Document:

EX-10.1

 Exhibit 10.1 

UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 
  

			
	 TROY LOWRY, derivatively on behalf of

VIOLIN MEMORY, INC.
  

Plaintiff,
  

vs.
  

DONALD G. BASILE, CORY J. SINDELAR,
 DIXON R. DOLL, JR., JEFFERY
J. NEWMAN,
 HOWARD ALLEN BAIN III, LAWRENCE J. LANG,
 DAVID B.
WALROD and MARK N. ROSENBLATT,
  
 Defendants,

 
 -and-

 
 VIOLIN MEMORY, INC.,

 
 Nominal Defendant.

 
	  	  
 CASE NO.: 4:13-cv-05768-YGR

 STIPULATION AND AGREEMENT OF 

COMPROMISE, SETTLEMENT AND RELEASE 

This Stipulation and Agreement of Compromise, Settlement and Release (the “Stipulation”) is entered into by counsel for plaintiff
Troy Lowry (“Plaintiff”) and counsel for defendants Donald G. Basile, Cory J. Sindelar, Dixon R. Doll, Jeffery J. Newman, Howard A. Bain III, Lawrence J. Lang, David B. Walrod, and Mark N. Rosenblatt (collectively the “Individual
Defendants”), and the nominal defendant, Violin Memory, Inc. (“Violin” or the “Company,” and together with Plaintiff and the Individual Defendants, the “Parties”), and is hereby submitted for approval by the United
States District Court for the Northern District of California. The settlement contemplated by this Stipulation shall be referred to as the “Settlement.” 

 WHEREAS: 

A. On November 26, 2013, a class action complaint, styled Yun-Chung Tsai v. Violin Memory Inc., et al., 4:13-cv-05486-YGR,
was filed in this Court against Violin Memory and certain of the Individual Defendants for claims under Sections 11 and 15 of the Securities Act of 1933. On November 27, 2013, a substantially similar related action was filed with this Court
entitled, Richard L. Schneider v. Violin Memory Inc. et al., 3:13-cv-013-cv-05515-CW, asserting both claims under the Securities Act and claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934. Thereafter two
additional related cases were filed: Andrew McBrian v. Violin Memory, Inc. et al., 13-cv-05610-PJH (filed December 4, 2013); and Alan Richards v. Violin Memory, Inc. et al., 13-cv-05834-YGR (December 17, 2013), alleging
Securities Act claims under Sections 11, 12(a)(2) and 15. On February 13, 2014, the Court issued an Order consolidating these cases In re Violin Memory, Inc. Securities Litigation, Master File No. 4:13-cv-05486-YGR (the
“Securities Class Action”).  
 B. Plaintiff filed this case (the “Derivative Action”) on December 12, 2013,
asserting that: (i) the Individual Defendants, while acting as members of the Company’s Board of Directors or as a Company officer, breached their fiduciary duties to nominal defendant Violin Memory by failing to ensure the accurate and
timely reporting of the Company’s operating results and financial condition; (ii) Defendants Basile, Doll, and Sindelar were unjustly enriched through, among other things, the compensation they received from the Company at a time when the
Company was experiencing losses; and (iii) the Individual Defendants wasted corporate assets in connection with Defendants Basile, Doll and Sindelar’s compensation, the Company’s initial public offering, and the alleged breaches of
fiduciary duties. 

  
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 C. The Individual Defendants executed waivers of the serve of summons on for the Derivative
Action on December 14, 2013, and the Company was served with the Derivative Action complaint on December 18, 2013. 
 D. On
December 16, 2013, the Company filed a Form 8-K, which disclosed that Violin Memory had terminated Defendant Basile, its President and Chief Executive Officer. 

E. On January 2, 2014, the Company filed a Form 8-K, announcing that Defendant Doll resigned from his position as Violin Memory’s
Chief Operating Officer and as a director. 
 F. The Parties attended an Initial Case Management Conference for all of the related actions,
including the Securities Class Action and the Derivative Action, on February 10, 2014. During the conference, the Parties discussed with the Court a possible stay of the Derivative Action pending further developments in the Securities Class
Action. 
 G. Pursuant to the Stipulation and Order for Stay entered on February, 26, 2014, the Derivative Action was stayed in order to
simplify the issues in question in the Derivative Action, streamline the trial of the Derivative Action, reduce the burden of litigation on the parties and the court, and avoid potential prejudice to the Company’s defense of the Securities
Class Action. The proceedings in the Derivative Action were temporarily stayed until the earliest to occur of: (a) thirty (30) days following the commencement of any shareholder derivative action alleging substantially the same facts and
claims as those in the Derivative Action in any federal or state court; (b) Defendants’ filing of an answer to the complaint in the Securities Class Action (including, if applicable, an amended or consolidated complaint); (c) thirty
(30) days following entry of an order in the Securities Class Action denying in whole or in part a motion to dismiss the Securities Class Action; or (d) thirty (30) days following notice to the Court that the parties in the Securities
Class Action have come to an agreement to settle the Securities Class Action. 

  
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 H. Also on February 26, 2014, the Court issued an order appointing a lead plaintiff in the
Securities Class Action. An expanded Securities Class Action consolidated complaint was filed on March 28, 2014. The Consolidated Complaint alleged that the Company’s Registration Statement contained materially untrue statements at the
time it became effective. The alleged untrue statements related to: certain negative trends that were materially impacting the Company’s sales to government-related customers; the quality of the Company’s flash array devices and memory
cards; the management and professional background of the Company’s then-current Chief Executive Officer, Donald G. Basile; and the Company’s disclosure of non-cancelable order commitments. The Securities Class Action consolidated complaint
alleged claims under Sections 11, 12, and 15 of the Securities Act of 1933. 
 I. On June 10, 2014, Violin Memory filed a Form 8-K,
announcing that Defendants Newman and Bain had resigned from the Company’s Board. 
 J. The Securities Class Action defendants filed
motions to dismiss, which were granted in part, with leave to amend, on October 31, 2014. 
 K. The parties in the Securities Class
Action agreed to a schedule for the filing of an amended complaint and motion to dismiss the amended complaint, pursuant to a Stipulation and Scheduling Order entered by the Court on November 12, 2014. Pursuant to this schedule, on
November 21, 2014, the Securities Class Action lead plaintiffs filed an amended complaint, amending their claims against the underwriter defendants only. 

L. On December 2, 2014, the Court entered a Stipulation and Order for Stay, extending the stay of the Derivative Action until
January 30, 2015, to allow the parties to continue to discuss the most efficient prosecution of this action in light of the developments in the Securities Class Action. 

  
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 M. On December 19, 2014, the Securities Class Action defendants filed motions to dismiss the
amended complaint. Thereafter, on January 16, 2015, the Court so ordered a stipulation amending the briefing schedule for the motions to dismiss the amended complaint. Pursuant to the January 16, 2015 Order, the Securities Class Action
lead plaintiffs filed their response to the motions to dismiss on January 23, 2015. 
 N. On February 3, 2015, the Court entered a
Stipulation and Order for Stay, extending the stay of the Derivative Action in order to avoid inefficiencies and duplicative efforts, better preserve the resources of the Parties and the Court, and more closely align the proceedings in the
Derivative Action with the proceedings in the Securities Class Action. The proceedings in the Derivative Action were temporarily stayed until the earliest to occur of: (a) thirty (30) days following the commencement of any shareholder
derivative action alleging substantially the same facts and claims as those in the Derivative Action in any federal or state court; (b) Defendants’ filing of an answer to the complaint in the Securities Class Action (including, if
applicable, an amended or consolidated complaint); (c) thirty (30) days following entry of an order in the Securities Class Action denying in whole or in part a motion to dismiss the amended complaint in the Securities Class Action; or
(d) thirty (30) days following notice to the Court that the parties in the Securities Class Action have come to an agreement to settle the Securities Class Action 

O. On February 13, 2015, the Securities Class Action defendants filed reply briefs in further support of their motions to dismiss the
amended complaint. On April 30, 2015, the Court issued an order in the Securities Class Action Granting in Part the Securities Class Action Defendants’ Motions to Dismiss and ordering that a new amended complaint in line with the order be
filed within seven days. The Court allowed the Securities Class Action to proceed against all Defendants with regard to two alleged omissions: (1) allegations concerning negative trends impacting sales to government-related customers and
(2) allegations concerning Donald Basile’s former employment. 

  
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 P. On March 2, 2015, counsel for Plaintiff sent a settlement demand letter to counsel for
Defendants. 
 Q. The parties in the Securities Class Action and the Parties in the Derivative Action participated in a formal mediation on
March 19, 2015, with the Honorable Layne R. Phillips (ret.), which was not successful. 
 R. On May 6, 2015, the Securities Class
Action lead plaintiffs filed a Second Amended Consolidated Class Action Complaint. The Securities Class Action second amended complaint alleged claims under Sections 11, 12, and 15 of the Securities Act of 1933. The Securities Class Action
defendants, including underwriter defendants, filed answers on May 20 and May 21, 2015. 
 S. Pursuant to the Stipulation and
Order for Stay entered by the Court on June 29, 2015, the Parties agreed that a continued stay of the Derivative Action was appropriate to avoid inefficiencies and duplicative efforts, better preserve the resources of the Parties and the Court,
and more closely align the proceedings in the Derivative Action with the proceedings in the Securities Class Action. The Defendants’ time to answer, move against, or respond to the Derivative Action complaint was extended pending further
litigation of the Securities Class Action. The Parties further agreed to confer in a status conference among each other no less frequently than every four (4) months, so as to update Plaintiff on the status of the Securities Class Action, the
possible effect of this action on the Derivative Action, and address any related matters. 

  
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 T. Beginning in June 2015, the parties in the Securities Class Action began to engage in
discovery. On October 13, 2015, while the Securities Class Action lead plaintiffs’ motion for class certification and the defendants’ Motion for an Order Requiring Plaintiffs to Seek Leave to Amend Their Complaint to Conform to Their
New Theory of Liability were pending, the Court issued an order in the Securities Class Action granting the defendants’ request for an order limiting discovery to the period of January 1, 2013 through September 30, 2013. 

U. On or about November 3, 2015, after several further private mediations, the parties to the Securities Class Action agreed on the
principal terms of a settlement, subject to certain contingencies. 
 V. In January 2016, in furtherance of settlement discussions, counsel
for Defendants provided counsel for Plaintiff with copies of certain corporate governance documents of the Company. 
 W. As a result of the
Parties’ arm’s-length discussions and negotiations, in February of 2016 the Parties to this action reached an agreement in principle, with certain contingencies, providing for the settlement of the Derivative Action on the terms and
conditions set forth below, which will include but are not limited to a release of all claims in the Derivative Action. 
 X. Beginning in
January of 2016, Defendants produced to Plaintiff certain documents and information as confirmatory discovery, including, but not limited to, the Company’s current corporate governance polices, the Company’s use of insurance policies that
may provide coverage in the Derivative Action, relevant Board and Board committee minutes, and a subset of documents produced by the Company in the Securities Class Action, for the sole purpose of allowing Plaintiff to assess the reasonableness and
adequacy of the proposed Settlement. 

  
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 Y. Plaintiff has thoroughly reviewed and analyzed the facts and circumstances relating to the
claims asserted in the Derivative Action, including conducting arm’s length discussions with Defendants, reviewing publicly available information, analyzing the confirmatory discovery and subsequent factual developments at the Company and in
the Securities Class Action, and reviewing applicable case law and other authorities. Plaintiff brought his claims in good faith and continues to believe that his claims have legal merit. However, Plaintiff recognizes that there are legal and
factual defenses to the claims asserted in the Derivative Action which present substantial risks to the successful resolution of any litigation, especially in complex shareholder derivative litigation such as the Derivative Action. Accordingly, in
light of these risks and based on their evaluation of the claims and their substantial experience, counsel for Plaintiff has determined that the Settlement, which confers substantial benefits upon the Company and its stockholders, is fair,
reasonable and adequate, and in the best interests of the Company and its stockholders. 
 Z. Defendants have vigorously denied, and
continue vigorously to deny, all allegations of wrongdoing, fault, liability or cognizable damage to the Company, deny that they engaged in any wrongdoing, deny that they committed any violation of law, deny that they acted improperly in any way,
believe that they acted properly at all times, believe the Derivative Action has no merit, and maintain that they have committed no disclosure violations or any other breach of duty whatsoever. Defendants are entering into this Settlement solely
because they consider it desirable that the Derivative Action be settled and dismissed with prejudice in order to, among other things, (i) eliminate the burden, inconvenience, expense, uncertainty and distraction of further litigation; and
(ii) finally put to rest all claims that were or could have been asserted against Defendants in the Derivative Action. 

  
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 AA. Based on the foregoing, the Parties believe that it is reasonable and appropriate to seek
approval of the Settlement by the Court based upon the terms set forth herein and the benefits and protections to be provided thereby. 

NOW THEREFORE, IT IS STIPULATED AND AGREED, subject to approval by the Court pursuant to Federal Rule of Civil Procedure 23.1, by and
between the undersigned counsel for the Parties, in consideration of the benefits flowing to the Parties from, and as described in, the Settlement, that all Released Claims (as defined below) shall be and hereby are fully and finally compromised,
settled, released and discontinued, and that the Derivative Action shall be dismissed with prejudice on the merits and without costs (except as provided herein) as to all Released Parties upon the terms and conditions herein. 

