<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Tricord Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO] TRICORD SYSTEMS, INC.
April 14, 1999
Dear Shareowner:
The date for this year's Annual Meeting is Friday, May 21, 1999. It will be held
at the Radisson Hotel and Conference Center, 3131 Campus Drive, Plymouth,
Minnesota, beginning at 1:00 p.m., Minneapolis time.
The Annual Meeting is an opportunity for you to meet the management of your
Company. I look forward to seeing you.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, WHETHER YOU
CAN ATTEND OR NOT, AND I URGE YOU TO SIGN AND RETURN YOUR PROXY CARD IN THE
ENCLOSED ENVELOPE.
Sincerely,
/s/ John J. Mitcham
John J. Mitcham
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
TRICORD SYSTEMS, INC.
2905 Northwest Boulevard, Suite 20
Plymouth, Minnesota 55441
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1999
To the Stockholders of Tricord Systems, Inc.:
The Annual Meeting of the Stockholders of Tricord Systems, Inc. will be held on
Friday, May 21, 1999, at 1:00 p.m., Minneapolis time, at the Radisson Hotel and
Conference Center, 3131 Campus Drive, Plymouth, Minnesota, for the following
purposes:
(1) To elect two directors for terms of three years.
(2) To ratify the appointment of PricewaterhouseCoopers LLP, certified public
accountants, as independent auditors for the Company for the year ending
December 31, 1999.
(3) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 9, 1999 will be
entitled to vote at the meeting or any adjournments.
By Order of the Board of Directors,
/s/ J. David Cabello
J. David Cabello
SECRETARY
April 14,1999
<PAGE>
[LOGO]
TRICORD SYSTEMS, INC.
2905 Northwest Boulevard, Suite 20
Plymouth, Minnesota 55441
--------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1999
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Tricord Systems, Inc. (the "Company") of
proxies in the accompanying form from holders of shares of Common Stock to be
voted at the Annual Meeting of Stockholders to be held on May 21, 1999, at 1:00
p.m., Minneapolis time, at the Radisson Hotel and Conference Center, 3131 Campus
Drive, Plymouth, Minnesota (the "Annual Meeting").
Stockholders of record as of the close of business on April 9, 1999 will be
entitled to vote at the meeting or any adjournments. On that date, the Company
had 19,018,309 shares of Common Stock outstanding. Each share is entitled to
one vote. The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting (9,509,155 shares) is required for a quorum for the
transaction of business. In general, shares of Common Stock represented by a
properly signed and returned proxy card will be counted as shares present and
entitled to vote at the Annual Meeting for the purposes of determining a quorum,
without regard to whether the card reflects votes withheld from director
nominees or abstentions (or is left blank) or reflects a "broker non-vote" on a
matter (i.e., a card returned by a broker on behalf of its beneficial owner
customer that is not voted on a particular matter because voting instructions
have not been received and the broker has no discretionary authority to vote).
Because the director nominees who receive the greatest number of votes cast for
the election of directors at the Annual Meeting will be elected as directors,
votes that are withheld from the election of director nominees will be excluded
entirely from the vote and will have no effect. The other proposal described in
this Proxy Statement requires the approval of a majority of the shares present
and entitled to vote in person or by proxy on that proposal. Shares voted as
abstaining on any of these proposals will be treated as shares present and
entitled to vote that were not cast in favor of the proposals, and thus will be
counted as votes against the particular proposal. Shares represented by a proxy
card that includes any broker non-votes on a matter will be treated as shares
not entitled to vote on that matter, and thus will not be counted in determining
whether that matter has been approved.
A proxy card is enclosed for your use. You are solicited on behalf of the Board
to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. No postage is
required if mailed within the United States. The cost of soliciting proxies,
including the preparation, assembly and mailing of the proxies and soliciting
material, as well as the cost of forwarding such material to the beneficial
owners of the Company's Common Stock, will be borne by the Company. Directors,
officers and regular employees of the Company may, without compensation other
than their regular compensation, solicit proxies by telephone, telegram or
personal conversation. The Company may reimburse brokerage firms and others for
expenses in forwarding proxy materials to the beneficial owners of Common Stock.
2
<PAGE>
Any shareholder giving a proxy may revoke it at any time prior to its use at the
Annual Meeting either by giving written notice of such revocation to the
Secretary of the Company, by filing a duly executed proxy bearing a later date
with the Secretary of the Company, or by appearing at the Annual Meeting and
filing written notice of revocation with the Secretary of the Company prior to
use of the proxy. Proxies will be voted as specified by shareholders.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
This Proxy Statement and the enclosed form of proxy will be mailed to each
stockholder on or about April 14, 1999, together with the Annual Report to
Stockholders of the Company for the year ended December 31, 1998.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information, as of April 9, 1999, regarding the
beneficial ownership of Common Stock of the Company, its only class of voting
securities, by each person known by the Company to own more than 5% of such
outstanding shares, each director, each of the executive officers named in the
summary compensation table, certain other executive officers, and the current
directors and executive officers of the Company as a group (consisting of nine
persons). Except as otherwise indicated, the stockholders listed in the table
have sole voting and investment power with respect to the shares indicated.
Shares subject to options exercisable within 60 days are treated as outstanding
only when determining the amount and percentage owned by such individual or
entity.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES CLASS
---- ------ -----
<S> <C> <C>
Joseph R. Canion 4,281,500(1) 20.4%
CORAL Entities 1,105,191(2) 5.8%
Yuval Almog 1,266,097(3) 6.7%
Tom R. Dillon 37,268(4) *
Donald L. Lucas 357,244(5) 1.9%
Fred G. Moore 31,812(6) *
John J. Mitcham 1,197,810(7) 6.2%
J. David Cabello 855,000(8) 4.4%
Kathleen H. Clark 400,000(9) 2.1%
Alexander H. Frey 345,939(10) 1.7%
Charles E. Pearsall 184,742(11) 1.0%
Jeff A. Stewart 70,197(12) *
All current directors and executive officers
as a group (9 persons) 4,675,912(13) 23.5%
</TABLE>
- ----------
* Less than 1%.
