EXHIBIT 4.2
DCH TECHNOLOGY, INC.
STOCK OPTION AGREEMENT
[FORM]
This DCH Technology, Inc. Stock Option Agreement (the "Agreement"), by and
between DCH Technology, Inc., a Colorado corporation (the "Company"), and
____________ ("Optionee"), is made effective as of this _____ day of __________,
1999.
RECITALS
1. Pursuant to the DCH Technology, Inc. 1999 Stock Option Plan (the
"Plan"), the Board of Directors of the Company (the "Board") has authorized the
grant of an option to purchase common stock of the Company ("Common Stock") to
Optionee, effective on the date indicated above, thereby allowing Optionee to
acquire a proprietary interest in the Company in order that Optionee will have
further incentive for continuing his or her employment by, and increasing his or
her efforts on behalf of, the Company or an Affiliate of the Company.
2. The Company desires to issue a stock option to Optionee and Optionee
desires to accept such stock option on the terms and conditions set forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Option Grant. The Company hereby grants to the Optionee, as a separate
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incentive and not in lieu of any fees or other compensation for his or her
services, an option to purchase, on the terms and conditions hereinafter set
forth, all or any part of an aggregate of _________________ (___________) shares
of authorized but unissued shares of Common Stock, at the Purchase Price set
forth in paragraph 2 of this Agreement.
2. Purchase Price. The Purchase Price per share (the "Option Price")
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shall be $_________, which is not less than eighty five percent (85%) [or one
hundred ten percent (110%)] of the fair market value per share of Common Stock
on the date hereof. The Option Price shall be payable in the manner provided in
paragraph 9 below.
3. Adjustment. The number and class of shares specified in paragraph 1
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above, and the Option Price, are subject to appropriate adjustment in the event
of certain changes in the capital structure of the Company such as stock splits,
recapitalizations and other events which alter the per share value of Common
Stock or the rights of holders thereof. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of
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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 Company may, in its absolute discretion, do one or more
of the following upon ten days' prior written notice to the Optionee: (a)
accelerate any vesting schedule to which this option is subject; (b) cancel this
option upon payment to the Optionee in cash, to the extent this option is then
exercisable, of any amount which, in the absolute discretion of the Company, is
determined to be equivalent to any excess of the market value (at the effective
time of such event) of the consideration that the Optionee would have received
if this option had been exercised before the effective time over the Option
Price; (c) shorten the period during which this option is exercisable (provided
that this option shall 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
option, or that the Company's obligations under this option 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 paragraph 3 may be taken
without regard to any resulting tax consequence to the Optionee.
[OPTIONAL FOUR YEAR VESTING]
4. Option Exercise. Commencing on the date one (1) year after the date of
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this Agreement the right to exercise this option will accrue as to one-fourth
(1/4) of the number of shares subject to this option. Thereafter, the right to
exercise the remainder of this option will accrue in twelve (12) equal quarterly
installments. Shares entitled to be, but not, purchased as of any accrual date
may be purchased at any subsequent time, subject to paragraphs 5 and 6 below.
The number of shares which may be purchased as of any such anniversary date will
be rounded up to the nearest whole number. No partial exercise of the option may
be for an aggregate exercise price of less than One Hundred Dollars ($100). In
order to exercise any part of this option, Optionee must agree to be bound by
the Company's Shareholder Buy-Sell Agreement, if any, existing at the time of
the exercise of this Option.
[OPTIONAL IMMEDIATE VESTING]
4. Option Exercise. Commencing on the date of this Agreement, the right
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to exercise this option will accrue as to all of the shares subject to this
option. Shares entitled to be, but not, purchased as of the accrual date may be
purchased at any subsequent time, subject to paragraphs 5 and 6 below. No
partial exercise of the option may be for an aggregate exercise price of less
than One Hundred Dollars ($100). In order to exercise any part of this option,
Optionee must agree to be bound by the Company's Shareholder Buy-Sell Agreement,
if any, existing at the time of the exercise of this Option.
5. Termination of Option. The right to exercise this option will lapse in
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four (4) equal installments of the number of shares subject to this option on
each of the sixth, seventh, eighth, and ninth anniversaries of the effective
date of this Agreement. Notwithstanding any other provision of this Agreement,
this option may not be exercised after, and will completely expire on, the close
of business on the date ten (10) years after the effective date of this
Agreement, unless terminated sooner pursuant to paragraph 6 below.
