exv10w1



 





Exhibit 10.1




D.G.H. LIMITED

1999 STOCK OPTION PLAN




SECTION 1.

DEFINITIONS




     As used herein, the following terms shall have the meanings indicated below:



     A. The “Company” shall mean D.G.H. Limited., a Minnesota corporation.



     B. “Common Stock” shall mean the Common Stock of the Company, subject to adjustment as
described in Section 12.



     C. The “Plan” shall mean the D.G.H. Limited 1999 Stock Option Plan, as amended hereafter from
time to time.



     D. The “Optionee” for purposes of Section 9 is an employee of the Company to whom an incentive
stock option has been granted under the Plan. For purposes of Section 10, the “Optionee” is the
director, officer or employee of the Company to whom a nonqualified stock option has been granted.
For purposes of Sections 11 through 16, the “Optionee” is any person to whom an incentive or
nonqualified stock option has been granted.



     E. “Committee” shall mean a Committee of three or more persons who may be appointed by, and
serve at the pleasure of the Board and shall have such powers and authority as granted to it by the
Board. Each of the members of the Committee shall be a “disinterested” person within the meaning
of Rule 16b-3, as then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934. A “disinterested” person under Rule 16b-3 means a person who, among other
things, is not eligible and has not at any time within one year prior to appointment to the
Committee or, if shorter, during the period following the initial registration of the Company’s
equity securities under Section 12 of the Securities Exchange Act of 1934, been eligible to
participate in the Plan or in any other plan of the Company entitling participants to acquire
stock, stock options or stock appreciation rights.



     F. The “Internal Revenue Code” is the Internal Revenue Code of 1986, as amended from time to
time.



SECTION 2.

PURPOSE




     The purpose of the Plan is to promote the success of the Company by facilitating the
employment and retention of competent personnel and by furnishing incentives to officers,
directors, employees and consultants upon whose efforts the success of the Company will depend to a
large degree.



     It is the intention of the Company to carry out the Plan through the granting of stock options
which will qualify as “incentive stock options” under the provisions of Section 422 of the Internal
Revenue Code, and through the granting of nonqualified stock options pursuant to Section 10 of this
Plan. Adoption of this Plan shall be and is expressly subject to the condition



 









 







of approval by the shareholders of the Company within twelve (12) months before or after the
adoption of the Plan by the Board of Directors.



SECTION 3.

EFFECTIVE DATE OF PLAN




     The Plan shall be effective as of the date it is adopted by the Board of Directors of the
Company.



SECTION 4.

ADMINISTRATION




     The Plan shall be administered by the Board of Directors of the Company (the “Board”) or, to
the extent empowered by the Board, by a Stock Option Committee (hereinafter referred to as the
“Committee” and as defined in Section l(e) of this Plan) which may be appointed by the Board from
time to time. Notwithstanding the foregoing, the Plan shall be administered by the Committee from
and after the date of the initial registration of the Company’s equity securities under Section 12
of the Securities Exchange Act of 1934. The Board shall have all of the powers vested in it under
the provisions of the Plan, including but not limited to exclusive authority (where applicable and
within the limitations described herein) to determine, in its sole discretion, whether an incentive
stock option or nonqualified stock option shall be granted, the individuals to whom, and the time
or times at which, options shall be granted, the number of shares subject to each option and the
option price, terms and conditions of each option. The Committee shall have such powers as are
granted to it by the Board. The Board, or the Committee if so empowered by the Board, shall have
full power and authority to administer and interpret the Plan, to make and amend rules, regulations
and guidelines for administering the Plan, to prescribe the form and conditions of the respective
stock option agreements (which may vary from Optionee to Optionee) evidencing each option and to
make all other determinations necessary or advisable for the administration of the Plan. The
Board’s interpretation of the Plan, or the Committee’s interpretation if so empowered by the Board,
and all actions taken and determinations made by the Board pursuant to the power vested in it
hereunder, or by the Committee to the extent empowered by the Board, shall be conclusive and
binding on all parties concerned. No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith in connection with the administration of the Plan.



     In the event the Board appoints a Committee as provided hereunder, any action of the Committee
with respect to the administration of the Plan shall be taken pursuant to a majority vote of the
Committee members or pursuant to the written resolution of all Committee members.



