**EXHIBIT 10.16**

 

**EMPLOYMENT AGREEMENT**

 

**THIS AGREEMENT,**dated effective as of September 30, 2004, is entered into by and betweenCiprico Inc., a Delaware corporation (the “Company”) and James W. Hansen, aMinnesota resident (“Executive”).

 

**WHEREAS**, the Companydesires to employ Executive upon and subject to the terms and conditions setforth in this agreement (“Agreement”), and Executive desires to render servicesfor the Company on such terms and conditions.

 

**NOW, THEREFORE**, inconsideration of the premises and the respective undertakings of the Companyand Executive set forth below, the Company and Executive agree as follows:

 

**1.****             Employment.**  The Company hereby employs Executive as ChiefExecutive Officer and President and other such positions of divisions orsubsidiaries as assigned by the Board of Directors, and Executive accepts suchemployment and agrees to perform services for the Company, for the period andupon the other terms and conditions set forth in this Agreement.

 

**2.****             Termof Employment**.  The term of Executive’semployment hereunder shall commence on the effective date hereof and shallcontinue for an initial term of two (2) years (“Initial Term”).  Prior to and within ninety (90) days of adate that is one year prior to the expiration of the Initial Term, the Board ofDirectors, or committee thereof, shall review Executive’s goals and objectivesand notify Executive in writing whether the Agreement will be extended for anadditional one year beyond the scheduled termination date or notification date,whichever is later, or terminate as scheduled. If the Agreement is renewed upon expiration of the Initial Term, theCompany shall notify Executive in writing whether the Agreement will be renewedfor additional one year, or terminate as scheduled, ninety (90) days prior tothe expiration date of then extension term. If Executive chooses not to extend the Agreement, Executive must notifythe Company in writing within thirty (30) days of Executive’s receipt of theextension.  Notwithstanding anything to thecontrary in this Agreement, this Agreement may be terminated as provided inSection 8 below.  The Initial Term andadditional terms are collectively referred to as “Term of Employment”).

 

**3.****             Positionand Duties**.

 

3.01         Service with Company.  During his Term of Employment, Executiveagrees to perform such reasonable employment duties,****consistent with the terms of this Agreement and the officesheld by Executive as provided in section 1 above, as the Board of Directors ofthe Company shall assign to him from time to time.  Such duties and employment responsibilities isset forth in Exhibit A and shall be performed in accordance with the Company’srules, regulations and instructions now in force or which may be adopted by theCompany in the future.

 

3.02         Performance of Duties.  During his Term of Employment, the Executiveagrees to serve the Company to the best of his ability.  The Executive shall have active involvementand be fully committed to the business and affairs of the Company.  Executive hereby confirms that he is under nocontractual commitments inconsistent with his obligations set forth in thisAgreement.  During his Term ofEmployment, Executive shall not render or perform services for any othercorporation, firm, entity or person that is in competition with the business ofthe Company.

 

3.03         Noncompetition.  In consideration of the payments to be madeto the Executive under this Agreement as provided in Sections 4.05 and 8.02which the Executive acknowledges constitute new and valuable consideration, theExecutive hereby covenants and agrees that during the Term of Employment or anysuccessor employment relationship between Executive and the Company, and for aperiod of twelve (12) months following the termination of Executive’semployment for any reason (the “Restricted Period”), the Executive shall not,directly or indirectly, own, manage, operate, control, act as an advisor orconsultant to, or participate in, the ownership, management, operation, orcontrol of any business involving the digital media storage device and relatedservices in any geographic market served by the Company during the RestrictedPeriod; provided, however, that the foregoing shall not prevent the Executivefrom owning not more than two percent (2%) interest in any entity engaged insuch a competing business whose securities are traded on any securitiesexchange or in the over-the-counter markets.

 

3.04         Nonsolicitation.  In consideration of the payments to be madeto the Executive under this Agreement as provided in Sections 4.05 and 8.02which the Executive acknowledges constitute new and valuable consideration, theExecutive hereby covenants and agrees that during the Term of Employment or anysuccessor employment relationship between Executive and the Company, and for aperiod of twelve (12) months following the termination of the employmentrelationship between Executive and the Company, Executive agrees that he willnot solicit or accept, either

 

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directly or indirectly, as anindividual or through a partnership, corporation, or other entity, any employeeof the Company or consultant under contract with the Company for employment orany other arrangement for compensation to perform services.

