Exhibit 10.21
SEVERANCE AND CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT, effective as of
November 11, 2008 (the “Effective Date”), is made
by and between STEC, Inc., a California corporation, (the
“Company”) and Raymond D. Cook (the
“Executive”), a resident of the State of
California.
RECITALS
WHEREAS, the Executive has agreed to
serve as the Chief Financial Officer of the Company;
WHEREAS, the Board has determined
that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility of his
termination of employment with the Company or of a change in
control of the Company;
WHEREAS, the Board wishes to
diminish the distraction to the Executive and to encourage the
Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending change in
control;
WHEREAS, the Board wishes to provide
the Executive with compensation arrangements upon certain
terminations of employment with the Company or a change in control
which satisfy the expectations of the Executive and which are
comparable to and competitive with those of other companies;
and
NOW, THEREFORE, in consideration of
the mutual undertakings of the parties hereto, the Company and the
Executive agree as follows:
Article I.
DEFINITIONS
1.1 “ Accrued Annual Base
Salary ” means that portion of the Executive’s
Annual Base Salary which is accrued but unpaid as of the Date of
Termination.
1.2 “ Affiliate ”
means any corporation or other entity which directly or through
intervening entities owns more than thirty five percent
(35%) of the combined power or value of all shares of stock of
a corporation or more than thirty five percent (35%) of the
capital and profits interest of an unincorporated entity, and any
corporation or other entity so owned by an Affiliate.
1.3 “ Annual Base
Salary ” means the annual base salary of the Executive in
effect as of the date of his date of Termination of Employment,
without regard to any salary reduction under any plan maintained by
the Company under Code Sections 125 or 401(k), or any nonqualified
deferred compensation plan maintained by the Company.
1.4 “ Board ”
means the Board of Directors of the Company.
1.5 “ Cause ”
means:
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(a) the Executive’s committing
any felony or any other crime involving dishonesty;
(b) the Executive’s failure to
perform reasonably assigned lawful duties or to comply with a
lawful instruction of the Board;
(c) the Executive’s
dishonesty, willful misconduct, or gross negligence in the
performance of his duties for the Company;
(d) the Executive’s
substantial or material failure or refusal to perform or comply
with Company policies, procedures, or practices; or
(e) the Executive’s
unauthorized use or disclosure of confidential information or trade
secrets of the Company (or any parent or Subsidiary of the
Company).
1.6 “ Change in Control
” means any of the following events provided that such event
is, or with respect to an event described in Subsection
(c) becomes, a “change in the ownership or effective
control” of the Company or a “change in the ownership
of a substantial portion of the assets” of the Company, in
each case as defined in Treasury Regulation
Section 1.409A-3(i)(5) or any successor provision
thereto:
(a) any person (as such term is used
in Rule 13d-5 of the Securities Exchange Act of 1934, as amended,
(the “1934 Act”) or group (as such term is defined in
Section 13(d) of the 1934 Act), other than a Subsidiary or any
employee benefit plan (or any related trust) of the Company becomes
the beneficial owner of at least fifty percent (50%) or more
of the Common Stock of the Company or of securities of the Company
that are entitled to vote generally in the election of directors of
the Company (“Voting Securities”) representing fifty
percent (50%) or more of the combined voting power of all
Voting Securities of the Company;
(b) within a period of twelve
(12) months or less, the individuals who, as of any date on or
after the Effective Date, constitute the Board (the
“Incumbent Directors”) cease for any reason to
constitute at least seventy-five percent (75%) of the Board
unless at the end of such period, seventy-five percent
(75%) of individuals then constituting the Board are persons
who are Incumbent Directors or were nominated upon the
recommendation of seventy-five percent (75%) of the Incumbent
Directors; or
(c) approval by the shareholders of
the Company of either of the following:
(i) a merger, reorganization, or
consolidation (“Merger”) with respect to which the
individuals and entities who were the respective beneficial owners
of Common Stock and Voting Securities of the Company immediately
before such Merger do not, after such Merger, beneficially own,
directly or indirectly, more than fifty percent (50%) of,
respectively, the Common Stock and the combined voting power of the
Voting Securities of the corporation resulting from such Merger in
substantially the same proportion as their ownership immediately
before such Merger, or
(ii) the sale or other disposition
of all or substantially all of the assets of the
Company.