SECTION 5.

PARTICIPANTS




     The Board, or the Committee if so empowered by the Board, shall from time to time, at its
discretion and without approval of the shareholders, designate those directors, officers,
employees, consultants or advisors of the Company or of any parent or subsidiary of the Company to
whom nonqualified stock options shall be granted; provided, however, that consultants or advisors
shall not be eligible to receive stock options hereunder unless such
consultant or advisor renders bona-fide services to the Company or a parent or subsidiary of
the



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Company and such services are not in connection with the offer or sale of securities in a
capital-raising transaction; provided further, however, that if, after the initial registration of
the Company’s equity securities under Section 12 of the Securities Exchange Act of 1934, the Board,
or the Committee if so empowered by the Board, grants a nonqualified stock option to a non-employee
director or any person serving as a member of a “disinterested” committee administering this Plan
or any other stock, stock option or stock appreciation rights plan of the Company, such option
grant shall be approved by the shareholders of the Company. The Board, or the Committee if so
empowered by the Board, shall also designate those employees of the Company or of any parent or
subsidiary of the Company to whom incentive stock options shall be granted.



     The Board, or the Committee if so empowered by the Board, may grant additional incentive stock
options or nonqualified stock options to some or all participants then holding options or may grant
such options solely or partially to new participants. In designating participants, the Board, or
the Committee if so empowered by the Board, shall also determine the number of shares to be
optioned to each such participant.



SECTION 6.

STOCK




     The capital stock of the Company to be subject to options granted under this Plan shall
consist of 1,600,000 shares of authorized but unissued Common Stock (the “Option Stock”) and shall
be reserved and available for options under the Plan; provided, however, the total number of shares
of Common Stock reserved for options under this Plan shall be subject to adjustment as provided in
Section 12. In the event that any outstanding option under the Plan for any reason expires or is
terminated prior to the exercise thereof, the shares of Common Stock allocable to the unexercised
portion of such option shall continue to be reserved for options under the Plan and may be optioned
hereunder.



SECTION 7.

DURATION OF PLAN




     Stock options may be granted pursuant to this Plan from time to time during a period of ten
(10) years from the earlier of the date the Plan is approved by the Board of Directors or the date
it is approved by the shareholders of the Company.



SECTION 8.

PAYMENT




     Optionees may pay for shares upon exercise of options granted pursuant to this Plan with cash,
a certified check, or any other form of legal consideration deemed sufficient by the Board of
Directors or the Committee and consistent with the Plan’s purpose and applicable law, including
promissory notes, or, if authorized by the Board of Directors or the Committee, in the form of
previously acquired shares of Common Stock.



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SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS




     Each incentive stock option granted pursuant to this Plan shall be evidenced by a written
stock option agreement (the “Option Agreement”). The Option Agreement shall be in such form as may
be approved from time to time by the Board or the Committee (if so empowered by the Board) and may
vary from Optionee to Optionee; provided, however, that each Optionee and each Option Agreement
shall comply with and be subject to the following terms and conditions:




(a) Number of Shares and Option Price. The Option Agreement shall state the total
number of shares covered by the incentive stock option. The option price per share shall
not be less than one hundred percent (100%) of the fair market value of the Common Stock per
share on the date the Board or the Committee if so empowered by the Board, grants the
option; provided, however, that, if an Optionee owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company or of its
parent or any subsidiary of the Company (a “10% Shareholder”), the option price per share of
an incentive stock option granted to such Optionee shall not be less than one hundred ten
percent (110%) of the fair market value of the Common Stock per share on the date of the
grant of the option. For purposes hereof, if such stock is then reported in the national
market system or is listed upon an established exchange or exchanges, “fair market value” of
the Common Stock per share shall be the highest closing price of such stock in such national
market system or on such stock exchange or exchanges on the last trading date immediately
preceding the date the option is granted or, if no sale of such stock shall have occurred on
that date, on the next preceding day on which there was a sale of stock. If such stock is
not so reported in the national market system or listed upon an exchange, “fair market
value” shall be the mean between the “bid” and “asked” prices quoted by a recognized
specialist in the Common Stock of the Company on the last trading date immediately preceding
the date the option is granted, or if there are no quoted “bid” and “asked” prices on such
date, on the next preceding date for which there are such quotes. If such stock is not
publicly traded as of the date the option is granted, the “fair market value” of the Common
Stock shall be determined by the Board, or the Committee if so empowered by the Board, in
its sole discretion by applying principles of valuation with respect to all such options.
The Board, or the Committee if so empowered by the Board, shall have full authority and
discretion in establishing the option price and shall be fully protected in so doing.




