ANCOR COMMUNICATIONS, INCORPORATED
1994 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN
SECTION 1. PURPOSE OF PLAN AND EFFECT ON PRIOR PLANS.
(a) Purpose. This Plan shall be known as the "ANCOR
COMMUNICATIONS, INCORPORATED 1994 LONG-TERM INCENTIVE AND STOCK OPTION PLAN" and
is hereinafter referred to as the "Plan." The purpose of the Plan is to aid in
maintaining and developing personnel capable of assuring the future success of
Ancor Communications, Incorporated, a Minnesota corporation (the "Company"), to
offer such personnel additional incentives to put forth maximum efforts for the
success of the business, and to afford them an opportunity to acquire a
proprietary interest in the Company through stock options and other long-term
incentive awards as provided herein. Options granted under this Plan may be
either incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code"), or options that
do not qualify as Incentive Stock Options. Awards granted under this Plan shall
be SARs, restricted stock or performance awards as hereinafter described.
(b) Effect on Prior Plans. From and after the Effective Date
(as defined in Section 18 hereof) of the Plan, no stock options shall be granted
under the Company's 1990 Stock Option Plan. All outstanding stock options
previously granted under the 1990 Stock Option Plan shall remain outstanding in
accordance with the terms thereof.
SECTION 2. STOCK SUBJECT TO PLAN.
Subject to the provisions of Section 15 hereof, the stock to be subject
to options or other awards under the Plan shall be the Company's authorized
common stock, par value $.01 per share (the "Common Shares"). Such shares shall
be authorized but unissued shares. Subject to adjustment as provided in Section
15 hereof, the maximum number of shares of Common Stock subject to options or
awards under the Plan at any time shall not exceed 13.5% of the then outstanding
Common Stock of the Company and the aggregate number of shares for which
incentive stock options may be exercised over the life of the Plan shall not
exceed 4,000,000 shares. If an option or award under the Plan expires, or for
any reason is terminated or unexercised with respect to any shares, such shares
shall again be available for options or awards thereafter granted during the
term of the Plan.
SECTION 3. ADMINISTRATION OF PLAN.
(a) The Plan shall be administered by the Board of Directors
of the Company or a committee thereof. The members of any such committee shall
be appointed by and serve at the pleasure of the Board of Directors. (The group
administering the Plan shall hereinafter be referred to as the "Committee".)
(b) The Committee shall have plenary authority in its
discretion, but subject to the express provisions of the Plan: (i) to determine
the purchase price of the Common Shares covered by each option or award, (ii) to
determine the employees to whom and the time or times at which such options and
awards shall be granted and the number of shares to be subject to each, (iii) to
determine the form of payment to be made upon the exercise of an SAR or in
connection with performance awards, either cash, Common Shares of the Company or
a combination thereof, (iv) to determine the terms of exercise of each option
and award, (v) to accelerate the time at which all or any part of an option or
award may be exercised, (vi) to amend or modify the terms of any option or award
with the consent of the optionee, (vii) to interpret the Plan, (viii) to
prescribe, amend and rescind rules and regulations relating to the Plan, (ix) to
determine the terms and provisions of each option and award agreement under the
Plan (which agreements need not be identical), including the designation of
those options intended to be Incentive Stock Options, and (x) to make all other
determinations necessary or advisable for the administration of the Plan,
subject to the exclusive authority of the Board of Directors under Section 16
herein to amend or terminate the Plan. The Committee's determinations on the
foregoing matters, unless otherwise disapproved by the Board of Directors of the
Company, shall be final and conclusive.
(c) The Committee shall select one of its members as its Chair
and shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.
SECTION 4. ELIGIBILITY AND GRANT.
(a) Eligibility. Incentive Stock Options may only be granted
under this Plan to any full or part-time employee (which term as used herein
includes, but is not limited to, officers and directors who are also employees)
of the Company and of its present and future subsidiary corporations within the
meaning of Section 424(f) of the Code (herein called "subsidiaries"). Full or
part-time employees, officers, consultants, directors (including directors who
are not employees of the Company) or independent contractors of the Company or
one of its subsidiaries shall be eligible to receive options which do not
qualify as Incentive Stock Options and awards. In determining the persons to
whom options and awards shall be granted and the number of shares subject to
each, the Committee may take into account the nature of services rendered by the
respective employees or consultants, their present and potential contributions
to the success of the Company and such other factors as the Committee in its
discretion shall deem relevant.