(1) As reported in a Schedule 13D, dated December 23, 1998, filed with the
Securities and Exchange Commission. Includes warrants issued December 15,
1998 to purchase 2,000,000 shares at $3.50 per share, expiring December 15,
2003. Mr. Canion's address is 5 Post Oak Park, Suite 1655, Houston, TX
77027.
(2) As reported in a Schedule 13G, dated February 3, 1998, filed with the
Securities and Exchange Commission, 838,525 shares are held of record by
Coral Partners I - Superior, a Minnesota limited partnership ("CPI"), and
266,666 shares are held of record by Coral Partners II, a limited
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<PAGE>
partnership ("CP II"). Coral Management Partners I, a limited partnership
("CMP I"), is the general partner of CP I, and Coral Management
Partners II, a limited partnership ("CMP II"), is the general partner of
CP II. CMP I and CMP II each have the following three general partners:
Yuval Almog, Peter H. McNerney and Linda L. Watchmaker. Pursuant to Rule
13d-3 of the Securities Exchange Act of 1934, each of Mr. Almog, Mr.
McNerney and Ms. Watchmaker may be deemed to share beneficial ownership
with respect to such shares; however, as set forth in their Schedule 13G,
these three individuals disclaim beneficial ownership except to the extent
of their pecuniary interests in the limited partnerships CMP I and CMP II.
The address of the CORAL Entities is 60 South Sixth Street, Suite 3510,
Minneapolis, MN 55402.
(3) Includes 1,105,191 shares beneficially owned by CMP I and CMP II with
respect to which Mr. Almog may be deemed to share beneficial ownership.
Mr. Almog, however, disclaims beneficial ownership except to the extent of
his pecuniary interest in the limited partnerships CMP I and CMP II. Also
includes options to purchase 50,000 shares that are exercisable on or
before June 8, 1999. Mr. Almog's address is the same as CORAL Entities
above.
(4) Includes options to purchase 8,335 shares that are exercisable on or before
June 8, 1999.
(5) Includes 52,244 shares held by the Donald L. Lucas & Lygia S. Lucas Trust
DTD 12-3-84 and 190,000 shares held by the Donald L. Lucas Profit Sharing
Trust DTD 1-1-84. Also includes options to purchase 40,000 shares that are
exercisable on or before June 8, 1999. Also includes warrants issued
December 15, 1998 to purchase 75,000 shares at $3.50 per share, expiring
December 15, 2003.
(6) Includes options to purchase 6,251 shares that are exercisable on or before
June 8, 1999.
(7) Includes options to purchase 166,369 shares that are exercisable on or
before June 8, 1999. Mr. Mitcham's address is 2905 Northwest Boulevard,
Suite 20, Plymouth, Minnesota 55441.
(8) Includes warrants issued December 15, 1998 to purchase 250,000 shares at
$3.50 per share, expiring December 15, 2003.
(9) Includes warrants issued December 15, 1998 to purchase 50,000 shares at
$3.50 per share, expiring December 15, 2003.
(10) Includes options to purchase 127,500 shares that are exercisable on or
before June 8, 1999.
(11) Includes options to purchase 85,500 shares that are exercisable on or
before June 8, 1999.
(12) Includes options to purchase 37,250 shares that are exercisable on or
before June 8, 1999.
(13) Includes options to purchase 483,955 shares that are exercisable on or
before June 8, 1999 and 375,000 shares of Common Stock issuable upon the
exercise of outstanding warrants.
ELECTION OF DIRECTORS
NOMINATION
The Company's Certificate of Incorporation provides that the Board shall consist
of between one and nine members, as determined from time to time by the Board,
divided into three classes in as nearly equal number as possible. The term of
each class of directors is three years, and the term of one class expires each
year in rotation. The terms of the directors in Class C expire with this Annual
Meeting.
4
<PAGE>
The Board has recommended that John J. Mitcham and Tom R. Dillon, the current
Class C directors, be nominated for election as directors in Class C to serve a
three-year term expiring at the 2002 Annual Meeting of Stockholders, or until
each of their respective successors are elected and qualified. Messrs. Mitcham
and Dillon have consented to serve for the new term, if elected.
NOMINEES AND CONTINUING DIRECTORS
The nominees for election as directors and the continuing directors, their ages
(as of March 31, 1999), the year in which each first became a director, and
their principal occupations or employment are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
NAMES OF NOMINEES AND PRINCIPAL OCCUPATION AGE BECAME DIRECTOR
DIRECTORS -------------------- --- ---------------
---------
<S> <C> <C> <C>
NOMINEES FOR THREE-YEAR TERM EXPIRING IN 2002:
John J. Mitcham Chairman and Chief Executive Officer of the Company 58 1995
Tom R. Dillon Vice President of Operations 55 1998
of NetFlix.com Inc.
DIRECTOR NOT STANDING FOR ELECTION THIS YEAR WHOSE TERM EXPIRES IN 2000:
Donald L. Lucas Private Investor 69 1992
Fred G. Moore President of Horison, Inc. 51 1998
DIRECTOR NOT STANDING FOR ELECTION THIS YEAR WHOSE TERM EXPIRES IN 2001:
Yuval Almog President of CORAL Group, Inc., a venture capital 49 1987
management company
</TABLE>
Except as indicated below, during the past five years, there has been no change
in the principal occupations or employment of the nominees for election as a
director or of the continuing directors.
Mr. Mitcham has been Chief Executive Officer and a director of the Company since
May 2, 1995, and was elected Chairman in October 1998. From 1989 to May 1995,
Mr. Mitcham served as President and Chief Executive Officer of AT&T Paradyne
Corporation.
Mr. Almog is President of Coral Group, Inc., which provides management services
to CMP I and CMP II venture capital partnerships of which Mr. Almog is Managing
General Partner. As described in footnote 1 to the table entitled "Security
Ownership of Certain Beneficial Owners and Management," CMP I and CMP II are the
general partners of CP I and CP II, respectively. Until November 1993, Mr.