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Notwithstanding the foregoing, there
shall not be a Change in Control if, in advance of such event, the
Executive agrees in writing that such event shall not constitute a
Change in Control.
1.7 “ Code ”
means the Internal Revenue Code of 1986, as amended from time to
time, and any regulatory guidance promulgated thereunder. A
reference to any specific Code section shall also be deemed to
refer to any successor section thereto.
1.8 “ Common Stock
” means the common stock, par value $0.001, of the
Company.
1.9 “ Company ”
means STEC, Inc., a California corporation, and any of its
successors.
1.10 “ Contract Term
” has the meaning specified in Section 3.1 of this
Agreement.
1.11 “ Date of
Termination ” means the date as of which the
Executive’s employment with the Company or its Affiliate is
terminated by the Company or its Affiliate, or by the Executive for
any reason including, but not limited to, death or
Disability.
1.12 “ Disability
” means either of the following events:
(a) The Executive is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months;
or
(b) The Executive is, by reason of
any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering
employees of the Company.
1.13 “ Good Reason
” means the occurrence of any one of the following
events:
(a) any material breach of this
Agreement by the Company including, but not limited to, the failure
of the Company to comply with the provisions of Article
IV;
(b) the failure of the Company to
assign this Agreement to a successor to the Company, or the failure
of a successor to the Company to explicitly assume and agree to be
bound by this Agreement;
(c) the Company’s requiring
the Executive to be based at any office or location more than
thirty (30) miles from the Company’s offices in Santa
Ana, California, except for reasonably required travel which is not
materially greater than such travel generally required of such
Executive prior to the date of execution of this
Agreement;
(d) a material reduction in duties
inconsistent with the Executive’s position;
(e) the Board’s directive for
the Executive to engage in unlawful conduct; or
(f) a material reduction in the
Executive’s base salary.
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Notwithstanding the foregoing, no
act or omission by the Company shall constitute Good Reason as
defined above unless the Executive gives the Company no more that
ninety (90) days written notice from the initial existence or
occurrence of any act or omission which constitutes Good Reason,
and the Company fails to cure such act or omission within the
succeeding thirty (30) day period following the receipt of
such notice from the Executive.
1.14 “ Monthly Base
Salary ” means the Executive’s Annual Base Salary
in effect as of the Executive’s Date of Termination of
employment, divided by twelve (12).
1.15 “ Person ”
means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal, or
otherwise, including, without limitation, any instrumentality,
division, agency, body, or department thereof).
1.16 “ Subsidiary
” means, with respect to any Person, (a) any corporation
or other entity of which an aggregate of more than fifty percent
(50%) of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any
other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned legally or beneficially by
such Person or one or more Subsidiaries of such Person and
(b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution)
of more than fifty percent (50%).
1.17 “ Termination of
Employment ” means the first day on which the Executive
is for any reason no longer employed by the Company or any of its
Affiliates.
1.18 “ Termination of
Employment Without Cause ” means a termination of the
Executive’s employment by the Company or any of its
Affiliates for any reason other than Cause (other than death or
Disability).
Article II.
AT WILL EMPLOYMENT
2.1 At Will Employment
.
(a) The Executive’s employment
with the Company is “at will,” meaning that either the
Executive or the Company may terminate the employment relationship
at any time on notice to the other, with or without Cause, for any
reason, no reason or Good Reason, and with no liability of either
party to the other, except as expressly described in this Agreement
or any other express agreement executed by both parties. This
Agreement is not intended to, and shall not infer or imply any
right on the part of the Executive to continue in the employ of the
Company or any of its Affiliates. This Agreement is not intended in
any way to limit the right of the Company to terminate the
employment of the Executive.
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Article III.
TERM OF AGREEMENT
3.1 Term of Agreement
.
(a) This Agreement
shall be effective for the period commencing on the Effective Date,
and ending on the second (2 nd ) anniversary of such
date. The Company may, in its sole discretion and for any reason,
provide written notice of termination (effective as of the then
applicable expiration date) to the Executive no later than sixty
(60) days prior to the expiration of this Agreement. If
written notice is not timely so provided, this Agreement shall be
automatically extended for an additional period of twelve
(12) months from the expiration date. This Agreement shall
continue to be automatically extended for an additional twelve
(12) months at the end of such 12-month period and each
succeeding 12-month period unless notice of termination of this
Agreement is given in the manner prescribed in this Section (the
initial term, and each such additional 12-month period, if any,
constituting the “Contract Term”). No termination of
this Agreement shall affect the Executive’s rights hereunder
with respect to a Change in Control which has occurred prior to
such termination.