(b) Grant of Additional Options. A person who has been granted
an option or award under this Plan may be granted additional options or awards
under the Plan if the Committee shall so determine; provided, however, that for
Incentive Stock Options to the extent the aggregate fair market value
(determined at the time the Incentive Stock Option is granted) of the Common
Shares with respect to which all Incentive Stock Options are exercisable for the
first time by an employee during any calendar year (under all plans described in
subsection (d) of Section 422 of the Code of his or her employer corporation and
its parent and subsidiary corporations) exceeds $100,000, such options shall be
treated as options that do not qualify as Incentive Stock Options. Nothing in
the Plan or in any agreement thereunder shall confer on any employee any right
to continue in the employ of the Company or any of its subsidiaries or affect,
in any way, the right of the Company or any of its subsidiaries to terminate his
or her employment at any time.
SECTION 5. PRICE.
The option price for all Incentive Stock Options granted under
the Plan shall be determined by the Committee but shall not be less than 100% of
the fair market value of the Common Shares at the date of grant of such option.
The option price for options granted under the Plan that do not qualify as
Incentive Stock Options and, if applicable, the price for all awards shall also
be determined by the Committee. For purposes of the preceding sentence and for
all other valuation purposes under the Plan, the fair market value of the Common
Shares shall be as reasonably determined by the Committee. If on the date of
grant of any option or award hereunder the Common Shares are not traded on an
established securities market, the Committee shall make a good faith attempt to
satisfy the requirements of this Section 5 and in connection therewith shall
take such action as it deems necessary or advisable.
SECTION 6. TERM.
Each option and award and all rights and obligations
thereunder shall expire on the date determined by the Committee and specified in
the option or award agreement. The Committee shall be under no duty to provide
terms of like duration for options or awards granted under the Plan, but the
term of an Incentive Stock Option may not extend more than ten (10) years from
the date of grant of such option and the term of options granted under the Plan
which do not qualify as Incentive Stock Options may not extend more than fifteen
(15) years from the date of granting of such option.
SECTION 7. EXERCISE OF OPTION OR AWARD.
(a) Exercisability. The Committee shall have full and complete
authority to determine whether an option or award will be exercisable in full at
any time or from time to time during the term thereof, or to provide for the
exercise thereof in such installments, upon the occurrence of such events (such
as termination of employment for any reason) and at such times during the term
of the option as the Committee may determine and specify in the option or award
agreement.
(b) No Violation of State or Federal Laws. The exercise of any
option or award granted hereunder shall only be effective at such time that the
sale of Common Shares pursuant to such exercise will not violate any state or
federal securities or other laws.
(c) Method of Exercise. An optionee or grantee electing to
exercise an option or award shall give written notice to the Company of such
election and of the number of shares subject to such exercise. The full purchase
price of such shares shall be tendered with such notice of exercise. Payment
shall he made to the Company in cash (including bank check, certified check,
personal check, or money order), or, at the discretion of the Committee and as
specified by the Committee, (i) by delivering certificates for the Company's
Common Shares already owned by the optionee or grantee having a fair market
value as of the date of grant equal to the full purchase price of the shares, or
(ii) by delivering the optionee's or grantee's promissory note, which shall
provide for interest at a rate not less than the minimum rate required to avoid
the imputation of income, original issue discount or a below-market-rate loan
pursuant to Sections 483, 1274 or 7872 of the Code or any successor provisions
thereto, or (iii) a combination of cash, the optionee's or grantee promissory
note and such shares. The fair market value of such tendered shares shall be
determined as provided in Section 5 herein. The optionee's or grantee's
promissory note shall be a full recourse liability of the optionee and may, at
the discretion of the Committee, be secured by a pledge of the shares being
purchased. Until such person has been issued the shares subject to such
exercise, he or she shall possess no rights as a shareholder with respect to
such shares.
SECTION 8. STOCK APPRECIATION RIGHTS.
