February 8, 1997
Xxxxxxx X. Xxxxx
Tricord Systems, Inc.
0000 Xxxxxxxxx Xxxx.
Plymouth, MN 55441
Dear Xxxxxxx:
The Board recognizes that continuance of your position with the Company
involves a substantial commitment to the Company in terms of your personal life
and professional career and the possibility of foregoing present and future
career opportunities, for which the Company receives substantial benefits.
Therefore, to induce you to remain in the employ of the Company, this Agreement,
which has been approved by the Board, sets forth the benefits which the Company
agrees will be provided to you in the event your employment with the Company is
terminated under the circumstances described below.
1. DEFINITIONS. The following terms will have the meaning set forth below
unless the context clearly requires otherwise. Terms defined elsewhere in this
Agreement will have the same meaning throughout this Agreement.
(a) "AFFILIATE" means (i) any corporation at least a majority of whose
outstanding securities ordinarily having the right to vote at elections of
directors is owned directly or indirectly by the Parent Corporation or (ii)
any other form of business entity in which the Parent Corporation, by
virtue of a direct or indirect ownership interest, has the right to elect a
majority of the members of such entity's governing body.
(b) "AGREEMENT" means this letter agreement as amended, extended or
renewed from time to time in accordance with its terms.
(c) "BASE PAY" means your annual base salary from the Company at the rate
in effect immediately prior to a Triggering Termination or at the time
Notice of Termination is given, whichever is greater. Base Pay includes
only regular cash salary and is determined before any reduction for
deferrals pursuant to any nonqualified deferred compensation plan or
arrangement, qualified cash or deferred arrangement or cafeteria plan.
(d) "BOARD" means the board of directors of the Parent Corporation duly
qualified and acting at the time in question.
(e) "CAUSE" means: (i) your gross misconduct; (ii) your willful and
continued failure to perform substantially your duties with the Company
(other than a failure resulting from your incapacity due to bodily injury
or physical or mental illness) after a demand for substantial
Xxxxxxx X. Xxxxx
February 8, 1997
Page 2
performance is delivered to you by the chair of the Board which specifically
identifies the manner in which you have not substantially performed your
duties and provides for a reasonable period of time within which you may
take corrective measures; or (iii) your conviction (including a plea of nolo
contendere) of willfully engaging in illegal conduct constituting a felony
or gross misdemeanor under federal or state law which is materially and
demonstrably injurious to the Company or which impairs your ability to
perform substantially your duties for the Company. An act or failure to
act will be considered "gross" or "willful" for this purpose only if done,
or omitted to be done, by you in bad faith and without reasonable belief
that it was in, or not opposed to, the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Company's board of directors (or a committee thereof)
or based upon the advice of counsel for the Company will be conclusively
presumed to be done, or omitted to be done, by you in good faith and in the
best interests of the Company. Notwithstanding the foregoing, you may not
be terminated for Cause unless and until there has been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were guilty
of the conduct set forth above in clauses (i), (ii) or (iii) of this
definition and specifying the particulars thereof in detail.
(f) "CHANGE IN CONTROL AGREEMENT" means that certain letter agreement
between the Parent Corporation and you, dated September 13, 1996, relating
to the payment of benefits in connection with certain change in control
events of the Parent Corporation.
(g) "COMPANY" means the Parent Corporation, any Successor and any
Affiliate.
(h) "DATE OF TERMINATION" means: (i) if your employment is to be
terminated by you for Good Reason, the date specified in a notice of
termination which in no event may be a date more than 15 days after the
date on which such notice of termination is given unless the Company agrees
in writing to a later date; (ii) if your employment is to be terminated by
the Company for Cause, the date specified in the notice of termination;
(iii) if your employment is terminated by reason of your death, the date of
your death; or (iv) if your employment is to be terminated by the Company
for any reason other than Cause or your death, the date specified in the
notice of termination, which in no event may be a date earlier than 15 days
after the date on which a notice of termination is given, unless you
expressly agree in writing to an earlier date.