CERTAIN DEFINITIONS 

In addition to the terms defined above, the following additional terms shall have the meanings specified below: 

1. “Final Approval” of the Settlement means the date, following the Court’s entry of the Order and Final Judgment, on
which the Order and Final Judgment is final and no longer subject to appeal or further review, whether as a result of affirmance on or exhaustion of any possible appeal or review, lapse of time or otherwise, provided, however, and
notwithstanding any provision to the contrary in this Settlement, Final Approval of the Settlement shall not include, and the Settlement is expressly not conditioned upon, the approval of an application for attorneys’ fees and the reimbursement
of expenses to Lead Counsel as contemplated below or any appeal or further review related thereto. 
 2. “Notice” means the
Notice of Settlement of Stockholder Derivative Litigation, substantially in the form attached hereto as Exhibit C. 

  
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 3. “Notice Costs” means the costs and expenses incurred in providing notice of the
Settlement to Company stockholders. 
 4. “Order and Final Judgment” means an order entered by the Court, substantially in the
form attached hereto as Exhibit D, finally approving the Settlement and dismissing the Derivative Action with prejudice on the merits and without costs to any party (except as provided in Paragraphs 18 and 22 below). 

5. “Person” means any individual, corporation, professional corporation, limited-liability company, partnership, limited
partnership, limited-liability partnership, association, joint-stock company, estate, legal representative, trust, unincorporated association, government or any political subdivision or agency thereof, and any business or legal entity and their
spouses, heirs, predecessors, successors, representatives or assignees. 
 6. “Preliminary Approval Order” means an order entered
by the Court, substantially in the form attached hereto as Exhibit B, setting forth the date for a Settlement Hearing on the proposed Settlement, directing notice thereof and preliminarily determining, for purposes of the Settlement only, that the
Derivative Action is properly maintained as shareholder derivative action on behalf of the Company. 
 7. “Released Claims” means
any and all manner of claims, demands, rights, liabilities, losses, obligations, duties, damages, costs, debts, expenses, interest, penalties, sanctions, fees, attorneys’ fees, actions, potential actions, causes of action, suits, actions taken
pursuant to the Stipulation, agreements, judgments, decrees, matters, issues and controversies of any kind, nature or description whatsoever, whether known or unknown, disclosed or undisclosed, accrued or unaccrued, apparent or not apparent,
foreseen or unforeseen, matured or not matured, suspected or unsuspected, liquidated or not liquidated, fixed or contingent, including Unknown Claims (defined below), whether based on state, local, foreign, federal, statutory, regulatory, common or
other law or rule, brought or that could be brought derivatively or otherwise by or on behalf of the Company against any of the Released Parties (defined below), which now or hereafter are based upon, arise out of, relate in any way to, or involve,
directly or indirectly, any of the actions, transactions, occurrences, statements, representations, misrepresentations, omissions, allegations, facts, practices, events, claims or any other matters, things or causes whatsoever, or any series
thereof, that are, were, could have been, or in the future can or might be alleged, asserted, set forth, claimed, embraced, involved or referred to in the Derivative Action; provided, however, that the Released Claims shall not include claims to
enforce this Settlement. For the avoidance of doubt, the Released Claims do not include any direct claims on behalf of present or former Company stockholders that are being prosecuted in the Securities Class Action. 

  
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 8. “Released Parties” means (i) the Defendants, including the Individual
Defendants Donald G. Basile, Cory J. Sindelar, Dixon R. Doll, Jeffery J. Newman, Howard A. Bain III, Lawrence J. Lang, David B. Walrod, and Mark N. Rosenblatt, and the nominal defendant Violin Memory; (ii) all other current and former
employees, officers, directors and advisers of the Company; and (iv) for each and all of the foregoing persons or entities (but only to the extent such persons are released as provided above), any and all of their respective past or present
insurers, reinsurers, family members, spouses, heirs, trusts, trustees, executors, estates, administrators, beneficiaries, distributees, foundations, agents, employees, fiduciaries, partners, partnerships, general or limited partners or
partnerships, joint ventures, member firms, limited-liability companies, corporations, parents, subsidiaries, divisions, affiliates, associated entities, stockholders, principals, officers, managers, directors, managing directors, members, managing
members, managing agents, predecessors, predecessors-in-interest, successors, successors-in-interest, assigns, financial or investment advisors, advisors, consultants, investment bankers, entities providing any fairness opinion, underwriters,
brokers, dealers, lenders, commercial bankers, attorneys, personal or legal representatives, accountants and associates. 

  
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 9. “Releases” means the releases set forth in Paragraphs 13 and 14 below. 

10. “Settlement Hearing” means the hearing at which the Court will review the adequacy, fairness and reasonableness of the
Settlement and determine whether to issue the Order and Final Judgment. 
 11. “Unknown Claims” means any claims of Plaintiff or
the Company or any Company stockholder that he, she or it does not know or suspect exist in his, her or its favor at the time of the release of the Released Claims as against the Released Parties, including without limitation those which, if known,
might have affected the decision to enter into or object to the Settlement. 
 SETTLEMENT CONSIDERATION 

12. In connection with the Settlement, the Company has agreed to implement a program of corporate-governance reforms described in Exhibit A
hereto that represent the Parties’ agreed-upon efforts to address the allegations set forth in the complaints in the Derivative Action and Plaintiff believes is tailored to address the allegations made in the Derivative Action. 

RELEASES 
 13. Upon
Final Approval, Plaintiff, the Company and by operation of law the Company’s stockholders shall and hereby do completely, fully, finally, and forever release, relinquish, settle, and discharge each and all of the Released Parties from and with
respect to any and all of the Released Claims, and will be forever barred and enjoined from commencing, instituting or prosecuting any action or proceeding, in any forum, asserting any of the Released Claims against any of the Released Parties.
Except as otherwise expressly provided in this Stipulation, none of the Released Parties shall be required to make any payment or other financial contribution to the Settlement. 

  
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 14. Upon Final Approval, Defendants, individually and collectively, shall and hereby do
completely, fully, finally and forever release, relinquish, settle, and discharge Plaintiff and Plaintiff’s counsel from and with respect to any and all claims arising out of or relating to the initiation, prosecution, and resolution of the
Derivative Action, excepting any claim to enforce the Stipulation or Settlement. 
 EFFECT OF RELEASES 

15. The Released Claims include any and all Unknown Claims. With respect to any of the Released Claims, the Parties stipulate and agree that
upon Final Approval of the Settlement, Plaintiff and the Company shall have, and each Company stockholder shall be deemed to have, and by operation of the final order and judgment by the Court shall have, expressly waived, relinquished and released
any and all provisions, rights and benefits conferred by or under California Civil Code § 1542 or any law or principle of common law of the United States or any state or territory of the United States or any foreign nation which is similar,
comparable or equivalent to California Civil Code § 1542, which provides: 
 “A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” 

  
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 Plaintiff and the Company acknowledge, and all Company stockholders by operation of law shall be deemed to have
acknowledged, that they may discover facts in addition to or different from those now known or believed to be true with respect to the Released Claims, but that it is the intention of Plaintiff, the Company and all Company stockholders by operation
of law, to completely, fully, finally and forever extinguish any and all Released Claims, known or unknown, suspected or unsuspected, which now exist, heretofore existed or may hereafter exist, and without regard to the subsequent discovery of
additional or different facts. Plaintiff and the Company acknowledge, and all Company stockholders by operation of law shall be deemed to have acknowledged, that the inclusion of “Unknown Claims” in the definition of “Released
Claims” was separately bargained for, was a material element of the Settlement, and was relied upon by each and all of Defendants in entering into the Settlement Agreement. 

PRELIMINARY APPROVAL 

16. As soon as practicable after the Stipulation has been executed, the Parties shall jointly submit this Stipulation, together with its
related documents, to the Court and request entry of the Preliminary Approval Order: (a) preliminarily determining that the Derivative Action is properly brought as shareholder derivative action; (b) preliminarily approving the Settlement;
(c) setting a date for hearing of a motion for final approval of the Settlement and Plaintiff counsel’s application for an award of attorneys’ fees and expenses; (d) directing the form and manner of Notice to stockholders of the
Settlement and of their right to object; (e) setting dates for the receipt of objections and the filing of final approval papers; (f) staying all proceedings in the Derivative Action except as may be necessary to implement the Settlement;
and (g) granting such other and further relief as the Court deems just and proper. 

  
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 NOTICE 

17. Notice of the proposed Settlement shall be provided to Company stockholders in the following manner (or in such other manner directed by
the Court): (i) the Company shall cause the Stipulation to be filed with the Securities and Exchange Commission on Form 8-K; (ii) the Company shall post a link to the Stipulation and Notice on the Company’s website;
(iii) Plaintiff’s Counsel shall publish the Notice through a national wire service; and (iv) and counsel for Plaintiff shall post the Notice on its website. 

18. The Company shall bear all Notice Costs related to promulgating notice in the manner set forth in items (i) and (ii) in
Paragraph 17 above. Counsel for Plaintiff shall bear all Notice Costs related to promulgating notice in the manner set forth in items (iii) and (iv) in Paragraph 17 above. 

DISMISSAL WITH PREJUDICE 

19. If the Settlement is approved by the Court, the Parties shall jointly and promptly request that the Court enter the Order and Final
Judgment in the Derivative Action substantially in the form attached hereto as Exhibit D. 
 CONDITIONS OF SETTLEMENT 

20. The Settlement (including the Releases given pursuant to the terms of this Stipulation) shall be null and void and of no force and effect,
unless otherwise agreed by the Parties in accordance with Paragraph 41 herein, if: (i) the Court does not enter the Order and Final Judgment; (ii) the Derivative Action is not dismissed with prejudice against all Defendants, without the
award of any damages, costs, fees or the grant of further relief; or (iii) the Settlement does not obtain Final Approval for any reason. In addition, Defendants shall have the right in their sole discretion to terminate this Settlement in the
event that any Released Claim is commenced or prosecuted against any of the Released Parties in any court prior to Final Approval of the Settlement and (following a motion by any Defendant) is not dismissed with prejudice or stayed pending Final
Approval of the Settlement. In the event of such termination, this Stipulation shall be deemed null and void (except as provided in Paragraph 28 below). The Parties shall be deemed to be in the respective positions they were in prior to the
execution of this Stipulation. 

  
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 ATTORNEYS’ FEES 

21. If the Court approves the terms of the Stipulation as provided herein, including any modifications thereto made with consent of the
Parties, Plaintiff’s Counsel intends to apply to the Court for an award of attorneys’ fees and expenses (the “Fee and Expense Amount”). Defendants agree that Plaintiff’s counsel is entitled to an award of reasonable
attorneys’ fees and expenses from the Company. Court approval of such fee application is not a condition of this Settlement, and such fee application may be considered separately from the proposed Settlement. 

22. The Fee and Expense Amount as awarded by the Court shall be shall be payable by the Defendants or its insurer(s) to Plaintiff’s
Counsel within ten (10) business days after the later of (a) the date of entry by the Court of the final order awarding such attorneys’ fees or expenses, or (b) the receipt by Defendants’ counsel of wire/check payee
instructions and a Form W-9 providing the tax identification number for Plaintiff’s Counsel. 
 23. Plaintiff’s counsel may also
submit an application to the Court for the awarding of an incentive amount of up to $5,000 for Plaintiff to be paid from the Fee and Expense Amount as may be awarded by the Court. 

24. Neither the resolution of, nor any ruling regarding, the fee application or any award of attorneys’ fees and expenses shall be a
precondition to the Settlement or the dismissal of the Derivative Action with prejudice and entry of the Order and Final Judgment in accordance with the terms of the Stipulation. The Court may consider and rule upon the fairness, reasonableness and
adequacy of the Settlement independently of the fee application and any fee award, and any failure of the Court to approve the fee application in whole or in part shall have no impact on the effectiveness of the Settlement. Notwithstanding anything
in this Stipulation to the contrary, the effectiveness of the Releases and the other obligations of the Parties under the Settlement (except with respect to the payment of attorneys’ fees and expenses) shall not be conditioned upon or subject
to the resolution of any appeal from any order, if such appeal relates solely to the issue of any award of attorneys’ fees or the reimbursement of expenses. 

  
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 COOPERATION 

25. The Parties and their respective counsel agree to cooperate fully with one another in seeking the Court’s approval of the Settlement
and to use their best efforts to effect the consummation of this Stipulation and the Settlement (including, but not limited to, resolving any objections raised with respect to the Settlement). 

26. The Parties may agree to reasonable extensions of time to carry out any of the provisions of this Stipulation to the extent that such
deadlines have not been so ordered by the Court. 
 27. If any of the Released Claims are asserted or continue to be litigated against any
of the Released Parties in any court prior to Final Approval of the Settlement, Plaintiff and his counsel shall join, if requested by Defendants, in any motion to dismiss or stay such proceedings and otherwise shall use their best efforts to
cooperate with Defendants to effect a withdrawal or dismissal of the claims. 