Almog also served as Senior Vice President of Investment Advisers, Inc.
Mr. Dillon joined NetFlix.com Inc. in April 1999 as its Vice President of
Operations. From January 1998 to March 1999, Mr. Dillon was Vice President and
Chief Information Officer at Candescent Technologies Corporation. From 1987 to
December 1997, Mr. Dillon was employed by Seagate Technology, Inc. in various
management positions, the last being Vice President and Chief Information
Officer.
Mr. Moore is President of Horison, Inc., an information strategies firm he
founded in March 1998. From 1976 to February 1998, Mr. Moore was employed at
Storage Technologies, Inc., most recently as Corporate Vice President, Strategic
Marketing. As described under "Compensation of Directors and
5
<PAGE>
Executive Officers," Mr. Moore consulted with and assisted the Company in
providing professional marketing services with respect to certain of the
Company's products.
The following Board members also serve as directors of the designated public
companies: Mr. Almog - Delphi Information Systems, Inc.; Mr. Lucas - Cadence
Design Systems, Inc., Coulter Pharmaceutical, Inc., Macromedia, Inc., Oracle
Corporation and Transcend Services, Inc.; and Mr. Mitcham - Reptron Electronics,
Inc.
COMMITTEES AND ATTENDANCE
The business and affairs of the Company are managed by the Board which met on
four occasions and took action by written consent nine times during 1998. All
of the directors attended 100% of all meetings of the Board and committees on
which they served during 1998.
The Board maintains standing committees of the Board including the Finance and
Audit Committee and the Compensation Committee. There is no Nominating
Committee of the Board.
The Finance and Audit Committee performs principally the following functions:
reviews the Company's current and long-range financial position, financial
policies and performance objectives; makes recommendations to the Board on
allocation of capital and banking relationships; evaluates retirement plan
investment management and fund performance; reviews the Company's business
insurance policies; recommends to the Board the engagement of the Company's
independent auditors; reviews with the independent auditors the plan and results
of the auditing engagement; reviews the adequacy of the internal accounting
controls; and reviews the range of audit and non-audit professional service
fees, approves such services and considers the independence of the Company's
independent auditors. The members of the Finance and Audit Committee are
Messrs. Dillon and Lucas. The Committee did not meet during 1998.
The Compensation Committee reviews and recommends for approval to the Board the
remuneration arrangements for the Company's executive officers and the adoption
of compensation and option plans in which these persons and other key employees
of the Company may participate. The Compensation Committee also serves as the
disinterested committee administering the Company's various stock option plans.
The members of the Compensation Committee are Messrs. Almog and Lucas. The
Committee took action by written consent once during 1998.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $10,000 plus $1,500 for
each Board meeting and committee meeting (if on a date other than a Board
meeting) attended and are reimbursed for travel and lodging expenses in
connection with attendance at Board and committee meetings. The 1998
Non-Employee Director Stock Plan (the "1998 Director Plan") provides that, in
the discretion of the Board, payment of the directors' annual cash retainer and
meeting fees may be made in the form of Company Common Stock. During 1998, the
non-employee directors received cash reimbursement for expenses in the following
amounts: Mr. Almog ($0); Mr. Dillon ($1,662); Mr. Lucas ($1,258); and Mr. Moore
($825).
Non-employee directors are entitled to participate in the 1998 Director Plan.
The 1998 Director Plan provides for automatic grants of non-qualified options to
the Company's non-employee directors. Currently, 550,000 shares are reserved
for issuance under the 1998 Director Plan. In accordance with the terms of the
1998 Director Plan, new non-employee directors of the Company who are first
elected or appointed to the Board to fill new directorships or vacancies will
automatically be granted, on a one-time basis on the date of their election or
appointment, non-qualified options to purchase 25,000 shares of Common Stock, at
an exercise price equal to the closing market price of the Common Stock on the
date of grant. The 1998 Director Plan further provides that, on January 5 of
each year, each non-employee director
6
<PAGE>
will automatically be granted additional options to purchase 10,000 shares, with
an exercise price equal to the closing market price on the date of grant. The
one-time option grants become exercisable each month on a cumulative basis with
respect to 2.78% of the total shares covered by each such option, commencing one
month after the date of grant and terminating five years after the date of
grant. Each annual option grant becomes exercisable in full six months after
its date of grant and terminates five years after its date of grant.
On December 7, 1998, the Company and Fred G. Moore, a director of the Company,
entered into a Consulting Agreement (the "December 7 Agreement") that terminated
on March 31, 1999. Pursuant to the December 7 Agreement, Mr. Moore consulted
with and assisted the Company in providing professional marketing services with
respect to certain of the Company's products. In consideration for his
services, Mr. Moore received an option, pursuant to a non-statutory stock option
agreement dated December 7, 1998, to purchase up to 100,000 shares of the Common
Stock of the Company at an exercise price of $0.65625 per share. None of the
options granted have vested at this time. Although the December 7 Agreement
expired on March 31, 1999, the options will vest with respect to all of the
shares if the Company and one or more of certain identified companies have
executed, on or before June 30, 1999, one or more OEM licensing agreements with
an estimated total value of $5,000,000 during the term of the OEM licensing
agreement and any extensions thereto through December 31, 2000, with respect to
the Company's products and services as a direct result of Mr. Moore's efforts.
If the total value of such OEM licensing agreements is less than $5,000,000, the
number of shares purchasable under such option shall be proportionally reduced.
To the extent exercisable, such option shall remain exercisable until
December 31, 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Composed entirely of outside directors, the Compensation Committee of the Board
is responsible for reviewing and approving remuneration arrangements for the
Company's executive officers and the administration of compensation and stock
option plans in which these individuals and other key employees participate. In
addition, the committee reviews and provides direction for the development of
future leadership to meet the long-term organizational and growth objective
requirements of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Company's executive compensation
philosophy is to pay for individual and Company results. The objectives of the
Company's executive compensation program are to:
- Reward the achievement of desired Company and individual performance
goals.
