EXHIBIT 10.2
EMPLOYMENT AGREEMENT
Agreement dated as of March 5, 2003, between Computer Network
Technology Corporation, a Minnesota corporation, having a place of business at
0000 Xxxxxx Xxxx Xxxxx, Xxxxxxxx, XX 00000 (the "Company"), and Xxxxxxx X.
Xxxxxx (the "Executive").
WITNESSETH
WHEREAS, the Executive has assumed duties of a responsible nature to
the benefit of the Company and to the satisfaction of the Board of Directors
(the "Board") of the Company and its Compensation Committee;
WHEREAS, the Board and its Compensation Committee believes it to be in
the best interests of the Company to enter into this Agreement to assure
Executive's continuing services to the Company including, but not limited to,
under circumstances in which there is a Change of Control (as defined below);
WHEREAS, the Board and its Compensation Committee believes it is
imperative to diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations; and
WHEREAS, in order to accomplish all the above objectives, the Board and
its Compensation Committee has authorized the Company to enter into this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive hereby agree as follows:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall mean the date hereof.
(b) The "Change of Control Date" shall mean the first
date during the Employment Period (as defined in Section 1(d)) on which
a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Executive's employment with the Company is terminated
or the Executive ceases to be Chief Financial Officer ("CFO") of the
Company prior to the date on which the Change of Control occurs, and if
it is reasonably demonstrated by the Executive that such termination of
employment or cessation of status as CFO (i) was at the request of a
third party who has taken steps reasonably calculated to effect the
Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of this
Agreement the
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"Change of Control Date" shall mean the date immediately prior to the
date of such termination of employment or cessation of status as CFO.
(c) "Compensation Committee" shall mean the Compensation
Committee of the Board of Directors.
(d) The "Employment Period" shall mean the period
commencing on the Effective Date and ending on the earlier to occur of
(i) the third anniversary of such date or (ii) the first day of the
month next following the Executive's 65th birthday ("Normal Retirement
Date"); provided, however, that on each anniversary of the Effective
Date, and on each successive annual anniversary of such date thereafter
(such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Employment Period shall be
automatically extended so as to terminate on the earlier of (x) three
years from such Renewal Date or (y) the Executive's Normal Retirement
Date, unless at least 90 days prior to the Renewal Date the Company
shall give notice to the Executive that the Employment Period shall not
be so extended; and provided, further, that upon the occurrence of a
Change of Control Date, the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (1) the third
anniversary of such date or (2) the Executive's Normal Retirement Date.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a
"Change of Control" or "Change in Control" shall mean:
(a) The acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 40% or more of either (i) the then outstanding shares
of common stock of Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change
of Control: (w) any acquisition directly from the Company, (x) any
acquisition by the Company or any of its subsidiaries, (y) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its subsidiaries or (z) any
acquisition by any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were beneficial owners,
respectively of the Outstanding Company Common Stock and Outstanding
Company Voting Securities in substantially the same proportions as
their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
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(b) Individuals who, as of the date hereof, constitute
the Company's Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Company Board of
Directors; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents; or
(c) Completion by the Company of a reorganization, merger
or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, less than 60% of, respectively, of the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case
may be; or
(d) Completion by the Company of (i) a complete liquidation or
dissolution of Company or (ii) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other
disposition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, during the Employment Period under the terms and conditions
provided herein.
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4. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period and prior to a
Change of Control Date, (A) if the Board determines that the
Executive has been performing his duties in accordance with
Section 4(a)(iii) hereof, the Board shall re-appoint the
Executive to the position of CFO with substantially similar
duties to those performed by the Executive on the Effective
Date, and (B) the Executive's services shall be performed at
the Executive's location on the Effective Date, the Company's
headquarters, or a location where a substantial activity for
which the Executive has responsibility is located.