 

**4.****             Compensation**.

 

4.01         Base Salary           Asbase compensation for all services to be rendered by the Executive under thisAgreement during the Term of Employment, the Company shall pay to Executive aminimum monthly base salary of $11,500 per month for the first twelve (12)months and $12,333 per month for the second twelve months of the Initial Term,which salary shall be paid in accordance with the Company’s normal payrollprocedures and policies and be reviewed annually by the Board of Directors.

 

4.02         Stock Ownership.

 

(a)           StockOptions.  Executive shall be granted,at signing, an option to purchase 50,000 shares of the Company’s common stock,par value $.01 per share, pursuant to the Company’s Qualified Stock OptionPlan, at an exercise price equal to 125% of the closing sale price for suchcommon stock on the day of issuance consistent with past practices.  All such stock options shall be grantedunder, and pursuant to all terms and conditions of, the Qualified Stock OptionPlan.  The Board may consider additionalgrants annually.  These stock optionswill vest in accordance with the terms of the Qualified Stock Option Plan.

 

(b)           StockPurchase.  If Executive has notpurchased at least 50,000 shares of Company’s Common Stock in the open marketby December 31, 2004, the Company agrees, at Executive’s sole discretion, tosell to Executive the number of shares of its Common Stock equal to thedifference of 50,000 and the number of shares Executive purchased in the openmarket between September 1, 2004 and December 31, 2004.  The purchase of such shares by Executive fromthe Company shall be at a purchase price equal to the closing sale price ofCompany’s Common Stock on the date of such purchase.  Executive shall make the election and effectthe purchase no later than January 15, 2005.

 

4.03         Benefits.  Executive shall be eligible to participatesuch company-sponsored benefits as are provided to executive employees of theCompany, subject to the terms and conditions of the applicable policies and/orplans.

 

4.04         Expenses.  The Company will pay or reimburse Executivefor all reasonable and necessary out-of-pocket expenses incurred by him in theperformance of his duties under this Agreement, subject to the presentment ofappropriate vouchers in accordance with the Company’s normal policies forexpense verification.  Executive shall beentitled to reimbursement for educational expenses approved by the Board ofDirectors.

 

4.05         Consulting Arrangement.  The Company will pay The Hansen Company, anaffiliate of Executive, $1,000 per month for the first twelve (12) months ofthe Initial Term and $1,250 per month for the second twelve (12) months of theInitial Term for strategic planning services.

 

4.06         Development.  Executive will receive an annual writtenperformance review from the Board of Directors, or committee thereof, and theCompany will pay for any developmental, learning or training experiencesrecommended by the Board of Directors or committee thereof.

 

4.07         Bonuses.  Executive shall be eligible to participate inthe Company’s short-term and long-term management bonuses programs as definedby management and approved by the Board.

 

**5.****             ConfidentialInformation**.  Except as permitted ordirected by the Company’s Board of Directors, during the Term of Employment orat any time thereafter, Executive shall not divulge, furnish or make accessibleto anyone or use in any way (other than in the ordinary course of the businessof the Company) any confidential or secret knowledge or information of theCompany which Executive has acquired or become acquainted with or will acquireor become acquainted with prior to the termination of the Term of Employment,whether developed by himself or by others, concerning any trade secrets,confidential or secret designs, processes, formulae, plans, devices or material(whether or not patented or patentable) directly or indirectly useful in anyaspect of the business of the Company, any customer or supplier lists of theCompany, any confidential or secret development or research work of theCompany, or any other confidential information or secret aspects of thebusiness of the Company.  Executiveacknowledges that the above-described knowledge or information constitutes aunique and valuable asset of the Company and represents a substantialinvestment of time and expense by the Company and its predecessors, that anydisclosure or other use of such knowledge or information other than for thesole benefit of the

 

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Company would be wrongful andwould cause irreparable harm to the Company. Both during and after the Term of Employment, Executive will refrainfrom any act or omissions that would reduce the value of such knowledge orinformation to the Company.  Theforegoing obligations of confidentiality, however, shall not apply to anyknowledge or information which is now published or which subsequently becomesgenerally publicly known in the form in which it was obtained from the Company,other than as a direct or indirect result of the breach of this Agreement byExecutive.  It is hereby acknowledgedthat it is not the intention of the foregoing provisions to preclude the Executivefrom securing gainful employment with subsequent employers who are notcompetitors of the Company or who would otherwise have no reasonable commercialuse of the above described knowledge or information, but only to protect theCompany’s confidential and proprietary information or knowledge.