(a) Grant. At the time of grant of an option or award under
the Plan (or at any other time), the Committee, in its discretion, may grant a
Stock Appreciation Right ("SAR") evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
(b) Exercise. An SAR shall be exercised by the delivery to the
Company of a written notice which shall state that the holder thereof elects to
exercise his or her SAR as to the number of shares specified in the notice and
which shall further state what portion, if any, of the SAR exercise amount
(hereinafter defined) the holder thereof requests is to be paid in cash and what
portion, if any, is to be paid in Common Shares of the Company. The Committee
promptly shall cause to be paid to such holder the SAR exercise amount either in
cash, in Common Shares of the Company, or any combination of cash and shares as
the Committee may determine. Such determination may be either in accordance with
the request made by the holder of the SAR or in the sole and absolute discretion
of the Committee. The SAR exercise amount is the excess of the fair market value
of one share of the Company's Common Shares on the date of exercise over the per
share exercise price in respect of which the SAR was granted, multiplied by the
number of shares as to which the SAR is exercised. For the purposes hereof, the
fair market value of the Company's shares shall be determined as provided in
Section 5 herein.
SECTION 9. RESTRICTED STOCK AWARDS.
Awards of Common Shares subject to forfeiture and transfer
restrictions may be granted by the Committee. Any restricted stock award shall
be evidenced by an agreement in such form as the Committee shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions and any additional terms and conditions established by the
Committee that are consistent with the terms of the Plan:
(a) Grant of Restricted Stock Awards. Each restricted
stock award made under the Plan shall be for such number of Common
Shares as shall be determined by the Committee and set forth in the
agreement containing the terms of such restricted stock award. Such
agreement shall set forth a period of time during which the grantee
must remain in the continuous employment of the Company in order for
the forfeiture and transfer restrictions to lapse. If the Committee so
determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the shares covered
by the restricted stock award. The agreement may also, in the
discretion of the Committee, set forth performance or other conditions
that will subject the Common Shares to forfeiture and transfer
restrictions. The Committee may, at its discretion, waive all or any
part of the restrictions applicable to any or all outstanding
restricted stock awards.
(b) Delivery of Common Shares and Restrictions. At
the time of a restricted stock award, a certificate representing the
number of Common shares awarded thereunder shall be registered in the
name of the grantee. Such certificate shall be held by the Company or
any custodian appointed by the Company for the account of the grantee
subject to the terms and conditions of the Plan, and shall bear such a
legend setting forth the restrictions imposed thereon as the Committee,
in its discretion, may determine. The grantee shall have all rights of
a shareholder with respect to the Common Shares, including the right to
receive dividends and the right to vote such shares, subject to the
following restrictions: (i) the grantee shall not be entitled to
delivery of the stock certificate until the expiration of the
restricted period and the fulfillment of any other restrictive
conditions set forth in the restricted stock agreement with respect to
such Common Shares; (ii) none of the Common Shares may be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered or
disposed of during such restricted period or until after the
fulfillment of any such other restrictive conditions; and (iii) except
as otherwise determined by the Committee, all of the Common Shares
shall be forfeited and all rights of the grantee to such Common Shares
shall terminate, without further obligation on the part of the Company,
unless the grantee remains in the continuous employment of the Company
for the entire restricted period in relation to which such Common
Shares were granted and unless any other restrictive conditions
relating to the restricted stock award are met. Any Common Shares, any
other securities of the Company and any other property (except for cash
dividends) distributed with respect to the Common Shares subject to
restricted stock awards shall be subject to the same restrictions,
terms and conditions as such restricted Common Shares.
(c) Termination of Restrictions. At the end of the
restricted period and provided that any other restrictive conditions of
the restricted stock award are met, or at such earlier time as
otherwise determined by the Committee, all restrictions set forth in
the agreement relating to the restricted stock award or in the Plan
shall lapse as to the restricted Common Shares subject thereto, and a
stock certificate for the appropriate number of Common Shares, free of
the restrictions and the restricted stock legend, shall be delivered to
the grantee or his or her beneficiary or estate, as the case may be.
SECTION 10. PERFORMANCE AWARDS.
The Committee is further authorized to grant performance
awards. Subject to the terms of this Plan and any applicable award agreement, a
performance awards granted under the Plan (i) may be denominated or payable in
cash, Common Shares (including, without limitation, restricted stock), other
securities, other awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee, in its discretion, and
payable to, or exercisable by, the holder of the performance awards, in whole or
in part, upon the achievement of such performance goals during such performance
periods as the Committee, in its discretion, shall establish. Subject to the
terms of this Plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any performance award granted, and the amount of any payment or
transfer to be made by the grantee and by the Company under any Performance
award shall be determined by the Committee.
SECTION 11. INCOME TAX WITHHOLDING AND TAX BONUSES.