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6. Termination of Employment. In the event of termination of Optionee's
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employment with the Company for any reason, this option will terminate three (3)
months after the date of the termination of Optionee's employment, unless
terminated earlier pursuant to paragraph 5 above. However, (i) if termination is
due to the death of Optionee, 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, exercise the option to the extent it was exercisable at the
date of termination; or (ii) if termination is due to Optionee's "disability"
(as determined in accordance with Section 22(e)(3) of the Internal Revenue
Code), Optionee may, at any time, within one (1) year following the date of this
Agreement, exercise the option to the extent it was exercisable at the date of
termination. If the Optionee or his or her legal representative fails to
exercise the option within the time periods specified in this paragraph 6, the
option shall expire. The Optionee or his or her legal representative may, on or
before the close of business on the earlier of the date for exercise set forth
in paragraph 5 or the dates specified in paragraph 4 above, exercise the option
only to the extent Optionee could have exercised the option on the date of such
termination of employment pursuant to paragraphs 4 and 5 above.
7. Repurchase Option of Company. Pursuant to Section 6.1.8 of the Plan,
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in the event of termination of Optionee's employment with the Company for any
reason, the Company shall have an option to repurchase ("Repurchase Option") any
Common Stock owned by the Optionee or his or her heirs, legal representatives,
successors or assigns at the time of termination, or acquired thereafter by any
of them at any time, by way of an option granted hereunder. The Repurchase
Option must be exercised, if at all, by the Company within ninety (90) days
after the date of termination upon notice ("Repurchase Notice") to the Optionee
or his or her heirs, legal representatives, successors or assigns, in
conformance with paragraph 13 below. The purchase price to be paid for the
shares subject to the Repurchase Option shall be One Hundred Fifteen Percent
(115%) of their book value. For the purposes of this paragraph, the Company's
book value shall be determined in accordance with generally accepted accounting
principles applied on a basis consistent with those previously applied by the
Company. The book value shall be fixed under this paragraph by the accountants
of the Company and shall be computed as of the last day of the Company's fiscal
quarter most recently preceding the Repurchase Notice. Any shares issued
pursuant to an exercise of an option hereunder shall contain the following
legend condition in addition to any other applicable legend condition:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
PROVISIONS IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
8. Transferability. This option will be exercisable during Optionee's
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lifetime only by Optionee. Except as otherwise set forth in the Plan, this
option will be non-transferable.
9. Method of Exercise. Subject to paragraph 10 below, this option may be
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exercised by the person then entitled to do so as to any shares which may then
be purchased by delivering to the Company an exercise notice in the form
attached hereto as Exhibit A and:
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(a) full payment of the Option Price thereof (and the amount of any
tax the Company is required by law to withhold by reason of such exercise) in
the form of:
(i) cash or readily available funds; or
(ii) delivery of Optionee's promissory note (the "Note")
substantially in the form attached hereto as Exhibit B in the amount of the
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aggregate Option Price of the exercised shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit C;
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or
(iii) a written request to Net Exercise, as defined in this
paragraph 9(a)(iii). In lieu of exercising this Option via cash payment or
promissory note, Optionee may elect to receive shares equal to the value of this
Warrant (or portion thereof being canceled) by surrender of this Option at the
principal office of the Company together with notice of election to exercise by
means of a Net Exercise in which event the Company shall issue to Optionee a
number of shares of the Company computed using the following formula:
X = Y (A-B)
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A
where X is the number of shares of stock to be issued to Optionee; Y is the
number of shares purchasable under this Option; A is the fair market value of
the stock determined in accordance with Section 6.1.12 of the Plan; and B is
the Option Price as adjusted to the date of such calculation.
(b) payment of any withholding or employment taxes, if any;
(c) an executed Shareholders Buy-Sell Agreement, if any, binding the
Company's shareholders and restricting the transfer of their shares, executed
appropriately by the Optionee and his or her spouse, if any.
The Company will issue a certificate representing the shares so purchased within
a reasonable time after its receipt of such notice of exercise, payment of the
Option Price and withholding or employment taxes, and execution of any existing
Shareholders Buy-Sell Agreement, with appropriate certificate legends.