- Provide compensation that is competitive with other companies of
comparable size and complexity that will enable the Company to attract
and retain key executive talent.
- Align the interests of the Company's executives to stockholder return
through long-term opportunities for stock ownership.
In determining the compensation of the Company's executive officers, the
Compensation Committee considers a number of factors, including Company
performance, both separately and in relation to other companies competing in the
Company's markets, the individual performance of each executive officer,
comparative compensation surveys concerning compensation levels and stock grants
at other companies, historical compensation levels and stock awards at the
Company, and the overall competitive environment for executives and the level of
compensation necessary to attract and retain key executive talent.
The Company's executive compensation program is comprised of base salary, annual
incentive opportunities in the form of cash bonuses and long-term incentive
opportunities in the form of stock options. The Compensation Committee uses its
discretion to establish executive compensation at levels
7
<PAGE>
which, in its judgment, are warranted by external and internal factors, as well
as an executive's individual circumstances. As a result, actual compensation
levels may be greater or less than the compensation levels at the companies used
in the comparative analysis based upon annual and long-term Company performance
as well as individual performance.
BASE SALARY. The Compensation Committee regularly reviews each executive's base
salary. Base salaries are determined by taking into account an executive's level
of responsibility, prior experience and competitive market data. The annual
merit program for executives is the same as for all of the Company's employees.
Upon a review of the Company's 1998 performance and other factors described
above, the executive officers were granted base salary increases of between 0%
and 28% for 1999. Three of these executive officers agreed to take a percentage
of their 1998 fourth quarter base salary in Company Common Stock valued
according to the closing market price on the day such compensation was due, such
percentage ranging from 12% to 15%.
The compensation of John J. Mitcham, the Company's Chairman and Chief Executive
Officer, is determined in accordance with his employment agreement with the
Company, which was entered into in May 1995. Pursuant to this employment
agreement, Mr. Mitcham is paid an annual base salary that was initially
established at $300,000 in May 1995. Effective April 1, 1997, Mr. Mitcham
voluntarily reduced his annual base salary 20% to $240,000. Each year the
Compensation Committee conducts a performance and salary review of Mr. Mitcham's
base salary to determine whether it should be increased. Based on this review,
the Compensation Committee determined to maintain Mr. Mitcham's base salary at
$300,000, subject to Mr. Mitcham's voluntary reduction to $240,000. In
addition, the employment agreement provides that the Company will reimburse
Mr. Mitcham for premiums on a term life insurance policy up to a maximum of
$3,500 per year. Mr. Mitcham agreed to take his entire 1998 fourth quarter base
salary in the form of Company Common Stock, valued according to the closing
market price on the day such compensation was due. Mr. Mitcham also agreed to
take relocation reimbursement and life insurance premium reimbursement due him
in the form of Company Common Stock at the closing market price on the date the
Board approved such payment. The Compensation Committee will conduct a
performance and salary review in May 1999 for the purpose of determining
Mr. Mitcham's base salary for the ensuing year, which review will be based upon
both individual and Company performance. In making its determination of base
salary for Mr. Mitcham, the Compensation Committee will consider the same
factors as described above with respect to all other executive officers.
ANNUAL CASH BONUSES. The philosophy of the Compensation Committee is to provide
executives with direct financial incentives in the form of annual cash bonuses
to achieve Company, business unit and individual performance goals. The
Compensation Committee does not have a fixed formula or criteria for determining
annual cash bonuses. Instead, the Compensation Committee, in its discretion,
establishes bonuses at year-end, based upon the extent to which the Company has
achieved its annual business plan and the individual executive has achieved his
goals. Upon a review of these factors, the executive officers of the Company
received bonuses for 1998 ranging from $0 to $30,000 and agreed to take such
bonuses in the form of Common Stock.
In October 1998, in lieu of an annual cash bonus, Mr. Mitcham was granted a
bonus option to purchase 100,000 shares of Common Stock at a price of $0.50 per
share that becomes exercisable in five years or earlier upon the satisfaction of
certain performance goals to be mutually agreed upon in good faith between Mr.
Mitcham and the Board. Accordingly, Mr. Mitcham did not receive an annual cash
bonus in 1998.
LONG-TERM INCENTIVES. The 1995 Stock Incentive Plan (the "1995 Plan") and the
1998 Plan, are broad "omnibus" plans that provide the Compensation Committee
with significant flexibility to award key
8
<PAGE>
executives stock options, restricted stock awards, stock appreciation rights,
performance units and stock bonuses. To date, long-term incentives have been
provided primarily in the form of stock options, which are granted with an
exercise price equal to the fair market value of the Common Stock at the date of
grant and become exercisable proportionately over a period of time. Grants of
all awards under the 1995 Plan and the 1998 Plan are made by the Compensation
Committee in its discretion based upon an executive's contribution toward
Company performance and expected contribution toward meeting the Company's
long-term strategic goals. Because the value to an executive of the various
stock awards depends on increases in the market price of the Common Stock, the
Compensation Committee believes that this form of compensation aligns an
executive's compensation more closely with increases in stockholder value.
During 1998, the Compensation Committee granted new stock options to all of its
executive officers, including the grant of an option to purchase 300,000 shares
of Common Stock at an exercise price of $0.656 per share to Mr. Mitcham.
Although the Compensation Committee's decision to grant options and its
determination of the size of such grants were based upon many of the same
factors considered in granting annual cash bonuses as described above, the
Compensation Committee also considered the need to continue to provide
executives with the proper incentives. In addition, the Compensation Committee
considered the level of prior stock option grants to such executives as well as
the level of grants to new hires.
TAX LAW CHANGES. The Omnibus Reconciliation Act of 1993 added Section 162(m) to
the Internal Revenue Code of 1986, as amended (the "Code"), which generally
precludes the Company and other public companies from taking a tax deduction for
compensation over $1 million which is not "performance-based" and is paid, or
otherwise taxable, to executives named in the Summary Compensation Table and
employed by the Company at the end of the applicable tax year. No named
executive is likely to earn over $1 million in 1999. Therefore, the Company
does not have a policy at this time regarding qualifying the compensation paid
to its executive officers for deductibility under Section 162(m), but will
formulate such a policy if compensation levels ever approach $1 million.
