<PAGE>
                          [LETTERHEAD]

September 13, 1996



Charles E. Pearsall, Jr.
Tricord Systems, Inc.
2800 Northwest Blvd.
Plymouth, MN 55441

Dear Ed:

       The Board considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of the Company and its stockholders. In this connection, the Board recognizes
that the possibility of a Change in Control may arise and that such possibility
and the uncertainty and questions which it may raise among management may result
in the departure or distraction of management personnel to the detriment of the
Company and its stockholders.

       Accordingly, the Board has determined that appropriate steps should be
taken to minimize the risk that Company management will depart prior to a
Change in Control, thereby leaving the Company without adequate management
personnel during such a critical period, and to reinforce and encourage the
continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a Change in Control. In particular, the Board believes it
important, should the Company or its stockholders receive a proposal for
transfer of control, that you be able to continue your management
responsibilities without being influenced by the uncertainties of your own
personal situation.

       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 in connection with a Change in Control 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.



<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 2


       (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 Change in Control 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)    "BENEFIT PLAN" means any

              (i)    employee benefit plan as defined in Section 3(3) of the
              Employee Retirement Income Security Act of 1974, as amended,

              (ii)   cafeteria plan described in Code Section 125,

              (iii)  plan, policy or practice providing for paid vacation, other
              paid time off or short- or long-term profit sharing, bonus or
              incentive payments, or

              (iv)   stock option, stock purchase, restricted stock, phantom
              stock, stock appreciation right or other equity-based compensation
              plan that is sponsored, maintained or contributed to by the
              Company for the benefit of employees (and/or their families and
              dependents) generally or you (and/or your family and dependents)
              in particular.

       (e)    "BOARD" means the board of directors of the Parent Corporation
       duly qualified and acting at the time in question. On and after the date
       of a Change in Control, any duty of the Board in connection with this
       Agreement is nondelegable and any attempt by the Board to delegate any
       such duty is ineffective.

       (f)    "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 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


<PAGE>



Charles E. Pearsall, Jr.
September 13, 1996
Page 3

       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.

       (g)    "CHANGE IN CONTROL" means any of the following: (i) the sale,
       lease, exchange or other transfer, directly or indirectly, of all or
       substantially all of the assets of the Parent Corporation, in one
       transaction or in a series of related transactions, to any Person; (ii)
       the approval by the stockholders of the Parent Corporation of any plan or
       proposal for the liquidation or dissolution of the Parent Corporation;
       (iii) any Person, other than a "bona fide underwriter," is or becomes the
       "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
       directly or indirectly, of (a) 20 percent or more, but not more than 50
       percent, of the combined voting power of the Parent Corporation's
       outstanding securities ordinarily having the right to vote at elections
       of directors, unless the transaction resulting in such ownership has been
       approved in advance by the "continuity directors" or (b) more than 50
       percent of the combined voting power of the Parent Corporation's
       outstanding securities ordinarily having the right to vote at elections
       of directors (regardless of any approval by the continuity directors);
       (iv) a merger or consolidation to which the Parent Corporation is a party
       if the stockholders of the Parent Corporation immediately prior to the
       effective date of such merger or consolidation have, solely on account of
       ownership of securities of the Parent Corporation at such time,
       "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act)
       immediately following the effective date of such merger or consolidation
       of securities of the surviving company representing (a) 50 percent or
       more, but less than 80 percent, of the combined voting power of the
       surviving corporation's then outstanding securities ordinarily having the
       right to vote at elections of directors, unless such merger or
       consolidation has been approved in advance by the continuity directors,
       or (b) less than 50 percent of the combined voting power of the surviving
       corporation's then outstanding securities ordinarily having the right to
       vote at elections of directors (regardless of any approval by the
       continuity directors); (v) the continuity directors cease for any reason
       to constitute at least a majority the Board; or (vi) a change in control
       of a nature that is determined by outside legal counsel to the Parent
       Corporation, in a written opinion specifically referencing this provision
       of the Agreement, to be required to be reported (assuming such event has
       not been "previously reported") pursuant to Section 13 or 15(d) of the
       Exchange Act, whether or not the Parent Corporation is then subject to
       such reporting requirement, as of the effective date of such change in
       control.

       For purposes of this Section 1(g), a "continuity director" means any
       individual who is a member of the Board on June 30, 1996, while he or she
       is a member of the Board, and any individual who subsequently becomes a
       member of the Board whose election or nomination for election by the
       Parent Corporation's stockholders was approved by a vote of at least a
       majority of the directors who are continuity directors (either by a
       specific vote or by approval of the proxy statement of the Parent
       Corporation in which such individual is named as a nominee for director
       without objection to such nomination). For purposes of this Section 1(g),
       a "bona fide underwriter" means a Person engaged in business as an
       underwriter of securities that acquires securities of the Parent
       Corporation through such Person's participation in good faith in a firm
       commitment underwriting until the expiration of 40 days after the date of
       such acquisition.


