CROSSROADS SYSTEMS, INC.

 

 

May 8, 2013

 

 

Robert C. Sims

 

                           RE: Separation Offer and General Release

Dear Rob:

 

In connection with your separation from employment with Crossroads Systems, Inc.
(the “Company”) (and any of its subsidiaries) effective May 8, 2013, you are
eligible for certain severance benefits. As set forth in the severance benefit
plan letter agreement dated as of February 11, 2002 (the “Severance Agreement”)
between you and the Company, your eligibility for the benefits set forth in the
Severance Agreement is conditioned on your execution of a general release in
substantially the form attached to the Severance Agreement. Attached as Exhibit
A to this Letter Agreement is a copy of the general release (the “Release”) the
Company is requiring you to sign in order to receive the benefits for which you
are eligible under the Severance Agreement. As we have discussed, your
employment as the President and Chief Executive Officer of the Company has ended
effective May 8, 2013 (your “Employment Separation Date”). This Letter Agreement
summarizes the separation benefits available to you upon your executing the
Release. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Severance Agreement.

 

I.             Background. As of the date of your separation from the Company,
your annual salary was $275,000 ($22,916.66 monthly), and you had received and
held the following option grants listed on Schedule 1 hereto.

 

II.            Separation Rights and Obligations

 

A.           Payment of Accrued Salary and Vacation. Within six days of the
Employment Separation Date, you will receive your final paycheck for wages and
accrued vacation time earned through the Employment Separation Date.

 

B.            Continuation of Health and Welfare Coverage. If you elect not to
sign the Release and accept the health coverage benefits offered to you in the
Severance Agreement, your health care coverage will terminate on the Employment
Separation Date, in which case you and your dependents shall have the right to
elect continuation of applicable medical insurance coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at your own cost,
after the Employment Separation Date.

 

C.            Reimbursement of Expenses. The Company will reimburse you for
actual and reasonable out-of-pocket costs and expenses incurred by you on behalf
of the Company prior to the Employment Separation Date, provided that you
provide proof of such costs and expenses on the appropriate forms and consistent
with Company policies.

 

 

 

 

D.           Other Agreements and/or Obligations. The Indemnity Agreement and
Proprietary Information and Inventions Agreement (“PIIA”) by and between the
Company and you will remain in force pursuant to their terms. Pursuant to the
terms of your Employment Agreement, effective as of October 13, 2003, in the
event that you are no longer the Chief Executive Officer or President of the
Company, you are required to resign from the Board of Directors of the Company
immediately following such change of status. Accordingly, you have been provided
with a resignation letter, which you must sign and return immediately.

 

III.           Separation Package Pursuant to the Severance Agreement. Because
your separation is not a Termination for Cause and is not in connection with a
Change in Control, upon signing the Release, you will become eligible for the
benefits set forth in Part Two, A(1-3) of the Severance Agreement, which are the
benefits available to you in the context of an Involuntary Termination not
related to a Change in Control. However, Part Four of the Severance Agreement
sets forth special restrictive covenants that would limit the benefits awarded
you under Part Two of the Severance Agreement should you, at any time during the
one-year period following the Employment Separation Date, take any of the
following actions:

 

(i)     render, anywhere in the United States, any services or provide any
advice or assistance to any entity that offers products or services which are or
may be competitive with those offered or proposed to be offered by the Company
(a “Competing Business”), whether as an employee, consultant, partner,
principal, agent, representative, equity holder or in any other capacity,
without the express prior written consent of the Company. However, nothing in
this subpart (i) will limit your making any passive investment representing an
interest of less than two percent (2%) of an outstanding class of
publicly-traded securities of any corporation or other enterprise;

 

(ii)    solicit customers, clients, suppliers, agents or other persons or
entities under contract or otherwise associated or doing business with the
Company and/or its controlled affiliates to reduce or alter any such association
or business with the Company and/or its controlled affiliates on behalf of any
Competing Business; and/or

 

(iii)   solicit any employee or contractor of the Company and/or its controlled
affiliates to (a) alter or reduce such relationship with the Company, and/or (b)
accept employment, or enter into any consulting arrangement, with any person
other than Company and/or its controlled affiliates.