 

**6.****             Ventures**.  If, during the Term of Employment, Executiveis engaged in or associated with the planning or implementing of any project,program or venture involving the Company and a third party or parties, allrights in such project, program or venture shall belong to the Company.  Except as formally approved by the Company’sBoard of Directors, Executive shall not be entitled to any interest in suchproject, program or venture or to any commission, finder’s fee or othercompensation in connection therewith other than the salary or othercompensation to be paid to Executive as provided in this Agreement.

 

**7.****             Patent,Copyrights and Related Matters**.

 

7.01         Disclosure andAssignment.  Executive will promptlydisclose in writing to the Company complete information concerning each andevery invention, discovery, improvement, device, design, apparatus, practice,process, method or product, whether patentable or not, made, developed,perfected, devised, conceived or first reduced to practice by Executive, eithersolely or in collaboration with others, during the Term of Employment, orwithin six (6) months thereafter, whether or not during regular working hours,relating to any phase of the business of the Company conducted at such time(hereinafter referred to as “Developments”). Executive, to the extent that he has the legal right to do so, herebyassigns and agrees to assign to the Company and all of the Executive’s right,title and interest in and to any and all of such Developments.

 

7.02         Future Developments.  As to any future Developments made byExecutive and which are first conceived or reduced to practice during the Termof Employment, or within six (6) months thereafter, but which are claimed forany reason to belong to an entity or person other than the Company, Executivewill promptly disclose the same in writing to the Company and shall notdisclose the same to others if the Company, within sixty (60) days thereafter,shall claim ownership of such Development under the terms of thisAgreement.  If the Company makes suchclaim, Executive agrees that, insofar as the rights (if any) of Executive areinvolved, it will be settled by arbitration in accordance with the rules of theAmerican Arbitration Association.  Thelocale of the arbitration shall be Minneapolis, Minnesota (or other localeconvenient to the Company’s principal executive offices).  If the Company makes no such claim, Executivehereby acknowledges that the Company has made no promise to receive and hold inconfidence any such information disclosed by Executive.

 

7.03         Limitation on Section7.01 and 7.02.  The provisions ofsection 7.01 and 7.02 shall not apply to any Development meeting the followingconditions:

 

(a)           suchDevelopment was developed entirely on Executive’s own time;

 

(b)           suchDevelopment was made without the use of any Company equipment, supplies,facility or trade secret information; and

 

(c)           suchDevelopment does not relate (i) directly to the business of the Company, or(ii) of the Company’s actual or demonstrably anticipated research ordevelopment.

 

7.04         Executive Assistance.  Executive agrees to assist Company inobtaining patents or copyrights on any Developments assigned to the Companythat Company, in its sole discretion, seeks to patent or copyright.  Executive also agrees to sign all documentsand do all things deemed necessary by Company to obtain and/or maintain suchpatents or copyrights, to assign them to Company, and to protect them againstinfringement.  The obligations of thisSection 7 are continuing and shall survive the termination of Executive’semployment with Company.

 

7.05         Appointment of Agent.  Executive irrevocably appoints the Company toact as Executive’s agent and attorney in fact to perform all acts necessary toobtain/or maintain patents or copyrights to any Developments assigned byExecutive to Company under this Agreement if (i) Executive refuses to performthose acts or (ii) is unavailable, within the meaning of the United Statespatent and copyright laws.  Executiveacknowledges that the grant of the foregoing power of attorney is coupled withan interest and shall survive the death or disability of Executive and thetermination of Executive’s employment with Company.

 

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7.06         Notice andAcknowledgment.  Executiveacknowledges that this section of this Agreement does not apply to aDevelopment for which there was no equipment, supplies, facilities or tradesecret information of the Company used and which was developed entirely onExecutive’s own time, and which does not relate directly to the business of theCompany or the Company’s actual or demonstrably anticipated research ordevelopment, or which does not result from any work performed by Executive forthe Company.

