The following constitutes the Schedule 13D filed by the undersigned (the “Schedule 13D”).
| Item 1. | Security and Issuer. |
This statement relates to the common stock, par value $0.001 per share (the “Shares”), of STEC, Inc., a California corporation (the “Issuer”). The address of the principal executive offices of the Issuer is 3001 Daimler Street, Santa Ana, CA 92705-5812.
| Item 2. | Identity and Background. |
| | (a) | This statement is filed by: |
| | (i) | Balch Hill Partners, L.P., a Delaware limited partnership (the “Partnership”); |
| | (ii) | Balch Hill Capital, LLC, a Delaware limited liability company (“Balch Hill”), an investment adviser registered with the Securities and Exchange Commission (“SEC”) and who serves as the general partner of, and investment adviser to, the Partnership; and |
| | (iii) | Simon J. Michael (“Mr. Michael”), who serves as the sole manager of Balch Hill (the “Board”). |
Each of the foregoing is referred to as a “Reporting Person” and collectively as the “Reporting Persons.” Each of the Reporting Persons is party to that certain Joint Filing Agreement, as further described in Item 6. Accordingly, the Reporting Persons are hereby filing a joint Schedule 13D.
(b) The principal business address of each of the Reporting Persons is 2778 Green Street, San Francisco, CA 94123.
(c) The principal business of the Partnership is investing in securities. The principal business of Balch Hill is serving the general partner of, and investment adviser to, the Partnership. The principal occupation of Mr. Michael is serving as the sole manager of Balch Hill.
(d) No Reporting Person has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) Except as otherwise set forth below, no Reporting Person has, during the last five years, been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
On September 28, 2012, the Court of Chancery of the State of Delaware (the “Court”) found that Mr. Michael, a director of Shocking Technologies, Inc. (“STI”), had breached his fiduciary duty of loyalty to STI by seeking to dissuade a potential investor from investing in STI and by sharing certain confidential information about STI with the same investor. The Court however did not award any damages to STI or relieve STI of its legal fees, finding that Mr. Michael’s conduct did not cause any material damage to STI nor did it rise to the level of subjective bad faith that would warrant the shifting of legal fees. Despite this ruling, Mr. Michael continues to believe that this civil action was in retaliation for the questions raised by Mr. Michael regarding STI’s corporate governance practices and management’s apparent missteps. Specifically, Mr. Michael believes that the lawsuit was in response to Mr. Michael’s concerns raised over the substantially enhanced compensation and severance package approved by the STI Board for the Chief Executive Officer of STI in exchange for additional director compensation, despite failing to meet projections and STI’s declining performance. Mr. Michael also believes that the lawsuit was in response to Mr. Michael’s efforts to press for an independent STI Board and to inform STI’s stockholders of his concerns regarding management’s misrepresentations and omissions and the failure of the STI Board to act in the best interests of stockholders.
(f) The Partnership and Balch Hill are organized under the laws of the State of Delaware. Mr. Michael is a citizen of the United States of America.
| Item 3. | Source and Amount of Funds or Other Consideration. |
The aggregate purchase price of the 4,190,000 Shares owned directly by the Partnership is approximately $23,632,213, including brokerage commissions. Such Shares were acquired with the working capital of the Partnership.
The Partnership effects purchases of securities primarily through margin accounts maintained for it with prime brokers, which may extend margin credit to it as and when required to open or carry positions in the margin accounts, subject to applicable federal margin regulations, stock exchange rules and the prime brokers’ credit policies. In such instances, the positions held in the margin accounts are pledged as collateral security for the repayment of debit balances in the accounts.
| Item 4. | Purpose of Transaction. |
The Reporting Persons purchased the Shares based on the Reporting Persons’ belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. Depending upon overall market conditions, other investment opportunities available to the Reporting Persons, and the availability of Shares at prices that would make the purchase or sale of Shares desirable, the Reporting Persons may endeavor to increase or decrease their position in the Issuer through, among other things, the purchase or sale of Shares on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem advisable.
No Reporting Person has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon or in connection with completion of any of the actions discussed herein. The Reporting Persons intend to review their investment in the Issuer on a continuing basis. Depending on various factors including, without limitation, the Issuer’s financial position and investment strategy, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, engaging in communications with management and the Board of the Issuer, engaging in discussions with stockholders of the Issuer and others about the Issuer and the Reporting Persons’ investment, making proposals to the Issuer concerning changes to the capitalization, ownership structure, board structure (including seeking board representation) or operations of the Issuer, purchasing additional Shares, selling some or all of their Shares, engaging in short selling of or any hedging or similar transaction with respect to the Shares, or changing their intention with respect to any and all matters referred to in Item 4.
| Item 5. | Interest in Securities of the Issuer. |
(a) The aggregate percentage of Shares reported owned by each person named herein is based upon 46,726,318 Shares outstanding as of October 24, 2012, which is the total number of Shares outstanding as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on November 6, 2012.