 

Therefore, unless and until Part Four of the Severance Agreement is invoked and
based upon the terms of the Severance Agreement, upon executing the Release, you
are eligible for the following benefits:

 

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A.           Salary Continuation. Twelve months of your monthly base salary
(which is $22,916.66 monthly), less all applicable withholdings (your “Salary
Continuation”), to be paid to you in the Company’s normal payroll practices.

 

B.           Immediate Vesting and Exercisability of Stock Options. Each
outstanding Option which you hold, to the extent not exercisable for all of the
shares of Common Stock subject to that Option as fully vested shares, will
immediately vest in full and become exercisable. Such options also shall remain
exercisable until the earlier of (i) the expiration of the option term or (ii)
the end of the twelve (12)-month period following your Employment Separation
Date. As a result of the extension of the post-separation exercise periods for
Options outstanding on the date of this Letter Agreement, those Options, to the
extent designated as Incentive Options, will no longer be treated as Incentive
Options for Federal tax purposes. Instead, such Options will be treated as
Non-Statutory Options for Federal tax purposes; and accordingly you will
recognize ordinary income upon exercise of such Options. All such income will be
subject to applicable income and employment withholding taxes.

 

C.           Continuation of Health Coverage. Finally, the Company will, at its
expense, continue to provide you and your eligible dependents with the Company’s
paid portion of health care coverage under the Company’s medical/dental plan
until the earlier of (i) the expiration of six months measured from June 1, 2013
or (ii) the first date that you are covered under another employer’s health
benefit program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such Health Care Coverage will be
in lieu of any other continued health care coverage to which you or your
dependents would otherwise be entitled at your own cost under Code Section 4980B
by reason of your termination of employment.

 

IV.           Laptop Computer/Smartphone. In exchange for your execution of this
Letter Agreement and the Release, the Company will agree to allow you to
maintain possession of your Company-provided laptop computer and smartphone,
although you have agreed to return to the Company any of the Company’s
Proprietary Information, as that term is defined in the Company’s PIIA. If
requested, you also agree to allow the Company’s Chief Executive Officer,
Chairman of the Board or anyone either of them may appoint on behalf of the
Company to examine your laptop and smartphone in your presence, and at a
mutually agreed location, for any Proprietary Information or any of the
Company’s property within five business days of the date hereof. You will be
responsible to report any income and pay any taxes associated with the Company’s
assignment of these devices to you, and agree to indemnify the Company with
respect to the same. If you do not wish to maintain possession of these devices,
you must return them immediately, without removing or in any way modifying any
of the Company’s Proprietary Information.

 

V.            Tax Obligations. The Company is not providing you with any tax,
legal or financial advice regarding any of the matters covered herein, including
but not limited to, your tax obligations under this Letter Agreement or the
Release. You are personally responsible for the payment of all federal, state
and local taxes that are due, or may be due, for any payments and other
consideration received under this Letter Agreement. You shall indemnify the
Company and hold the Company harmless, from any and all taxes, penalties and/or
other assessments that the Company is, or may become, obligated to pay on
account of any payments and other consideration (including the acceleration of
stock vesting) made to you under this Letter Agreement for which withholding is
not required.

 

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VI.           Non-Disparagement.

 

A.           You shall not, directly or indirectly, disclose, communicate, or
publish any disparaging or critical information concerning the Company, its
business, financial condition, professional skills or expertise, suppliers,
customers or clients, products or services, operations, market position,
performance, technology, employees, officers, directors, consultants,
representatives, agents, attorneys, accountants or investors, or proprietary or
technical information whatsoever, or directly or indirectly cause or encourage
others to disclose, communicate, or publish any disparaging or critical
information concerning the same.

 

B.           In further consideration of the promises contained herein, the
Company agrees to instruct its current senior officers and the directors of the
Company to not, directly or indirectly, disclose, communicate or publish any
disparaging critical information concerning you or your performance as the
Company’s President and Chief Executive Officer or otherwise as an employee.