(b) Term and Exercisability of Incentive Stock Option. The term during which any
incentive stock option granted under the Plan may be exercised shall be established in each
case by the Board, or the Committee if so empowered by the Board, but in no event shall any
incentive stock option be exercisable during a term of more than ten (10) years after the
date on which it is granted, and in the case of an incentive stock option granted to a 10%
Shareholder, the incentive stock option shall not be exercisable during a term of more than
five (5) years after the date on which it is granted. The Option Agreement shall state when
the incentive stock option becomes exercisable and shall also state the maximum term during
which the option may be exercised. In the event an incentive stock option is not
exercisable in full immediately, the manner of exercise of the option shall be specified in
the Option Agreement. The Board, or the Committee if so



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empowered by the Board, may accelerate the exercise date of any incentive stock option
granted hereunder which is not immediately exercisable as of the date of grant.




(c) Holding Period. The sale or other disposition of any shares of Common Stock
acquired by an Optionee pursuant to the exercise of an option described above shall be
eligible for the favorable taxation treatment of Section 421 (a) of the Internal Revenue
Code if no disposition of such shares is made by the Optionee within two (2) years from the
date of the granting of the option under which the shares were acquired nor within one (1)
year after the acquisition of such shares pursuant to the exercise of such option, or such
other periods as may be prescribed by the Internal Revenue Code. In the event of an
Optionee’s death, such holding period shall not be applicable pursuant to Section 421(c)(l)
of the Internal Revenue Code.




(d) Limitation. The aggregate fair market value of the shares of Common Stock
(determined at the time of the grant of the option) with respect to which incentive stock
options granted under this Plan and any other plans of the Company (including all such plans
adopted by a parent or subsidiary of the Company) are exercisable for the first time by the
Optionee during any calendar year shall not exceed $100,000.



SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS




     Each nonqualified stock option granted pursuant to the Plan shall be evidenced by a written
Option Agreement. The Option Agreement shall be in such form as may be approved from time to time
by the Board, or the Committee if so empowered by the Board, and may vary from Optionee to
Optionee; provided, however, that each Optionee and each Option Agreement shall comply with and be
subject to the following terms and conditions:




(a) Number of Shares and Option Price. The Option Agreement shall state the total
number of shares covered by the nonqualified stock option. Unless otherwise determined by
the Board of Directors, or the Committee if so empowered by the Board, the option price per
share shall be equal to one hundred percent (100%) of the fair market value of the Common
Stock per share on the date the Board or the Committee grants the option. For purposes
hereof, the “fair market value” of a share of Common Stock shall have the same meaning as
set forth under Section 9(a) herein.




(b) Term and Exercisability of Nonqualified Stock Option. The term during which any
nonqualified stock option granted under the Plan may be exercised shall be established in
each case by the Board, or the Committee if so empowered by the Board. The Option Agreement
shall state when the nonqualified stock option becomes exercisable and shall also state the
maximum term during which the option may be exercised. In the event a nonqualified stock
option is not exercisable in full immediately, the manner of exercise of the option shall be
specified in the stock option agreement. The Board, or the Committee if so empowered by the
Board, may accelerate the exercise date of any nonqualified stock option granted hereunder
which is not immediately exercisable as of the date of grant.



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(c) Other Provisions. The Option Agreement authorized under this Section 10 shall
contain such other provisions as the Board, or the Committee, as the case may be, shall deem
advisable, including, without limitation, rights of repurchase and transfer restrictions
with respect to any shares acquired by the Optionee pursuant to the exercise of the option.



SECTION 11.

TRANSFER OF OPTION




     No option shall be transferable, in whole or in part, by the Optionee other than by will or by
the laws of descent and distribution and, during the Optionee’s lifetime, the option may be
exercised only by the Optionee. If the Optionee shall attempt any transfer of any option granted
under the Plan during the Optionee’s lifetime, such transfer shall be void and the option, to the
extent not fully exercised, shall terminate.