Compensation Committee,
Yuval Almog, CHAIRMAN
Donald L. Lucas
9
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total return during the period
January 1, 1994 to December 31, 1998 for the Company's Common Stock, the
Nasdaq - U.S. Index and the Nasdaq - Computer Manufacturer Stock Index. This
graph assumes the investment on January 1, 1994 of approximately $100 in the
Company's Common Stock and the stock in the companies presented in the Nasdaq -
U.S. Index and the Nasdaq - Computer Manufacturer Stock Index on January 1, 1994
and the reinvestment of all dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRICORD SYSTEMS,
NASDAQ STOCK MARKET - US NASDAQ COMPUTER MANUFACTURERS INC.
<S> <C> <C> <C>
12/31/93 100.000 100.000 100.000
3/31/94 95.797 96.947 55.660
6/30/94 91.318 78.618 40.566
9/30/94 98.881 95.592 19.340
12/31/94 97.752 109.847 19.811
3/31/95 106.578 115.765 19.340
6/30/95 121.911 140.741 14.151
9/30/95 136.596 169.329 17.215
12/31/95 138.256 172.955 11.321
3/31/96 145.900 178.222 15.566
6/30/96 156.508 200.345 16.981
9/30/96 162.052 220.924 10.140
12/31/96 170.015 231.878 5.660
3/31/97 160.793 194.898 2.358
6/30/97 190.266 251.902 4.717
9/30/97 222.440 316.200 3.774
12/31/97 208.580 280.504 1.887
3/31/98 244.052 345.194 4.128
6/30/98 251.119 409.338 4.245
9/30/98 227.341 449.182 1.887
12/31/98 293.209 610.146 8.491
</TABLE>
10
<PAGE>
EXECUTIVE COMPENSATION
The following table provides summary information concerning cash and non-cash
compensation paid to or earned by the Company's Chief Executive Officer and the
four most highly paid executive officers of the Company, all of whom received or
earned cash and non-cash salary and bonus of more than $100,000 for the fiscal
year ended December 31, 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
POSITION YEAR (1) (2) (3) AWARDS (SHARES) (4)
- -------- ---- --- --- --- ------ -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Mitcham 1998 $240,000 $ -- $186,502 $ -- 566,369 $1,000
Chairman and Chief 1997 270,000 -- -- -- 800,000(5) 1,000
Executive Officer 1996 300,000 -- 13,316 -- 100,000 1,000
Alexander H. Frey(6) 1998 122,500 25,000 150 75,000(7) 540,000 1,000
Vice President, 1997 103,752 25,000 86,537 -- 300,000(5) 1,000
Architecture 1996 22,350 -- -- -- 100,000 1,000
Charles E. Pearsall 1998 115,833 30,000 -- -- 350,500 1,000
Vice President, 1997 95,000 35,000 24,316 -- 175,000(5) 1,000
Engineering 1996 80,628 -- 63,659 -- 100,000 1,000
Jeff A. Stewart 1998 98,333 20,000 150 -- 199,000 1,000
Vice President and 1997 85,824 15,000 -- -- 130,000(5) 1,000
Controller 1996 78,732 3,825 -- -- 11,000 --
Charles C. Devor(8) 1998 120,000 -- 5,846 -- -- --
Vice President, 1997 186,669 10,000 -- -- 350,000(5) 1,000
Business Development 1996 158,674 20,000 -- -- 150,000 1,000
</TABLE>
- ---------------
(1) The following Named Executive Officers elected to receive a portion of
their 1998 fourth quarter salary in the form of Common Stock at the closing
price on the day such salary was due: Mr. Mitcham ($60,000; 78,556
shares); Mr. Frey ($4,500; 5,892 shares); Mr. Pearsall ($3,600; 4,714
shares); and Mr. Stewart ($3,750; 4,910 shares).
(2) Bonuses for services rendered have been included as compensation for the
year earned, even though such bonuses may have actually been paid in the
following year. For bonuses earned in 1998, the following Named Executive
Officers elected to receive their 1998 bonuses in the form of Common Stock
at the closing price on January 29, 1999, the day prior to the date of
Board approval of such bonuses: Mr. Frey ($25,000; 7,547 shares) and Mr.
Pearsall ($30,000; 9,056 shares). For bonuses earned in 1997, the
following Named Executive Officers elected to receive their bonuses in the
form of Common Stock at the closing price on February 12, 1998, the day the
Board approved such bonuses: Mr. Frey ($25,000; 40,000 shares) and Mr.
Pearsall ($35,000; 56,000 shares).
(3) "Other Annual Compensation" consists of the following: relocation
assistance and refund of life
11
<PAGE>
insurance premiums for Mr. Mitcham, which Mr. Mitcham elected to receive in
the form of Common Stock at the closing price on the day the Board approved
such payments (relocation assistance, $172,502; 230,003 shares at $0.75 per
share, and refund of life insurance premiums, $14,000; 14,451 shares at
$0.97 per share), and relocation assistance in 1996; a recognition award to
Mr. Frey; relocation assistance to Mr. Pearsall; and earned vacation pay to
Mr. Devor.
(4) "All Other Compensation" consists of the Company's matching contribution to
the employees' accounts in the Company's 401K Retirement Plan.
(5) Certain options previously granted in 1995 and 1996 were canceled and
reissued in 1997 at the then market price as follows: Mr. Mitcham, 800,000
shares; Mr. Frey 100,000 shares; Mr. Pearsall, 100,000 shares; and Mr.
Devor, 350,000 shares.
(6) Mr. Frey joined the Company in October 1996.