 

C.           Nothing contained in this Section VI is intended to prevent any
person from testifying truthfully in any legal proceeding in which such person
is under a subpoena or other court order to do so.

 

VII. Miscellaneous.

 

A.           This Letter Agreement and the Release are binding on your
representatives, heirs, executors, administrators, successors and assigns and
upon the Company’s successors and assigns. In any dispute between you and the
Company regarding the terms of this Letter Agreement and/or the Release and/or
any alleged breach thereof, the prevailing party shall be entitled to recover
its costs and reasonable attorneys’ fees arising out of such dispute.

 

B.           You shall not act in any manner that might damage the business of
the Company. You shall not counsel or assist any attorneys or their clients in
the presentation or prosecution of any disputes, differences, grievances,
claims, charges, or complaints by any third party against the Company and/or any
officer, director, employee, agent, representative, stockholder or attorney of
the Company, provided that nothing herein shall prohibit you from testifying
truthfully in any legal proceeding in which you are under a subpoena or other
court order to do so.

 

C.           By signing this Letter Agreement and the Release, you acknowledge
that you do not have any Company property (in tangible or electronic form) in
your possession, nor have you failed to return any Company property (in tangible
or electronic form) to the Company including but not limited to the Company’s
Proprietary Information (as defined in the PIIA), all other confidential and
proprietary information of the Company, including customer and prospect lists
and all other contacts or prospective contacts relating to the Company’s
business, computer files, computer discs, documents, notes, correspondence,
access cards, keys, credit card, other charge cards, mobile phone, and computer
equipment including laptops, smart phone and software (except that the Company
has agreed for you to keep your laptop computer and smart phone). You
acknowledge that you have not made, and agree that you will not make, or retain
a copy of any Company property.

 

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D.           By signing this Letter Agreement, you may be waiving significant
legal rights by signing this agreement, and represent that you have entered into
this Letter Agreement voluntarily, after having the opportunity to consult with
an attorney of your own choosing, with a full understanding of and in agreement
with all of its terms.

 

E.           This Letter Agreement, together with the Release, including any
agreements or documents referred to herein, constitute an integrated, written
contract, expressing the entire agreement between the Company and you with
respect to the subject matter hereof. In this regard, you represent and warrant
that you are not relying on any promises or representations that do not appear
in this Letter Agreement or the Release. This Letter Agreement and the Release
can be amended or modified only by a written agreement signed by you and the
Company.

 

F.           This Letter Agreement and the Release shall, in all respects, be
interpreted, enforced and governed under the laws of the State of Texas
applicable to contracts executed and performed in Texas without giving effect to
conflicts of law principles. Any disputes or litigation that may arise with
respect to this Letter Agreement and/or the Release shall be brought and
prosecuted in Travis County, Texas, and the parties agree to waive any
objections to the location of such disputes or litigation, including, but not
limited to objections based on forum non conveniens.

 

G.           It is agreed and understood that monetary damages would not
adequately compensate the Company for the breach of this Letter Agreement by
you, that this Letter Agreement shall be specifically enforceable by the
Company, and that any breach or threatened breach of this Agreement by you shall
be the proper subject of a temporary or permanent injunction or restraining
order. Further, you waive any claim or defense that there is an adequate remedy
at law for such breach or threatened breach.

 

H.           If any provision or portion of any provision of this Letter
Agreement or the Release is held to be invalid or unenforceable or to be
contrary to public policy or any law, for any reason, the remainder of the
Release shall not be affected thereby.

 

I.           The parties agree to take whatever additional actions and execute
whatever additional documents that may be necessary or advisable in order to
carry out or effect one or more of the obligations provided for in this Letter
Agreement or the Release.

 

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J.           This Letter Agreement and the Release may be executed in separate
counterparts and by facsimile and each such counterpart shall be deemed an
original with the same effect as if the Company and you signed the same
document.

