Exhibit 10.2
CHANGE OF CONTROL AGREEMENT
     This Change Of Control Agreement (the “Agreement”) is made as of July 14,
2006 between Dot Hill Systems Corp., a Delaware corporation (the “Company”), and
Hanif I. Jamal (“Employee”), contingent and effective upon Employee’s
commencement of employment with the Company.
     Whereas, in order to provide an incentive for Employee to participate
actively in the affairs and maximize the value of the Company, the Company is
willing to provide Employee with certain benefits on the terms and conditions
set forth below.
     Now Therefore, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, Employee and the Company (each, a “Party,” and
collectively, the “Parties”) agree as follows:
1. Benefits in the Event of a Change of Control. If (i) a Change of Control
(defined below) occurs and (ii) during the period beginning two (2) months prior
to the effective date of such Change of Control and ending twenty-four
(24) months after the effective date of such Change of Control, Employee’s
employment with the Company is terminated either (A) by the Company for reasons
other than Cause (defined below) or for no reason or (B) by Employee for Good
Reason (defined below), then, without further action by Employee or the Company,
Employee shall be entitled to the benefits set forth below:
     (a) The vesting applicable to all options to purchase shares of the
Company’s capital stock (“Options”) and all shares of the Company’s capital
stock which are subject to the company’s right to repurchase such shares
(“Restricted Stock”) held by Employee as of the effective date of such
termination shall be accelerated in full such that Employee shall have the right
to exercise in accordance with the terms thereof all or any portion of such
Options (notwithstanding any vesting schedule set forth in such Options) and any
such Company repurchase rights with respect to such Restricted Stock shall lapse
in full; and
     (b) Employee shall be entitled to a lump sum cash payment in an amount
equal to one hundred twenty-five percent (125%) of Employee’s annual base salary
in effect as of the date of such termination, subject to applicable withholdings
as required by applicable law, payable on the Effective Date specified in a
Release delivered by Employee to the Company following such Change of Control in
the form attached hereto as Exhibit A.
2. Definitions. For purposes of this Agreement, capitalized terms used herein
shall have the following meanings:
     (a) “Cause” shall be limited to the occurrence of any of the following
events, as set forth in a written resolution duly adopted by a majority of the
Board: (i) Employee continuing to engage in conduct which causes material harm
to the Company after having been given thirty (30) days written notice of such
determination by the Board, (ii) Employee’s indictment for violation of any Law
constituting a felony (including the Foreign Corrupt Practices Act of 1977)

1

--------------------------------------------------------------------------------

 

or the foreign equivalent thereof, (iii) Employee’s continuing failure to
perform the lawful directives of the Board or Employee’s employment duties and
responsibilities to the Company, in each case in all material respects and after
having been given thirty (30) days written notice of such determination by the
Board which written notice shall specifically identify the directive alleged not
to have been followed or the employment duties which it is alleged Employee has
continually failed to substantially perform, the basis for the Board’s
determination thereof and the specific corrective action that the Board proposes
that Employee take, and (iv) Employee’s incurable breach of any material element
of the Company’s Confidential Information and Inventions Agreement. In no event
shall Employee’s death or Disability constitute Cause or the basis for any
termination therefor.
     (b) “Change of Control” shall mean: (1) a dissolution or liquidation of the
Company; (2) any sale or transfer of all or substantially all of the assets of
the Company; (3) any merger, consolidation or similar transaction in which the
holders of the Company’s outstanding voting securities immediately prior to such
transaction do not hold, immediately following such transaction, securities
representing fifty percent (50%) or more of the combined voting power of the
outstanding securities of the surviving entity; or (4) the acquisition by any
person (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), in a single
transaction or series of related transactions, of beneficial ownership (within
the meaning of Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing fifty percent (50%) or more of the
combined voting power of the then-outstanding securities of the Company,
excluding in any case shares of capital stock of the Company purchased from the
Company in a transaction the principal purpose of which is to raise capital for
the Company.
     (c) “Good Reason” shall mean: (i) a reduction in Employee’s annual base
salary, (ii) the relocation of Employee’s full-time office to a location other
than within sixty (60) miles of Carlsbad, California, or (iii) a violation or
breach by the Company, in any material respect, of any of its obligations to
Employee so long as Employee has given the Company thirty (30) days notice of
such breach and the Company has not cured the breach during that thirty (30) day
period.
     (d) “Disability” shall mean Employee’s failure or inability, for reasons of
health, to perform Employee’s usual and customary duties on behalf of the
Company in the usual and customary manner for a total of more than ninety
(90) consecutive business days (excluding Saturdays, Sundays and Holidays (days
during which the Company is closed due to a recognized holiday)).
3. Golden Parachute Taxes. In the event that any payment or distribution by the
Company, or the grant of any benefit by the Company, to or for the benefit of
Employee (whether paid or payable, distributed or distributable or granted or to
be granted pursuant to the terms of this Agreement or otherwise) (collectively,
“Benefits”) would be nondeductible by the Company for federal income tax
purposes because of Section 280G of the Internal Revenue Code (the “Code”)
and/or would cause Employee to be liable for an excise tax pursuant to
Section 4999 of the Code, then the Benefits paid, distributed or granted to
Employee under this Agreement shall equal (i) the full amount of such Benefits
or (ii) the Reduced Amount (as defined below), whichever of the foregoing
amounts is determined by the Company to result, on