(ii) During the Employment Period and on and
following a Change of Control Date, (A) the Executive's
position (including status, offices, titles and reporting
relationships), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at any
time during the 180-day period immediately preceding the
Change of Control Date and (B) the Executive's services shall
be performed at the location where the Executive was employed
immediately preceding the Change of Control Date or any office
or location less than fifty (50) miles from such location.
(iii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive
is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the
business and affairs the Company and, to the extent necessary
to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as
such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee
of the Company in accordance with this Agreement. It is also
expressly understood and agreed that to the extent that such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Company shall pay the Executive a base salary (x) through
April 30, 2003, at an annual rate of
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$200,000, and (y) from and after May 1, 2003, at an annual
rate of $210,000 and during each succeeding 12 month period
ending April 30, at a rate not less than his base salary in
effect on the last day of the preceding 12-month period ending
April 30. During the Employment Period, base salary shall be
reviewed at least annually and shall be adjusted as agreed
between the Compensation Committee of the Board of Directors
and Executive (in the event no agreement is reached, Base
Salary shall remain unchanged). Any increase in base salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Base Salary shall not be
reduced after any such increase except in connection with
Company wide reductions applied to other senior executives of
the Company. Base salary under Section 4(b)(i) shall
hereinafter be referred to as the "Base Salary."
(ii) Additional Compensation. In addition to Base
Salary, the Executive shall participate in the Company's
Success Share Bonus Arrangement under terms and conditions
determined each year by the Compensation Committee of the
Board of Directors of the Company (which, beginning May 1,
2003, shall be a 60% incentive opportunity for the applicable
year).
(iii) Fringe Benefits. While Executive is employed
by the Company under this Agreement, the Company shall provide
Executive such insurance and other benefits as are provided
from time to time by the Company to its other executives, in
accordance with the Company's benefits practices then in
effect.
5. TERMINATION.
(a) Death or Disability. This Agreement shall terminate
automatically upon the Executive's death. If the Company determines in
good faith that the Disability of the Executive has occurred (pursuant
to the definition of "Disability" set forth below), it may give to the
Executive written notice of its intention to terminate the Executive's
employment hereunder. In such event, the Executive's employment with
the Company shall terminate effective on the 90th day after receipt by
the Executive of such notice given at any time after a period of six
consecutive months of Disability and while such Disability is
continuing (the "Disability Effective Date"), provided that, within the
90 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" means disability which, at least six months
after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably). During such six month
period and until the Disability Effective Date, Executive shall be
entitled to all compensation provided for under Section 4 hereof.
(b) Cause. During the Employment Period, the Company may
terminate the Executive's employment with the Company for "Cause." For
purposes of this Agreement,
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"Cause" means (i) an act or acts of personal dishonesty taken by the
Executive and intended to result in substantial personal enrichment of
the Executive at the expense of the Company, (ii) willful failure to
follow the reasonable directions of the Company or repeated violations
by the Executive of the Executive's obligations under Section 4(a) of
this Agreement which are demonstrably willful and deliberate on the
Executive's part and in each case which are not remedied in a
reasonable period of time after receipt of written notice from the
Company or (iii) the conviction of the Executive of a felony.
(c) Good Reason. During the Employment Period, the
Executive's employment hereunder may be terminated by the Executive for
Good Reason. For purposes of this Agreement, "Good Reason" means:
(i) the assignment to the Executive of any
duties inconsistent in any respect with Executive's position
(including status, offices, titles and reporting
relationships), authority, duties or responsibilities as
contemplated by Section 4(a)(i) or (ii) of this Agreement
(including, without limitation, Executive ceasing to be the
Chief Financial Officer of the Company), or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities;
(ii) the failure by the Company to appoint the
Executive to the position of CFO or any other action by the
Company which results in the diminution of the Executive's
position, authority, duties, or responsibilities
(iii) (x) any failure by the Company to comply
with any of the provisions of Section 4(b) of this Agreement
or (y) after the Change of Control Date, any failure of the
Company to pay Base Salary in accordance with Section 4(b)(i)
or failure to pay Additional Compensation on a basis
comparable (with respect to targets and incentive opportunity)
to that applicable to the Executive with respect to the year
immediately preceding the year in which the Change in Control
occurs;
(iv) the Company requiring the Executive to be
based at any office or location other than that described in
Sections 4(a)(i)(B) or 4(a)(ii)(B) hereof, except for travel
reasonably required in the performance of the Executive's
responsibilities;
(v) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(vi) any failure by the Company to comply with
and satisfy Section 12(c) of this Agreement.