  
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 STIPULATION NOT AN ADMISSION 

28. The existence of this Stipulation, its contents and any negotiations, statements or proceedings in connection therewith will not be
argued to be, and will not be construed or deemed to be, a presumption, concession or admission by any of the Released Parties or any other person of any fault, liability or wrongdoing as to any facts or claims alleged or asserted in the Derivative
Action or otherwise or that the Company, Plaintiff, Plaintiff’s counsel or any present or former stockholders of the Company or any other person, have suffered any damage attributable in any manner to any of the Released Parties. Nor shall the
existence of this Stipulation and its contents or any negotiations, statements or proceedings in connection therewith be construed as a presumption, concession or admission by Plaintiff or Plaintiff’s counsel of any lack of merit of the
Released Claims, or that the Company has not suffered cognizable damages caused by Defendants. The existence of the Stipulation, its contents or any negotiations, statements or proceedings in connection therewith, shall not be offered or admitted in
evidence or referred to, interpreted, construed, invoked or otherwise used by any person for any purpose in the Derivative Action or otherwise, except as may be necessary to effectuate the Settlement. This provision shall remain in force in the
event that the Settlement is terminated for any reason whatsoever. Notwithstanding the foregoing, any of the Released Parties may file the Stipulation or any judgment or order of the Court related hereto in any other action that may be brought
against them, in order to support any and all defenses or counterclaims based on res judicata, collateral estoppel, release, good-faith settlement, judgment bar or reduction or any other theory of claim preclusion or issue preclusion or
similar defense or counterclaim. 

  
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 NO WAIVER 

29. Any failure by any party to insist upon the strict performance by any other party of any of the provisions of this Stipulation shall not
be deemed a waiver of any of the provisions hereof, and such party, notwithstanding such failure, shall have the right thereafter to insist upon the strict performance of any and all of the provisions of this Stipulation by such other party. 

30. No waiver, express or implied, by any party of any breach or default in the performance by the other party of its obligations under this
Stipulation shall be deemed or construed to be a waiver of any other breach, whether prior, subsequent, or contemporaneous, under this Stipulation. 

AUTHORITY 
 31.
This Stipulation will be executed by counsel to the Parties, each of whom represents and warrants that he or she has been duly authorized and empowered to execute this Stipulation on behalf of such party, and that it shall be binding on such party
in accordance with its terms. 
 SUCCESSORS AND ASSIGNS 

32. This Stipulation is, and shall be, binding upon, and inure to the benefit of, the Parties and their respective agents, executors,
administrators, heirs, successors and assigns; provided, however, that no Party shall assign or delegate its rights or responsibilities under this Stipulation without the prior written consent of the other Parties. 

GOVERNING LAW AND FORUM 

33. This Stipulation, and any dispute arising out of or relating in any way to this Stipulation, whether in contract, tort or otherwise, shall
be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict-of-laws principles. Each of the Parties: (i) irrevocably submits to the personal jurisdiction of any state or federal court sitting in
Alameda County, California as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, in any suit, action or proceeding arising out of or relating to this Stipulation and/or the Settlement; (ii) agrees that
all claims in respect of such suit, action or proceeding shall be brought, heard and determined exclusively in the Court (provided that, in the event that subject-matter jurisdiction is unavailable in the federal court, then all such claims shall be
brought, heard and determined exclusively in any state court sitting in Alameda County, California); (iii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from such court;
(iv) agrees not to bring any action or proceeding arising out of or relating to this Stipulation in any other court; and (v) EXPRESSLY WAIVES THE RIGHT TO A JURY TRIAL, AND AGREES NOT TO PLEAD OR TO MAKE ANY CLAIM THAT ANY SUCH ACTION OR
PROCEEDING IS SUBJECT (IN WHOLE OR IN PART) TO A JURY TRIAL. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding brought in accordance with this paragraph. Each of the Parties further agrees to
waive any bond, surety or other security that might be required of any other Party with respect to any such action or proceeding, including an appeal thereof. Each of the Parties further consents and agrees that process in any such suit, action or
proceeding may be served on such Party by certified mail, return receipt requested, addressed to such Party or such Party’s registered agent in the state of its incorporation or organization, or in any other manner provided by law, and in the
case of Plaintiff by giving such written notice to Plaintiff’s counsel at their address set forth in the signature blocks below. 

  
 19 

 WARRANTY 

34. Plaintiff’s counsel warrants that (i) their client has been a continuous stockholder of the Company at all times relevant to the
allegations in the Derivative Action and through the date of this Stipulation; and (ii) none of the Released Claims has been assigned, encumbered or in any manner transferred in whole or in part, and that they and their client will not attempt
to assign, encumber or in any manner transfer in whole or in part any of the Released Claims. 
 35. Each party represents and warrants that
the party has made such investigation of the facts pertaining to the Settlement provided for in this Stipulation, and all of the matters pertaining thereto, as the party deems necessary and advisable. 

ENTIRE AGREEMENT 

36. This Stipulation and the attached exhibits constitute the entire agreement among the Parties with respect to the subject matter hereof,
supersede all prior or contemporaneous oral or written agreements, understandings or representations. All of the exhibits hereto are incorporated by reference as if set forth herein verbatim, and the terms of all exhibits are expressly made part of
this Stipulation. 
 INTERPRETATION 

37. Each term of this Stipulation is contractual and not merely a recital. 

38. This Stipulation will be deemed to have been mutually prepared by the Parties and will not be construed against any of them by reason of
authorship. 
 39. Section and/or paragraph titles have been inserted for convenience only and will not be used in construing the terms of
this Stipulation. 
 40. The terms and provisions of this Stipulation are intended solely for the benefit of the Parties, and their
respective successors and permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights or remedies upon any other person or entity, except with respect to (a) any attorneys’ fees and expenses to be
paid to counsel pursuant to the terms of this Stipulation; and (b) the Released Parties who are not signatories hereto, and who shall be third-party beneficiaries under this Stipulation entitled to enforce it in accordance with its terms. 

  
 20 

 AMENDMENTS 

41. This Stipulation may not be amended, changed, waived, discharged or terminated (except as explicitly provided herein), in whole or in
part, except by an instrument in writing signed by the parties to this Stipulation. Any such written instrument signed by the parties to this Stipulation shall be effective upon approval of the Court, without further notice to Company stockholders,
unless the Court requires such notice. 
 COUNTERPARTS 

42. This Stipulation may be executed in any number of actual, telecopied or electronically mailed counterparts and by each of the different
parties on several counterparts, each of which when so executed and delivered will be an original. This Stipulation will become effective when the actual or telecopied counterparts have been signed by each of the parties to this Stipulation and
delivered to the other parties. The executed signature page(s) from each actual, telecopied or electronically mailed counterpart may be joined together and attached and will constitute one and the same instrument. 

IN WITNESS WHEREOF, the parties have caused this Stipulation, dated as of June 29, 2016, to be executed by their duly authorized
attorneys. 

  
 21 

 KAHN SWICK & FOTI, LLC 

By:             /s/ Melinda
Nicholson                 
 Melinda A. Nicholson 

206 Covington Street 
 Madisonville, LA 70447 

Telephone: (504) 455-1400 
 Facsimile: (504) 455-1498

 melinda.nicholson@ksfcounsel.com 

michael.palestina@ksfcounsel.com 
 Counsel for
Plaintiff Troy Lowry 

  
 22 

 ORRICK HERRINGTON & SUTCLIFFE LLP 

By:             /s/ M. Todd
Scott                 
 James N. Kramer 

M. Todd Scott 
 405 Howard St. 

San Francisco, CA 94105 
 (415) 773-5700 

jkramer@orrick.com 
 tscott@orrick.com 

Counsel for Individual Defendants 
 Donald G. Basile,
Cory J. Sindelar, 
 Dixon R. Doll, Jeffery J. Newman, 

Howard A. Bain III, Lawrence J. Lang, 
 David B. Walrod,
and Mark N. Rosenblatt, 
 and nominal defendant Violin Memory, Inc. 

  
 23 

 Exhibit A 

CORPORATE GOVERNANCE TERMS 
 Within
ninety days following approval of the Settlement, the Company’s Board of Directors will affirm and implement the corporate governance and internal controls set forth below, which will remain in effect for no less than ten years following the
Settlement’s effective date. 
  

	I.	CORPORATE GOVERNANCE REFORMS 

  

	 	A.	Stockholder Proposals 

 All stockholder proposals shall be evaluated by a
committee of at least three independent directors, with the assistance of outside advisors, if necessary, to determine whether such holder proposal is in the best interests of the Company. The committee shall recommend to the Board for or against
such stockholder proposals and the reasons for such a recommendation. The Board shall recommend for or against such proposal and the reasons for such recommendation in a proxy statement. 

 

	 	B.	Board of Directors: 

  

	 	1.	Board Independence 

 The Company’s Corporate Governance Guidelines shall be amended
to provide that at least a majority of the Board shall be comprised of Independent Directors and that a director will be deemed to be independent only if he or she meets the independence requirements of the New York Stock Exchange or the appropriate
NASDAQ stock market, as applicable. 
  

	 	2.	Limited Director and Committee Engagements 

 The Company shall require that: (i) no
director may serve simultaneously on the boards of more than four public companies, and (ii) directors shall not serve on more than two committees of the Board, to help ensure that each director fulfills his or her fiduciary oversight duties by
devoting sufficient attention to the Company’s business and operations. 
  

	 	3.	Director Orientation and Continuing Education 

 The Company’s Corporate Governance
Guidelines shall be amended to provide that, within one year of their election or appointment, all new members of the Board must participate in a total of eight (8) hours of programs on Corporate Governance Guidelines and Best-in-Class
Practices, unless the new member participated in an equivalent program during the three years prior to joining the Board. In addition, annually every member of the Board and senior officers shall participate in a total of four (4) hours of
programs on Corporate Governance Guidelines and Best-in-Class Practices. The Company shall make reasonable efforts to arrange for participation in programs including, to the extent possible, modules directed to the issues of compliance with law and
regulation, disclosures to shareholders, and fiduciary duties in the context of a heavily regulated public company, including coverage of compliance with Generally Accepted Accounting Principles (“GAAP”), the Sarbanes Oxley Act, corporate
governance, assessment of risk, compliance auditing, and reporting requirements for publicly-traded corporations. 

	 	4.	Director Term Limits 

 The Company’s Corporate Governance Guidelines shall be
amended to provide that no person shall serve as a member of the Violin Memory Board for more than ten (10) years. 
  

	 	5.	Meetings in Executive Session 

 The Company’s Corporate Governance Guidelines shall
be amended to provide that the Company shall continue to comply with the executive session requirements of the New York Stock Exchange or the appropriate NASDAQ stock market, as applicable. 

 

	 	6.	Disclosure Committee 

 The Company will formalize its Disclosure Committee
(“Disclosure Committee”) by adopting a Disclosure Committee Charter. The Disclosure Committee members shall consist of the Company’s CEO, Chief Financial Officer, Senior Vice Presidents, General Counsel and Secretary, Vice President
and Corporate Controller, Assistant Corporate Controller, Director of Internal Audit, and other officers and/or representatives as the Company may determine from time to time. 

The Disclosure Committee will be responsible for effective procedures and protocols to ensure that all of the Company’s public
statements, including but not limited to SEC filings, public announcements, and statements to non-Company individuals at public or private meetings, are in compliance with applicable law. The Disclosure Committee will continue to conduct regular
meetings prior to the filing of each annual and quarterly report pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and ad-hoc meetings from time to time as directed by the Disclosure Committee Chairperson.
The Disclosure Committee Chairperson shall report at least quarterly to the Audit Committee and at least annually to the full Board. 
 The
responsibilities of the Disclosure Committee shall include: 
  

	 	a.	maintaining controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act and other information that the
Company may disclose to the public is recorded, processed, summarized, and reported accurately and within the time periods specified in the SEC’s rules and forms; 

 

	 	b.	continuing to design, implement, and monitor the Company’s disclosure controls and procedures; 

  
 2 

	 	c.	continuing to evaluate the effectiveness of the Company’s disclosure controls and procedures as of the end of each fiscal quarter and year-end; 

 

	 	d.	continuing to review the Company’s Exchange Act filings, correspondence to stockholders, and presentations to analysts and investors; 

 

	 	e.	review each Exchange Act report prior to filing with the SEC to assess the quality and completeness of the disclosures and whether the report is accurate and complete in all material respects; and 

 

	 	f.	evaluate the materiality of information and events relating to or affecting the Company, and determine the timing and appropriate method of disclosure of information deemed material. 

 

	 	C.	Audit Committee 

 The Audit Committee Charter shall be revised as follows: 

 

	 	1.	Composition and Number of Meetings 

 The Audit Committee Charter shall be revised to
require that at least two members of the Audit Committee possess the expertise requirements for audit committee members of the SEC, the New York Stock Exchange or the appropriate NASDAQ stock market, as applicable. The Audit Committee Charter also
shall be revised to require that the Audit Committee shall meet, at a minimum, at least eight times annually, including prior to the filing of each of the Company’s periodic reports pursuant to the Exchange Act. 

 

	 	2.	Additional Changes to Audit Committee Charter 

 The Audit Committee shall oversee the
work of the Disclosure Committee. The Audit Committee shall review such ad hoc reports that management may make from time to time and shall meet with one or more representatives of the Disclosure Committee at least once each quarter and more
frequently if necessary to effectively supervise the Company’s disclosure function and specific disclosure issues of particular importance. 
  

	 	D.	Compensation Committee 

 The Board shall adopt a resolution setting forth the
following amendment to the Compensation Committee Charter: The Compensation Committee shall recommend for review by the Board annual and long-term performance goals for the CEO, and compensation will be based on whether those performance goals are
achieved. 

