EXHIBIT 10S-1
COMPUTER NETWORK TECHNOLOGY CORPORATION
1992 STOCK AWARD PLAN
(as amended and restated through May 1999)
Incentive Stock Option Agreement
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Name of Employee:
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No. of Shares Covered: Date of Grant:
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Exercise Price Per Share: $ Expiration Date:
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Exercise Schedule (Cumulative):
No. of Shares
Date of As to Which Option
Exercisability* Becomes Exercisable
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* See Section 4 below regarding acceleration of Date of Exercisability
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This is an INCENTIVE STOCK OPTION AGREEMENT between Computer Network
Technology Corporation, a Minnesota corporation ("CNT"), and the employee of CNT
or an Affiliate of CNT listed above (the "Employee").
WHEREAS, CNT desires to carry out the purposes of its 1992 Stock Award Plan
(as amended and restated through May 1999) (the "Plan") by affording Employee an
opportunity to purchase shares of Common Stock of CNT, par value $.01 per share
(the "Common Shares"), in accordance with the terms set forth in this Agreement.
NOW, THEREFORE, CNT and Employee agree as follows:
1. GRANT OF OPTION. Subject to the terms of the Plan and this Agreement,
CNT hereby grants to Employee the right and option (the "Option") to purchase
the number of Common Shares specified at the beginning of this Agreement. The
Option is intended to be an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). See
Section 9 below for a limitation on incentive stock option treatment.
2. PURCHASE PRICE. The purchase price of each of the Common Shares subject
to the Option shall be the Exercise Price Per Share specified at the beginning
of this Agreement, which equals 100% of the Fair Market Value (as defined in the
Plan) per Common Share on the Date of Grant.
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3. OPTION EXERCISE PERIOD. (a) Subject to the provisions of Sections 6(a),
6(b), and 7, the Option shall become exercisable as to the number of shares and
on the dates specified in the exercise schedule at the beginning of this
Agreement and in Section 4. The exercise schedule shall be cumulative, which
means that to the extent the Option has not already been exercised and has not
expired, terminated, or been canceled, Employee may at any time and from time to
time purchase all or any portion of the Common Shares then purchasable under the
exercise schedule.
(b) The Option and all rights to purchase shares thereunder shall cease on
the earliest of: (i) The Expiration Date specified at the beginning of this
Agreement (which date is not more than 10 years after the date of this
Agreement); or (ii) The expiration of the period after Employee's termination of
employment within which the Option is exercisable as specified in Section 6(a)
or 6(b), whichever is applicable.
(c) Notwithstanding any other provision of this Agreement, no one may
exercise the Option, in whole or in part, after its Expiration Date.
4. ACCELERATION OF DATE OF EXERCISABILITY. (a) Except as provided in
Section 7 the Option shall not become exercisable before the first anniversary
of the Date of ▇▇▇▇▇. If the criteria of the following subsections (b) or (c)
are met before the first anniversary of the Date of Grant, exercisability of the
Option shall be deferred until the first anniversary of the Date of Grant.
(b) Subject to the provisions of Section 4(a), the Option shall become
exercisable with respect to 50% of the Common Shares subject to Option on the
day following the date that the average of the Closing Sale Price of a Common
Share for 60 consecutive trading days exceeds 150% of the Exercise Price Per
Share (specifically $ per share) specified at the beginning of this
Agreement. For purposes of this Agreement, the Closing Sale Price of a Common
Share on a trading date shall be the closing sale price of a Common Share on
that date or if no sale of Common Shares shall have occurred on that date, then
the closing sale price of a Common Share on the next preceding day on which a
sale occurred of Common Shares on the National Association of Securities
Dealers, Inc. Automated Quotations National Market System (NMS) or if the shares
are not quoted on the NMS, the price that the Stock Plans Committee of the Board
of Directors of CNT (the "Committee") determines in good faith to be the Fair
Market Value of a Common Share on that date.