 

VI.           Conclusion. If you wish to receive the severance benefits
available to you pursuant to the Severance Agreement as well as the Additional
Benefits being offered to you, please (i) execute this Letter Agreement in the
space provided below, and (ii) review the attached Release, execute it, and
return it c/o Richard K. Coleman, Jr. at the Company within five (5) days. The
Release will be considered “returned” to the Company when you have dated, signed
and faxed or delivered it c/o Richard K. Coleman, Jr. at the Company’s office
located at 11000 N. MoPac Expressway, Austin, Texas 78759, on or before 5:00
p.m. on the return deadline. Should you desire to fax the executed Release to
the Company instead, you should use the following fax number: (512) 349-0304.

 

[Signature Page Follows]

 

 

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  Very truly yours,             CROSSROADS SYSTEMS, INC.             By: /s/
Richard K. Coleman, Jr.     Name: Richard K. Coleman, Jr.     Title: President
and Chief Financial Officer  

 

 

 

By executing this Letter Agreement, I hereby agree to the provisions hereof, and
acknowledge that I am concurrently delivering an executed copy of the Release,
without which the Company’s other agreements herein shall be null and void.

 

ACCEPTED AND ACKNOWLEDGED:           /s/ Robert C. Sims   Robert C. Sims  

 

 

 

 

 

Schedule 1
Option Grants

 

 

Shares Subject to Grant Price ($) Option Expiration Date 5,469 (1) 4.56
2/12/2013 7,032 (1) 4.56 2/12/2013 3,907 (2) 7.48 8/21/2013 8,594 (2) 7.48
8/21/2013 14,602 (3) 9.72 9/30/2013 16,649 (3) 9.72 9/30/2013 42,749 (4) 5.32
10/19/2014 19,752 (4) 5.32 10/19/2014 36,000 (5) 3.52 3/31/2016 66,867 (6) 4.48
1/31/2017 62,500 (7) 1.56 8/25/2020 62,500 (8) 1.56 8/25/2020 125,000 (9) 4.75
10/17/2021

 

(1)This award was fully vested on February 12, 2007.

(2)This award was fully vested on August 21, 2007.

(3)This award was fully vested on September 30, 2007.

(4)This award was fully vested on October 19, 2008.

(5)This award was fully vested on March 31, 2010.

(6)This award was fully vested as of January 31, 2011.

(7)Mr. Sims was awarded options to purchase 62,500 shares of common stock on
August 25, 2010. This award vests 25% on the one-year anniversary of the award,
and 6.25% quarterly for the following three years. This award will be fully
vested as of August 25, 2014.

(8)This award was fully vested as of August 25, 2012.

(9)Mr. Sims was awarded options to purchase 125,000 shares of common stock on
October 17, 2011. This awards vests 25% on the one-year anniversary of the
award, and 6.25% quarterly for the following three years. This award will be
fully vested as of October 17, 2015.

 

 

 

 

EXHIBIT A

GENERAL RELEASE

 

By signing this General Release (this “Release”) and accepting the severance
being offered to Robert C. Sims (“you” or “You”) in the Separation Offer and
General Release Letter Agreement to which this Release is an exhibit, you agree
to waive, release, and forever discharge Crossroads Systems, Inc. (the
“Company”) and its parents, successors, assigns, divisions, subsidiaries,
affiliates, partners, officers, directors, executives, investors, shareholders,
managers, supervisors, employees, agents, attorneys and representatives
(collectively the “Released Parties” or “Releasees”), from any and all claims,
demands, and causes of action which you have or claim to have, whether known or
unknown, of whatever nature, which exist or may exist as of the date of your
execution of this Release. “Claims,” “demands,” and “causes of action” include,
but are not limited to, those based on contract, fraud, equity, tort,
discrimination, sexual harassment, retaliation, personal injury, constructive
discharge, emotional distress, public policy, wage and hour law, defamation,
claims for debts, accounts, attorneys’ fees, compensatory damages, punitive
damages, and/or liquidated damages, claims for vesting or accelerated vesting of
options to purchase the Company’s Common Stock, claims for any additional shares
of the Company’s Common Stock, and any and all claims arising under the
Americans with Disabilities Act, the Family and Medical Leave Act, or any other
federal or state statute governing employment, including but not limited to
Title VII of the Civil Rights Act of 1964, the Employee Retirement Income
Security Act of 1974, the Worker Adjustment Retraining and Notification Act, the
Texas Labor Code, and the Texas Commission on Human Rights Act, as such statutes
may have been or may be amended from time to time.