As of the close of business on November 15, 2012, the Partnership beneficially owned 4,190,000 Shares, constituting approximately 9.0% of the Shares outstanding. By virtue of their relationships with the Partnership discussed in further detail in Item 2, each of Balch Hill and Mr. Michael may be deemed to beneficially own the Shares beneficially owned by the Partnership.
The filing of this Schedule 13D shall not be deemed an admission that the Reporting Persons are, for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the beneficial owners of any Shares he or it does not directly own. Each of the Reporting Persons specifically disclaims beneficial ownership of the Shares reported herein that he or it does not directly own, except to the extent of his or its pecuniary interest therein.
(b) Each of the Partnership, Balch Hill and Mr. Michael has shared voting and dispositive power over the Shares owned directly by the Partnership.
(c) Schedule A annexed hereto lists all transactions in the Shares by the Reporting Persons during the past sixty days. All of such transactions were effected in the open market.
(d) No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the Shares.
(e) Not applicable.
| Item 6. | Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. |
On November 16, 2012, the Reporting Persons entered into a Joint Filing Agreement (the “Joint Filing Agreement”) in which the parties agreed to the joint filing on behalf of each of them of statements on Schedule 13D with respect to the securities of the Issuer to the extent required by applicable law. The Joint Filing Agreement is attached as Exhibit 99.1 hereto and is incorporated herein by reference.
Other than as described herein, there are no contracts, arrangements, understandings or relationships among the Reporting Persons, or between the Reporting Persons and any other person, with respect to the securities of the Issuer.
| Item 7. | Material to be Filed as Exhibits. |
| | 99.1 | Joint Filing Agreement by and among Balch Hill Partners, L.P., Balch Hill Capital, LLC, and Simon J. Michael, dated November 16, 2012. |
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: November 16, 2012
| | BALCH HILL PARTNERS, L.P. |
| | |
| | By: | Balch Hill Capital, LLC General Partner |
| | |
| | By: | /s/ Simon J. Michael |
| | | Name: | Simon J. Michael |
| | | Title: | Manager |
| | BALCH HILL CAPITAL, LLC |
| | |
| | By: | /s/ Simon J. Michael |
| | | Name: | Simon J. Michael |
| | | Title: | Manager |
| | /s/ Simon J. Michael |
| | Simon J. Michael |
SCHEDULE A
Transactions in the Shares During the Past Sixty Days
Shares Purchased / (Sold) | | |
BALCH HILL PARTNERS, L.P.
| 58,609 | | 7.1337 | 09/18/2012 |
| 35,000 | | 7.1093 | 09/19/2012 |
| 30,000 | | 7.1275 | 09/24/2012 |
| 47,672 | | 6.8606 | 09/25/2012 |
| 39,970 | | 6.7479 | 09/26/2012 |
| 34,294 | | 6.7200 | 09/26/2012 |
| 28,064 | | 6.8569 | 09/28/2012 |
| 36,600 | | 6.6195 | 10/02/2012 |
| 13,400 | | 6.5687 | 10/03/2012 |
| 34,522 | | 6.4596 | 10/04/2012 |
| 223,659 | | 6.6342 | 10/04/2012 |
| 7,462 | | 6.3166 | 10/09/2012 |
| 34,357 | | 6.4031 | 10/10/2012 |
| 100,000 | | 6.2499 | 10/11/2012 |
| 60,000 | | 6.1326 | 10/12/2012 |
| 40,000 | | 6.4307 | 10/16/2012 |
| 50,000 | | 6.2688 | 10/18/2012 |
| 40,258 | | 6.2320 | 10/18/2012 |
| 145,576 | | 6.0633 | 10/19/2012 |
| 69,166 | | 5.9894 | 10/22/2012 |
| 117,662 | | 6.0057 | 10/23/2012 |
| 25,804 | | 6.0491 | 10/24/2012 |
| 73,685 | | 5.9888 | 10/24/2012 |
| 60,565 | | 6.0025 | 10/25/2012 |
| 65,105 | | 5.8966 | 10/26/2012 |
| (47,821) | | 5.8415 | 11/01/2012 |
| 700,000 | | 4.3916 | 11/07/2012 |
| 30,000 | | 4.4021 | 11/08/2012 |
| 100,000 | | 4.4466 | 11/09/2012 |
| 270,000 | | 4.4219 | 11/09/2012 |
| 95,000 | | 4.3920 | 11/12/2012 |
| 125,000 | | 4.2648 | 11/13/2012 |
| 134,900 | | 4.1914 | 11/14/2012 |
| 55,000 | | 4.1058 | 11/14/2012 |
| 195,100 | | 4.1856 | 11/14/2012 |
| 155,000 | | 4.1540 | 11/15/2012 |
| 30,000 | | 4.0999 | 11/15/2012 |
BALCH HILL CAPITAL, LLC
None
SIMON J. MICHAEL
None