<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 4

       (h)    "CODE" means the Internal Revenue Code of 1986, as amended. Any
       reference to a specific provision of the Code includes a reference to
       such provision as it may be amended from time to time and to any
       successor provision.

       (i)    "COMPANY" means the Parent Corporation, any Successor and any
       Affiliate.

       (j)    "DATE OF TERMINATION" following a Change in Control (or prior to a
       Change in Control if your termination was either a condition of the
       Change in Control or was at the request or insistence of any Person
       related to the Change in Control) means: (i) if your employment is to be
       terminated by you for Good Reason, the date specified in the Notice of
       Termination which in no event may be a date more than 15 days after the
       date on which 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. In the case of
       termination by the Company of your employment for Cause, if you have not
       previously expressly agreed in writing to the termination, then within
       the 30-day period after your receipt of the Notice of Termination, you
       may notify the Company that a dispute exists concerning the termination,
       in which event the Date of Termination will be the date set either by
       mutual written agreement of the parties or by the judge or arbitrators in
       a proceeding as provided in Section 11 of this Agreement. During the
       pendency of any such dispute, you will continue to make yourself
       available to provide services to the Company and the Company will
       continue to pay you your full compensation and benefits in effect
       immediately prior to the date on which the Notice of Termination is given
       (without regard to any changes to such compensation or benefits which
       constitute Good Reason) and until the dispute is resolved in accordance
       with Section 11 of this Agreement. You will be entitled to retain the
       full amount of any such compensation and benefits without regard to the
       resolution of the dispute unless the judge or arbitrators decide(s) that
       your claim of a dispute was frivolous or advanced by you in bad faith.

       (k)    "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
       amended. Any reference to a specific provision of the Exchange Act or to
       any rule or regulation thereunder includes a reference to such provision
       as it may be amended from time to time and to any successor provision.

       (l)    "GOOD REASON" means:

              (1)    a change in your status, position(s), duties or
              responsibilities as an executive of the Company as in effect
              immediately prior to the Change in Control which, in your
              reasonable judgment, 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;



<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 5

              (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 Change in Control or as thereafter
              increased;

              (iii)  the failure by the Company to cover you under Benefit
              Plans that, in the aggregate, provide substantially similar
              benefits to you and/or your family and dependents at a
              substantially similar total cost to you (e.g., premiums,
              deductibles, copays, out of pocket maximums, required
              contributions and the like) relative to the benefits and total
              costs under the Benefit Plans in which you (and/or your family
              or dependents) were participating at any time during the 90-day
              period immediately preceding the Change in Control;

              (iv)   the Company's requiring you to be based more than 30 miles
              from where your office is located immediately prior to the Change
              in Control, except for required travel on the Company's business,
              and then only to the extent substantially consistent with the
              business travel obligations which you undertook on behalf of the
              Company during the 90-day period immediately preceding the Change
              in Control (without regard to travel related to or in anticipation
              of the Change in Control);

              (v)    the failure by the Company to obtain from any Successor the
              assent to this Agreement contemplated by Section 5 of this
              Agreement;

              (vi)   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, and, for
              purposes of this Agreement, no such purported termination will be
              effective; or

              (vii)  any refusal by the Company to continue to allow you to
              attend to matters or engage in activities not directly related to
              the business of the Company which, at any time prior to the Change
              in Control, you were not expressly prohibited in writing by the
              Board from attending to or engaging in.

              Your continued employment does not constitute consent to, or
       waiver of any rights arising in connection with, any circumstances
       constituting Good Reason. Your termination of employment for Good Reason
       as defined in this Section 1(m) will constitute Good Reason for all
       purposes of this Agreement notwithstanding that you may also thereby be
       deemed to have retired under any applicable retirement programs of the
       Company.

       (m)    "NOTICE OF TERMINATION" means a written notice given on or after
       the date of a Change in Control (unless your termination before the date
       of the Chance in Control was either a condition of the Change in Control
       or was at the request or insistence of any Person related to the Change
       in Control) which indicates the specific termination provision in this
       Agreement pursuant to which the notice is given. Any purported
       termination by the Company or by you for Good Reason on or after the date
       of a Change in Control (or before the date of a Change in Control if your
       termination was either a condition of the Change in Control or was at the
       request or insistence of any Person related to the Change in Control)
       must be communicated by written Notice of Termination to be effective;
       provided, that your failure to provide Notice of


<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 6

       Termination will not limit any of your rights under this Agreement except
       to the extent the Company demonstrates that it suffered material actual
       damages by reason of such failure.