 

**8.****             Termination.**

 

8.01         Grounds for Termination.  Notwithstanding any other provision of thisAgreement to the contrary, this Agreement will terminate prior to the end ofthe Term of Employment under the following circumstances:

 

(a)           By mutual agreement ofExecutive and the Company;

 

(b)           Immediately upon thedeath of Executive;

 

(c)           Immediatelyupon the bankruptcy or insolvency of the Company;

 

(d)           Immediately,in the event of (i) Executive’s personal dishonesty, willful misconduct, breachof fiduciary duty, intentional failure to perform stated duties, willfulviolation of any laws (other than minor traffic violations or similaroffenses), or material breach of the policies or procedures of the Company; or

 

(e)           UponExecutive’s inability to perform the essential functions of his position due tophysical or mental disability, with or without reasonable accommodation, asdetermined in the good faith judgment of the Board of Directors, and suchinability continues for a period consistent with Company policy as mayotherwise be required by applicable law.

 

Notwithstanding any termination of this Agreement, Executive, inconsideration of his employment hereunder to the date of such termination,shall remain bound by the provisions of this Agreement which specificallyrelate to periods, activities or obligations upon or subsequent to thetermination of Executive’s employment.

 

8.02         Severance Payments.

 

(a)           Therights and obligations of the Company and Executive as to a terminationfollowing a Change of Control (as defined in a Change of Control Agreement) aregoverned by a Change of Control Agreement between the Company and Executivedated effective as of September 1, 2004. In the event of any inconsistencies between this Agreement and theChange of Control Agreement, the Change of Control Agreement shall control.

 

(b)           IfExecutive’s employment is terminated by the Company other than pursuant toSection 8.01(d) or in connection with a Change of Control, the Company shallpay Executive as severance pay an amount equal to the total compensation (basesalary, target bonus and consulting pay) paid to Executive during the 12-monthperiod immediately preceding his termination or the total compensation for theremaining portion of the Initial Term, whichever is greater, payable at theCompany’s option in either a lump sum or in installments in accordance with theCompany’s standard payroll policies (beginning after the expiration of anyapplicable consideration and/or rescission periods), subject to requiredwithholding and deductions.  Anyseverance pay provided herein may, at Company’s discretion, be conditioned uponthe execution of a full and final release by the Executive of all claimsagainst the Company arising out of his employment and the termination thereof,the form of which will be provided by the Company.

 

8.03         Surrender of Recordsand Property.  Upon termination ofhis employment with the Company, Executive shall deliver promptly to theCompany all records, manuals, books, blank forms, documents, letters,memoranda, notes, notebooks, reports, data, tables, calculations or copiesthereof, which are the property of the Company or which relate in any way tothe business, products, information of the Company, including, but not limitedto, all documents which in whole or in part contain any trade secrets or confidentialinformation of the Company, which in any of these cases are in his possessionor under his control.  Provided, however,that Executive shall be entitled to retain items of sentimental value, copiesof which shall be provided to the Company at the request of the Company and atthe Company’s expense.

 

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**9.****             Miscellaneous**.

 

9.01         Governing Law.  This Agreement is made under and shall begoverned by and construed in accordance with the laws of the State ofMinnesota.

 

9.02         Prior Agreements.  This Agreement, together with the Change ofControl Agreement, contain the entire Agreement of the parties relating to thesubject matter hereof and supersede all prior agreements and understandingswith respect to such subject matter, and the parties hereto have made noagreements, representations or warranties relating to the subject matter ofthis Agreement which are not set forth herein.

 

9.03         Withholding Taxes.  The Company shall withhold from all salary,bonus, severance pay or other benefits payable under this Agreement allfederal, state, city or other taxes as shall be required pursuant to any law orgovernmental regulation or ruling.

 

9.04         Amendments.  No amendment or modification of thisAgreement shall be deemed effective unless made in writing and signed by theparties hereto.

 

9.05         No Waiver.  No term or condition of this Agreement shallbe deemed to have been waived, nor shall there be any estoppel to enforce anyprovisions of this Agreement except by a statement in writing signed by theparty by whom enforcement of the waiver or estoppel is sought.  Any written waiver shall not be deemed acontinuing waiver unless specifically stated, shall operate only as to thespecific term or condition waived and shall not constitute a waiver of suchterm or condition for the future or as to any act other than specificallywaived.