SECTION 12.

RECAPITALIZATION, SALE, MERGER, EXCHANGE

CONSOLIDATION OR LIQUIDATION




     In the event of an increase or decrease in the number of shares of Common Stock resulting from
a subdivision or consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without receipt of consideration by
the Company, the number of shares of Common Stock covered by each outstanding option and the price
per share thereof shall be equitably adjusted by the Board of Directors or the Committee, as the
case may be, to reflect such change. Additional shares which may be credited pursuant to such
adjustment shall be subject to the same restrictions as are applicable to the shares with respect
to which the adjustment relates.



     In the event of the sale by the Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, exchange, consolidation or liquidation
of the Company, the Board of Directors may, in connection with the Board’s adoption of the plan for
sale, merger, exchange, consolidation or liquidation, provide for one or more of the following:
(i) the acceleration of the exercisability of any or all outstanding options; (ii) the complete
termination of this Plan and cancellation of outstanding options not exercised prior to a date
specified by the Board (which date shall give Optionees a reasonable period of time in which to
exercise the options prior to the effectiveness of such sale, merger, exchange, consolidation or
liquidation); and (iii) the continuance of the Plan with respect to the exercise of options which
were outstanding as of the date of adoption by the Board of such plan for sale, merger, exchange,
consolidation or liquidation and provide to Optionees holding such options the right to exercise
their respective options as to an equivalent number of shares of stock of the corporation
succeeding the Company by reason of such sale, merger, exchange, consolidation or liquidation. The
grant of an option pursuant to the Plan shall not limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.



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SECTION 13.

INVESTMENT PURPOSE




     No shares of Common Stock shall be issued pursuant to the Plan unless and until there has been
compliance, in the opinion of Company’s counsel, with all applicable legal requirements, including,
without limitation, those relating to securities laws and stock exchange listing requirements. As
a condition to the issuance of Common Stock to Optionee, the Board, or the Committee if so
empowered by the Board, may require an Optionee to (a) represent that the shares of Common Stock
are being acquired for investment and not resale and to make such other representations as the
Board, or the Committee if so empowered by the Board, shall deem necessary or appropriate to
qualify the issuance of the shares as exempt from the Securities Act of 1933 and any other
applicable securities laws, and (b) represent that Optionee shall not dispose of the shares of
Common Stock in violation of the Securities Act of 1933 or any other applicable securities laws.
Company reserves the right to place a legend on any stock certificate issued upon exercise of an
option granted pursuant to the Plan to assure compliance with this Section 13.



SECTION 14.

RIGHTS AS A SHAREHOLDER




     An Optionee (or the Optionee’s successor or successors) shall have no rights as a shareholder
with respect to any shares covered by an option until the date of the issuance of a stock
certificate evidencing such shares (except as otherwise provided in Section 12 above). No
adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is prior to the date such
stock certificate is actually issued (except as otherwise provided in Section 12).



SECTION 15.

AMENDMENT OF THE PLAN




     The Board of Directors of the Company may from time to time, insofar as permitted by law,
suspend or discontinue the Plan or revise or amend it in any respect; provided, however, that no
such revision or amendment shall impair the terms and conditions of any option which is outstanding
on the date of such revision or amendment to the material detriment of the Optionee without the
consent of the Optionee. Notwithstanding the foregoing, no such revision or amendment shall (i)
materially increase the number of shares of Common Stock subject to the Plan except as provided in
Section 12 hereof, (ii) change the designation of the class of persons eligible to receive options,
(iii) decrease the price at which options may be granted, or (iv) materially increase the benefits
accruing to Optionees under the Plan, unless such revision or amendment is approved by the
shareholders of the Company. Furthermore, the Plan may not, without the approval of the
shareholders of the Company, be amended in any manner that will cause incentive stock options to
fail to meet the requirements of “Incentive Stock Options” as defined in Section 422 of the
Internal Revenue Code.



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SECTION 16.

NO OBLIGATION TO EXERCISE OPTION




     The granting of an option shall impose no obligation upon the Optionee to exercise such
option. Further, the granting of an option hereunder shall not impose upon the Company or any
parent or subsidiary of the Company any obligation to retain the Optionee in its employ or as a
director for any period.




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