Prior to giving a Notice of Termination for Good Reason,
Executive shall notify the Company within 30 days of action the Company
has taken in such 30 day period, together with any other similar
actions within the prior six months, which Executive believes
constitutes Good Reason. The Company shall have 30 days to cure such
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circumstances, and if not cured to the reasonable satisfaction of the
Executive, then Executive may give such Notice of Termination for Good
Reason.
(d) Notice of Termination. Any termination of the
Executive's employment hereunder by the Company for Cause or by the
Executive for Good Reason shall be communicated by Notice of
Termination to such other party hereto given in accordance with Section
14(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision
so indicated and (iii) if the Date of Termination (as defined below) is
other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than fifteen (15) days
after the giving of such notice). Further, a Notice of Termination for
Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board (excluding the Executive) at a meeting of the
Board which was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel,
to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in the
definition of Cause herein, and specifying the particulars thereof in
detail.
(e) Date of Termination. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, however, that (i) if
the Executive's employment hereunder is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be the date
on which the Company notifies the Executive of such termination and
(ii) if the Executive's employment hereunder is terminated by reason of
death or Disability, the Date of Termination shall be the date of death
of the Executive or the Disability Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death. If the Executive's employment hereunder is
terminated by reason of the Executive's death, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than those obligations
accrued or earned and vested (if applicable) by the Executive as of the
Date of Termination, including, for this purpose (i) the Executive's
full Base Salary through the Date of Termination at the rate in effect
on the Date of Termination, disregarding any reduction in Base Salary
in violation of this Agreement (the "Highest Base Salary") and (ii) any
compensation previously deferred by the Executive (together with any
accrued interest thereon) and not yet paid by the Company in accordance
with the applicable plan (to the extent vested) and any accrued
vacation pay not yet paid by the Company (such amounts specified in
clauses (i) and (ii) are hereinafter referred to as "Accrued
Obligations"). All such Accrued Obligations shall be paid to the
Executive's estate or
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beneficiary, as applicable, in a lump sum in cash within 30 days of the
Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by the
Company and any of its subsidiaries to surviving families of employees
of the Company and such subsidiaries under such plans, programs,
practices and policies relating to family death benefits, if any, in
accordance with the most favorable plans, programs, practices and
policies of the Company and its subsidiaries in effect on the date of
the Executive's death with respect to other key employees of the
Company and its subsidiaries and their families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, this Agreement
shall terminate without further obligations to the Executive, other
than those obligations accrued or earned and vested (if applicable) by
the Executive as of the Date of Termination, including for this
purpose, all Accrued Obligations. All such Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the Disability
Effective Date to receive disability and other benefits at least equal
to the most favorable of those provided by the Company and its
subsidiaries to disabled employees and/or their families in accordance
with such plans, programs, practices and policies relating to
disability, if any, in accordance with the most favorable plans,
programs, practices and policies of the Company and its subsidiaries in
effect on or after the Effective Date or, if more favorable to the
Executive and /or the Executive's family, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries and their families.
(c) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause, this Agreement shall
terminate without further obligations to the Executive other than those
obligations accrued or earned and vested (if applicable) by the
Executive as of the Date of Termination, including for this purpose all
Accrued Obligations. If the Executive terminates employment other than
for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than those obligations accrued or
earned and vested (if applicable) by the Executive through the Date of
Termination, including for this purpose, all Accrued Obligations. All
such Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause, Disability or
Death.