 

9.06         Severability.  To the extent any term or provision of thisAgreement shall be invalid or unenforceable, the term or provision shall beconsidered deleted herefrom and the remaining term and provision of theAgreement shall be unaffected and shall continue in full force and effect.  In furtherance and not in limitation of theforegoing, should the duration or geographical extent of, or business activitiescovered by, any provision of this Agreement be in excess of that which is validand enforceable under applicable law, then such provision shall be construed tocover only that duration, extent or activities which may validly andenforceably be covered.  Executiveacknowledges the uncertainty of the law in this respect and expresslystipulates that this Agreement be given the construction which renders itsprovisions valid and enforceable to the maximum extent (not exceeding itsexpress terms) possible under applicable law.

 

9.07         Assignment.  This Agreement shall be binding upon andinure to the benefit of the Company’s successor or assigns.  This Agreement shall not be assignable, inwhole or in part, by Executive without prior written consent of the Company.

 

9.08         Injunctive Relief.  Executive agrees that it would be difficultto compensate the Company fully for damages for any violation of the provisionsof this Agreement, including without limitation the provisions of Sections 3,5, 6 and 7.  Accordingly, Executivespecifically agrees that the Company shall be entitled to temporary andpermanent injunctive relief in any court of competent jurisdiction, to enforcethe provisions of this Agreement and that such relief may be granted withoutthe necessity of proving actual damages. This provision with respect to injunctive relief shall not, however,diminish the right of the Company to claim and recover damages in addition toinjunctive relief.

 

9.09         Survival.  The parties agree that sections 3, 5 and 7shall survive termination of this Agreement and term of Executive’s employmentfor any reason.

 

9.10         Blue Pencil Doctrine.  In the event that any provision of thisAgreement is held to be overbroad as written, such provision shall be deemedamended to narrow its application to the extent necessary to make the provisionenforceable according to applicable law and shall be enforced as amended.

 

9.11         Mandatory Arbitration.  In the event any dispute arises under thisAgreement, or as to the breach hereof, the parties shall discuss the dispute ina good faith effort to arrive at a mutual settlement.  If notwithstanding, such dispute cannot besettled, except for sections 9.08 (which the parties specifically acknowledgeand agree entitles the Company to, among other relief, injunction relief,relief in any court of competent jurisdiction if Executive breaches section 3,5, 6 and 7), such dispute shall be submitted to binding arbitration conductedin Minneapolis, Minnesota, in accordance with the then-current Commercial Rulesof the American Arbitration Association ) (“AAA”).  The costs and expenses of the arbitrationshall be paid by the party against whom the arbitrators render a decision, if adecision is rendered against a party; otherwise the costs and expenses shall beshared equally by Executive and the Company. The arbitrators shall have full power and authority to rule on anyquestion of law in the same manner as any judge of any court of competentjurisdiction, and the decision of the arbitrators shall be final and conclusiveupon the parties, and shall not be subject to any appeal or

 

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review if the arbitrators havefollowed the Commercial Rules of the AAA. The arbitrators shall have full power to make any award (including theaward of equitable remedies) that shall under the circumstances presented tothem be deemed to be proper; provided that the arbitrators shall not have thepower to award punitive damages or to limit, expand or otherwise modify theterms of this Agreement.  Judgment may beentered upon any award rendered by the arbitrators in accordance withapplicable law in any court of competent jurisdiction.

 

**IN WITNESS WHEREOF,**theparties have executed this Agreement effective as of the date and year firstwritten above.

 
|   | **CIPRICO INC.**           |
|--------|----------------------------|
|   |                       |
|   |                       |
|   | By:                        | /s/ Michael M. Vekich | ** ** |
|   | Its                        | Chairman of the Audit Committee |   |
|   |                       |
|   |                       |
|   | **EXECUTIVE**              |
|   | ** **                 |
|   |                       |
|   |   /s/ James W. Hansen |   |
|   | James W. Hansen            |
|        |                            |  |  |  |  |  |

 

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**CHANGE OF CONTROL AGREEMENT**

** **
| Parties:                                             | Ciprico Inc.       | (“Company”)  |
|------------------------------------------------------|--------------------|------------------------|
|                                                 | 17400 Medina Road  |                   |
|                                                 | Plymouth, MN 55447 |                   |
|                                                 |               |                   |
|                                                 |               |                   |
|                                                 | James W. Hansen    | (“Employee”) |
|                                                 |               |                   |
|                                                 |               |                   |
| Effective Date:    September 30, 2004 |               |

 

**RECITALS:**

 

1.             Employee is employedby Company pursuant to an Employment Agreement dated September 30, 2004.

 

2.             The parties recognizethat a “Change of Control” may materially change or diminish Employee’sresponsibilities and substantially frustrate Employee’s commitment to theCompany.