  
 3 

	 	E.	Claw-Backs 

 The Company shall comply with any applicable “claw back”
rules or regulations of the SEC, the New York Stock Exchange, or the appropriate NASDAQ stock market, as applicable. 
  

	 	F.	Forfeiture of Bonuses and Profits for Restatements  

 The Company shall comply
with any applicable rules and regulations relating to restatements of financial statements of the SEC, the NYSE, or the appropriate NASDAQ stock market, as applicable. 
  

	 	G.	Insider Trading Policy 

 The Company will disclose its insider trading policy by
posting it on the Company’s external website. 
  

	 	H.	Annual Compliance Training; Log of Whistleblower Complaints 

 At least once a
year, the Company shall conduct training for the Company’s employees regarding the Company’s Code of Business Conduct and Ethics. Such training shall be conducted in a manner to be determined by the Company. Additionally, the Company shall
maintain a log of all Anonymous Hotline complaints and report to the Chairman of the Audit Committee for a period of at least five years. 
 II.
PLAINTIFF’S EFFORTS CAUSED THE CORRECTIVE CHANGES  
 As a condition to the parties’ settlement discussions, Defendants
will acknowledge that Plaintiff’s actions were the primary cause of the following changes made to the Company’s governance policies in response to Plaintiff’s efforts in prosecuting this Action: 

 

	 	a.	Updated Compensation Committee Charter; 

  

	 	b.	Revised Corporate Governance Guidelines; 

  

	 	c.	Revised Insider Trading and Communications Policy. 

  
 4 

 Exhibit B 

UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 
  

			
	 TROY LOWRY, derivatively on behalf of

VIOLIN MEMORY, INC.
  

Plaintiff,
  

vs.
  

DONALD G. BASILE, CORY J. SINDELAR,
 DIXON R. DOLL, JR., JEFFERY
J.
 NEWMAN, HOWARD ALLEN BAIN III,
 LAWRENCE J. LANG, DAVID B.
WALROD
 and MARK N. ROSENBLATT,
  

Defendants,
  

-and-
  

VIOLIN MEMORY, INC.,
  

Nominal Defendant
  
	  	  
 CASE NO.: 4:13-cv-05768-YGR

 ORDER SETTING SCHEDULE AND 

PRELIMINARILY APPROVING PROPOSED SETTLEMENT 

The parties to the above-styled shareholder derivative action (the “Derivative Action”), currently pending before the United States
District Court for the Northern District of California (the “Court”), having applied pursuant to Federal Rule of Civil Procedure 23.1 for an order preliminarily approving the proposed settlement of the Derivative Action in accordance with
the Stipulation and Agreement of Compromise, Settlement and Release entered into by the parties on June 29, 2016 (the “Stipulation”), upon the terms and conditions set forth therein (the “Settlement”); the Court having read
and considered the Stipulation and accompanying documents; and all parties having consented to the entry of this Order, 
 NOW,
THEREFORE, IT IS HEREBY ORDERED that: 
 1. Except for terms defined herein, the Court adopts and incorporates the
definitions in the Stipulation for purposes of this Order. 

 2. The Court preliminarily approves the Settlement, as embodied in the Stipulation and the
exhibits attached thereto, as fair, reasonable and adequate, pending a final hearing on the proposed Settlement as provided herein. 
 3.
For the purposes of the proposed Settlement only, the Court preliminarily finds that the Derivative Action was properly brought as a derivative action for and on behalf of Violin Memory, Inc. (“Violin Memory” or the “Company”)
and that Plaintiff fairly and adequately represents the interests of Violin Memory stockholders (“Company Stockholders”) similarly situated in enforcing the rights of the Company. 

4. Plaintiff’s counsel is authorized to act on behalf of Company Stockholders with respect to all acts required by the Stipulation or
such other acts which are reasonably necessary to consummate the Settlement set forth in the Stipulation. 
 5. A hearing (the
“Settlement Hearing”) shall be held on October 25, 2016 at 2:00 p.m., Pacific Time, at the United States District Court for the Northern District of California, Oakland Courthouse, Courtroom 1 – 4th Floor, 1301 Clay Street, Oakland, California 94612, to: 
  

	 	a.	determine whether the Settlement should be approved as fair, reasonable and adequate; 

  

	 	b.	determine whether an Order and Final Judgment should be entered dismissing the Derivative Action with prejudice; 

  

	 	c.	determine whether counsel for Plaintiff’s application for attorneys’ fees and expenses should be approved; and 

  

	 	d.	rule on such other matters as the Court may deem appropriate. 

 6. The Court reserves the right
to (i) approve the Settlement at or after the Settlement Hearing with such modification(s) as may be consented to by the parties to the Stipulation and without further notice to Company Stockholders; and (ii) adjourn the Settlement Hearing
or any adjournment thereof, without further notice of any kind to Company Stockholders. 

  
 2 

 7. Within ten (10) business days following entry of this Order: (i) the Company shall
cause the Stipulation to be filed with the Securities and Exchange Commission on Form 8-K; (ii) the Company shall post a link to the Stipulation and Notice on the Company’s website; (iii) Plaintiff’s Counsel shall publish the
Notice through a national wire service; and (iv) and counsel for Plaintiff shall post the Notice on its website. The costs of such forms of notice reflected above shall be borne in accordance with the terms of the Stipulation. The Parties
shall, at or before the Final Hearing, file with the Court proof of publication of the required notice. 
 8. The Court approves, in form
and substance, the Notice, and finds that the form and method of notice specified herein constitutes the best notice practicable under the circumstances, constitutes due and sufficient notice of the Settlement Hearing to all persons entitled to
receive such notice and fully satisfies the requirements of due process, Federal Rule of Civil Procedure 23.1 and applicable law. 
 9. All
proceedings and pending deadlines in the Derivative Action, other than such proceedings as may be necessary to effectuate the terms and conditions of the Settlement, are hereby stayed and suspended until further order of this Court. 

  
 3 

 10. Any Company Stockholder who objects to any aspect of the Settlement or the Order and Final
Judgment to be entered in the Derivative Action, may appear in person or by his or her attorney at the Settlement Hearing and present evidence or argument that may be proper and relevant; provided, however, that, except for good cause shown,
no person other than Counsel for Plaintiff, and counsel for Defendants and the Company shall be heard and no papers, briefs, pleadings or other documents submitted by any Company Stockholder shall be considered by the Court unless, not later than
twenty-one (21) days prior to the Settlement Hearing directed herein, or by October 4, 2016: (i) a statement of the objections by the Company Stockholder to the proposed Settlement of the above-captioned action; (ii) the grounds
for such objections; and (iii) proof of ownership of Company common stock, as well as all documents or writings such person desires the Court to consider, are filed by such person with the Court, and, on or before such filing, are served by
hand or mail on the following: 
  

			
	Counsel for Plaintiff:	    	 KAHN SWICK & FOTI, LLC
 Melinda A.
Nicholson
 206 Covington Street
 Madisonville, LA
70447

		
	Counsel for the Individual Defendants and the Company:	    	 ORRICK HERRINGTON & SUTCLIFFE LLP
 James N.
Kramer
 M. Todd Scott
 405 Howard St.

San Francisco, CA 94105

 11. Any Company Stockholder who fails to object in the manner described above shall be deemed to have waived
the right to object (including any right of appeal) and shall be forever barred from raising such objection in this or any other action or proceeding unless the Court orders otherwise. 

12. All papers in support of the Settlement or the award of attorneys’ fees and expenses shall be filed and served fourteen
(14) days prior to the deadline for Company Stockholders to object to the Settlement, or by September 20, 2016, and all reply papers shall be filed and served seven (7) calendar days before the Settlement Hearing, or by
October 18, 2016. 
 13. If the Settlement is approved by the Court following the Settlement Hearing, an Order and Final Judgment will
be entered as described in the Stipulation. 

  
 4 

 14. If the Settlement, including any amendment made in accordance with the Stipulation, is not
approved by the Court or shall not become effective for any reason whatsoever, the Settlement (including any modification thereof made with the consent of the parties as provided for in the Stipulation), and certifications herein and any actions
taken or to be taken in connection therewith (including this Order and any judgment entered herein) shall be terminated and shall become void and of no further force and effect, except for the Company’s, Plaintiff’s and Plaintiff’s
counsel’s obligations to pay, in accordance with the terms of the Stipulation, expenses incurred in connection with provision of the notice prescribed by this Order. In that event, neither the Stipulation, nor any provision contained in the
Stipulation, nor any action undertaken pursuant thereto, nor the negotiation thereof by any party, shall be deemed an admission, concession or received as evidence in this or any other action or proceeding. 

15. The existence of the Stipulation, its contents, and any negotiations, statements, or proceedings in connection therewith will not be
argued to be, and will not be construed or deemed to be, a presumption, concession or admission by any of the Released Parties or any other person of any fault, liability or wrongdoing as to any facts or claims alleged or asserted in the Derivative
Action or otherwise or that the Company, Plaintiff, Plaintiff’s counsel or any present or former stockholders of the Company or any other person, have suffered any damage attributable in any manner to any of the Released Parties. Nor shall the
existence of the Stipulation and its contents or any negotiations, statements or proceedings in connection therewith be construed as a presumption, concession or admission by Plaintiff or Plaintiff’s counsel of any lack of merit of the Released
Claims, or that the Company has not suffered cognizable damages caused by Defendants. The existence of the Stipulation, its contents or any negotiations, statements or proceedings in connection therewith, shall not be offered or admitted in evidence
or referred to, interpreted, construed, invoked or otherwise used by any person for any purpose in the Derivative Action or otherwise, except as may be necessary to effectuate the Settlement. Notwithstanding the foregoing, any of the Released
Parties may file the Stipulation or any judgment or order of the Court related hereto in any other action that may be brought against them, in order to support any and all defenses or counterclaims based on res judicata, collateral estoppel,
release, good faith settlement, judgment bar or reduction or any other theory of claim preclusion or issue preclusion or similar defense or counterclaim. 

  
 5 

 16. The Court may, for good cause, extend any of the deadlines set forth in this Order without
further notice to Company Stockholders, and the Court retains jurisdiction to consider all further applications arising out of or connected with the Settlement. 

It is SO ORDERED. 
  

					
			
	Dated: August 23, 2016	 		 	/s/ Yvonne Gonzalez Rogers
		 		 	 HONORABLE YVONNE GONZALEZ ROGERS
 UNITED STATES
DISTRICT JUDGE

  
 6 

 Exhibit C 

UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 
  

			
	 TROY LOWRY, derivatively on behalf of

VIOLIN MEMORY, INC.
  

Plaintiff,
  

vs.
  

DONALD G. BASILE, CORY J. SINDELAR,
 DIXON R. DOLL, JR., JEFFERY
J.
 NEWMAN, HOWARD ALLEN BAIN III,
 LAWRENCE J. LANG, DAVID B.
WALROD
 and MARK N. ROSENBLATT,
  

Defendants,
  

-and-
  

VIOLIN MEMORY, INC.,
  

Nominal Defendant.
  
	  	  
 CASE NO.: 4:13-cv-05768-YGR

 NOTICE OF SETTLEMENT OF STOCKHOLDER DERIVATIVE LITIGATION 

TO: ALL PERSONS WHO OWN SHARES OF VIOLIN MEMORY, INC. (“COMPANY”) COMMON STOCK AS OF JUNE 29, 2016 AND CONTINUE TO OWN SUCH SHARES (“COMPANY
STOCKHOLDERS”): 
 THIS NOTICE IS GIVEN pursuant to an Order of the United States District Court for the United States District Court
for the Northern District of California (the “Court”), to inform you of a proposed stipulated settlement (the “Settlement”) in the above-captioned derivative action (the “Action”). 

Because this is a stockholder derivative action brought for the benefit of Violin Memory, Inc., no individual Company stockholder has
the right to receive any individual compensation as a result of the settlement of this Action. 
 The Action involves breach of
fiduciary and other claims, brought derivatively on behalf of the Company, against certain of its current and former directors and officers (the “Individual Defendants”), asserting that: (i) the Individual Defendants, while acting as
members of the Company’s Board of Directors or as a Company officer, breached their fiduciary duties to the Company by failing to ensure the accurate and timely reporting of the Company’s operating results and financial condition;
(ii) certain Individual Defendants were unjustly enriched through, among other things, the compensation they received from the Company at a time when the Company was experiencing losses; and (iii) the Individual Defendants wasted corporate
assets in connection with certain Individual Defendants’ compensation, the Company’s initial public offering, and the alleged breaches of fiduciary duties. 