(1) If, during the Employment Period and prior
to a Change of Control the Company shall terminate the
Executive's employment hereunder other than for Cause,
Disability, or death or if the Executive shall terminate his
employment hereunder for Good Reason:
(i) the Company shall pay to the
Executive in a lump sum in cash within thirty (30)
days (or such longer period necessary for the release
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referred to in Section 10(f) to become irrevocable)
after the Date of Termination the aggregate of the
following amounts:
A. to the extent not theretofore paid, the Executive's Highest
Base Salary through the Date of Termination;
and
B. subject to execution of the
release referred to in Section 10(f) and the
lapse of any period necessary for such
release to become irrevocable, an amount
equal to 150% of the Highest Base Salary and
150% of Additional Compensation that would
be paid if the Company met its plan for the
fiscal year in which the termination
occurred; and
C. (I) in the case of
compensation previously deferred by the
Executive, all amounts previously deferred
(together with any accrued interest thereon)
in accordance with the applicable plan and
not yet paid by the Company; and all such
deferred amounts shall become fully vested
as of the Date of Termination, and (II) any
accrued vacation pay not yet paid by the
Company; and
D. the Company shall, for a
period of two years continue benefits to the
Executive and/or the Executive's family at
least equal to those which would have been
provided to them in accordance with the
plans, programs, practices and policies
described in Section 4(b)(iii) including
health insurance and life insurance, in
accordance with the most favorable plans,
practices, programs or policies of the
Company and its subsidiaries in effect on
the date of termination; provided that the
Company shall not be required to provide a
benefit or benefits under this Section to
the extent Executive is reemployed during
such two year period and such subsequent
employer provides a comparable benefit or
benefits. For purposes of eligibility for
retiree benefits pursuant to such plans,
practices, programs and policies, the
Executive shall be considered to have
remained employed by the Company for the
duration of such two year period and to have
retired on the last day of such period.
E. in addition to the foregoing,
one hundred percent (100%) of Executive's
unvested options shall immediately vest and
shall remain exercisable for the same period
as an option held by a retiring section 16
officer.
F. the Company shall provide the
Executive with tax planning and financial
counseling services for a period of two
years following the Date of Termination on
the same basis as such
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services were provided or made available to
him immediately prior to the Date of
Termination.
(2) If, during the Employment Period and on and
after a Change of Control Date the Company shall terminate the
Executive's employment hereunder other than for Cause,
Disability, or death or if the Executive shall terminate his
employment hereunder for Good Reason:
(i) the Company shall pay to the
Executive in a lump sum in cash within thirty (30)
(or such longer period necessary for the release
referred to in Section 10(f) to become irrevocable)
days after the Date of Termination the aggregate of
the following amounts:
A. to the extent not theretofore paid, the Executive's Highest
Base Salary through the Date of Termination;
and
B. subject to execution of the
release referred to in Section 10(f) and the
lapse of any period necessary for such
release to become irrevocable, an amount
equal to 200% of the Highest Base Salary and
200% of Additional Compensation that would
be paid if the Company met its plan for the
fiscal year in which the termination
occurred; and
C. (I) in the case of
compensation previously deferred by the
Executive, all amounts previously deferred
(together with any accrued interest thereon)
in accordance with the applicable plan and
not yet paid by the Company; and all such
deferred amounts shall become fully vested
as of the Date of Termination, and (II) any
accrued vacation pay not yet paid by the
Company; and
D. the Company shall, for a
period of three years continue benefits to
the Executive and/or the Executive's family
at least equal to those which would have
been provided to them in accordance with the
plans, programs, practices and policies
described in Section 4(b)(iii) including
health insurance and life insurance, in
accordance with the most favorable plans,
practices, programs or policies of the
Company and its subsidiaries in effect on
the date of termination; provided that the
Company shall not be required to provide a
benefit or benefits under this Section to
the extent Executive is reemployed during
such three year period and such subsequent
employer provides a comparable benefit or
benefits. For purposes of eligibility for
retiree benefits pursuant to such plans,
practices, programs and policies, the
Executive shall be considered to have
remained employed by the Company for the
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duration of such three year period and to
have retired on the last day of such period.
E. in addition to the foregoing,
all of Executive's unvested options shall
immediately vest if not previously vested
pursuant to Section 6(e) hereof and shall
remain exercisable for the same period as an
option held by a retiring section 16
officer.
F. the Company shall provide the
Executive with tax planning and financial
counseling services for a period of three
years following the Date of Termination on
the same basis as such services were
provided or made available to him
immediately prior to the Date of Termination
or the Change of Control Date, whichever is
more favorable.
(e) All of Executive's unvested options shall immediately
vest upon completion of a Change of Control, if at the time of
completion such options are not substituted or continued by the
acquiror, regardless of whether Executive's employment is terminated.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or practices,
provided by Company, the Company or any of their respective subsidiaries and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any stock option, restricted
stock or other agreements with Company, the Company or any of their respective
subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of
Company, the Company or any of their respective subsidiaries at or subsequent to
the Date of Termination shall be payable in accordance with such plan, policy
practice or program.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses,
as incurred by the Company, the Executive and others, which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to Section 9 of this Agreement), plus in each case interest at
the applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
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9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company, any individual or
entity whose actions result in a Change of Control, or their
respective subsidiaries or affiliates to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9, including, but not
limited to, any amounts in respect of (i) options to acquire
shares of Company common stock and (ii) restricted shares of
Company common stock (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest
or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") from the Company in an amount such that
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes, employment
taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax, imposed upon the Gross-Up Payment,
the Executive retains, after taking into account the phase out
of itemized deductions and personal exemptions attributable to
such Gross-Up Payment, an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon Payments.
(b) Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9,
including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by the firm of
independent public accountants selected by the Company (which
firm shall not audit the Company's financial statements) (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 30
business days of the Date of Termination, or such earlier time
as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or company effecting the Change of Control,
the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross- Up Payment, as determined pursuant to this Section 9,
shall be paid to the Executive upon the receipt of the
Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable
federal income tax return would not result in the imposition
of a negligence or a similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to
Section 9(c) and the
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Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross- Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the
Executive knows of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the thirty-day period following the
date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good
faith in order to effectively contest such claim,
(iv) permit the Company to participate
in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with
respect thereto, imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing
provisions of this Section 9(c), the Company shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option,
pay such claim and direct the Executive to xxx for a
refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such
contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
pays such claim and directs the Executive to xxx for
a refund, the Company shall indemnify
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and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed
with respect to such payment; and further provided
that any extension of the statute of limitations
relating to payment of taxes for the taxable year of
the Executive with respect to which such contested
amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an
amount paid by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
paid by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund
with respect to such claim, and the Company does not notify
the Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty days after such
determination, then Executive shall be under no obligation to
repay such amount and the amount of such payment shall offset,
to the extent thereof, the amount of Gross-Up Payment required
to be paid.
10. CERTAIN COVENANTS OF EXECUTIVE.
(a) As used in Section 10 and Section 11, the
Company shall include the Company and each corporation,
partnership, or other entity that controls the Company, is
controlled by the Company, or is under common control with the
Company (in each case "control" meaning the direct or indirect
ownership of 50% or more of all outstanding equity interests).
(b) While Executive is employed by the Company
and, following the termination of the Executive 's employment
for any reason, until the first anniversary of the Date of
Termination, Executive will not, directly or indirectly:
(i) employ or attempt to employ any
director, officer, or employee of the Company, or
otherwise interfere with or disrupt any employment
relationship (contractual or other) of the Company;
(ii) solicit, request, advise, or induce
any present or potential customer, supplier, or other
business contact of the Company to cancel, curtail,
or otherwise change its relationship with the
Company; or
14
(iii) publicly criticize or disparage in
any manner or by any means the Company or its
management, policies, operations, products, services,
practices, or personnel.
(c) Executive hereby acknowledges and agrees
that all non-public information and data of the Company,
including without limitation that related to product and
service formulation, customers, pricing, sales, and financial
results (collectively, "Trade Secrets") are of substantial
value to the Company, provide it with a substantial
competitive advantage in its business, and are and have been
maintained in the strictest confidence as trade secrets.
Except as permitted by the Board, or as appropriate in the
performance of Executive's duties in the normal course of
business, Executive shall not at any time disclose or make
accessible to anyone any Trade Secrets.
(d) Executive acknowledges and agrees that this
Section 10 and each provision hereof are reasonable and
necessary to ensure that the Company receives the expected
benefits of this Agreement and that violation of this Section
10 will harm the Company to such an extent that monetary
damages alone would be an inadequate remedy. Consequently, in
the event of any violation or threatened violation by
Executive of any provision of this Section 10, the Company
shall be entitled to an injunction (in addition to all other
remedies it may have) restraining Executive from committing or
continuing such violation. If any provision or application of
this Section 10 is held unlawful or unenforceable in any
respect, this Section 10 shall be revised or applied in a
manner that renders it lawful and enforceable to the fullest
extent possible.
(e) Upon termination of Executive's employment
for any reason, Executive covenants to resign from the Board
effective no later than the Termination Date.
(f) Prior to the payment of any amount pursuant
to Sections 6(d)(1)(i)(B), 6(d)(2)(i)(B) and Section 9,
Executive shall have executed the release in the form set
forth as Exhibit A (with the blanks appropriately filled in)
and the release shall have become irrevocable.
11. CREATIONS.
(a) Executive hereby transfers and assigns to
the Company (or its designee) all right, title, and interest
of Executive in and to every idea, concept, invention, and
improvement (whether patented or not) conceived by Executive
and all copyrighted or copyrightable matter created by
Executive that relates to the Company's business
(collectively, "Creations"). Executive shall communicate
promptly and disclose to the Company, in such form as the
Company may request, all information, details, and data
pertaining to each Creation. Every copyrightable Creation,
regardless of whether copyright protection is sought or
preserved by the Company, shall be "work for hire" as defined
in 17 U.S.C. Section 101 and the Company shall own all rights
in and to such matter throughout the world, without the
payment of any royalty or other consideration to Executive or
anyone claiming through Executive.
15
(b) All right, title, and interest in and to any
and all trademarks, trade names, service marks, and logos
adopted, used, or considered for use by the Company during
Executive's employment (whether or not developed by Executive)
to identify the Company's products or services (collectively,
the "Marks") and all other materials, ideas, or other property
conceived, created, developed, adopted, or improved by
Executive solely or jointly during Executive's employment by
the Company and relating to its business, shall be owned
exclusively by the Company. Executive shall not have, and will
not claim to have, any right, title, or interest of any kind
in or to the Marks or such other property.
(c) Executive shall execute and deliver to the
Company such formal transfers and assignments and such other
documents as the Company may request to permit the Company (or
its designee) to file and prosecute such registration
applications and other documents it deems useful to protect
its rights under this Agreement. Any idea, copyrightable
matter, or other property relating to the Company's business
and disclosed by Executive prior to the first anniversary of
the Date of Termination shall be deemed to be governed hereby
unless proved by Executive to have been first conceived and
made after the Date of Termination.
(d) Executive acknowledges and understands that
this Agreement does not apply to any invention that qualifies
fully under the provisions of Minnesota Statutes Annotated
Sections 181.78(1) and (2), the text of which is attached as
Exhibit B. Employee acknowledges this section shall serve as
written notice to Employee as required by Minnesota Statutes
Annotated Section 181.78(3).
12. SUCCESSORS.
(a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not
be assignable by the Executive otherwise than by will or the
laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon Company and the Company and their
respective successors and assigns.
(c) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of its
business and/or assets to assume expressly and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place. As used in this Agreement,
"Company" shall mean as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
16
13. ARBITRATION. Any controversy or claim arising out of
or relating to this Agreement, or the breach of this Agreement, other
than claims for specific performance or injunctive relief pursuant to
Section 10, shall be settled by arbitration conducted in Minneapolis,
Minnesota in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes by a sole arbitrator
selected by the parties from the Center for Public Resources Panels of
Distinguished Neutrals. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. Sections 1-16 and judgment upon any
award rendered by the arbitrator may be entered in any Minnesota state
or United States federal court sitting in Minneapolis, Minnesota. The
arbitrator shall not award either damages in excess of actual damages
or attorneys' fees, but may award the prevailing party reasonable
costs. The parties to this Agreement irrevocably submit to the
jurisdiction of said arbitrator and court and agree that all such
claims may be heard and determined only by such arbitrator and that all
judgments may be entered in only such courts.
14. MISCELLANEOUS.
(a) This Agreement shall be governed by and
construed in accordance with the laws of the State of
Minnesota, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: If to the Company:
Xxxxxxx X. Xxxxxx Computer Network Technology
(at home address Corporation
separately notified) 0000 Xxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Board of
Directors
or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by
the addressees.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such Federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
17
(e) The Executive's failure to insist upon
strict compliance with any provision hereof shall not be
deemed to be a waiver of such provision or any other provision
thereof.
(f) Words or terms used in this Agreement which
connote the masculine gender are deemed to apply equally to
female executives.
(g) The Change of Control Agreement dated as of
July 1, 2002 between the Company and Executive is hereby
terminated and is of no further force an effect.
[Remainder of page is blank.]
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IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors and
Compensation Committee, the Company has caused those present to be
executed in its name on its behalf, all as of the day and year first
above written.
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Name:
COMPUTER NETWORK TECHNOLOGY
CORPORATION,
By /s/ Xxxx X. Xxxxxxxxx
--------------------------------
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EXHIBIT A
RELEASE AGREEMENT
Computer Network Technology Corporation (the "Company") and Xxxxxxx X.
Xxxxxx ("Executive") agree as follows:
WHEREAS, the Company and Executive are parties to that certain
Employment Agreement dated ______ (the "Employment Agreement"); and
WHEREAS, the Company and Executive have agreed to terminate the
Employment Agreement releasing each other from all further obligations except
those specifically identified therein as surviving such termination.
THEREFORE, in consideration of the covenants and obligations set forth
below, the Company and Executive agree as follows:
1. Separation from Employment. Executive's employment with the
Company will terminate on _________________.
2. Severance. The Company agrees to pay Executive severance
benefits in accordance with the terms of the Employment Agreement commencing as
soon as practicable following the expiration of the rescission period referred
to below.
3. Release of Claims. After adequate opportunity to review this
Release Agreement and to obtain the advice of legal counsel of Executive's
choice, Executive hereby releases, acquits and forever discharges the Company,
and all of its directors, officers, agents, employees, affiliates, parents,
successors and assigns, from any and all liability whatsoever arising from or
relating to (i) his employment by the Company, (ii) his separation from
employment with the Company, or (iii) any other claim or liability, excluding
liabilities from claims arising under this Release Agreement or under Sections
6(d) and 9 of the Employment Agreement. Subject to the foregoing, by this
Release, Executive gives up any right to make a claim, bring a lawsuit, or
otherwise seek money damages or court orders as a result of his employment by
the Company, his separation from employment with the Company, or otherwise.