 

3.             The parties furtherrecognize that it is in the best interests of the Company and its stockholdersto provide certain benefits payable upon a “Change of Control Termination” toencourage Employee to continue in his position in the event of a Change ofControl, although no such Change of Control is now contemplated or foreseen.

 

4.             The parties furtherdesire to provide for certain benefits payable upon certain involuntaryterminations of Employee’s employment.

 

**AGREEMENTS:**

 

In consideration of the mutual covenants set forth herein and for othergood and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties agree as follows:

 

1.             **Term of Agreement**.  The term of this Agreement shall commence onthe Effective Date and shall continue in effect until termination of Employee’semployment which does not constitute a Change of Control Termination; provided,however, that if a Change of Control of the Company shall occur during the termof this Agreement, this Agreement shall instead continue in effect for a periodof twelve (12) months following the date of such Change of Control.  Any rights and obligations accruing beforethe termination or expiration of this Agreement shall survive to the extentnecessary to enforce such rights and obligations.

 

2.             **“Change of Control.”**  For purposes of this Agreement, “Change ofControl” shall mean any of the following events occurring after the date ofthis Agreement:

 

(a)           A merger or consolidation to which the Company is aparty if the individuals and entities who were shareholders of the Companyimmediately prior to the effective date of such merger or consolidation have,immediately following the effective date of such merger or consolidation,beneficial ownership (as defined in Rule 13d-3 under the Securities ExchangeAct of 1934) of less than fifty percent (50%) of the total combined votingpower of all classes of securities issued by the surviving corporation for theelection of directors of the surviving corporation;

 

(b)           Theacquisition of direct or indirect beneficial ownership (as defined in Rule13d-3 under the Securities Exchange Act of 1934) of securities of the Companyby any person or entity or by a group of associated persons or entities actingin concert in one or a series of transactions, which causes the aggregatebeneficial ownership of such person, entity or group to equal or exceed twentypercent (20%) or more of the total combined voting power of all classes of theCompany’s then issued and outstanding securities;

 

(c)           Thesale of substantially all of the assets of the Company to any person or entitythat is not a wholly-owned subsidiary of the Company;

 

(d)           Theapproval by the stockholders of the Company of any plan or proposal for theliquidation of the Company;

 

(e)           A change in the composition of the Board of theCompany at any time during any consecutive twenty-four (24) month period suchthat the “Continuity Directors” no longer constitute at least a seventy percent(70%) majority of the Board.

 

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For purposes of this event, “ContinuityDirectors” means those members of the Board who were directors at the beginningof such consecutive twenty-four (24) month period or were elected by, or on thenomination or recommendation of, at least a two thirds (2/3) majority of thethen-existing Board of Directors; or

 

(f)            The execution by the Company of a letter of intent, anagreement in principle or a definitive agreement relating to an event describedin Section 2(a), 2(b), 2(c), 2(d) or 2(e) that ultimately results in such aChange of Control, or a tender or exchange offer or proxy contest is commencedthat ultimately results in an event described in Section 2(b) or 2(e).

 

3.             **Termination**.  For purposes of this Agreement, “Change ofControl Termination” shall mean any of the following events occurring withintwelve (12) months after a change of control occurring during the term of thisAgreement.

 

(a)           Thetermination of Employee’s employment by the Company for any reason except GoodCause.  For purposes of this Agreement, “GoodCause” shall include, but not be limited to, the following:

 

(i)            Employee’sconviction of or plea of guilty or *nolocontendere* to a felony resulting from conduct occurring on or afterthe date of the Change of Control;

 

(ii)           Employee’swillful and repeated failure to fulfill his employment duties with the Company;provided, however, that for purposes of this clause (ii), an act or failure toact by Employee shall not be “willful” unless it is done, or omitted to bedone, in bad faith and without any reasonable belief that Employee’s action oromission was in the best interests of the Company;

 

(iii)          Employee’sincurable breach of any material element of any proprietary or confidentialinformation agreement with the Company;

 

(iv)          Employee’sconduct that is materially detrimental to Company’s business reputation orgoodwill;

 

(v)           Anydishonesty in dealing between Employee and Company or between Employee andCompany’s vendors, advisors, other employees, or customers;

 

(vi)          Employee’sactive use of alcohol or controlled substances in a manner which impairsEmployee’s ability to perform his duties;

 

(vii)         Employee’sviolation of any material portion of this Agreement;

 

(viii)        Employee’sfailure to substantially perform his material duties, which failure is notcured within thirty (30) days after Employee’s receipt of written notice fromCompany specifying the non-performance.