 YOU ARE HEREBY NOTIFIED THAT, a hearing will be held on October 25, 2016, at 2:00 p.m.,
before the Honorable Yvonne Gonzales Rogers, at the United States District Court for the Northern District of California, Oakland Courthouse, Courtroom 1 – 4th Floor, 1301 Clay Street,
Oakland, California 94612, for the purpose of determining whether the Settlement should be approved as fair, reasonable and adequate, and to consider other matters, including Plaintiff’s counsel’s application for an award of
attorneys’ fees and expenses in the amount of $280,000 and whether a final judgment dismissing the Action should be entered. 
 In
accordance with the terms of the Settlement, and in consideration for certain broad releases, the Company has agreed to implement certain corporate-governance reforms within ninety days following final approval of the Settlement. These reforms
include: 
 These reforms include: 

(i) the formalization of a disclosure committee, to be overseen by the Audit Committee, and to put effective procedures and protocols in place
at the Company designed to: 
 (a) ensure that all of the Company’s public statements, including but not limited to SEC filings, press
releases, and statements to non-Company individuals at public or private meetings, are vetted for accuracy, integrity, and completeness, and 

(b) for reviewing with management and the Board its ongoing compliance with these protocols and procedures; 

(ii) modifications to the Company’s Corporate Governance Guidelines: 

(a) to limit directors’ service of other public company boards and on multiple committees of the Board; 

(b) to help ensure that each director fulfills his or her fiduciary oversight duties by devoting sufficient attention to the Company’s
business and operations; 
 (c) to impose a term limit on directors of 10 years; and 

(d) to require that a majority of the members of the Board be independent; 

(iii) providing for a formal process for stockholder proposals to be evaluated, including an initial evaluation by a committee of at least
three independent directors; 
 (iv) modifications to the charter of the Company’s Audit Committee to provide that at least two members
of the Audit Committee possess the expertise requirements for audit committee members of the SEC and to require that the Audit Committee shall meet, at a minimum, at least eight times annually; 

(v) institution of director orientation and continuing education; 

(vi) modifications to the Company’s charter for the Compensation Committee to provide that the Compensation Committee shall recommend to
the Board annual and long-term performance goals for the CEO, and compensation will be based on whether those performance goals are achieved; 

(vii) the formalized reporting of any hotline reports to the Chairman of the Audit Committee; 

(viii) disclosure of the Company’s Insider Trading policy; and 

(ix) annual training for the Company’s employee regarding the Company’s Code of Business Conduct and Ethics. 

  
 2 

 Additionally, the Company has made certain changes to the Company’s policies, including the
Compensation Committee Charter, Corporate Governance Guidelines, and Insider Trading and Communications Policy, in response to Plaintiff’s efforts in prosecuting the Action. 

IF YOU ARE AN OWNER OF COMPANY COMMON STOCK, YOUR RIGHTS MAY BE AFFECTED BY THE SETTLEMENT. This notice contains only a summary of the
Action and the terms of the Settlement. If you are a current Company Stockholder, you may obtain a copy the Stipulation of Settlement, by visiting the website http://investor.violin-memory.com. Should you have any other
questions regarding the proposed Settlement or the Action, please contact: 
  

			
	Counsel for Plaintiff:	    	 KAHN SWICK & FOTI, LLC
 Melinda A.
Nicholson
 206 Covington Street
 Madisonville, LA
70447

		
	Counsel for the Individual Defendants and the Company:	    	 ORRICK HERRINGTON & SUTCLIFFE LLP
 James N.
Kramer
 M. Todd Scott
 405 Howard St. San Francisco, CA
94105

 Any objection to the Settlement or to Plaintiff’s application for an award of attorneys’ fees and
expenses must be filed with the Clerk of the Court, United States District Court for the Northern District of California, Oakland Courthouse, 1301 Clay Street, Oakland, California 94612) in this case numbered 4:13-cv-05768-YGR, no later than
October 4, 2016 and served by hand or first class mail (postage prepaid) for delivery by the same date on counsel for Plaintiff (at the address listed below) and on counsel for Defendants (at the address listed below): 

 

			
	Counsel for Plaintiff:	    	 KAHN SWICK & FOTI, LLC
 Melinda A.
Nicholson
 206 Covington Street
 Madisonville, LA
70447

		
	Counsel for the Individual Defendants and the Company:	    	 ORRICK HERRINGTON & SUTCLIFFE LLP
 James N.
Kramer
 M. Todd Scott
 405 Howard St. San Francisco, CA
94105

  
 3 

 PLEASE DO NOT CALL OR WRITE THE COURT REGARDING THIS NOTICE. 

 

			
	DATED: August 23, 2016	  	BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

  
 4 

 Exhibit D 

UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 
  

			
	 TROY LOWRY, derivatively on behalf of

VIOLIN MEMORY, INC.
  

Plaintiff,
  

vs.
  

DONALD G. BASILE, CORY J. SINDELAR,
 DIXON R. DOLL, JR., JEFFERY
J.
 NEWMAN, HOWARD ALLEN BAIN III,
 LAWRENCE J. LANG, DAVID B.
WALROD
 and MARK N. ROSENBLATT,
  

Defendants,
  

-and-
  

VIOLIN MEMORY, INC.,
  

Nominal Defendant.
  
	  	  
 CASE NO.: 4:13-cv-05768-YGR

 [PROPOSED] ORDER AND FINAL JUDGMENT 

A hearing having been held before this Court (the “Court”) on August 23, 2016, pursuant to the Court’s Order of
August 23, 2016 (the “Scheduling and Preliminary Approval Order”), upon a Stipulation and Agreement of Compromise, Settlement and Release, executed on June 29, 2016 (the “Stipulation”), in the above-captioned
stockholder derivative action (the “Derivative Action”); the Scheduling and Preliminary Approval Order and the Stipulation being incorporated herein by reference; it appearing that due notice of said hearing was given in accordance with
the aforementioned Scheduling and Preliminary Approval Order and that said notice was adequate and sufficient; the parties having appeared by their attorneys of record; the attorneys for the respective parties having been heard in support of the
proposed settlement (the “Settlement”) of the Derivative Action; and an opportunity to be heard having been given to all other persons desiring to be heard as provided in the notice; and the entire matter of the Settlement having been
considered by the Court; 

 IT IS HEREBY ORDERED, ADJUDGED AND DECREED, this
         day of                         , 2016, as follows: 

1. Unless otherwise defined herein, all defined terms shall have the meanings as set forth in the Stipulation. 

2. The Notice of Settlement of Stockholder Derivative Litigation has been given to stockholders of Violin Memory, Inc. (the
“Company”) pursuant to and in the manner directed by the Preliminary Approval Order; proof of publication of the required notice was filed with the Court; and full opportunity to be heard has been offered to all parties, Company
stockholders and persons in interest. The form and manner of the notice provided is hereby confirmed to have been the best notice practicable under the circumstances and to have been given in full compliance with each of the requirements of Federal
Rule of Civil Procedure 23.1, due process and applicable law, and it is further determined that all Company stockholders are bound by the Order and Final Judgment herein. 

3. The Court reconfirms that, for settlement purposes only, the Derivative Action is properly maintained as a shareholder derivative action on
behalf of the Company, and that Plaintiff fairly and adequately represented the interests of stockholders similarly situated in enforcing the rights of Company stockholders. Counsel for Plaintiff is authorized to act on behalf of Company
stockholders with respect to all acts required by the Stipulation or such other acts which are reasonably necessary to consummate the Settlement set forth in the Stipulation. 

4. The Settlement is found to be fair, reasonable and adequate, and is hereby approved pursuant to Federal Rule of Civil Procedure 23.1. The
parties to the Stipulation are hereby authorized and directed to comply with and to consummate the Settlement in accordance with its terms and provisions, and the Clerk is directed to enter and docket this Order and Final Judgment in the Action.

  
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 5. This Court has jurisdiction over the subject matter of the Derivative Action, including all
matters necessary to effectuate the Settlement and this Final Judgment and over all parties to the Derivative Action. 
 6. The Derivative
Action and the Released Claims are hereby dismissed on the merits with prejudice as to all Defendants in the Derivative Action and against all Released Parties on the merits and, except as provided below in Paragraph 14, without fees or costs. 

7. “Released Claims” means any and all manner of claims, demands, rights, liabilities, losses, obligations, duties, damages, costs,
debts, expenses, interest, penalties, sanctions, fees, attorneys’ fees, actions, potential actions, causes of action, suits, actions taken pursuant to the Stipulation, agreements, judgments, decrees, matters, issues and controversies of any
kind, nature or description whatsoever, whether known or unknown, disclosed or undisclosed, accrued or unaccrued, apparent or not apparent, foreseen or unforeseen, matured or not matured, suspected or unsuspected, liquidated or not liquidated, fixed
or contingent, including Unknown Claims (defined below), whether based on state, local, foreign, federal, statutory, regulatory, common or other law or rule, brought or that could be brought derivatively or otherwise by or on behalf of the Company
against any of the Released Parties (defined below), which now or hereafter are based upon, arise out of, relate in any way to, or involve, directly or indirectly, any of the actions, transactions, occurrences, statements, representations,
misrepresentations, omissions, allegations, facts, practices, events, claims or any other matters, things or causes whatsoever, or any series thereof, that are, were, could have been, or in the future can or might be alleged, asserted, set forth,
claimed, embraced, involved or referred to in the Derivative Action. For the avoidance of doubt, the Released Claims do not include any direct claims on behalf of present or former Company stockholders that are being prosecuted in the Securities
Class Action. 

  
 3 

 8. “Released Parties” means (i) the Defendants, including the Individual
Defendants Donald G. Basile, Cory J. Sindelar, Dixon R. Doll, Jeffery J. Newman, Howard A. Bain III, Lawrence J. Lang, David B. Walrod, and Mark N. Rosenblatt, and the nominal defendant Violin Memory; (ii) all other current and former
employees, officers, directors and advisers of the Company; and (iii) for each and all of the foregoing persons or entities (but only to the extent such persons are released as provided above), any and all of their respective past or present
family members, spouses, heirs, trusts, trustees, executors, estates, administrators, beneficiaries, distributees, foundations, agents, employees, fiduciaries, partners, partnerships, general or limited partners or partnerships, joint ventures,
member firms, limited-liability companies, corporations, parents, subsidiaries, divisions, affiliates, associated entities, stockholders, principals, officers, managers, directors, managing directors, members, managing members, managing agents,
predecessors, predecessors-in-interest, successors, successors-in-interest, assigns, financial or investment advisors, advisors, consultants, investment bankers, entities providing any fairness opinion, underwriters, brokers, dealers, lenders,
commercial bankers, attorneys, personal or legal representatives, accountants and associates. 
 9. Plaintiff, the Company and by operation
of law all Company stockholders, shall and hereby do completely, fully, finally and forever release, relinquish, settle and discharge each and all of the Released Parties from and with respect to any and all of the Released Claims, and will be
forever barred and enjoined from commencing, instituting or prosecuting any action or proceeding, in any forum, asserting any of the Released Claims against any of the Released Parties. 

  
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 10. Defendants, individually and collectively, shall and hereby do completely, fully, finally and
forever release, relinquish, settle and discharge the Plaintiff and counsel for Plaintiff from and with respect to any and all claims arising out of or relating to the initiation, prosecution and resolution of the Derivative Action, excepting any
claim to enforce the Stipulation or Settlement. 
 11. The Releases include any claims of Plaintiff or the Company or any Company
stockholder that he, she or it does not know or suspect exist in his, her or its favor at the time of the releases of the Released Claims against the Released Parties, including without limitation those which, if known, might have affected the
decision to enter into or to object to the Settlement (“Unknown Claims”). Plaintiff and the Company shall have, and all Company stockholders shall be deemed to have, and by operation of the final order and judgment by the Court shall have,
expressly waived, relinquished and released any and all provisions, rights and benefits conferred by or under California Civil Code § 1542 or any law or principle of common law of the United States or any state or territory of the United States
which is similar, comparable or equivalent to California Civil Code § 1542, which provides: 
 “A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 Plaintiff and the Company acknowledge, and all Company stockholders by operation of law shall be deemed to have acknowledged, that they may discover
facts in addition to or different from those now known or believed to be true with respect to the Released Claims, but that it is the intention of Plaintiff, the Company and all Company stockholders by operation of law, to completely, fully, finally
and forever extinguish any and all Released Claims, known or unknown, suspected or unsuspected, which now exist, heretofore existed or may hereafter exist, and without regard to the subsequent discovery of additional or different facts. Plaintiff
and the Company acknowledge, and all Company stockholders by operation of law shall be deemed to have acknowledged, that the inclusion of “Unknown Claims” in the definition of “Released Claims” was separately bargained for and
was a material element of the Settlement and was relied upon by each and all of Defendants in entering into the Settlement Agreement. 

  
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 12. Plaintiff, the Company and each and every Company stockholder are hereby permanently barred
and enjoined from asserting, commencing, prosecuting, assisting, instigating, continuing or in any way participating in the commencement or prosecution of any action, whether directly, representatively, derivatively or in any other capacity,
asserting any of the Released Claims that are released pursuant to this Order and Final Judgment or under the Stipulation. 
 13. Neither
the Stipulation, the Settlement, this Order and Final Judgment, nor any act performed, statement made or document executed pursuant to or in furtherance of the Settlement is or may be construed or deemed to be, a presumption, concession or admission
(i) by any of the Released Parties or any other person of any fault, liability or wrongdoing as to any facts or claims alleged or asserted in the Derivative Action or otherwise or that the Company, Plaintiff, counsel for Plaintiff, any present
or former stockholders of the Company, or any other person, have suffered any damage attributable in any manner to any of the Released Parties; or (ii) by Plaintiff or counsel for Plaintiff of any lack of merit of the Released Claims, or that
the Company has not suffered cognizable damages caused by Defendants. The existence of the Stipulation and its contents, the Settlement, this Order and Final Judgment or any negotiations, statements or proceedings in connection therewith, shall not
be offered or admitted in evidence or referred to, interpreted, construed, invoked or otherwise used by any person for any purpose in the Derivative Action or otherwise, except as may be necessary to effectuate the Settlement. Notwithstanding the
foregoing, any of the Released Parties may file the Stipulation or any judgment or order of the Court related hereto in any other action that may be brought against them, in order to support any and all defenses or counterclaims based on res
judicata, collateral estoppel, release, good-faith settlement, judgment bar or reduction or any other theory of claim preclusion or issue preclusion or similar defense or counterclaim. 