       (n)    "PARENT CORPORATION'' means Tricord Systems, Inc. and any
       Successor.

       (o)    "PERSON" means any individual, corporation, partnership, group,
       association or other "person," as such term is used in Section 14(d) of
       the Exchange Act, other than the Parent Corporation, any Affiliate or any
       benefit plan(s) sponsored by the Parent Corporation or an Affiliate.

       (p)    "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.

       (q)    "TARGET INCENTIVE COMPENSATION" means your targeted incentive
       compensation from the Company at the rate in effect immediately prior to
       a Change in Control or at the time Notice of Termination is given,
       whichever is greater. Target Incentive Compensation is determined before
       any reduction for deferrals pursuant to any nonqualified deferred
       compensation plan or arrangement, qualified cash or deferred arrangement
       or cafeteria plan.

2.     TERM OF AGREEMENT. This Agreement is effective immediately and will
continue in effect until January 1, 1998; provided, however, that commencing on
January 1, 1998 and each January I 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 Change in Control has occurred
during the term of this Agreement, this Agreement will continue in effect beyond
the termination date then in effect for a period of 24 months following the
month during which the Change in Control occurs or, if later, 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 CHANGE IN CONTROL TERMINATION. You will become entitled
to the benefits described in this Section 3 if and only if (a) the Company
terminates your employment for any reason other than your death or Cause, or you
terminate your employment with the Company for Good Reason and (b) the
termination occurs either within the period beginning on the date of a Change in
Control and ending on the last day of the 12th month that begins after the month
during which the Change in Control occurs or prior to a Change in Control if
your termination was either a condition of the Change in Control or was at the
request or insistence of a Person related to the Change in Control.

       (a)    CASH PAYMENT. Within 10 business days following the Date of
       Termination, or if later, within 10 business days following the date of
       the Change in Control, the Company will make a lump-sum cash payment to
       you in an amount equal to the sum of (1) one times your Base Pay plus
       (ii) one times your Target Incentive Compensation for the fiscal year
       during which the Date of Termination occurs.

       (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


<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 7

       were eligible to be covered at any time during the 90-day period
       immediately prior to the date of a Change in Control for the period after
       the Change in Control 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 Change in Control) 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 under applicable federal and state continuation
       laws will begin to run from the date on which coverage pursuant to this
       Section 3(b) ends. 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.

       (c)    GROSS-UP PAYMENTS. Following a Change in Control, the Company will
       cause its independent auditors promptly to review, at the Company's sole
       expense, the applicability of Code Section 4999 to any payment or
       distribution of any type by the Company to or for your benefit, whether
       paid or payable or distributed or distributable pursuant to the terms of
       this Agreement, any Benefit Plan or otherwise (the "Total Payments"). If
       the auditor determines that the Total Payments result in an excise tax
       imposed by Code Section 4999 or any comparable state or local law, or any
       interest or penalties with respect to such excise tax (such excise tax,
       together with any such interest and penalties, are collectively referred
       to as the "Excise Tax"), the Company will make an additional cash payment
       (a "Gross-Up Payment") to you within 10 days after such determination
       equal to an amount such that after payment by you of all taxes (including
       any interest or penalties imposed with respect to such taxes), including
       any Excise Tax, imposed upon the Gross-Up Payment, you would retain an
       amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
       Total Payments. For purposes of the foregoing determination, your tax
       rate will be deemed to be the highest statutory marginal state and
       federal tax rate (on a combined basis) then in effect. If no
       determination by the Company's auditors is made prior to the time you are
       required to file a tax return reflecting the Total Payments, you will be
       entitled to receive from the Company a Gross-Up Payment calculated on the
       basis of the Excise Tax you reported in such tax return, within 10 days
       after the later of the date on which you file such tax return or the date
       on which you provide a copy thereof to the Company. In all events, if any
       tax authority determines that a greater Excise Tax should be imposed upon
       the Total Payments than is determined by the Company's independent
       auditors or


<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 8

       reflected in your tax return pursuant to this Section 3(c), you will be
       entitled to receive from the Company the full Gross-Up Payment calculated
       on the basis of the amount of Excise Tax determined to be payable by such
       tax authority within 10 days after you notify the Company of such
       determination.

       (d)    OUT PLACEMENT ASSISTANCE. The Company will pay up to five percent
       of your Base Pay for out placement counseling to you. Such payments will
       be made either directly to the counselor or to you within 10 days after
       presentation of an invoice for services rendered or to be rendered.