 

In no event shall Employee’s death or disability (as defined below)constitute Good Cause.  “Disability”shall mean Employee’s failure or inability, for reasons of health, to performEmployee’s usual and customary duties on behalf of the Company in the usual andcustomary manner for a total of more than 90 consecutive business days(excluding Saturdays, Sundays and days during which the Company is closed dueto a recognized holiday).

 

(b)           The termination of employment with the Company byEmployee for Good Reason.  Such terminationshall be accomplished by, and effective upon, Employee giving written notice tothe Company of his decision to terminate. “Good Reason” shall mean a good faith determination by Employee, inEmployee’s sole and absolute judgment that any one or more of the followingevents has occurred on or after the date of the Change of Control without theEmployee’s express written consent:

 

(i)            A change in Employee’sreporting responsibilities, titles or offices as in effect immediately prior tothe date of the Change of Control, or any removal of Employee from or anyfailure to re-elect Employee to any of such positions, which has the effect ofdiminishing Employee’s responsibility or authority;

 

(ii)           Areduction in Employee’s base salary in effect immediately prior to the date ofthe Change of Control;

 

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(iii)          Requiring Employee tomove to or work from a location that is outside of a fifty (50) mile radius ofEmployee’s job location on the date of the Change of Control;

 

(iv)          Withoutthe adoption of a replacement plan, program or arrangement that providesbenefits to Employee that are equal to or greater than those benefits that arediscontinued or adversely affected:

 

(A)          TheCompany’s failure to continue in effect, within its maximum stated term, anypension, bonus, incentive, stock ownership, stock purchase, stock option, lifeinsurance, health, accident, disability, or any other employee compensation orbenefit plan, program or arrangement, in which Employee is participatingimmediately prior to the date of the Change of Control; or

 

(B)           TheCompany taking any action that would adversely affect Employee’s participationor materially reduce Employee’s benefits under any of such plans, programs orarrangements; or

 

(v)           Anymaterial breach by the Company of this Agreement so long as Employee has giventhe Company thirty (30) days notice of such breach, and the Company has notcured the breach during that thirty (30) day period.

 

Termination for “Good Reason” shall not include Employee’s death or atermination of employment by Employee for any reason other than the eventsspecified in clauses (1) through (5) above.

 

4.             **Compensation and Benefits**.  Subject to the limitations contained inSection 5 below, upon a Change of Control Termination, Employee shall beentitled to the following compensation and benefits:

 

(a)           The Company shall payto Employee:

 

(i)            Withinfive (5) days of the Change of Control Termination, all salary and othercompensation earned by Employee through the date of the Change of ControlTermination at the rate in effect immediately prior to such Change of ControlTermination;

 

(ii)           Within fifteen (15)days of the Change of Control Termination, all other amounts to which Employeemay be entitled to receive under any compensation plan maintained by theCompany, subject to any distribution requirements contained in suchcompensation plans; and

 

(iii)          Aseverance benefit in a single lump sum payment, an aggregate amount equal tofifty percent (50%) of Employee’s then current annual base salary.

 

(b)           The Company shall provide, at no cost to Employee,continued coverage under the Company’s group life, health or dental benefitplans, if any, at a level comparable to the benefits which Employee wasreceiving or entitled to receive immediately prior to the Change of ControlTermination or, if greater, at a level comparable to the benefits whichEmployee was receiving immediately prior to the event which constituted GoodReason.  Employee shall be entitled tosuch continued coverage for a six month period following such Change of ControlTermination or, if earlier, until Employee is eligible to be covered for suchbenefits through his employment with another employer.  The Company may, in its sole discretion,provide such coverage through the purchase of individual insurance contractsfor Employee.