(c) Subject to the provisions of Section 4(a), the Option shall become
exercisable with respect to 50% of the Common Shares subject to Option on the
day following the date that the average of the Closing Sale Price of a Common
Share for 60 consecutive trading days exceeds 200% (specifically $ per
share) of the Exercise Price Per Share specified at the beginning of this
Agreement. For purposes of this Agreement, the Closing Sale Price of a Common
Share on a trading date shall be the closing sale price of a Common Share on
that date or if no sale of Common Shares shall have occurred on that date, then
the closing sale price of a Common Share on the next preceding day on which a
sale occurred of Common Shares on the National Association of Securities
Dealers, Inc. Automated Quotations National Market System (NMS) or if the shares
are not quoted on the NMS, the price that the Committee determines in good faith
to be the Fair Market Value of a Common Share on that date.
(d) If not sooner vested pursuant to the foregoing provisions, the Option
shall become exercisable on the Date of Exercisability specified at the
beginning of this Agreement.
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5. MANNER OF EXERCISING OPTION. (a) Subject to the terms and conditions of
this Agreement, the Option may be exercised by delivering or mailing written
notice of exercise to CNT at its principal executive office, marked for the
attention of the Human Resources Department. The notice shall state the election
to exercise the Option, the number of Common Shares for which it is being
exercised, and be signed by the person exercising the Option. If the person
exercising the Option is not Employee, he or she shall enclose with the notice
appropriate proof of his or her right to exercise the Option. The date of
exercise of the Option shall be the date that the written notice of exercise
with appropriate payment under the following subsection (b) is actually received
by the Human Resources Department of CNT.
(b) Notice of exercise of the Option shall be accompanied by either: (i)
payment (by certified or cashier's check payable to the order of CNT) of the
purchase price of the Common Shares being purchased; or (ii) if so permitted by
the Committee, certificates for unencumbered Common Shares having an aggregate
Fair Market Value (as defined in the Plan) on the date of exercise equal to the
purchase price of the Common Shares to be purchased; or (iii) if so permitted by
the Committee, a combination of cash and such unencumbered Common Shares. The
purchaser shall endorse all certificates delivered to CNT under the foregoing
subsections (b)(ii) or (iii) in blank and represent and warrant in writing that
he or she is the owner of the shares so delivered free and clear of all liens,
security interests, and other restrictions or encumbrances.
(c) As soon as practicable after receipt of the purchase price provided for
above (and any payment required under Section 14), CNT shall deliver to the
person exercising the Option, in the name of Employee (or his or her estate or
heirs, as the case may be) a certificate or certificates representing the Common
Shares being purchased. CNT shall pay all original issue or transfer taxes, if
any, with respect to the issue of the Common Shares to the person exercising the
Option and all fees and expenses necessarily incurred by CNT in connection with
the exercise of the Option. All Common Shares issued upon exercise of the Option
shall be fully paid and nonassessable. Notwithstanding anything in this
Agreement to the contrary, CNT shall not be required, upon exercise of the
Option or any part thereof, to issue or deliver any Common Shares unless such
issuance has been registered under federal and applicable state securities laws
or an exemption therefrom is available.
6. EXERCISABILITY OF OPTION AFTER TERMINATION OF EMPLOYMENT. (a) During the
lifetime of Employee, the Option may be exercised only while Employee is an
employee of CNT or an Affiliate and only if Employee has been continuously so
employed since the date of this Agreement, except that:
(i) If Employee has been continuously employed by CNT (or an
Affiliate) for at least 12 full calendar months following the date of
this Agreement, Employee may exercise the Option within 90 days after
termination of Employee's employment, but only to the extent that the
Option was exercisable immediately prior to Employee's termination of
employment; and
(ii) If Employee is disabled (within the meaning of Section
22(e)(3) of the Code) while employed, Employee (or his or her legal
representative) may exercise the Option within one year after the
termination of Employee's employment.
(b) In the event of Employee's death while employed by CNT or an Affiliate,
or within 90 days after his or her termination of employment, the person
designated by Employee as his or her beneficiary under this Agreement on a form
prescribed by and filed with the Committee, the legal representative of
Employee's estate, or the person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option within one year after the
death of Employee.