(a) Withholding of Taxes. In order to comply with all
applicable federal or state income tax laws or regulations, the Company may take
such action as it deems appropriate to ensure that all applicable federal or
state payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of an optionee or grantee under the Plan, are withheld
or collected from such optionee or grantee. In order to assist an optionee or
grantee in paying all federal and state taxes to be withheld or collected upon
exercise of an option or award which does not qualify as an Incentive Stock
Option hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, shall permit the optionee or
grantee to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the shares otherwise to be delivered upon exercise of such
option or award with a fair market value, determined in accordance with Section
5 herein, equal to such taxes or (ii) delivering to the Company Common Shares
other than the shares issuable upon exercise of such option or award with a fair
market value, determined in accordance with Section 5, equal to such taxes.
(b) Tax Bonus. The Committee shall have the authority, at the
time of grant of an option under the Plan or at any time thereafter, to approve
tax bonuses to designated optionees or grantees to be paid upon their exercise
of options or awards granted hereunder. The amount of any such payments shall be
determined by the Committee. The Committee shall have full authority in its
absolute discretion to determine the amount of any such tax bonus and the terms
and conditions affecting the vesting and payment thereafter.
SECTION 12. ADDITIONAL RESTRICTIONS.
The Committee shall have full and complete authority to
determine whether all or any part of the Common Shares of the Company acquired
upon exercise of any of the options or awards granted under the Plan shall be
subject to restrictions on the transferability thereof or any other restrictions
affecting in any manner the optionee's or grantee's rights with respect thereto,
but any such restriction shall be contained in the agreement relating to such
options or awards.
SECTION 13. TEN PERCENT SHAREHOLDER RULE.
Notwithstanding any other provision in the Plan, if at the
time an option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Common
Shares of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or its parent or
subsidiary corporations, if any (within the meaning of Section 422(b)(6) of the
Code), then any Incentive Stock Option to be granted to such optionee pursuant
to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and
the option price shall be not less than 110% of the fair market value of the
Common Shares of the Company determined as described herein, and such option by
its terms shall not be exercisable after the expiration of five (5) years from
the date such option is granted.
SECTION 14. NON-TRANSFERABILITY.
No option or award granted under the Plan shall be
transferable by an optionee or grantee, otherwise than by will or the laws of
descent or distribution. Except as otherwise provided in an option or award
agreement, during the lifetime of an optionee or grantee, the option shall be
exercisable only by such optionee or grantee.
SECTION 15. DILUTION OR OTHER ADJUSTMENTS.
If there shall be any change in the Common Shares through
merger, consolidation, reorganization, recapitalization, dividend in the form of
stock (of whatever amount), stock split or other change in the corporate
structure, appropriate adjustments in the Plan and outstanding options and
awards shall be made by the Committee. In the event of any such changes,
adjustments shall include, where appropriate, changes in the aggregate number of
shares subject to the Plan, the number of shares and the price per share subject
to outstanding options and awards and the amount payable upon exercise of
outstanding awards, in order to prevent dilution or enlargement of option or
award rights.
SECTION 16. AMENDMENT OR DISCONTINUANCE OF PLAN.
The Board of Directors may amend or discontinue the Plan at
any time. Subject to the provisions of Section 15 no amendment of the Plan,
however, shall without shareholder approval: (i) increase the maximum number of
shares under the Plan as provided in Section 2 herein, (ii) decrease the minimum
price provided in Section 5 herein, (iii) extend the maximum term under Section
6, or (iv) modify the eligibility requirements for participation in the Plan.
The Board of Directors shall not alter or impair any option or award theretofore
granted under the Plan without the consent of the holder of the option.
SECTION 17. TIME OF GRANTING.
Nothing contained in the Plan or in any resolution adopted or
to be adopted by the Board of Directors or by the shareholders of the Company,
and no action taken by the Committee or the Board of Directors (other than the
execution and delivery of an option or award agreement), shall constitute the
granting of an option or award hereunder.
SECTION 18. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The Plan was approved by the Board of Directors on March
3, 1994 and shall be effective upon (i) the completion of the Company's initial
registered public offering on Form SB-2, and (ii) the approval by the
shareholders of the Company (the "Effective Date").
(b) Unless the Plan shall have been discontinued as provided
in Section 15 hereof, the Plan shall terminate March 2, 2004. No option or award
may be granted after such termination, but termination of the Plan shall not,
without the consent of the optionee or grantee, alter or impair any rights or
obligations under any option or award theretofore granted.