(i) "GOOD REASON" means:
(i) a change in your status, position(s), duties or responsibilities
as an executive of the Company as in effect immediately prior to the
date of this Agreement which is adverse (other than, if applicable,
any such change directly attributable to the fact that the Parent
Corporation is no longer publicly owned); provided, however, that Good
Reason does not include a change in your status, position(s), duties
or responsibilities caused by an insubstantial and inadvertent action
that is remedied by the Company promptly after receipt of notice of
such change is given by you;
Xxxxxxx X. Xxxxx
February 8, 1997
Page 3
(ii) a reduction by the Company in your Base Pay, or an adverse change
in the form or timing of the payment thereof, as in effect immediately
prior to the date of this Agreement or as thereafter increased;
(iii) the Company's requiring you to be based more than 30 miles from
where your office is located immediately prior to the date of this
Agreement, except for required travel on the Company's business;
(iv) the failure by the Company to obtain from any Successor the
assent to this Agreement; or
(v) any purported termination by the Company of your employment which
is not properly effected pursuant to a Notice of Termination and
pursuant to any other requirements of this Agreement.
(j) "PARENT CORPORATION" means Tricord Systems, Inc. and any Successor.
(k) "SUCCESSOR" means any person that succeeds to, or has the practical
ability to control (either immediately or solely with the passage of time),
the Parent Corporation's business directly, by merger, consolidation or
other form of business combination, or indirectly, by purchase of the
Parent Corporation's outstanding securities ordinarily having the right to
vote at the election of directors or all or substantially all of its assets
or otherwise.
(l) "TRIGGERING TERMINATION" means termination by the Company of your
employment for any reason other than your death or Cause, or termination by
you of your employment with the Company for Good Reason, so long as such
termination of employment by the Company or you would not cause you to
become entitled to receive benefits pursuant to the Change in Control
Agreement.
2. TERM OF AGREEMENT. This Agreement is effective immediately and will
continue in effect until February 8, 1999; provided, however, that commencing on
January 1, 1999 and each January 1 thereafter, the term of this Agreement will
automatically be extended for 12 additional months beyond the expiration date
otherwise then in effect, unless at least 90 calendar days prior to any such
January 1, the Company or you has given notice that this Agreement will not be
extended; and, provided, further, that if a Triggering Termination has occurred
during the term of this Agreement, this Agreement will continue in effect beyond
the termination date then in effect until the date on which the Company's
obligations to you arising under or in connection with this Agreement have been
satisfied in full.
3. BENEFITS UPON A TRIGGERING TERMINATION. You will become entitled to the
following benefits if a Triggering Termination occurs during the term of this
Agreement.
(a) CASH PAYMENT. Within 10 business days following the Date of
Termination, the Company will make a lump-sum cash payment to you in an
amount equal to one times your Base Pay.
(b) GROUP HEALTH PLANS. During the continuation period, the Company will
maintain a group health plan(s) which by its terms covers you (and your
family members and dependents who were eligible to be covered at any time
during the 90-day period immediately prior to the Date of Termination for
the period after the Date of
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February 8, 1997
Page 4
Termination in which such family members and dependents would otherwise
continue to be covered under the terms of the plan in effect immediately
prior to the Date of Termination) under the same terms and at the same cost
to you and your family members and dependents as similarly situated
individuals who continue to be employed by the Company (without regard to
any reduction in such benefits that constitutes Good Reason). The
"continuation period" is the period beginning on your Date of Termination
and ending on the earlier of (i) the last day of the 12th month that
begins after your Date of Termination or (ii) the date after your Date
of Termination on which you first become eligible to participate as an
employee in a plan of another employer providing group health benefits to
you and your eligible family members and dependents which plan does not
contain any exclusion or limitation with respect to any pre-existing
condition of you or any eligible family member or dependent who would
otherwise be covered under the Company's plan but for this clause (ii). To
the extent you incur a tax liability (including federal, state and local
taxes and any interest and penalties with respect thereto) in connection
with a benefit provided pursuant to this Section 3(b) which you would not
have incurred had you been an active employee of the Company participating
in the Company's group health plan, the Company will make a payment to you
in an amount equal to such tax liability plus an additional amount
sufficient to permit you to retain a net amount after all taxes (including
penalties and interest) equal to the initial tax liability in connection
with the benefit. For purposes of applying the foregoing, your tax rate
will be deemed to be the highest statutory marginal state and federal tax
rate (on a combined basis) then in effect. The payment pursuant to this
Section 3(b) will be made within 10 days after your remittal of a written
request therefor accompanied by a statement indicating the basis for and
amount of the liability. The continuation period under applicable federal
and state continuation laws will begin to run from the Date of Termination
and will run concurrently during the time that coverage pursuant to this
Section 3(b) is provided.
4. BINDING AGREEMENT. This Agreement inures to the benefit of, and is
enforceable by, you, your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
die while any amount would still be payable to you under this Agreement if you
had continued to live, all such amounts, unless otherwise provided in this
Agreement, will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there be no such designee, to your
estate.