2

--------------------------------------------------------------------------------

 

an after-tax basis, in the receipt by Employee of the greatest amount of such
Benefits, notwithstanding that all or some portion of the Benefits may be
taxable under Section 4999 of the Code. In making its determination pursuant to
the preceding sentence, the Company shall take into account all applicable
Federal, state, and local employment and income taxes, as well as the excise tax
imposed by Section 4999 of the Code. For purposes of this Section 4, the
“Reduced Amount” shall be the maximum amount payable to Employee that would
result in no portion of the Benefits being (i) nondeductible by the Company
under Section 280G of the Code or (ii) subject to an excise tax liability under
Section 4999 of the Code. Notwithstanding the foregoing and any other provision
contained herein, in the event (as a result of Benefits to be received under
this Agreement or any other plan or arrangement between the Employee and the
Company) of any required reduction, as a result of Section 4999 of the Code, of
Benefits to be received by Employee, reduction shall be made from such other
plan or arrangement prior to any reduction relating to Benefits to be received
by Employee under this Agreement.
4. Application of Code Section 409A. If the Company determines that any of the
Benefits fail to satisfy the distribution requirement of Section 409A(a)(2)(A)
of the Code as a result of Section 409A(a)(2)(B)(i) of the Code, the payment of
such benefit shall be accelerated to the minimum extent necessary so that such
benefit is not subject to the provisions of Section 409A(a)(1) of the Code. (It
is the intention of the preceding sentence to apply the short-term deferral
provisions of Section 409A of the Code, and the regulations and other guidance
thereunder, to the Benefits, and the payment schedule as revised after the
application of the preceding sentence shall be referred to as the “Revised
Payment Schedule.”) However, if there is no Revised Payment Schedule that would
avoid the application of Section 409A(a)(1) of the Code, the payment of such
benefits shall not be paid pursuant to a Revised Payment Schedule and instead
shall be delayed to the minimum extent necessary so that such benefits are not
subject to the provisions of Section 409A(a)(1) of the Code. The Board may
attach conditions to or adjust the amounts paid pursuant to this Section 4 to
preserve, as closely as possible, the economic consequences that would have
applied in the absence of this Section 4; provided, however, that no such
condition or adjustment shall result in the payments being subject to
Section 409A(a)(1) of the Code.
5. General Provisions.
     (a) This Agreement shall be governed by the laws of the State of California
(without regard to principles of conflict of laws).
     (b) Any notice, demand or request required or permitted to be given by
either the Company or Employee pursuant to the terms of this Agreement shall be
in writing and shall be deemed given when delivered personally or deposited in
the U.S. mail, First Class with postage prepaid, and addressed to the parties at
such addresses as have been previously furnished by the Parties or such other
address as a Party may request by notifying the other in writing.
     (c) The rights and obligations of Employee under this Agreement may not be
transferred or assigned without the prior written consent of the Company.
     (d) This Agreement is meant to supplement the terms of stock option
agreement(s) or other agreement(s) pursuant to which Employee acquired the
Options, as well as any written