(b) In the event of a Change in
Control, Section 4.4 of this Agreement shall become applicable
to the Executive. Section 4.4 shall continue to remain
applicable to the Executive until the date which is eighteen
(18) months following the date upon which the Change in
Control occurs. Following such eighteen (18) month period, so
long as the employment of the Executive has not been terminated on
account of a termination as described in Section 4.4, this
Agreement shall terminate and be of no further force or effect. If
the Executive’s employment with the Company is terminated on
account of a termination described in Section 4.4 on or before
such date, this Agreement shall remain in effect until the
Executive receives, in the entirety, the various payments and
benefits to which the Executive has become entitled under the terms
of this Agreement.
(c) If there is a Termination of
Employment Without Cause, or a Termination of Employment by the
Executive for Good Reason during the Contract Term, this Agreement
shall remain in effect until the Executive receives, in the
entirety, the various payments and benefits to which Executive has
become entitled under the terms of this Agreement.
Article IV.
TERMINATION
BENEFITS
4.1 Termination of Employment by
the Company for Cause or by the Executive Other Than for Good
Reason . If, before the end of the Contract Term, the Company
terminates the Executive’s employment for Cause or the
Executive terminates employment other than for Good Reason (other
than for death or Disability), the Company shall pay to the
Executive as soon as reasonably practicable after the Date of
Termination an amount equal to the Executive’s Accrued Annual
Base Salary. The Company may not terminate the Executive’s
employment for Cause unless:
(a) no fewer than sixty
(60) days prior to the Date of Termination, the Company
provides the Executive with written notice of its intent to
consider termination of the Executive’s employment for Cause,
including a detailed description of the specific reasons which form
the basis for such consideration (the “Notice of
Consideration”);
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(b) provided that
“Cause” shall not constitute “Cause” unless
the Executive is provided with said Notice of Consideration by the
Board of such termination for Cause and fails to cure it within a
reasonable period of time (not less than fifteen (15) nor more
than thirty (30) days) after receipt of the Notice of
Consideration, except that the Executive shall not be entitled to a
Notice of Consideration and opportunity to cure if the Executive
knew, or should have known, that the wrongful conduct would result
in material harm to the Company;
(c) if, after providing Notice of
Consideration, a majority of the Board (disallowing the vote of the
Executive (if the Executive is a member of the Board) and any other
members of the Board alleged to be involved in the events leading
the Board to desire to terminate the Executive for Cause) so
determines, the Board may immediately suspend the Executive, with
or without pay, at the discretion of the majority of the Board,
until a final determination pursuant to this Section 4.1 has
been made (which suspension shall not constitute “Good
Reason” for purposes of this Agreement);
(d) for a period ending thirty
(30) days after the date Notice of Consideration is provided,
the Executive shall have an opportunity to appear before the Board,
with or without legal representation, at the Executive’s
election, to present arguments on his own behalf;
(e) following the presentation to
the Board as provided in Subsection (d) above, the Executive
shall be terminated for Cause only if (i) a majority of the
Board (disallowing the vote of the Executive (if the Executive is a
member of the Board) and any other members of the Board alleged to
be involved in the events leading the Board to terminate the
Executive for Cause) determines that the actions of the Executive
constituted Cause and that the Executive’s employment should
accordingly be terminated for Cause and (ii) the Board
provides the Executive with a written determination setting forth
in full specificity the basis for such termination of employment
which shall be consistent with the reasons set forth in the Notice
of Consideration; and
(f) the Company shall provide the
Executive with not less than thirty (30) days advance written
notice of termination, including a statement of the Date of
Termination and the specific detailed basis for such termination
which shall be consistent with the reasons set forth in the Notice
of Consideration; provided however
(g) notwithstanding the foregoing,
nothing in this Section 4.1 shall prevent the Company from
terminating the Executive immediately upon the Executive’s
committing any of the acts set forth in Sections 1.5 (a),
(c) or (e) herein, upon a determination by a majority of
the Board (disallowing the vote of the Executive (if the Executive
is a member of the Board) and any other members of the Board
alleged to be involved in the events leading the Board to terminate
the Executive for Cause) that the Executive should be immediately
terminated for Cause pursuant to Sections 1.5 (a), (c) or
(e).