  
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 14. Counsel for Plaintiff are hereby awarded attorneys’ fees and expenses in the total
amount of $[                    ], which sum the Court finds to be fair and reasonable, and which shall be paid to Counsel for Plaintiff in
accordance with the terms of the Stipulation. Plaintiff is hereby awarded incentive award in the total amount of $[                    ],
which sum shall be paid out of counsel for Plaintiff’s attorneys’ fees and expenses award. 
 15. The effectiveness of the Order
and Final Judgment and the obligations of Plaintiff, counsel for Plaintiff, the Company, Company stockholders and Defendants under the Settlement shall not be conditioned upon or subject to the resolution of any appeal that relates solely to the
issue of attorneys’ fees and expenses. 
 16. The Court further orders, adjudges and decrees that all other relief be, and is hereby,
denied, and that this Order and Final Judgment disposes of all the claims and all the parties in the above-styled and numbered stockholder derivative action. 

17. Without affecting the finality of this Order and Final Judgment in any way, this Court retains jurisdiction over all matters relating to
the administration and consummation of the Settlement and all parties hereto for the purpose of construing, enforcing and administering the Settlement. 

  
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 18. In the event that the Settlement does not become effective or that Defendants exercise their
right to terminate the Settlement in accordance with the terms of the Stipulation, then this Order and Final Judgment shall be rendered null and void to the extent provided by and in accordance with the Stipulation and shall be vacated, and, in such
event, all orders entered and releases delivered in connection herewith shall be null and void to the extent provided for and in accordance with the Stipulation. 

Dated:
                                        

  

					
		 	 HONORABLE YVONNE GONZALEZ ROGERS

UNITED STATES DISTRICT JUDGE
	 	

  
 8Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made the 29th day of August, 2016, by and between MURRAY WRIGHT (“Executive”), and TESSCO TECHNOLOGIES INCORPORATED, a Delaware corporation, with its principal executive office currently located at 11126 McCormick Road, Hunt Valley, Maryland  21136 (the “Company”).

 

WITNESSETH THAT:

 

WHEREAS, the Company desires to employ Executive as its President and Chief Executive Officer, subject to the terms and conditions of this Agreement, to provide services to the Company (inclusive of its subsidiaries and affiliates), and the Executive desires to be so employed and to perform accordingly.

 

NOW, THEREFORE, in consideration of the mutual covenants and premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

 

1.                                      Term.  The Company hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Company, subject to and upon the terms and conditions set forth in this Agreement, for a term (the “Term”) which shall commence on September 1, 2016 (the “Effective Date”) and end at the end of the fiscal year of the Company ending in 2020.  Absent any written agreement between the parties to extend the Term for a renewal term or other period ending at an agreed upon date or time subsequent to the end of the fiscal year of the Company ending in 2020, the Term will end at the end of the fiscal year of the Company ending in 2020.

 

2.                                      Employment; Duties.

 

(a)                                 Employment                         Subject to the terms and conditions hereof, Executive shall  be employed by the Company as its President and Chief Executive Officer and have powers and duties commensurate with the positions of President and Chief Executive Officer of a company the size and nature of the Company, provided that  Executive’s specific responsibilities shall be as from time to time established by the Board of Directors (the “Board”) of the Company, to which Executive shall report.  In addition to his employment and duties as President and Chief Executive Officer, the Board has appointed the Executive as a member of the Board, conditioned upon and commencing at the beginning of the Term, to serve until the next annual meeting of the stockholders of the Company and until his successor is duly elected and shall qualify, and the Company agrees that, Executive shall, during the Term, continue to be nominated to serve on the Board as his term would otherwise from time to time expire.

 

(b)                                 Duties.           Executive agrees to his employment as described in this Paragraph 2 and agrees to devote his full working time and efforts to the performance of his duties hereunder and to perform those duties diligently and faithfully.  Except as otherwise determined or approved by Board, Executive’s office will be situated and Executive will perform his day to day

 

 

responsibilities hereunder at the principal executive offices of the Company, currently located in Timonium and Hunt Valley, Maryland.  Executive may engage in professional development organizations and activities consistent with and conducive to the performance of his duties hereunder. Executive may also engage in religious, charitable or other community activities as long as such activities do not materially interfere with Executive’s performance of his duties to the Company under this Agreement.  Executive may not serve on other boards of directors of for-profit companies without the consent of the Board.

 

3.                                      Compensation.

 

(a)                                 Base Salary.  The Company shall pay Executive during year one of the Term an annual salary (the “Base Salary”) of Five Hundred Fifty Thousand Dollars ($550,000), payable in accordance with the Company’s normal business practices for senior executives (including tax withholding), but in no event less frequently than monthly.  Upon the second anniversary of the Effective Date, Executive’s Base Salary shall be reviewed and thereafter at least annually by the Compensation Committee of the Board (the “Compensation Committee”) and may be adjusted in its discretion, provided that during the Term the Base Salary may not be decreased below Five Hundred Fifty Thousand Dollars ($550,000) without the consent of the Executive.  After any such adjustment in Base Salary, the term “Base Salary” shall refer to the increased amount.

 

(b)                                 Incentive Compensation.

 

(i)                                     Option Award.                Concurrent with the Effective Date, Executive shall be granted a non-qualified stock option (the “Option”) under and subject to the terms of the Third Amended and Restated Stock and Incentive Plan of the Company (the “Plan”), for 250,000 shares of the common stock, par value $0.01 per share, of the Company (“Common Stock”), and which Option shall vest and become exercisable 25% upon the first anniversary of the Effective Date, and thereafter pro-rata monthly on the last day of each of the following thirty six (36) full calendar months, whereupon the Option will be vested in full, subject however to continued employment of Executive on and as of each date upon which vesting is scheduled to occur. The Option will be exercisable in whole or in part from time to time prior to its expiration on the sixth anniversary of the date of grant or its earlier termination, insofar as vested, at an exercise price established by the Board or the Compensation Committee of the Board at the time of grant, in accordance with and subject to the terms of the Plan.  The terms and conditions of the Option, which shall provide for among other things a so called “double trigger” acceleration following a change in control of the Company (change in control and termination without cause, as such terms are to be defined therein), shall be set forth in a separate award agreement in a form or forms prescribed by the Company consistent with this Agreement, to be entered into by the Company and Executive on or promptly following the Effective Date, and which shall recite the grant of such equity award.

 

(ii)                                  Cash Bonus.                            For each fiscal year of the Company that commences during the Term, Executive shall be entitled to participate with the other senior executives of the Company in, and shall be eligible to receive cash incentive compensation (“Cash Bonus”) in accordance with the terms herein, and as applicable to each fiscal year of the

 

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Company during the Term. The parties acknowledge that the standards and criteria on which Cash Bonus awards have historically been based include both corporate earnings targets (typically annual targets measured after all incentive compensation is taken into account and satisfaction of which is a condition to any payment) and a somewhat more subjective individual performance factor, and that it is the Board’s current expectation (but not the Board’s or the Company’s obligation hereunder) to continue to use similar criteria and factors in determining cash incentive compensation for all senior executives, including Executive.  Executive’s minimum Cash Bonus opportunity for each fiscal year beginning during the Term (Executive’s “Target Bonus”) shall be such amount (expressed either as a percentage of Base Salary, as is currently the case, or as a stated dollar amount) as the Board (or the Compensation Committee of the Board, as applicable) from time to time determines in its sole discretion is appropriate, but in no event shall Executive’s Target Bonus for any fiscal year beginning during the Term be less than Five Hundred Fifty Thousand Dollars ($550,000). The actual Cash Bonus awarded to Executive for any particular fiscal year, if any, may be more or less than Executive’s Target Bonus, based on the actual level of achievement relative to the performance metrics established for that year by the Board.  For fiscal year 2017, Executive shall be entitled to participate in the Cash Bonus as though the Term had commenced on the first day of fiscal year 2017, provided that Executive’s Target Bonus for fiscal 2017 shall be pro-rated for the number of days from the Effective Date until the last day of fiscal year 2017 (i.e., the Target Bonus ($550,000) will be multiplied by a fraction, the numerator of which is the number of days from and including the Effective Date and ending on March 26, 2017 and the denominator of which is the total number of days in fiscal year 2017), and provided further that, assuming the Executive is otherwise eligible to receive payment of the Cash Bonus for fiscal year 2017, Executive will be paid not less than 75% of  Executive’s pro-rated Target Bonus for fiscal year 2017.

 

(iii)                               Equity-based Compensation.                                   For fiscal year 2017 and for each subsequent fiscal year of the Company commencing during the Term, Executive shall be entitled to participate in the Company’s Performance Stock Unit (PSU) program, or any subsequent equity compensation program or arrangement established from time to time as a replacement therefor by the Compensation Committee for the executive officers of the Company, generally. Executive shall be entitled to receive PSUs (evidenced by a Performance Stock Unit Agreement in the form established from time to time by the Compensation Committee, and the current form of which has been reviewed by Executive) for no less than ten thousand (10,000) shares of Common Stock forfiscal year 2017, and for each subsequent fiscal year of the Term, for which the PSU program continues.  In the event the Company (or the Compensation Committee) determines to end the existing PSU program prior to expiration of the Term, the Company agrees that it will replace this incentive compensation component of Executive’s compensation with a new plan or other form of compensation providing Executive with comparable incentive compensation, and the parties agree to engage in prompt good faith negotiation to so agree to the terms thereof.

 

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4.                                      Benefits and Perquisites.

 

(a)                                 Retirement and Other Benefits.  During the Term, Executive shall be eligible to participate in fringe benefits, perquisites, and such other benefit plans and arrangements as are made available generally to the Company’s other senior executives, other than the Founder, President and Chief Executive Officer of the Company immediately preceding the Executive.  Where any specific benefits described herein are subject to an existing formal plan, such benefits shall be governed in all respects in accordance with the terms of such plans in effect, unless specifically provided otherwise herein.

 

(b)                                 Long Term Disability Plan.  During the Term, Executive shall be provided coverage under a long term disability policy for senior executives which provides a benefit of 66 2/3% of his base compensation, after a 90-day policy waiting period, and subject to other terms standard in the industry for such comparable policies.

 

(c)                                  Paid Time Off.  During the Term, Executive shall accrue vacation at a rate of not less than 1.5 days per full calendar month, in accordance with and subject to the Company’s vacation policies applicable to its executives generally as such policies are in effect from time to time, and subject also to the following:  Executive shall not accrue vacation at any time that the total number of days of vacation time then accrued and unused by Executive would otherwise exceed thirty (30) days, and at any time that Executive has accrued at least thirty (30) days of unused vacation time, the accrual of additional vacation time shall cease until the number of days accrued and unused subsequently falls below thirty (30), whereupon accrual will recommence until thirty (30) days again become accrued and unused.

 

(d)                                 Reimbursement of Expenses.  The Company shall reimburse Executive for any and all expenses reasonably incurred by Executive during the Term in performing Executive’s duties hereunder, including travel, meals and accommodations, upon submission by Executive of vouchers or receipts and in compliance with such rules and policies relating thereto as the Company may from time to time adopt.  Executive agrees to promptly submit and document any reimbursable expenses in accordance with the Company’s expense reimbursement policies to facilitate the timely reimbursement of such expenses.  Executive shall also be entitled to reimbursement of relocation expenses required to relocate Executive from Executive’s home in the State of Colorado to the Baltimore Maryland area, as further delineated on Schedule 1 hereto. Any expenses submitted more than sixty (60) days after incurred will be payable in the sole discretion of the Company.

 

(e)                                  Company Authority/Policies. Executive agrees to observe and comply with the rules and regulations of the Company as adopted by the Board respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time by the Board, to the extent consistent with Executive’s duties pursuant to Paragraph 2(b) above.  Without limiting the foregoing, Executive agrees that in the performance of his duties hereunder he shall abide and be bound by the Company’s Code of Conduct as in effect from time to time (the “Code of Conduct”), a copy of which in its current form Executive acknowledges having received and reviewed.  Executive further acknowledges that the Code of Conduct is subject to revision from time to time by the Board or the Company in its sole discretion.  Provided, however, that in the event any provision of the Code of Conduct is inconsistent with the terms of this Agreement, it is the terms of this Agreement that will control.

 

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5.                                      Covenants.  Executive acknowledges that during the period of his employment with the Company or any affiliate, he shall have access to the Company’s “Confidential Information” (as defined below) and will meet and develop relationships with the Company’s potential and existing vendors, customers, financing sources and employees.  Accordingly, Executive agrees to the following provisions of this Paragraph 5 (in addition to Executive’s confidentiality obligations to the Company and its subsidiaries pursuant to the Company’s Code of Conduct) and agrees this Paragraph 5 shall survive expiration or termination of the Term, indefinitely.