3

--------------------------------------------------------------------------------

 

employment agreement between the Company and Employee. To the extent that the
terms and conditions of this Agreement are inconsistent with those found in such
stock option agreement(s) or other agreement(s) (employment or otherwise), the
terms and conditions of this Agreement shall be controlling.
     (e) Any Party’s failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent any Party from thereafter enforcing each and every other
provision of this Agreement. The rights granted the Parties herein are
cumulative and shall not constitute a waiver of any Party’s right to assert all
other legal remedies available to it under the circumstances.
     (f) Employee agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this
Agreement.
     (g) In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired.
     (h) This Agreement, in whole or in part, may be modified, waived or amended
upon the written consent of the Company and Employee.
     (i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one
instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

4

--------------------------------------------------------------------------------

 

In Witness Whereof, the undersigned have set their hand as of the date first
above written.

             
Employee
      Dot Hill Systems Corp.    
 
           
/s/ Hanif I. Jamal
 
Hanif I. Jamal
      /s/ Dana Kammersgard
 
Dana Kammersgard,    
 
      President and Chief Executive Officer    

[Signature Page to Change of Control Agreement]

 

--------------------------------------------------------------------------------

 

Exhibit A
RELEASE AND WAIVER OF CLAIMS
     In consideration of the payments and other benefits set forth in the Change
of Control Agreement dated July 14, 2006, between Dot Hill Systems Corp. (the
“Company”) and Hanif I. Jamal (“Employee”), to which this form is attached,
Employee hereby furnishes the Company with the following release and waiver.
     Employee hereby releases, and forever discharges the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and affiliates,
of and from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys’ fees, damages, indemnities and obligations of every kind
and nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising at any time prior to and
including Employee’s employment termination date with respect to any claims
relating to Employee’s employment and the termination of Employee’s employment,
including but not limited to, claims pursuant to any federal, state or local law
relating to employment, including, but not limited to, discrimination claims,
claims under the California Fair Employment and Housing Act, and the Federal Age
Discrimination in Employment Act of 1967, as amended (“ADEA”), the Federal
Americans with Disabilities Act (“AD”) or claims for wrongful termination,
breach of the covenant of good faith, contract claims, tort claims, and wage or
benefit claims, including but not limited to, claims for salary, bonuses,
commissions, stock, stock options, vacation pay, fringe benefits, severance pay
or any form of compensation.
     Employee also acknowledges that Employee has read and understood
Section 1542 of the California Civil Code which reads as follows: “A general
release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the debtor.” Employee hereby
expressly waives and relinquishes all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to any claims
Employee may have against the Company.
     Employee acknowledges that, among other rights, Employee is waiving and
releasing any rights Employee may have under ADEA, that this waiver and release
is knowing and voluntary, and that the consideration given for this waiver and
release is in addition to anything of value to which Employee was already
entitled as an employee of the Company. Employee further acknowledges that
Employee has been advised, as required by the Older Workers Benefit Protection
Act, that: (a) the waiver and release granted herein does not relate to claims
which may arise after this release and waiver is executed; (b) Employee has the
right to consult with an attorney prior to executing this release and waiver
(although Employee may choose voluntarily not to do so); and (c) if on the date
of execution of this release and waiver Employee is age 40 or older, then
(I) Employee has twenty-one (21) days from the date Employee receives this
release and waiver, in which to consider this release and waiver (although
Employee may choose voluntarily to execute this release and waiver earlier); and
(II) Employee has seven (7) days following the execution of this release and
waiver to revoke Employee’s consent to this release and waiver. This release and
waiver shall be effective as of the date of execution hereof; provided that if
on the date of execution of this release and waiver Employee is age 40 or older,
then this release and waiver shall not be effective until the foregoing seven
(7) day revocation

 

--------------------------------------------------------------------------------

 

period has expired. The date as of which this release and waiver is effective as
aforesaid shall be deemed the “Effective Date” hereof.

                     
Date:
          By:        
 
 
 
         
 
Hanif I. Jamal