(7) Effective November 3, 1998, the Company granted to Mr. Frey a restricted
stock award consisting of 150,000 shares of Common Stock that are
restricted and subject to forfeiture in satisfaction of certain contingent
obligations of the Company. Such award is valued for purposes of the above
table based on the closing price of the Common Stock on the date of grant.
The restrictions on these shares lapse with respect to 75,000 shares if Mr.
Frey remains in the employ of the Company until December 1, 1999 and with
respect to the remaining 75,000 shares if Mr. Frey remains in the employ of
the Company until December 1, 2000. As of December 31, 1998, such shares
of restricted Common Stock had a value of $337,500, based on the closing
price of the Common Stock as of such date.
(8) Mr. Devor resigned from the Company in September 1998.
OPTIONS
The following tables provide certain information regarding option grants and
exercises during 1998 to or by the executive officers named in the Summary
Compensation Table above and the number and value of the options held by such
persons at the end of 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (1)
--------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED TERM (2)
OPTIONS TO EMPLOYEES in EXERCISE OR BASE EXPIRATION
NAME Granted 1998 PRICE DATE 5% 10%
---- ------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
John J. Mitcham 100,000 2.52% $0.500 10/30/08 $ 31,445 $79,687
John J. Mitcham 300,000 7.55% 0.656 12/7/08 123,766 313,649
Alexander H. Frey 50,000 1.26% 0.500 10/9/08 15,722 39,844
Alexander H. Frey 200,000 5.03% 0.656 12/7/08 82,511 209,099
Charles E. Pearsall 40,000 1.01% 0.500 10/9/08 12,578 31,875
Charles E. Pearsall 150,000 2.77% 0.656 12/7/08 61,883 156,824
Jeff A. Stewart 25,000 0.63% 0.500 10/9/98 7,861 19,922
Jeff A. Stewart 50,000 1.26% 0.656 12/7/98 20,628 52,275
Charles C. Devor -- -- -- -- -- --
</TABLE>
12
<PAGE>
- ---------------
(1) All of the options granted to executives were granted under the 1998 Plan.
Options become exercisable under the 1998 Plan so long as executives remain
in the employ of the Company and such options have not expired. To the
extent not already exercisable, options under the 1998 Plan become
immediately exercisable in full upon certain changes in control of the
Company and remain exercisable for the remainder of their terms. See
"Change in Control Arrangements." Options with an exercise price of $0.500
become exercisable with respect to 25% of the shares upon each anniversary
of the grants. Options with an exercise price of $0.656 become exercisable
with respect to 25% of the shares 12 months after grant date and one
forty-eighth (1/48th) of the shares each month thereafter.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
performance of the Company's Common Stock, overall market conditions and
the executive's continued employment with the Company. The amounts
represented in this table may not necessarily be achieved.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY
AT END OF 1998 OPTIONS AT END OF 1998 (1)
SHARES ACQUIRED -------------- --------------------------
ON VALUE
NAME EXERCISE (2) REALIZED (3) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Mitcham 633,631 $ -- 124,701 441,668 157,747 661,910
Alexander H. Frey 10,000 -- 45,000 450,000 59,341 639,976
Charles E. Pearsall 14,500 -- 54,250 296,250 67,651 420,844
Jeff A. Stewart 6,000 -- 32,500 166,500 45,935 208,314
Charles C. Devor 200,000 397,860 -- -- -- --
</TABLE>
- ---------------
(1) Value calculated as the excess of the market value of the Common Stock at
December 31, 1998 ($2.14) over the exercise price per share. The market
value of the Common Stock at December 31, 1998 represents the average of
the high and low sales price as reported on the Nasdaq SmallCap Market
System. Options are in-the-money if the market price of the shares exceeds
the option exercise price. As of December 31, 1998, all of the options
held by these officers were in-the-money. As of December 31, 1998, Mr.
Devor had exercised all of his outstanding options.
(2) The exercise price may be paid in cash or, in the Compensation Committee's
discretion, by delivery of a promissory note or shares of Common Stock
valued at the fair market value on the date of exercise or pursuant to a
cashless exercise procedure under which the executive provides irrevocable
instructions to a brokerage firm to sell the purchased shares and remit to
the Company, out of the sale proceeds, an amount equal to the exercise
price plus applicable withholding taxes.
(3) Value calculated as the excess of the market value at the date of exercise
over the option exercise price.
13
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
Under the Company's option plans, in the event a "change in control" of the
Company occurs, all outstanding options held by a participant for at least six
months will become immediately exercisable in full and will remain exercisable
for the remainder of their terms, regardless of whether the participant remains
in the employ or service of the Company or any subsidiary. A "change in
control" for purposes of the Company's option plans will generally occur upon
the following events: (a) the sale or other transfer of substantially all of the
assets of the Company; (b) the liquidation or dissolution of the Company; (c) a
merger or consolidation involving the Company if 70% or less of the voting stock
of the surviving company is held by persons who were stockholders of the Company
immediately before the merger or consolidation; (d) any person becomes the
beneficial owner of 30% or more of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors; (e) the "continuity directors" (directors as of the date the
applicable plan was adopted and additional directors nominated or elected by the
"continuity directors") of the Company cease to constitute at least a majority
of the Board; or (f) any change of control that is required to be reported under
Section 13 or 15 (d) of the Securities Exchange Act of 1934 (the "Exchange
Act").
In addition to the change in control provisions under its option plans and
agreements, the Company also has in place a change in control agreement with Mr.
Charles E. Pearsall, the Company's Vice President of Engineering. Pursuant to
this agreement (the "Change in Control Agreement"), in the event of a Change in
Control Termination (as defined below), the Company agrees (a) to make a
lump-sum cash payment to the employee in an amount equal to one and one-half
times such employee's annual base salary, plus one and one-half times such
employee's target annual cash bonus for the year during which the termination
occurs, (b) to provide to the employee continued coverage under the Company's
group health plan for up to 18 months, (c) to provide to the employee a
"gross-up" payment sufficient to pay any excise tax imposed under Section 4999
of the Code (or any comparable state or local law) resulting from any Change in
Control (as defined below), and (d) to provide to the employee outplacement
counseling services costing up to 5% of such employee's annual base salary.