 

You understand and agree, in compliance with any statute or ordinance which
requires a specific release of unknown claims or benefits, that this Release
includes a release of unknown claims, and you hereby expressly waive and
relinquish any and all claims, rights or benefits that you may have which are
unknown to you at the time of the execution of this Release. You understand and
agree that if, hereafter, you discover facts different from or in addition to
those which you now know or believe to be true, that the waivers and releases of
this Release shall be and remain effective in all respects notwithstanding such
different or additional facts or the discovery of such fact(s).

 

You represent and warrant that you do not presently have on file, and further
represent and warrant to the maximum extent allowed by law that you will not
hereafter file, any lawsuits, claims, charges, grievances or complaints against
the Company and/or the Released Parties in or with any administrative, state,
federal or governmental entity, agency, board or court, or before any other
tribunal or panel or arbitrators, public or private, based upon any actions or
omissions by the Company and/or the Released Parties occurring prior to the
Effective Date of this Release. You understand that nothing in this Release
prevents you from filing a charge or complaint with or from participating in an
investigation or proceeding conducted by the EEOC or any other federal, state or
local agency charged with the enforcement of any employment laws. To the extent
that you are still entitled to file an administrative charge with any
governmental agency, you hereby release any personal entitlement to
reinstatement, back pay, or any other types of damages or injunctive relief in
connection with any civil action brought on your behalf after your filing of any
administrative charge.

 

 

 

 

The only claims that this Release does not include are claims for the
consideration offered for this Release and the business expenses for which you
are entitled to reimbursement, and claims related to your continuing rights
under the employment benefits plans of the Company (as applicable to you on the
date of your separation from the Company), and any claims that controlling law
clearly states may not be released by settlement.

 

Nothing in this Release shall constitute or be treated as an admission of any
wrongdoing or liability on your part or on the part of the Company and/or the
Released Parties. You acknowledge that you have been advised to consult with an
attorney of your choosing prior to entering into this Release. You waive any
right to written notice of termination from the Company that may have been
contemplated or required pursuant to the Severance Benefit Plan you agreed to on
February 11, 2002 (the “Severance Agreement”).

 

Nothing in this Release is intended to alter, modify or waive the Company’s and
your continuing rights and obligations under the Company’s Confidentiality,
Proprietary Information and Inventions Agreement or its Indemnity Agreement,
each signed by you and each incorporated herein by this reference. You
understand and agree that a breach of any continuing obligation contained in the
above agreements shall also constitute a breach of this Release.

 

Finally, you represent and agree that you are the sole and lawful owner of all
rights, title and interest in and to all released matters, claims and demands
arising out of or in any way related to your employment with the Company and/or
your separation from the Company.

 

You acknowledge that you have until May 13, 2013 to consider this Release and
that you received this Release on May 8, 2013. You must execute and deliver this
Release to Richard K. Coleman, Jr. at the Company on May 13, 2013 (the “Delivery
Deadline”). This Release will be deemed “delivered” to the Company when you have
dated, signed and faxed or delivered it c/o Richard K. Coleman, Jr. at the
Company’s office located at 11000 N. Mo-Pac Expressway, Austin, TX 78759, on or
before 5:00 p.m. on the Delivery Deadline. Should you desire to fax the executed
Release to the Company instead, you should use the following fax number: (512)
349-0304. This Release will become effective on the date the executed document
is delivered to the Company.

 

[Signature Page Follows]

 

 

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ROBERT C. SIMS

 

                                                                         

 

Dated:                                                             

 

 

 

ACCEPTED AND ACKNOWLEDGED:

 

CROSSROADS SYSTEMS, INC.

 

By:                                                                   

Name:                                                              

Title:                                                                

 

Dated:                                                             

 

 

 

 

 

 

 

 

 

[Signature Page to General Release]