EXHIBIT 10.14
[CROSSROADS LETTERHEAD]
STRICTLY PRIVATE
To: Robert Sims
From: Brian R. Smith, Chairman and CEO
Date: 11/04/02
Subject: Fiscal Year 2003 Stock Bonus Incentive Program
The fiscal year 2003 Stock Bonus Incentive Program has been developed to reward
individual contributions through Company success and to incent and reward high
individual performance.
The specifics of the plan are:
1.) You will be eligible to receive a stock performance grant for 160,000
shares of the Company's common stock (the "Shares") at a zero cost
basis except for applicable withholding taxes. You will receive the
Shares in accordance with the following schedule:
a. You will receive up to fifty percent (50%) of the Shares on
December 15, 2003, provided (i) the performance goals
specified in Paragraph 2 below are attained for fiscal year
2003 which ends on October 31, 2003 and (ii) you are an
employee of the Company through such date. The actual number
of Shares to be issued to you on December 15, 2003 will
depend on the level of achievement of the performance goals
as specified in Paragraph 2 below.
b. You will receive one-half (1/2) of the remaining Shares on
June 15, 2004, provided you remain an employee of the
Company through such date.
c. You will receive the remaining Shares on December 15, 2004,
provided you remain an employee of the Company through such
date.
2.) The number of Shares payable to you on December 15, 2003 will be
determined as follows:
a. Seventeen and one-half percent (17.5%) of the Shares will be
paid provided 100% of the pre-determined Company target
revenue for fiscal year 2003 is achieved. If less than 100%
of the target revenue is achieved, the number of Shares
issuable with respect to this performance goal will be
reduced in the proportion specified in Paragraph 3.
b. Seventeen and one-half percent (17.5%) of the Shares will be
issued provided 100% of the pre-determined Company target
pre-tax income for fiscal year 2003 is achieved. If less
than 100% of the target pre-tax income is achieved, the
number of Shares issuable with respect to this performance
goal will be reduced in the proportion specified in
Paragraph 3.
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c. Three percent (3.0%) of the Shares will be issued on
December 15, 2003 for fiscal year 2003 upon achievement of
EACH of the Management by Objective (MBO) components as
defined below such that a total of fifteen percent (15.0%)
of the Shares will be issued if all the MBOs are achieved:
i. Individual contribution-subjective management
assessment (3%)
ii. Customer satisfaction-one customer
satisfaction objective (3%)
iii. Financial performance-one financial
performance objective (3%)
iv. Selectable-one objective not already selected
in any of the four areas based on
organization primary objectives (3%)
v. Team development-one team development
objective (3%)
The target Company revenue and pre-tax income will be determined by the Company
at its sole discretion. There will be an update quarterly on Company performance
goals.
The MBOs will be selected and approved at the sole discretion of the executive
you report to. The objectives are key to current and future business plans of
the Company. The objectives will be reviewed quarterly with you to validate the
continued relevance of the objective and to communicate your performance in
relation to the objective. An objective can be adjusted at the discretion of the
Company during the year with one over one approval (two management levels) for
unusual or windfall events.
3.) The number of Shares issuable on December 15, 2003 for fiscal year
2003 on the basis of the achievement of less than 100% of the
Company's performance measures (revenue (17.5%) and pre-tax income
(17.5%)) will be determined as follows:
<Table>
<Caption>
PERCENT OF PERCENT OF SHARES PERCENT OF PERCENT OF SHARES
TARGET ACHIEVED ALLOCATED TO TARGET TARGET ACHIEVED ALLOCATED TO TARGET
- --------------- ------------------- --------------- -------------------
<85% 0% 96% 96%
=85% 85% 97% 97%
86% 86% 98% 98%
87% 87% 99% 99%
88% 88% 100% 100%
89% 89%
90% 90%
91% 91%
92% 92%
93% 93%
94% 94%
95% 95%
</Table>
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Income Tax Consequences: You will recognize taxable income upon receipt of
the Shares. The amount of taxable income will be equal to the fair market
value of the Shares received. Such income will be subject to all applicable
income and employment withholding taxes. No Shares will be issued to you
until receipt by the Company of such taxes.
Change in Control:
Any Shares remaining payable at the time of a Change in Control but not
otherwise payable at such time will automatically accelerate and be paid
immediately following the effective date of such transaction.
The term Change in Control is as defined in the Appendix, page A-1, item D,
of the Crossroads Systems, Inc. 1999 Stock Incentive Plan.
General Provisions:
1) Employees who leave the Company prior to the completion of the stock
bonus issuance schedule as stated above will not be eligible to
receive the remaining shares of the grant.
2) The 2003 discretionary Stock Bonus Incentive Program has been
developed for fiscal year 2003 only and is subject to change annually
and/or as business conditions from time to time dictate.
3) This plan is confidential to you. The sharing of this information may
be grounds for removing you from the Plan.
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