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(c) Neither the transfer of Employee between CNT and any Affiliate nor a
leave of absence granted to Employee and approved by the Committee shall be
deemed a termination of employment.
7. ACCELERATION OF OPTION ON DISABILITY OR DEATH. If Section 6(a)(ii) or
6(b) of this Agreement is applicable, the Option, whether or not previously
exercisable, shall become immediately exercisable in full.
8. LIMITATION ON TRANSFER. During the lifetime of Employee, only Employee
or his or her guardian or legal representative may exercise the Option. Employee
may not assign or transfer the Option otherwise than by will, the laws of
descent and distribution, or under Section 17 of the Plan, and the Option shall
not be subject to pledge, attachment, or similar process. Any attempt to assign,
transfer, pledge, or otherwise dispose of the Option contrary to the provisions
of this Agreement, and the levy of any attachment or similar process upon the
Option, shall be null and void.
9. LIMITATION ON INCENTIVE STOCK OPTION TREATMENT. Although the Option is
intended to be an incentive stock option within the meaning of Section 422 of
the Code, the Option must meet the requirements of Section 422 to qualify for
that treatment. One requirement for incentive stock option treatment is that the
number of shares first exercisable in any one year, considering all incentive
stock options of Employee from CNT and its Affiliates, cannot exceed $100,000 in
value. This limitation is applied by taking options into account in the order in
which they were granted. CNT will monitor and apply this limitation at the time
that an Option is exercised. CNT will notify Employee if any of the Options
exercised are non-qualified options rather than incentive stock options because
of this limitation.
10. NO SHAREHOLDER RIGHTS BEFORE EXERCISE. Employee shall have none of the
rights of a shareholder of CNT with respect to any share subject to the Option
until the share is actually issued to him or her upon exercise of the Option.
11. OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other benefits
received by Employee under this Agreement shall not be deemed a part of
Employee's regular, recurring compensation for purposes of the termination,
indemnity, or severance pay law of any country and shall not be included in, nor
have any effect on, the determination of benefits under any other employee
benefit plan, contract, or similar arrangement provided by CNT (or an Affiliate
of CNT) unless expressly so provided by such other plan, contract, or
arrangement, or unless the Committee determines that the Option, or a portion
thereof, should be included to accurately recognize that the Option has been
made in lieu of a portion of competitive cash compensation, if such is the case.
12. CHANGES IN CAPITALIZATION; FUNDAMENTAL CHANGE. (a) The Committee may in
its sole discretion make appropriate adjustments in the number and types of
shares subject to the Option and in the Purchase Price Per Share to give effect
to any adjustments made in the number or types of shares of CNT through a
dissolution or liquidation of CNT, a sale of substantially all of the assets of
CNT, a merger or consolidation of CNT with or into any other corporation
(regardless of whether CNT is the surviving corporation), a statutory share
exchange involving capital stock of CNT (each of the foregoing, a "Fundamental
Change"), a recapitalization, a reclassification, a stock dividend, a stock
split, a stock combination, or other relevant change.