For purposes of the Change in Control Agreement, a "Change in Control
Termination" is deemed to occur if the Company terminates such employee's
employment for any reason other than for Cause (which includes gross misconduct,
willful and continued failure to perform, or conviction of a felony or gross
misdemeanor) or the employee's death or the employee terminates his or her
employment for Good Reason (which includes an adverse change in the employee's
position with the Company, reduction in base salary or benefits, forced
relocation, or failure by the Company to observe certain requirements of the
Change in Control Agreement) and any such termination occurs either within 12
months after the last day of the month in which the Change in Control occurred
or prior to the Change in Control if the employee's termination was a condition
of or related to the Change in Control. For purposes of the Change in Control
Agreement, a "Change in Control" is defined to include (a) a merger involving
the Company where the pre-merger stockholders own at least 50% but less than 80%
of the surviving Company's voting stock (unless approved by the "continuity
directors") or less than 50% of the surviving Company's voting stock (whether or
not approved by the "continuity directors"), (b) a transfer of substantially all
of the Company's assets or a liquidation of the Company, (c) the acquisition by
any person or group of 20% or more but less than 50% of the Company's voting
stock (unless approved by the "continuity directors") or 50% or more of the
Company's voting stock (whether or not approved by the "continuity directors"),
(d) the "continuity directors" (the current directors and their future nominees)
ceasing to constitute a majority of the Board of Directors, and (e) any other
change in control that would be required to be reported by the Securities and
Exchange Commission.
The change in control provisions of the Company's option plans, as well as the
Change in Control Agreement, are designed to attract and retain valued employees
of the Company and to ensure that the performance of these employees is not
undermined by the possibility, threat or occurrence of a change in
14
<PAGE>
control. While these measures were not adopted to deter takeovers, they may
have an incidental anti-takeover effect by making it more expensive for a bidder
to acquire control of the Company.
MITCHAM EMPLOYMENT AGREEMENT
Pursuant to the terms of an employment agreement, dated as of May 2, 1995, Mr.
Mitcham is paid an annual base salary that is determined each year by the
Compensation Committee based on a performance and salary review of Mr. Mitcham.
The base salary was initially fixed at $300,000. In addition to base salary,
the employment agreement provided for the grant to Mr. Mitcham of certain
options to purchase 800,000 shares Common Stock. Mr. Mitcham is also entitled
to customary benefits, reimbursements of business expenses and reimbursement for
premiums on a term life insurance policy up to a maximum of $3,500 per year. In
addition, pursuant to the employment agreement, the Company agreed to reimburse
Mr. Mitcham for his relocation expenses (up to a maximum of $100,000) plus
amounts for any taxes on such reimbursement amounts.
The employment agreement continues until terminated and may be terminated in the
following circumstances: (i) by the Company upon written notice with or without
cause; (ii) by Mr. Mitcham upon 30 days' written notice; or (iii) upon Mr.
Mitcham's death or disability. If the Company terminates the employment
agreement other than for cause or if Mr. Mitcham terminates the agreement due to
a material breach by the Company that is not cured within 30 days of notice, the
Company will be obligated to continue to pay Mr. Mitcham his then current base
salary for a period of two years following such termination, if such termination
occurs within two years after the effective date of the agreement, or for a
period of one year following such termination, if termination occurs thereafter.
Such payments, however, will continue only so long as Mr. Mitcham
conscientiously and aggressively seeks new employment and complies with his
continuing obligations under the employment agreement and will be reduced to
reflect any payments received during such period from another employer.
Pursuant to the employment agreement, Mr. Mitcham has agreed that, during his
employment and for a period of one year thereafter, he will not: (i) compete in
the network server business within any state or country in which the Company
markets or services products or provides services; (ii) interfere in any way
with the Company's relationship with any of its current or potential customers;
or (iii) employ or attempt to employ any of the Company's employees. In
addition, the employment agreement prohibits the disclosure of confidential
information to anyone outside of the Company during and subsequent to
Mr. Mitcham's employment and requires disclosure to the Company of ideas,
discoveries or inventions relating to or resulting from Mr. Mitcham's work for
the Company and assignment to the Company of all proprietary rights to such
ideas, discoveries or inventions.
INVESTORS AGREEMENT
In connection with a private placement to certain investors of the Company's
Common Stock in December 1998 (the "1998 Private Placement"), the Company, the
purchasers in the 1998 Private Placement (the "Purchasers"), and John Mitcham,
the Company's Chief Executive Officer, entered into an Investors Agreement,
dated effective as of December 7, 1998 (the "Investors Agreement"). Among other
provisions, the Investors Agreement (a) provides the Purchasers with certain
demand and "piggyback" registration rights; (b) provides the Purchasers with
certain rights of first refusal to acquire a pro-rata portion of securities sold
or issued by the Company in certain future private placement financings; (c)
provides the Purchasers with rights of co-sale in the event that Mr. Mitcham
desires to sell Voting Securities (as defined in the Investors Agreement) under
certain circumstances; and (d) provides that, as long as Rod Canion (one of the
Purchasers) or his immediate family members and trusts and entities established
for their benefit holds at least one-third of the Voting Securities acquired in
connection with the 1998 Private Placement, the Company will use its best
efforts to cause Mr. Canion, or his designee ("the Investors' Nominee"), to be
elected to the Board of Directors of the Company. The Investors' Nominee will
have the option of choosing when to accept election. Prior to accepting
15
<PAGE>
election, the Investors Nominee will not be permitted to vote, but will be
allowed to attend board meetings as a visitor. Mr. Canion has not yet chosen to
submit a candidate for election to the Board of Directors.