5. NO MITIGATION. You will not be required to mitigate the amount of any
benefits the Company becomes obligated to provide to you in connection with this
Agreement by seeking other employment or otherwise. The benefits to be provided
to you in connection with this Agreement may not be reduced, offset or subject
to recovery by the Company by any benefits you may receive from other employment
or otherwise.
6. NO SETOFF. The Company has no right to setoff benefits owed to you under
this Agreement against amounts owed or claimed to be owed by you to the Company
under this Agreement or otherwise.
7. TAXES. All benefits to be provided to you in connection with this
Agreement will be subject to required withholding of federal, state and local
income, excise and employment-related taxes.
8. NOTICES. For the purposes of this Agreement, notices and all other
communications provided for in, or required under, this Agreement must be in
writing and will be deemed to have been duly given when personally delivered or
when mailed by United States registered or certified mail, return receipt
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February 8, 1997
Page 5
requested, postage prepaid and addressed to each party's respective address set
forth on the first page of this Agreement (provided that all notices to the
Company must be directed to the attention of the chair of the Board), or to such
other address as either party may have furnished to the other in writing in
accordance with these provisions, except that notice of change of address will
be effective only upon receipt.
9. DISPUTES. If you so elect, any dispute, controversy or claim arising under
or in connection with this Agreement will be settled exclusively by binding
arbitration administered by the American Arbitration Association in Minneapolis,
Minnesota in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, that you may seek
specific performance of your right to receive benefits until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement. If any dispute, controversy or claim for
damages arising under or in connection with this Agreement is settled by
arbitration, each party will pay its own costs, provided that the costs of the
arbitration will be shared equally by the parties. If you do not elect
arbitration, you may pursue all available legal remedies.
10. RELATED AGREEMENTS. To the extent that any provision of any other benefit
plan or agreement between the Company and you limits, qualifies or is
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while such other benefit plan or agreement remains in force, the
provision of this Agreement will control and such provision of such other
benefit plan or agreement will be deemed to have been superseded, and to be of
no force or effect, as if such other agreement had been formally amended to the
extent necessary to accomplish such purpose. Notwithstanding the foregoing, in
determining whether you are, and in the event that you become, entitled to
receive benefits pursuant to the Change in Control Agreement, the terms and
conditions of the Change in Control Agreement will control and supersede the
terms and conditions of this Agreement. Nothing in this Agreement prevents or
limits your continuing or future participation in any benefit plan provided by
the Company and for which you may qualify, and nothing in this Agreement limits
or otherwise affects the rights you may have under any benefit plans or other
agreements with the Company. Amounts which are vested benefits or which you are
otherwise entitled to receive under any benefit plan or other agreement with the
Company at or subsequent to the Date of Termination will be payable in
accordance with such benefit plan or other agreement.
11. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement is intended
to provide you with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company, which rights are hereby expressly
reserved by each, to terminate your employment at any time for any reason or no
reason whatsoever, with or without cause.
12. FUNDING AND PAYMENT. Benefits payable under this Agreement will be paid
only from the general assets of the Company. No person has any right to or
interest in any specific assets of the Company by reason of this Agreement. To
the extent benefits under this Agreement are not paid when due to any
individual, he or she is a general unsecured creditor of the Company with
respect to any amounts due.
13. SURVIVAL. The respective obligations of, and benefits afforded to, the
Company and you which by their express terms or clear intent survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, will survive termination of your employment
with the
Xxxxxxx X. Xxxxx
February 8, 1997
Page 6
Company or termination of this Agreement, as the case may be, and will remain
in full force and effect according to their terms.
14. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the chair of the Board. No waiver by any party to this
Agreement at any time of any breach by another party to this Agreement of, or of
compliance with, any condition or provision of this Agreement to be performed by
such party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter to this Agreement have been made by any party which are not
expressly set forth in this Agreement. This Agreement and the legal relations
among the parties as to all matters will be governed by and construed
exclusively in accordance with the internal laws of the State of Minnesota
(without regard to the conflict of laws principles of any jurisdiction), and the
parties agree that any litigation arising under or in connection with this
Agreement must be brought in a court of competent jurisdiction in the State of
Minnesota and hereby consent to the exclusive jurisdiction of said courts for
this purpose. The invalidity or unenforceability of all or any part of any
provision of this Agreement will not affect the validity or enforceability of
the remainder of such provision or of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
several counterparts, each of which will be deemed to be an original, but all of
which together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
discussed above, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
TRICORD SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
President and Chief Executive Officer
Agreed to as of this 8th day of February, 1997.
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