10. Securities Laws. The issuance of shares of Common Stock upon the
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exercise of the option will be subject to compliance by the Company and the
person exercising the option with all applicable requirements of federal and
state securities and other laws relating thereto. No person may exercise the
option at any time when, in the opinion of counsel to the Company, such exercise
is permitted under applicable federal or state securities laws. Nothing herein
will be construed to require the Company to register or qualify any securities
under applicable federal or state securities laws, or take any action to secure
an exemption from such registration and qualification for the issuance of any
securities upon the exercise of this option.
11. No Rights as Shareholder. Neither Optionee nor any person claiming
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under or through Optionee will be, or have any of the rights or privileges of, a
shareholder of the Company in
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respect of any of the shares issuable upon the exercise of the option, unless
and until this option is properly and lawfully exercised.
12. No Right to Continued Employment. Nothing in this Agreement will be
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construed as granting Optionee any right to continued employment. EXCEPT AS THE
COMPANY AND OPTIONEE WILL HAVE OTHERWISE AGREED IN WRITING, OPTIONEE'S
EMPLOYMENT WILL BE TERMINABLE BY THE COMPANY, AT WILL, WITH OR WITHOUT CAUSE FOR
ANY REASON OR NO REASON. Except as otherwise provided in the Plan, the Board in
its sole discretion will determine whether any leave of absence or interruption
in service (including an interruption during military service) will be deemed a
termination of employment for the purpose of this Agreement.
13. Notices. Any notice to be given to the Company under the terms of this
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Agreement will be addressed to the Company, in care of its Secretary, at its
executive offices, or at such other address as the Company may hereafter
designate in writing. Any notice to be given to Optionee will be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to Optionee at the address set forth beneath
Optionee's signature in writing. Any such notice will be deemed to have been
duly given where deposited in a United States post office in compliance with the
foregoing.
14. Non-Transferrable. Except as otherwise provided in the Plan or in this
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Agreement, the option herein granted and the rights and privileges conferred
hereby will not be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise). Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of this option, or of any right
or upon any attempted sale under any execution, attachment or similar process
upon the rights and privileges conferred hereby, this option will immediately
become null and void.
15. Successor. Subject to the limitation on the transferability of the
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option contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legal representatives, successors and assigns of the
parties hereto.
16. California Law. This Agreement will be governed by and construed in
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accordance with the laws of the State of California.
17. Type of Option. The option granted in this Agreement:
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[ ] Is intended to be an Incentive Stock Option ("ISO") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended.
[ ] Is a non-qualified Option and is not intended to be an ISO.
18. Plan Provisions Incorporated by Reference. A copy of the Plan is
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attached hereto as Exhibit "A" and incorporated herein by this reference. In the
case of conflict between any provision in this Agreement and any provision in
the Plan or a Shareholder Buy-Sell Agreement, if any, the terms of this
Agreement shall prevail. In the case of conflict between any provision in the
Plan and a provision in a Shareholders Buy-Sell Agreement, if any, the terms of
the Plan shall prevail.
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19. Term. Capitalized terms used herein, except as otherwise indicated,
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shall have the same meaning as those terms have under the Plan.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written below.
COMPANY: DCH TECHNOLOGY, INC.
By: __________________________
Its: __________________________
OPTIONEE: _______________________________
(Optionee)
Address: ______________________
_______________________________
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EXHIBIT A
EXERCISE NOTICE
1. Exercise of Option. Effective as of today, ____________________, the
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undersigned ("Purchaser") hereby elects to purchase ____________________ shares
(the "Shares") of the Common Stock of DCH Technology, Inc. (the "Company") under
and pursuant to the DCH Technology, Inc. 1999 Stock Option Plan (the "Plan") and
the Stock Option Agreement dated _______________ (the "Option Agreement"). The
purchase price for the Shares shall be $_______, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares in the form of:
[ ] Cash or readily available funds;
[ ] Promissory Note and Security Agreement;
[ ] Formal Request to Net Exercise;
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
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has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
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appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Option,
notwithstanding the exercise of the Option. The Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date of issuance, except as provided in the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
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adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
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incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the law of the State of California.
Submitted by: Accepted by:
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PURCHASER: DCH TECHNOLOGY, INC.
______________________________ By: __________________________
______________________________ Its: __________________________
Signature
______________________________ _______________________________
Print Name Date
Address: _____________________
Received:_____________________
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