In connection with the 1998 Private Placement, each Purchaser agreed not to
offer, sell or otherwise transfer any securities acquired pursuant to the 1998
Private Placement without the prior approval of the Board of Directors except
(i) pursuant to a public offering registered under the Securities Act of 1933,
as amended (the "Act"), (ii) pursuant to Rule 144 of the Act, (iii) pursuant to
a transaction that effects a broad distribution of the Company's securities
without resulting in an acquiring person holding more than 3% of the voting
securities of the Company, (iv) transfers to certain related parties or (v) bona
fide pledges to institutional lenders for money borrowed. The Purchasers also
agreed to not solicit proxies or become a participant in a solicitation of
proxies in opposition to the recommendation of the majority of the directors of
the Company with respect to the election of directors.
In connection with the 1998 Private Placement, each director and officer of the
Company entered into a lock-up agreement (collectively, the "Lock-Up
Agreements"), pursuant to which each such person agreed that, until the earlier
of June 30, 2000 or three months after the date on which the Company's storage
management software has been licensed for commercial use for 90 days, such
person will not, without the prior written consent of the Purchasers holding a
majority of the shares sold by the Company in the Private Placement, and subject
to certain exceptions, sell or otherwise dispose of Common Stock or rights to
acquire Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Almog and Mr. Lucas served as members of the Compensation Committee of the
Board of Directors during 1998. On December 15, 1998, Mr. Lucas, through a
trust with respect to which he is deemed the beneficial owner, participated in
the private placement by the Company. Mr. Lucas purchased a total of 75,000
shares of Common Stock at a price of $1.00 per share and received warrants to
purchase an additional 75,000 shares of Common Stock at an exercise price of
$3.50 per share. The warrants are exercisable until December 15, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than 10% of the Company's Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with all Section 16(a) reports they file. To
the Company's knowledge, based upon a review of the copies of such reports
furnished to the Company during, or with respect to, the period ended
December 31, 1998, and based on representations by such persons, all of the
Company's executive officers, directors, and greater-than-10% stockholders
complied with all Section 16(a) filing requirements, except as follows:
Kathleen H. Clark purchased 4,500 shares prior to joining the Company and such
purchase was not timely reported; and Fred G. Moore was granted an option
pursuant to the December 7 Agreement and such grant was not timely reported.
SELECTION OF INDEPENDENT AUDITORS
16
<PAGE>
The Board has appointed PricewaterhouseCoopers LLP, independent certified public
accountants, as auditors of the Company for the year ending December 31, 1999.
PricewaterhouseCoopers LLP has audited the financial statements of the Company
since incorporation and has no other relationship with or interest in the
Company.
Unless a contrary choice is specified, proxies solicited by the Board will be
voted FOR ratification of the appointment of PricewaterhouseCoopers LLP as
auditors for the Company for the year ending December 31, 1999.
Representatives of PricewaterhouseCoopers LLP will be present at the meeting,
will have an opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Stockholder proposals intended to be presented in the proxy material relating to
the next Annual Meeting of Stockholders must be received by the Company on or
before December 14, 1999.
A stockholder who wishes to make a proposal at the next Annual Meeting without
including the proposal in the Company's proxy statement must notify the Company
by February 28, 2000. If a stockholder fails to provide notice by this date,
then the persons named as proxies in the proxies solicited by the Company for
the next Annual Meeting will have discretionary authority to vote on the
proposal.
OTHER BUSINESS
The Company knows of no other matters that will be presented at this year's
Annual Meeting of Stockholders. If any other matter properly arises at the
meeting, it is intended that the shares represented by proxies in the
accompanying form will be voted in accordance with the judgment of the persons
named in the proxies.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1998 accompanies this Notice of Annual Meeting and Proxy Statement.
The Annual Report describes the financial condition of the Company as of
December 31, 1998.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K
(EXCLUSIVE OF EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1998 TO EACH PERSON WHO
IS A STOCKHOLDER OF THE COMPANY AS OF APRIL 9, 1999, UPON RECEIPT FROM ANY SUCH
PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT ON FORM 10-K. SUCH
REQUESTS SHOULD BE SENT TO: TRICORD SYSTEMS, INC., 2905 NORTHWEST BOULEVARD,
SUITE 20, PLYMOUTH, MINNESOTA 55441, ATTENTION: INVESTOR RELATIONS.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ J. David Cabello
J. David Cabello
SECRETARY
April 14, 1999
Plymouth, Minnesota
17
<PAGE>
-arrow- Please detach here -arrow-
Share Amounts
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED IN PROPOSAL 1
BELOW AND FOR PROPOSAL 2
1. Election of directors
01 John J. Mitcham 02 Tom R. Dillon / / Vote FOR / / Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED
NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO
THE RIGHT.) / /
------------------------------
2. Proposal to ratify the appointment of PricewaterhouseCoopers
LLP as independent auditors for the Company for the year ending December 31,
1999.
/ / For / / Against / / Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 2 ABOVE AND TO GRANT AUTHORITY TO VOTE FOR THE
NOMINEES NAMED IN PROPOSAL 1 ABOVE.
Address Change? Mark Box / / Indicate changes below:
Dated: , 1999
--------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
/ /
/ /
------------------------------------
Signature(s) in Box
(If there are co-owners both must sign)
PLEASE SIGN EXACTLY AS THE NAME APPEARS ON THIS CARD. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
<PAGE>
[LOGO]
TRICORD SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 21, 1999
Tricord Systems, Inc.
2905 Northwest Boulevard, Suite 20
Plymouth, Minnesota 55441
[LOGO]
TRICORD SYSTEMS, INC.
2905 NORTHWEST BOULEVARD, SUITE 20, PLYMOUTH, MINNESOTA 55441 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TRICORD
SYSTEMS, INC.
The undersigned, having duly received the Notice of Annual Meeting of
Stockholders and Proxy Statement dated April 14, 1999, appoints John J.
Mitcham and J. David Cabello and each of them, as Proxies, each with power to
appoint his substitute, and hereby authorizes each of them to represent and
to vote, as designated below, all shares of common stock of Tricord Systems,
Inc. held of record by the undersigned on April 9, 1999, at the Annual
Meeting of Stockholders to be held on May 21, 1999, or any adjournments
thereof.
SEE REVERSE FOR VOTING INSTRUCTIONS