 

(a)                                 Confidentiality.  In the performance of Executive’s duties hereunder Executive shall abide by and be bound by the Company’s Code of Conduct, including the confidentiality and non-solicitation restrictions set forth therein.  In addition and not in lieu or in substitution therefor, Executive shall not, during Executive’s employment or at any time thereafter, directly or indirectly, disclose or make available to any person for any reason or purpose whatsoever, any Confidential Information (as defined below). Executive agrees that, upon termination of Executive’s employment with the Company, all Confidential Information in Executive’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files), whether or not otherwise included among the Personal Property (as defined below) required to be returned pursuant hereto, shall be returned to the Company and shall not be retained by Executive or furnished or disclosed to any third party in any form except as provided herein; provided, however, that Executive shall not be obligated to treat as confidential any information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available thereafter other than by virtue of a violation of this Agreement or any other duty owed to the Company by Executive, or (iii) is lawfully disclosed to Executive by a third party. As used in this Agreement the term “Confidential Information” means otherwise nonpublic information disclosed to Executive or known by Executive as a consequence of or through Executive’s relationship with the Company, including information about the customers, vendors, employees, consultants, business methods, public relations methods, organization, procedures, business plans, or finances, of the Company or its affiliates, , whether or not such information constitutes a “trade secret” under applicable law.

 

(b)                                 Non-competition.  In addition to the restrictions contained in the Company’s Code of Conduct, Executive agrees that Executive shall not, without the prior written consent of the Company:

 

(i)                                     During the term of the Executive’s employment with the Company and during the Restriction Period (as defined below), directly or indirectly, engage or participate in (as an owner, partner, stockholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business that is competitive with the business of the Company or any of its affiliates (x) during the term of the Executive’s employment with the Company, as it is being conducted while Executive is employed by the Company or (y) during the Restriction Period, as it was being conducted at the time of the termination of Executive’s employment (each a “Competitive Business”);

 

(ii)                                  After termination of Executive’s employment and during the Restriction Period, directly or indirectly, solicit or attempt to persuade any person who was, at any time within the two (2) year period before such termination an employee or

 

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independent contractor of the Company, to terminate his, her, or its relationship with the Company; or

 

(iii)                               After termination of Executive’s employment and during the Restriction Period, directly or indirectly, employ, hire, or retain any person who was an employee of the Company at any time within the one (1) year period before such termination.

 

For the avoidance of doubt and without limitation, this subparagraph (b) is intended, among other things, to prohibit, during the term of the Executive’s employment with the Company and Restriction Period, the solicitation by Executive of any customer, client, or vendor of the Company for the benefit of or in furtherance of a Competitive Business and the engagement or participation of Executive by or with any business that solicits or engages in business with any customer, client, or vendor of the Company in furtherance of a Competitive Business.  Notwithstanding the foregoing, Executive may own up to a five percent (5%) interest in a publicly traded corporation or other person engaged in a Competitive Business.  For purposes hereof, “Restriction Period” means the period beginning upon the Date of Termination and ending on the first anniversary thereof.

 

(c)                                  Remedies for Breach.                           Executive acknowledges that the provisions of Paragraph 5(a) and 5(b) are reasonable and necessary for the protection of the Company and that the Company may be irrevocably damaged if these provisions are not specifically enforced. Accordingly, Executive agrees that, in addition to any other legal or equitable relief or remedy available to the Company, the Company shall be entitled to seek an appropriate injunction or other equitable remedy for the purposes of restraining Executive from any actual or threatened breach of or otherwise enforcing these provisions (and that no bond or security shall be required in connection therewith), together with an equitable accounting of all earnings, profits, and other benefits arising from such violation, which rights shall be cumulative. Each of the covenants in this Paragraph 5 shall be construed as an agreement independent of any other provisions in this Agreement.

 

(d)                                 Modification. If a court determines that any of the restrictions contained in Paragraph 5(a) or Paragraph 5(b) is unreasonable in terms of scope, duration, geographic area, or otherwise, or any provision in Paragraph 5(a) or Paragraph 5(b) is otherwise illegal, invalid, or unenforceable, then such restriction or provision, as applicable, shall be reformed to the extent deemed necessary by the court so that the same shall be rendered enforceable to the fullest extent otherwise permissible under applicable law, and the parties hereto do hereby expressly authorize any such court to so provide.

 

(e)                                  Cooperation.  Executive agrees that following the termination of his employment, Executive will cooperate in all reasonable respects with the Company and its affiliates in connection with (i) any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory or otherwise) brought by or against the Company or any of its affiliates, or (ii) any audit of the financial statements of the Company with respect to the period of time when Executive was employed by the Company or any affiliate, in each case to the extent the Company reasonably deems Executive’s cooperation necessary.  Executive shall be reimbursed for all reasonable out-of-pocket expenses incurred by Executive as a result of such cooperation.

 

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(f)                                   No Limitation.  Nothing contained in this Paragraph 5 shall limit any common law or statutory obligation that Executive may have to the Company or any of its affiliates.  For purposes of all provisions of this Paragraph 5, the “Company” refers to the Company and any incorporated or unincorporated affiliates of the Company.

 

(g)                                  Permitted Statements.  Nothing in this Agreement shall restrict either party from making truthful statements (i) when required by law, subpoena, court order or the like; (ii) when requested by a governmental, regulatory, or similar body or entity; or (iii) in confidence to a professional advisor for the purpose of securing professional advice.

 

6.                                      Termination.

 

(a)                                 General.

 

(i)                                     Accrued Compensation and Benefits.  Upon any termination of Executive’s employment for any reason or non-renewal of this Agreement after the Term, Executive shall be entitled to receive the following compensation and benefits:  (A) any accrued but unpaid Base Salary (to be paid as provided in Paragraph 3(a)) as of the Date of Termination (as defined below); (B) reimbursement for expenses incurred by Executive prior to the Date of Termination in accordance with Paragraph 4(d) hereof; (C) vested benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the Date of Termination; and (D) any additional amounts or benefits due under law or any applicable plan or agreement of the Company other than this Agreement (the amounts and benefits described in clauses (A) through (D) above, collectively, the “Accrued Compensation and Benefits”).  Payment of Accrued Compensation and Benefits under this Paragraph 6 shall in all events be paid in accordance with the Company’s payroll procedures, expense reimbursement procedures or plan terms, as applicable, or in accordance with applicable law. Thereafter, the Company shall have no further obligations to Executive with regard to Accrued Compensation and Benefits.  This provision does not apply to or control payment of any Incentive Compensation, provided in paragraph 3(b) herein.

 

(ii)                                  Notice of Termination / Not a Breach.  Except for termination as a result of Executive’s death, any termination of Executive’s employment, either by the Company or by Executive, shall be communicated by written Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision under this Agreement relied upon by the terminating party.  Any termination of Executive’s employment by either party pursuant to and in compliance with the various subsections of this Paragraph 6 shall not be deemed a breach of this Agreement.

 

(iii)                               Date of Termination.  “Date of Termination” shall mean: (A) if the Executive’s employment is terminated by the Executive or the Company to be effective upon or following the expiration of the Term, upon the expiration of the last day of the Term, or such later date as is indicated in the Notice of Termination; (B) if Executive’s employment is terminated by his death, the date of his death; (C) if Executive’s employment is terminated on account of his Disability, the date on which Notice of Termination is given by the Company, or such later date as is indicated in the Notice of

 

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Termination; (D) if Executive’s employment is terminated by the Company for Cause, the date on which a Notice of Termination is given by the Company, or such later date as is indicated in the Notice of Termination; (E) if Executive’s employment is terminated by the Company without Cause, the date as is indicated in the Notice of Termination; (F) if Executive’s employment is terminated by Executive without Good Reason, thirty (30) days after the date on which a Notice of Termination is given by Executive, or such other date as is mutually agreed by Executive and the Company; and (G) if Executive’s employment is terminated by Executive for Good Reason, the date on which the Notice of Termination is given by Executive after the end of the Good Reason Period, or such other date as is mutually agreed by Executive and the Company.  Neither the forgoing or anything else herein shall preclude the Company from requiring that Executive take a leave of absence with pay until the expiration of the period between the date the Notice of Termination is given and the Date of Termination, during which the Executive will remain employed by the Company, and the Company is expressly authorized to do so. If not previously expired, the Term will in any event terminate on the Date of Termination.

 

(b)                                 Termination by the Company for Cause. The Company may terminate Executive’s employment hereunder for Cause.  “Cause” means the occurrence of any of the following: (A) Executive’s willful and continued failure to fully perform his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness (other than abuse of drugs or alcohol); (B) Executive’s willful and continued failure to follow and comply with the material policies of the Company as in effect from time to time (other than any such failure resulting from Executive’s incapacity due to physical or mental illness); (C) Executive’s commission of an act of fraud, dishonesty, material misrepresentation, breach of trust or act of moral turpitude, or other unethical conduct, whether or not  in connection with the performance by the Executive of his duties hereunder, and a reasonable determination by the Board or the Company that his continued association with the Company following such commission would reflect negatively on the Company in any manner or render the Executive unable to perform his duties as contemplated hereby; (D) Executive’s engagement in illegal conduct or gross misconduct; (E) Executive’s breach of any provision of Paragraph 5 of this Agreement; or (F) Executive’s indictment for, conviction of, or a plea of guilty or nolo contendere to any felony. Provided, however, (A) and (B) above shall not constitute “Cause” for termination unless (a) a written notice has first been delivered to the Executive (a “Cause Notice”), which Cause Notice specifically identifies the event(s) or manner of performance the Company believes constitutes Cause and (b) Executive fails to substantially cure or rectify the same within thirty (30) days after receiving the Cause Notice.  If any Cause Notice shall not have been delivered to Executive within ninety (90) days following the date the Company becomes aware of the purported existence of a Cause event or circumstances, then unless continuing or reoccurring beyond such ninety (90) day period, the applicable event or circumstances shall no longer be a basis for Cause and any purported termination of Executive’s employment relating to the applicable event or circumstances shall not be a termination for Cause under this Agreement.

 

(c)                                  Termination due to Disability.  Executive’s employment hereunder may be terminated by the Company upon Executive’s Disability.  “Disability” means that Executive (A) by reason of any medically determinable physical or mental impairment Executive is unable to perform his essential job functions with or without a reasonable accommodation, and (B) the

 

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Executive qualifies for benefits under the Company’s long term disability plan covering the Company’s senior executives provided under the terms of Paragraph 4(b).

 

(d)                                 Termination by Executive with Good Reason.  Executive may terminate his employment hereunder for Good Reason.  “Good Reason” means the occurrence, without the express prior written consent of Executive, of any of the following events:  (A)  any material diminution by the Company of  Executive’s  authority, duties or responsibilities, as specified herein or as modified from time to time by written agreement (other than a diminution due to an accommodation of Executive’s disability pursuant to (c) above; and other than a diminution on account of failure of the Executive to be reelected to the Board), (B)  the imposition on the Executive of a requirement that he report to a corporate officer or employee other than reporting directly to the Board of Directors, (C) any reduction in Executive’s Base Salary from the initial Base Salary provided for hereunder, (D) any material breach by the Company of any of its material obligations to Executive, (E) any relocation  by the Company of Executive’s primary office work location to a point that is more than fifty (50) miles from 11126 McCormick Road, Hunt Valley, Maryland 21136, or (F) the failure of the Board to nominate the Executive to serve on the Board of Directors.  Notwithstanding the foregoing, “Good Reason” to terminate Executive’s employment shall not exist unless (a) a written notice has first been delivered to the Company by Executive (the “Good Reason Notice”), which Good Reason Notice specifically identifies the event(s) or circumstances Executive believes constitutes Good Reason and (b) the Company fails to cure or rectify the same within thirty (30) days after the giving of the Good Reason Notice (the “Good Reason Period”) .  If the Company fails to timely cure or rectify such events of circumstances in accordance with the foregoing, Executive may send a notice to the Company that he is terminating his employment for Good Reason (“Good Reason Termination Notice”), in which case his employment hereunder shall thereupon be terminated for Good Reason.  If any Good Reason Notice shall not have been delivered by Executive within ninety (90) days following the date Executive becomes aware of the purported existence of a Good Reason event, or any Good Reason Termination Notice shall not have been delivered within thirty (30) days following the end of the Good Reason Period, then unless continuing or reoccurring thereafter, the applicable event or circumstances shall no longer be a basis for Good Reason and any purported termination of Executive’s employment relating to the applicable event or circumstances shall not be a termination for Good Reason under this Agreement.  Executive acknowledges  that election of the Executive to serve on the Board of Directors of the Company is an action taken annually by the stockholders, and agrees that. assuming he is nominated, the failure, following his initial appointment to the Board, of the Executive to be reelected to the Board, or his ceasing to serve on the Board, for any reason shall not be a basis or grounds for Good Reason hereunder.  For the avoidance of doubt, any prospective action that would, if actually taken or implemented, constitute Good Reason (after the expiration without cure of the applicable notice and cure period provided for above) shall not in any event be deemed to have occurred unless and until such action is actually taken or implemented.

 

(e)                                  Termination by the Company without Cause, or Termination by Executive without Good Reason.  Executive’s employment hereunder may also be terminated by the Company without cause or by the Executive without Good Reason, either prior to, upon or following expiration of the Term.

 

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7.                                      Payment Upon Termination / Severance.