Executive hereby acknowledges and intends that this Release applies to any
statutory or common law claims which have arisen through the date of Executive's
signature below, including but not limited to, any and all claims of unpaid
wages, stock options, wrongful termination, defamation, intentional or negligent
infliction of emotional distress, negligence, breach of contract, fraud, and any
claims under the Age Discrimination in Employment Act (ADEA), Title VII of the
Civil Rights Act of 1964, the Americans with Disabilities Act, the Minnesota
Human Rights Act (MHRA), the Family and Medical Leave Act, the Employee
Retirement Income Security Act, and any other local, state or federal statutes.
Executive acknowledges that this Release includes all claims Executive is
legally permitted to release and as such does not apply to any claim for
reemployment benefits, nor does it preclude Executive from filing a charge of
discrimination with the state Department of Human Rights or the federal Equal
Employment Opportunity Commission although Executive would not be able
20
to recover any damages if Executive filed such a charge. This Release includes
but is not limited to all claims relating to Executive's employment and the
separation of Executive's employment. This Release Agreement shall be binding
upon Executive and upon his heirs, administrators, representatives, executors,
successors and assigns. Notwithstanding anything to the contrary contained
herein, in no event shall this Release Agreement constitute a release by the
Executive of his rights with respect to accrued benefits to which he would
otherwise be entitled under any of the Company's employee benefit plans,
programs or other employee benefit arrangements (excluding any severance plans
or arrangements).
4. Entire Agreement. This Release Agreement contains the entire
agreement between Executive and the Company with respect to the subject matter
hereof. No modification or amendment to this Release Agreement shall be valid or
binding unless made in writing and signed by the parties. This Release Agreement
will be interpreted under the laws of Minnesota.
5. Notification of Rescission Rights.
a) This Release Agreement contains a release of certain
legal rights which Executive may have under the ADEA or the MHRA.
Executive should consult with an attorney regarding such release and
other aspects of this Release Agreement before signing.
b) The termination of Executive's employment by the
Company will not be affected by Executive's acceptance or failure to
accept this Release Agreement. If Executive does not accept the terms
hereof, or if Executive revokes his acceptance of this Release
Agreement, the Company will not provide to him the benefits described
herein.
c) Executive has twenty-one (21) days to consider
whether or not to sign this agreement, starting from the date he first
receives a copy of this agreement. Executive may sign this agreement at
any time during this twenty-one (21) day period.
d) After Executive has accepted this Release Agreement
by signing it, he may revoke his acceptance for a period of fifteen
(15) days after the date he signed this Release Agreement. This Release
Agreement will not be effective until this fifteen (15) day revocation
period has expired.
e) If Executive wishes to revoke his acceptance of this
Release Agreement he must notify the Company in writing within the
fifteen (15) day revocation period. Such notice must be delivered to
the Company in person or mailed by certified mail, return receipt
requested, addressed to: Computer Network Technology Corporation, 0000
Xxxxxx Xxxx Xxxxx, Xxxxxxxx, XX 00000, Attention: Board of Directors).
If Executive fails to properly deliver or mail such written revocation
as instructed, the revocation will not be effective.
21
I first received a copy of this Release Agreement on _____________________.
Date:____________________ ________________________________
Xxxxxxx X. Xxxxxx
I agree to accept the terms of this Release Agreement.
Date:____________________ ________________________________
Xxxxxxx X. Xxxxxx
COMPUTER NETWORK TECHNOLOGY CORPORATION
By:_____________________________
Name:
Title:
Date:
22
EXHIBIT B
Minnesota Statutes Annotated Section 181.78 provides as follows:
Subdivision 1. Any provision in an employment agreement that provides
that an employee shall assign or offer to assign any of the employee's rights in
an invention to the employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the employer was
used and that was developed entirely on the employee's own time, and
(1) that does not relate (a) directly to the business of the
employer or (b) to the actual or demonstrably anticipated research or
development, or
(2) that does not result from any work performed by the employee
for the employer. Any provision that purports to apply to such an invention is
to that extent against the public policy of this state and is to that extent
unenforceable.
Subdivision 2. No employer shall require a provision made void and
unenforceable by subdivision 1 as a condition of employment or continuing
employment.
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