 

5.             **Payment of Attorneys Fees and Other Costs**.  If, after a Change in Control of the Company,a good faith dispute arises with respect to the enforcement of Employee’s rightsunder this Agreement or if any legal or arbitration proceeding shall be broughtin good faith to enforce or interpret any provision contained herein or torecover damages for breach hereof, Employee shall recover from the Company (a)reasonable attorneys’ fees and necessary costs and disbursements incurred byEmployee as a result of such dispute or such legal or arbitration proceeding,and (b) prejudgment interest on any money judgment or arbitration awardobtained by Employee calculated at the prime rate announced from time to timeby Wells Fargo Bank Minnesota, N. A., or the maximum rate permitted underSection 280G(d)(4) of the Internal Revenue Code of 1986, as amended, or anysuccessor provision, whichever rate is lower, such prejudgment interest to bepaid from the date that payments to Employee should have been made under thisAgreement.

 

6.             **Withholding Taxes**. The Company shall beentitled to deduct from all payments or benefits provided for under thisAgreement any federal, state or local income and employment related taxesrequired by law to be withheld with respect to such payments or benefits.

 

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7.             **Successors and Assigns**.  This Agreement shall inure to the benefit ofand shall be enforceable by Employee, his heirs and the personal representativeof his estate, and shall be binding upon and inure to the benefit of theCompany and its successors and assigns. The Company will require the transferee of any sale of all orsubstantially all of the business and assets of the Company or the survivor ofany merger, consolidation or other transaction expressly to agree to honor thisAgreement in the same manner and to the same extent that the Company would berequired to perform this Agreement if no such event had taken place.  Failure of the Company to obtain suchagreement before the effective date of such event shall be a breach of thisAgreement and shall entitle Employee to the benefits provided in Section 4 asif Employee had terminated employment for Good Reason following a Change inControl.

 

8.             **Notices**. For the purpose of this Agreement, notices and all other communicationsprovided for in the Agreement shall be in writing and shall be deemed to havebeen duly given when delivered or mailed by United States certified orregistered mail, return receipt requested, postage prepaid, addressed to therespective addresses set forth on the first page of this Agreement or to suchother address as either party may have furnished to the other in writing in accordanceherewith, except that notice of change of address shall be effective only uponreceipt.  All notices to the Companyshall be directed to the attention of the Board of Directors of the Company.

 
| For Ciprico:  | 17400 Medina Road  |
|---------------|--------------------|
|          | Plymouth, MN 55447 |
|          |               |
| For Employee: | 26 Highway 96 East |
|          | Dellwood, MN 55110 |

 

9.             **Captions**. The headings or captions set forth in this Agreement are for convenienceonly and shall not affect the meaning or interpretation of this Agreement.

 

10.           **Governing Law**.  The validity, interpretation, constructionand performance of this Agreement shall be governed by the laws of the State ofMinnesota.

 

11.           **Construction**.  Wherever possible, each term and provision ofthis Agreement shall be interpreted in such manner as to be effective and validunder applicable law.  If any term orprovision of this Agreement is invalid or unenforceable under applicable law,(a) the remaining terms and provisions shall be unimpaired, and (b) the invalidor unenforceable term or provision shall be deemed replaced by a term orprovision that is valid and enforceable and that comes closest to expressingthe intention of the unenforceable term or provision.

 

12.           **Amendment; Waivers**.  This Agreement may not be modified, amended,waived or discharged in any manner except by an instrument in writing signed byboth parties hereto.  The waiver byeither party of compliance with any provision of this Agreement by the otherparty shall not operate or be construed as a waiver of any other provision ofthis Agreement, or of any subsequent breach by such party of a provision ofthis Agreement.

 

13.           **Entire Agreement**.  This Agreement supersedes all prior orcontemporaneous negotiations, commitments, agreements (written or oral) andwritings between the Company and Employee with respect to the subject matterhereof and constitutes the entire agreement and understanding between theparties hereto.  All such othernegotiations, commitments, agreements and writings will have no further forceor effect, and the parties to any such other negotiation, commitment, agreementor writing will have no further rights or obligations thereunder.

 

14.           **Counterparts**.  This Agreement may be executed in severalcounterparts, each of which shall be deemed to be an original but all of whichtogether shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to beduly executed and delivered as of the day and year first above written.

 
|   | CIPRICO INC.        |
|--------|---------------------|
|   |                |
|   |                |
|   | By:                 | /s/ Michael M. Vekich |   |
|   | Its:                | Chairman of the Audit Committee |   |
|   |                |
|   |                |
|   | /s/ James W. Hansen |   |
|   | Employee            |   |
|        |                     |  |  |  |  |  |

 

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