 

(a)                                 Termination by the Company without Cause or by Executive for Good Reason.  If Executive’s employment is terminated by the Company during the Term without Cause or if Executive terminates his employment for Good Reason during the Term (in each case, other than upon Disability and other than any such termination having a Date of Termination on or after the last day of the Term), then Executive shall be entitled to the following (but in any event and for the avoidance of doubt, not duplicative with the Accrued Benefits and Compensation through the Date of Termination, to which Executive shall also be entitled):

 

(i)                                     Salary continuation in an aggregate amount (the “Severance Amount”) equal to two times Executive’s annual Base Salary. The Severance Amount shall be paid in equal installments in accordance with the Company’s then payroll practice over a twelve (12) month period beginning with the first payroll date that occurs following forty-five (45) days after the effective date of the Release under Paragraph (c) below.  Solely for purposes of Section 409A of the Code, each installment payment is considered a separate payment;

 

(ii)                                  Acceleration of vesting as of the Date of Termination of any then-outstanding awards granted to Executive under the Company’s Performance Stock Unit Agreement, if, as and to the extent provided under the terms of the applicable award and the terms of that plan.

 

(iii)                               Payment of the Cash Bonus provided under the terms of paragraph 3(b)(ii) and earned through the applicable Date of Termination, including payment on a pro-rated basis for any partial year of employment, in the event the Executive is otherwise eligible to receive payment of the Cash Bonus; in other words, in the event Executive’s employment ends six months into the fiscal year, Executive shall be eligible to receive one half of the Cash Bonus, payable in accordance with the terms of paragraph 3(b)(ii) in the event he is otherwise eligible to receive payment of the Cash Bonus, provided that the payment thereof may be delayed until after the then current fiscal year end when the actual amount can be determined;

 

(iv)                              If Executive elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) with respect to the Company’s group health plan, the Company shall continue to pay its then-current portion of the cost of such coverage, for a period of one (1) year following the applicable Date of Termination. The Company shall be authorized to deduct from the installments to be paid to Executive under Paragraph (a) above Executive’s then-current share of the cost of such coverage. The Company’s subsidy of such group health plan coverage shall terminate in the event that Executive becomes enrolled in the health insurance plan of a subsequent employer.

 

(b)                                 Termination for Cause or without Good Reason, upon Disability.  If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, or by the Company upon Disability of Executive, then Executive shall not be entitled to any of the payments or benefits at paragraph 7(a) above, but shall nevertheless be entitled to receive the Accrued Compensation and Benefits through the Date of Termination.  In addition, the

 

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Executive shall be entitled to the rights referenced in Section 7(a)(ii) above, if, as and to the extent provided under the terms of the applicable award and the terms of the applicable plan.

 

(c)           Termination upon or Following Expiration of the Term without Renewal.   If Executive’s employment is terminated by the Company or by the Executive with a Date of Termination upon or following the last day of the Term, then Executive shall not be entitled to any of the payments or benefits described in Paragraph 7(a)(i), (iii) or (iv) above, but shall nevertheless be entitled to receive the Accrued Compensation and Benefits through the Date of Termination.  In addition, the Executive shall be entitled to the rights referenced in Section 7(a)(ii) above, if, as and to the extent provided under the terms of the applicable award and the terms of the applicable plan.  Continuation of Executive’s employment with the Company for any period of time following expiration of the Term without renewal shall not constitute an extension or renewal of the Term of this Agreement, unless and until, if ever, this Agreement is modified or amended, in a writing executed by the parties, so providing.

 

(d)           Release. Notwithstanding any other provision of this Agreement, payment of the Severance Amount described in Paragraph 7(a) is conditioned upon Executive’s execution of a general release of claims against the Company, in a form satisfactory to the Company, and upon such release being executed by Executive and delivered to the Company within 45 days following cessation of employment.

 

(e)           Post Employment Covenants. Notwithstanding any other provision of this Agreement, payment of the Severance Amount described in Paragraph 7(a) is conditioned on Executive’s compliance with the Covenants in Paragraph 5 above.

 

(f)            No Other Compensation.  Other than provided in this Paragraph 7, Executive shall not at any time be eligible to participate in or receive benefits under any other severance plan, program, policy, arrangement or agreement of the Company.  Executive agrees that the payments, benefits, and entitlements contemplated by this Section 7 shall constitute the sole and exclusive remedy for termination of his employment or early termination of the Term for any reason, and Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to such termination of employment or or early termination.

 

(g)           Nonrenewal.  Nonrenewal of the Term upon expiration shall not entitle Executive to severance under this Paragraph 7.

 

8.             Termination Obligations.

 

(a)           Return of Property and Materials.  Executive hereby acknowledges and agrees that all Company Property and Materials furnished or made available to Executive in the course of or incident to Executive’s employment, belong to the Company and shall be promptly returned to the Company upon termination of Executive’s employment for whatever reason. “Company Property and Materials” for such purpose includes (i) all electronic devices owned, leased, or made available by the Company for Executive’s use, including personal computers, fax machines, cellular telephones, pagers, and tape recorders, and (ii) all books, manuals, records, reports, notes, contracts, lists, blueprints, maps and other documents, or materials, or copies thereof (including computer files) belonging to, and all other proprietary information relating to the business of, the Company. Following termination, Executive will not

 

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retain any written or other tangible material containing any proprietary information of the Company and, upon request, will confirm Executive’s compliance with this subsection in writing.

 

(b)           Resignation.  Upon termination of Executive’s employment for any reason, Executive will be deemed to have resigned from all offices and directorships then held with the Company or any of its affiliates.

 

9.             Parachute Payments.

 

(a)           Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Payments”), would be subject to the Excise Tax, the following provisions shall apply:

 

(i)            If the Payments, reduced by the sum of (x) the Excise Tax and (y) the total of the Federal, state, and local income and employment taxes payable by Executive on the amount of the Payments which are in excess of the Threshold Amount, are greater than or equal to the Threshold Amount, Executive shall be entitled to the full benefits payable under this Agreement.

 

(ii)           If the Threshold Amount is less than (x) the Payments, but greater than (y) the Payments reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Payments which are in excess of the Threshold Amount, then the Payments shall be reduced (but not below zero) to the minimum extent necessary so that the sum of all Payments shall not exceed the Threshold Amount.  In such event, the Payments shall be reduced in the following order: (A) cash payments not subject to Section 409A of the Code; (B) cash payments subject to Section 409A of the Code (to the extent such reduction does not result in tax penalties to Executive); (C) equity-based payments and acceleration; and (D) non-cash forms of benefits.  To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order.  No reductions shall be made under this Subparagraph 9(a)(ii) unless agreed to by Executive.

 

(b)           For the purposes of this Paragraph 8, “Threshold Amount” shall mean three times Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by Executive with respect to such excise tax.

 

(c)           The determination as to which of the alternative provisions of Subparagraph 9(a) shall apply to Executive shall be made by a nationally recognized accounting firm selected by the Company, which does not provide services to the acquirer or other counter-party in the transaction to which this Paragraph 8 applies (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or Executive.  For purposes of determining which of the alternative provisions of

 

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Subparagraph 8(a) shall apply, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of Executive’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

 

10.          Conflicting Agreements.  Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which he is a party or is bound, and that he is not now subject to any covenants against competition or similar covenants which would affect the performance of his obligations hereunder.

 

11.          Change in Fiscal Year. Notwithstanding any other provision hereof, in the event of a change in the period of time constituting the fiscal year of the Company, equitable adjustments shall be made to those terms hereof that are dependent upon a determination of fiscal year, as may be reasonably determined by the Company upon approval of the Board in good faith, but no such change in fiscal year shall materially increase or decrease the benefits and burdens of the parties hereunder.  By way of example, and without limitation or commitment, in the event that the fiscal year of the Company is changed from its current fiscal year (ending on the Sunday falling on or between March 26 and April 1 of each calendar year), the last day of the Initial Term or any Renewal Term then in effect may be changed to either March 31 or to the next succeeding anniversary of the Effective Date, or December 31, or any other date, as may be reasonably determined by the Company upon approval of the Board in good faith.

 

12.          Notices.  Any notices provided hereunder must be in writing and shall be deemed given and effective the earlier of one (1) business day following personal delivery (including personal delivery by telecopy or telex, or via Federal Express or other nationally recognized overnight courier with evidence delivery), or the third (3rd) business day after mailing by certified mail return receipt requested to the recipient at the address indicated below:

 

If to the Company:

 

TESSCO Technologies Incorporated

11126 McCormick Road

Hunt Valley, Maryland  21031

Attention: Board of Directors

 

with a copy to:

 

TESSCO Technologies Incorporated

11126 McCormick Road

Hunt Valley, Maryland  21031

Attention: Chief Financial Officer

 

If to Executive:

 

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To the address of Executive’s principal residence as reflected on his employment records with the Company

 

or to such other address or to the attention of such other person as the recipient party will have specified by prior written notice to the sending party.

 

13.          Integration.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect to any related subject matter.

 

14.          Assignment; Successors and Assigns, Survival etc.  Neither the Company nor Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other party.  This Agreement shall inure to the benefit of and be binding upon the Company and shall inure to the benefit of and be binding upon the Executive and his heirs.

 

15.          Miscellaneous.  Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof.

 

16.          Amendment.  This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective.

 

17.          Arbitration; Other Disputes.

 

(a)           If any legally actionable dispute arises which cannot be resolved by mutual discussion between the parties, each of Executive and the Company agree to resolve that dispute by arbitration before an arbitrator experienced in employment law.  Said arbitration will be conducted pursuant to the JAMS Employment Arbitration Rules and Procedures then in effect.  Maryland substantive law and statues of limitations shall apply in any such proceeding, and for limitations purposes, the arbitration shall be deemed commenced when the matter is submitted to the arbitral forum.  The Company and Executive agree that this arbitration agreement includes any such disputes that the Company and its related entities may have against Executive, or Executive may have against the Company and/or its related entities and/or employees, arising out of or relating to Executive’s employment or its termination including any claims of discrimination or harassment in violation of applicable law and any other aspect of Executive’s compensation, training, employment, or its termination.

 

(b)           The Company and Executive further agree that this arbitration provision is the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either the Company or Executive for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law or an administrative claim with an administrative agency.  EACH OF THE COMPANY AND EXECUTIVE HEREBY WAIVES ANY RIGHTS IT OR HE MAY HAVE TO TRIAL BY JUDGE OR JURY.

 

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(c)           The Company and Executive agree that the arbitration shall be conducted in Baltimore, Maryland unless otherwise mutually agreed.

 

(d)           Each party shall pay its own costs and attorneys’ fees, if any; provided, however, the Company shall pay any costs and expenses that Executive would not otherwise have incurred if the dispute had been adjudicated in a court of law, rather than through arbitration, including the arbitrator’s fee, any administrative fee, and any filing fee in excess of the maximum court filing fee in the jurisdiction in which the arbitration is commenced.  If either the Company or Executive prevails on a statutory claim that affords the prevailing party an award of attorneys’ fees, then the arbitrator may award reasonable attorneys’ fees to the prevailing party, consistent with applicable law.

 

(e)           Executive acknowledges that Executive has been provided with a copy of the current JAMS Employment Arbitration Rules and Procedures for Executive’s reference.

 

18.          Severability.  Each term and provision of this Agreement shall be considered as separable and divisible from every other term and provision and the invalidity or unenforceability of any one term or provision shall not limit the validity and enforceability, in whole or in part, of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable term or provision as may be valid and enforceable.

 

19.          Governing Law.  This Agreement shall be construed and regulated in all respects under the laws of the State of Maryland without reference to principles of conflict of laws.

 

20.          Section 409A.

 

(a)           Anything in this Agreement to the contrary notwithstanding, if at the time of Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Executive becomes entitled to under this Agreement on account of Executive’s separation from service would be considered “non-qualified deferred compensation” otherwise subject to the twenty percent (20%) additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after Executive’s separation from service, or (B) Executive’s death.  If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

 

(b)           All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Executive during the time periods set forth in this Agreement.  All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred.  The amount of in-kind benefits

 

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provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses).  Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

(c)           To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Executive’s termination of employment, then such payments or benefits shall be payable only upon Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

 

(d)           With respect to any payments which are intended to fall under the short-term deferral exception from Section 409A of the Code, unless this Agreement provides a specified and objectively determinable payment schedule to the contrary, all payments due hereunder shall be made as soon as practicable after the right to payment vests and in all events by March 15 of the calendar year following the calendar year in which the right to payment vests.  For purposes of this section, a right to payment will be treated as having vested when it is no longer subject to a substantial risk of forfeiture as determined by the Company in its sole discretion.

 

(e)           The parties intend that this Agreement will be administered in accordance with Section 409A of the Code.  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.  Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

 

(f)            The Company makes no representation or warranty and shall have no liability to Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

 

21.          Counterparts.  This Agreement may be executed in any number of counterparts, and electronically, and each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

22.          Executive’s Acknowledgment/ Advisor’s Fees.  The Company shall pay Executive’s reasonable advisor fees (legal and tax) incurred in connection with the contemplation, preparation, negotiation and execution of this Agreement up to a maximum of $12,500.00.  Executive acknowledges (i) that Executive has had the opportunity to consult with independent counsel of Executive’s own choice concerning this Agreement, and (ii) that Executive has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on Executive’s own judgment

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written.

 

 

	
 
    	
TESSCO Technologies   Incorporated
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert B.   Barnhill, Jr.
    
	
 
    	
Name: Robert B.   Barnhill, Jr.
    
	
 
    	
Title: Chairman of the   Board
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Murray Wright
    
	
 
    	
Murray Wright
    

 

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