4.2 Termination of Employment for
Death or Disability . If, before the end of the Contract Term,
the Executive’s employment terminates due to death or
Disability, the Company shall pay as soon as reasonably practicable
to the Executive, the beneficiaries designated in writing by the
Executive, or the Executive’s estate, as the case may be, the
Executive’s Accrued Annual Base Salary.
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4.3 Termination of Employment by
the Company without Cause or by the Executive for Good Reason .
If there is a Termination of Employment by the Company without
Cause or a Termination of Employment by the Executive for Good
Reason, the Executive shall receive as soon as reasonably
practicable after the Date of Termination in a lump-sum the
Executive’s Accrued Annual Base Salary. Additionally, as soon
as reasonably practicable after six (6) months and one
(1) day following the Date of Termination, the Company shall
pay the Executive, in a lump sum, an amount equal to twelve
(12) months of the Executive’s Monthly Base
Salary.
In addition to the foregoing
benefits, Executive shall be entitled to participate, for twelve
(12) months following Termination of Employment, in the following
employee benefit plans maintained by the Company to the extent the
Executive is a participant in such employee benefit plans
immediately preceding the Date of Termination: group medical
insurance, and group dental insurance. The level of benefits in
such plans shall be the level in effect for the Executive and his
dependents at the Date of Termination. The COBRA continuation
period for the Executive shall begin at the end of such twelve
(12) month period. These programs shall be continued at no
cost to the Executive, except to the extent that federal, state or
local tax law requires the inclusion of the value of such benefits
in Executive’s income.
The Executive’s entitlement to
any termination benefits pursuant to this Section 4.3 are
expressly conditioned upon the Executive’s execution of a
General Release and Waiver as set forth in Section 6.7 (and as
attached in form as “Exhibit A” hereto) prior to the
Company’s obligation to provide payment of any amounts due or
any benefits hereunder.
4.4 Termination upon a Change in
Control . If within the Contract Term (a) there occurs a
Change of Control and (b) within an eighteen (18) month
period subsequent to the Change of Control the Company terminates
the employment of the Executive without Cause (other than for death
or Disability) or the Executive terminates his employment for Good
Reason (other than for death or Disability), the Executive shall
receive as soon as reasonably practicable after the Date of
Termination in a lump sum the Executive’s Accrued Annual Base
Salary. Additionally, as soon as reasonably practicable after six
(6) months and one (1) day following the Termination of
Employment, the Company shall pay the Executive, in a lump sum, an
amount equal to twelve (12) months of the Executive’s
Monthly Base Salary.
In addition to the foregoing
benefits, Executive shall be entitled to participate, for twelve
(12) months following Termination of Employment, in the
following employee benefit plans maintained by the Company to the
extent the Executive is a participant in such employee benefit
plans immediately preceding the Date of Termination: group medical
insurance, and group dental insurance. The level of benefits in
such plans shall be the level in effect for the Executive and his
dependents at the Date of Termination. The COBRA continuation
period for the Executive shall begin at the end of such twelve
(12) month period. These programs shall be continued at no
cost to the Executive, except to the extent that federal, state or
local tax law requires the inclusion of the value of such benefits
in Executive’s income.
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The Executive’s entitlement to
any termination benefits pursuant to this Section 4.4 are
expressly conditioned upon the Executive’s execution of a
General Release and Waiver as set forth in Section 6.7 (and as
attached in form as “Exhibit A” hereto) prior to the
Company’s obligation to provide payment of any amounts due or
any benefits hereunder.
4.5 Other Plans and Policies
. The termination benefits described in Sections 4.1 through 4.4
are in lieu of any termination benefits that the Executive might
otherwise be entitled to receive from the Company under any of the
Company’s applicable severance pay policies; provided,
however, to the extent the Executive participates in any annual
bonus, long-term incentive, equity award, or similar plan or
program, the Executive’s rights upon a Termination of
Employment under such plans or programs shall be determined under
the documents or agreements governing said plans or
programs.
Except as specified in the preceding
paragraph, nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation
