 Notice of Exercise. An optionee wishing to exercise an Option
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shall give written notice to the Company at its principal executive office, to
the attention of the officer of the Company designated by the Option Committee,
accompanied by payment of the exercise price as provided in Section 6.1.6. The
date the Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price and, if required, by payment of any federal or
state withholding or employment taxes required to be withheld by virtue of
exercise of the Option will be considered as the date such Option was exercised.
7.2 Issuance of Certificates. Promptly after receipt of written
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notice of exercise of an Option, the Company shall, without stock issue or
transfer taxes to the optionee or other person entitled to exercise the Option,
deliver to the optionee or such other person a certificate or certificates for
the requisite number of shares of stock. Unless the Company specifies
otherwise, an optionee or transferee of an optionee shall not have any
privileges as a shareholder with respect to any stock covered by the Option
until the date of issuance of a stock certificate. Subject to Section 6.1.1
hereof, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date the certificates are delivered.
8. EMPLOYMENT RELATIONSHIP
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Nothing in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment at any time, nor confer upon any optionee
any right to continue in the employ of the Company or any of its Affiliates.
9. AMENDMENTS TO PLAN
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The Board may amend this Plan at any time. Without the consent of an
optionee, no amendment may affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to federal or other tax laws relating to
incentive stock options. No amendment shall require shareholder approval unless
shareholder approval is required to preserve incentive stock option treatment
for tax purposes or the Board otherwise concludes that shareholder approval is
advisable.
10. SHAREHOLDER APPROVAL; TERM
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The Board of Directors of the Company adopted this Plan as of January 1,
2001 and the Company's shareholders approved this Plan as of June 12, 2001.
This Plan shall terminate ten years after initial adoption by the Board unless
terminated earlier by the Board. The Board may terminate this Plan without
shareholder approval. No Options shall be granted after termination of this
Plan, but termination shall not affect rights and obligations under
then-outstanding Options.