EXHIBIT 10.1
AMENDED AND RESTATED 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 Xxxxxx 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 Executive Officer ("CEO") 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 CEO (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 CEO.
(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 CEO 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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$350,000, and (y) from and after May 1, 2003, at an annual
rate of $367,500 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 be 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, currently is a 65%
incentive opportunity and beginning May 1, 2003, shall be a
100% 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.
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(b) Cause. During the Employment Period, the Company may
terminate the Executive's employment with the Company for "Cause." For
purposes of this Agreement, "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) 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 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, failure to nominate the
Executive to the Board or Executive ceasing to be the Chief
Executive 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 CEO 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.
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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
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
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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
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
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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
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 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 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
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shall remain exercisable for the same period
as an option held by a retiring section 16
officer or Board member.
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
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 300% of the Highest Base Salary and
300% 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
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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
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 or Board member.
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
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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").
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
12
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 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
13
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 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;
14
(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
(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
15
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.
(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
16
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.
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:
Xxxxxx 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.
17
(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.
(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 and the Employment Agreement
dated June 9, 1996 between the Company and Executive are hereby
terminated and are of no further force an effect.
[Remainder of page is blank.]
18
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/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name:
COMPUTER NETWORK TECHNOLOGY
CORPORATION,
By /s/ Xxxx X. Xxxxxxxxx
------------------------------------------
19
EXHIBIT A
RELEASE AGREEMENT
Computer Network Technology Corporation (the "Company") and Xxxxxx X.
Xxxxxx ("Executive") agree as follows:
WHEREAS, the Company and Executive are parties to that certain Amended
and Restated 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:____________________ ________________________________
Xxxxxx X. Xxxxxx
I agree to accept the terms of this Release Agreement.
Date:____________________ ________________________________
Xxxxxx 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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