(b) In the event of a proposed Fundamental Change: (i) involving a merger,
consolidation, or statutory share exchange, unless appropriate provision is made
for the protection of the Option by the
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substitution of options and appropriate voting common stock of the corporation
surviving any such merger or consolidation or, if appropriate, the parent
corporation of CNT or such surviving corporation, to be issuable upon the
exercise of options in lieu of the Option and Common Shares, or (ii) involving
the dissolution or liquidation of CNT, the Committee shall provide written
notice to Employee at least 20 days prior to the occurrence of the Fundamental
Change that the Option, whether or not then exercisable, shall be canceled at
the time of, or immediately prior to the occurrence of, the Fundamental Change
in exchange for payment to Employee (or the person then entitled to exercise the
Option), within 10 days after the Fundamental Change, of cash equal to the
amount, if any, for each Common Share covered by the canceled Option, by which
the Fair Market Value, as defined in this Section 12(b), per Common Share
exceeds the exercise price per Common Share of the Option. At the time of the
notice provided for in the preceding sentence, the Option shall immediately
become exercisable in full and Employee (or the person then entitled to exercise
the Option) shall have the right, during the period preceding the time of
cancellation of the Option, to exercise the Option as to all or any part of the
Common Shares covered by the Option. In the event of a declaration under this
Section 12(b), if the Option shall not have been exercised prior to the
Fundamental Change, it shall be canceled at the time of, or immediately prior
to, the Fundamental Change, as provided in the notice. Notwithstanding the
foregoing, Employee shall not be entitled to the payment provided for in this
Section 12(b) if the Option shall have expired. For purposes of this Section
12(b) only, "Fair Market Value" per Common Share means the cash plus the fair
market value, as determined in good faith by the Committee, of the non-cash
consideration to be received per Common Share by the shareholders of CNT upon
the occurrence of the Fundamental Change, notwithstanding anything to the
contrary in the Plan or this Agreement.
13. DISQUALIFYING TRANSFERS OF SHARES. Employee acknowledges that if any
stock received upon the exercise of any portion of the Option is sold within two
years from the effective date of the grant of the Option or within one year from
the effective date of exercise of the Option, or if certain other requirements
of the Code are not satisfied, including the limitation discussed in Section 9,
such stock will be deemed under the Code not to have been acquired by Employee
pursuant to an "incentive stock option" and that CNT shall not be liable to the
Employee in the event the Option for any reason is deemed not to be an incentive
stock option within the meaning of the Code.
14. TAX WITHHOLDING. CNT or an Affiliate may be obligated to withhold
federal and state income taxes and social security or other taxes upon
Employee's exercise of the Option. If CNT or an Affiliate is required to
withhold such taxes, Employee will promptly pay in cash upon demand to CNT, or
the Affiliate having such obligation; such amounts as shall be necessary to
satisfy such obligation, provided, however, that in lieu of all or any part of
such a cash payment, the Committee may, but shall not be required to, permit
Employee to elect to cover all or any part of the required withholdings, and to
cover any additional withholdings up to the amount needed to cover Employee's
full FICA and federal, state, and local income tax with respect to income
arising from the exercise of the Option, through a reduction of the number of
Common Shares delivered upon exercise or through a subsequent return to CNT of
shares delivered upon exercise, in each case valued in the same manner as used
in computing the withholding taxes under the applicable laws. Further, such
elections may be subject to the limitations of the Exchange Act, as specified in
Section 11 of the Plan.
15. INTERPRETATION OF THIS AGREEMENT. All decisions and interpretations
made by the Committee with regard to any question arising under this Agreement
or the Plan shall be binding and conclusive upon CNT and Employee. In the event
that there is any inconsistency between the provisions of this Agreement and the
Plan, the provisions of the Plan shall govern.
16. NO RIGHT TO EMPLOYMENT. This Agreement shall not give Employee a right
to
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continued employment with CNT or any Affiliate, and CNT or any Affiliate
employing Employee may terminate his or her employment and otherwise deal with
Employee without regard to the effect it may have upon him or her under this
Agreement.
17. GENERAL. CNT shall at all times during the term of this Option reserve
and keep available such number of Common Shares as will be sufficient to satisfy
the requirements of this Option Agreement. A copy of the Plan is available to
Employee from CNT upon request. Unless the context otherwise dictates,
capitalized terms that are not defined in this Agreement have the meaning set
forth in the Plan from time to time. This Agreement shall be binding in all
respects on the Employee's heirs, representatives, successors and assigns. This
Agreement is entered into under the laws of the State of Minnesota and shall be
construed and interpreted thereunder.
IN WITNESS WHEREOF, Employee and CNT have executed this Agreement and it is
effective as of the date of the grant of the Option.
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Employee
COMPUTER NETWORK TECHNOLOGY CORPORATION
By:
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Its:
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