If, on or after the date of a Change in Control, an Affiliate is sold, merged,
transferred or in any other manner or for any other reason ceases to be an
Affiliate or all or any portion of the business or assets of an Affiliate are
sold, transferred or otherwise disposed of and the acquiror is not the Parent
Corporation or an Affiliate (a "Disposition"), and you remain or become employed
by the acquiror or an affiliate of the acquiror (as defined in this Agreement
but substituting "acquiror" for "Parent Corporation") in connection with the
Disposition, you will be deemed to have terminated employment on the effective
date of the Disposition for purposes of this Section 3 unless (x) the acquiror
and its affiliates jointly and severally expressly assume and agree, in a manner
that is enforceable by you, to perform the obligations of this Agreement to the
same extent that the Company would be required to perform if the Disposition had
not occurred and (y) the Successor guarantees, in a manner that is enforceable
by you, payment and performance by the acquiror.

4.     INDEMNIFICATION. Following a Change in Control, the Company will
indemnify and advance expenses to you to the full extent permitted by law for
damages, costs and expenses (including, without limitation, judgments, fines,
penalties, settlements and reasonable fees and expenses of your counsel)
incurred in connection with all matters, events and transactions relating to
your service to or status with the Company or any other corporation, employee
benefit plan or other entity with whom you served at the request of the Company.

5.     SUCCESSORS. The Parent Corporation will seek to have any Successor, by
agreement in form and substance satisfactory to you, assent to the fulfillment
by the Company of the Company's obligations under this Agreement. Failure of the
Parent Corporation to obtain such assent at least three business days prior to
the time a Person becomes a Successor (or where the Parent Corporation does not
have at least three business days' advance notice that a Person may become a
Successor, within one business day after having notice that such Person may
become or has become a Successor) will constitute Good Reason for termination by
you of your employment. The date on which any such succession becomes effective
will be deemed the Date of Termination, and Notice of Termination will be deemed
to have been given on that date. A Successor has no rights, authority or power
with respect to this Agreement prior to a Change in Control.


6.     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.


<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 9

7.     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.

8.     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.

9.     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.

10.    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
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.

11.    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, the Company will pay, or if elected by you, reimburse, all fees,
costs and expenses incurred by you related to such arbitration. If you do not
elect arbitration, you may pursue all available legal remedies. The Company will
pay, or if elected by you, reimburse you for, all fees, costs and expenses
incurred by you in connection with any actual, threatened or contemplated
litigation relating to this Agreement to which you are or reasonably expect to
become a party, whether or not initiated by you, if you are successful in
recovering any benefit under this Agreement as a result of such action. 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 and agree not to assert that such courts are an inconvenient forum.
The Company will not assert in any dispute or controversy with you arising under
or in connection with this Agreement your failure to exhaust administrative
remedies.

12.    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. 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


<PAGE>


CHARLES E. PEARSALL, JR.
September 13, 1996
Page 10

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.

13.    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.

14.    CHANGE OF AFFILIATE STATUS. This Agreement will become null and void if,
prior to a Change in Control: (a) an Affiliate is sold, merged, transferred or
in any other manner or for any other reason ceases to be an Affiliate or all or
any portion of the business or assets of an Affiliate or sold, transferred or
otherwise disposed of and no Change in Control occurs in connection therewith;
(b) your primary employment duties are with the Affiliate at the time of the
occurrence of such event; and (c) you do not, in conjunction therewith, transfer
employment directly to the Company.

15.    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.

       The Company with whom you were employed immediately before your Date of
Termination has primary responsibility for benefits to which you or any other
person are entitled pursuant to this Agreement but to the extent such Company is
unable or unwilling to provide such benefits, the Parent Corporation and each
other Affiliate are jointly and severally responsible therefor to the extent
permitted by applicable law. If you were simultaneously employed by more than
one Company immediately before your Date of Termination, each such Company has
primary responsibility for a portion of the benefits to which you or any other
person are entitled pursuant to this Agreement that bears the same ratio to the
total benefits to which you or such other person are entitled pursuant to this
Agreement as your Base Pay from the Company immediately before your Date of
Termination bears to your aggregate Base Pay from all such Companies.


16.    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 Company or
termination of this Agreement, as the case may be, and will remain in full force
and effect according to their terms.

17.    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, including,


<PAGE>


Charles E. Pearsall, Jr.
September 13, 1996
Page 11

without limitation, matters of validity, interpretation, construction,
performance and remedies, 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). Headings are for purposes
of convenience only and do not constitute a part of this Agreement. The parties
to this Agreement agree to perform, or cause to be performed, such further acts
and deeds and to execute and deliver or cause to be executed and delivered, such
additional or supplemental documents or instruments as may be reasonably
required by the other party to carry into effect the intent and purpose of this
Agreement. 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/ John J. Mitcham
                                      ------------------------------
                                      John J. Mitcham
                                      President and Chief Executive Officer

                                   Agreed to as of this 24th day of
                                   September 1996.

                                   /s/ Charles E. Pearsall
                                   -----------------------------------
                                   Charles E. Pearsall