EVERGREEN SOLAR, INC. CHANGE OF CONTROL SEVERANCE AGREEMENT
Exhibit 10.5
EVERGREEN SOLAR, INC.
This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and
between Xxxx Xxxxx Xxxxxx (“Executive”) and Evergreen Solar, Inc. (the “Company”), effective as of
June 14, 2007 (the “Effective Date”).
RECITALS
1. It is expected that the Company from time to time will consider the possibility of an
acquisition by another company or other change of control. The Board of Directors of the Company
(the “Board”) recognizes that such consideration can be a distraction to Executive and can cause
Executive to consider alternative employment opportunities. The Board has determined that it is in
the best interests of the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein) of the Company.
2. The Board believes that it is in the best interests of the Company and its stockholders to
provide Executive with an incentive to continue his employment and to motivate Executive to
maximize the value of the Company upon a Change of Control for the benefit of its stockholders.
3. The Board believes that it is imperative to provide Executive with certain benefits upon a
Change of Control and with certain severance benefits upon Executive’s termination of employment
following a Change of Control. These benefits will provide Executive with enhanced financial
security and incentive and encouragement to remain with the Company notwithstanding the possibility
of a Change of Control.
4. Certain capitalized terms used in the Agreement are defined in Section 7 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement will have a term of three (3) years commencing
on the Effective Date. On the third anniversary of the Effective Date, and on each annual
anniversary of the Effective Date thereafter, this Agreement automatically will renew for an
additional one (1)-year term unless either party provides the other party with written notice of
non-renewal at least thirty (30) days prior to the date of automatic renewal.
2. At-Will Employment. The Company and Executive acknowledge that Executive’s
employment is and will continue to be at-will, as defined under applicable law, except as may
otherwise be specifically provided under the terms of any written formal employment agreement
between the Company and Executive (an “Employment Agreement”). If Executive’s employment
terminates for any reason, including (without limitation) any termination not set for in Section 4
hereof, Executive will not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement or under Executive’s Employment Agreement.
3. Acceleration of Vesting on Change of Control. Upon the consummation of a Change of
Control (i) Executive’s outstanding equity awards, including without limitation stock options and
restricted stock, will immediately vest and become exercisable or become released from the
Company’s repurchase or reacquisition right as to (A) that number of unvested shares that would
have vested during the period between the equity awards’ most recent vesting date (or grant date
if no vesting date has been reached) and the Change of Control if the equity awards had been
granted with a monthly vesting schedule and (B) that number of unvested shares that would have
otherwise vested during the last twelve (12) months of each equity awards’ vesting schedule, and
(ii) all performance targets for all of Executive’s performance-based equity awards will be deemed
fully achieved on the first anniversary of the Change of Control if Executive is employed on such
date.
4. Severance Benefits.
(a) Termination without Cause or Resignation for Good Reason in Connection with a Change
of Control. If the Company or its Affiliates terminate Executive’s employment with the Company
or its Affiliates, respectively, without Cause or Executive resigns from such employment for Good
Reason within twelve (12) months following a Change of Control, and Executive signs and does not
revoke a separation agreement and release of claims with the Company (in a form acceptable to the
Company), then Executive will receive the following severance from the Company:
(i) Accrued Compensation. The Company will pay Executive all accrued but unpaid
vacation, expense reimbursements, wages, and other benefits due to Executive under any
Company-provided plans, policies, and arrangements.
(ii) Severance Payment. Executive will receive monthly severance payments (less
applicable withholding taxes) for twelve (12) months following Executive’s termination equal to (A)
one-twelfth of Executive’s annual base salary as in effect immediately prior to Executive’s
termination date or (if greater) at the level in effect immediately prior to the Change of Control,
and (B) one-twelfth of Executive’s target bonus for the year of Executive’s termination. Subject
to Section 5, the Company will pay the severance payments to which Executive is entitled as salary
continuation on the same basis and timing as in effect immediately prior to the Change of Control.
(iii) Equity. All of Executive’s outstanding equity awards, including without
limitation stock options and restricted stock, will immediately vest and become exercisable or
become released from the Company’s repurchase or reacquisition right.
(iv) Continued Employee Benefits. Executive will receive Company-paid coverage for a
period of twelve (12) months for Executive and Executive’s eligible dependents under the Company’s
Benefit Plans.
For purposes of this Section 4(a), if Executive’s employment with the Company or one of its
Affiliates terminates, he will not be determined to have been terminated without Cause, if he
continues to remain employed by the Company or one of its Affiliates (e.g., upon transfer from
one Affiliate to another); provided, however, that the parties understand and acknowledge that any
such termination could potentially result in Executive’s ability to resign for Good Reason.
(b) Voluntary Resignation; Termination for Cause. If Executive’s employment with the
Company or its Affiliates terminates (i) voluntarily by Executive (other than for Good Reason
within twelve (12) months following a Change of Control) or (ii) for Cause by the Company, then
Executive will not be entitled to receive severance or other benefits except for those (if any) as
may then be established under the Company’s then existing severance and benefits plans and
practices or pursuant to other written agreements with the Company, including, without limitation,
any Employment Agreement.
(c) Disability; Death. If the Company terminates Executive’s employment as a result
of Executive’s Disability, or Executive’s employment terminates due to his death, then Executive
will not be entitled to receive severance or other benefits except for those (if any) as may then
be established under the Company’s then existing written severance and benefits plans and practices
or pursuant to other written agreements with the Company, including, without limitation, any
Employment Agreement.
(d) Exclusive Remedy. In the event of a termination of Executive’s employment as set
forth in Section 4(a), the provisions of this Section 4 are intended to be and are exclusive and in
lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled,
whether at law, tort, contract, or in equity. Executive will be entitled to no benefits,
compensation or other payments or rights upon termination of employment following a Change of
Control other than those benefits expressly set forth in this Section 4.
5. Code Section 409A.
(a) Distributions. Notwithstanding anything to the contrary in this Agreement, if
Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”) and the final regulations and any guidance promulgated thereunder
(“Section 409A”) at the time of Executive’s termination, and the severance payable to Executive, if
any, pursuant to this Agreement, when considered together with any other severance payments or
separation benefits which may be considered deferred compensation under Section 409A (together, the
“Deferred Compensation Separation Benefits”) will not and could not under any circumstances,
regardless of when such termination occurs, be paid in full by the fifteenth day of the third month
of the Company’s fiscal year following Executive’s termination, then only that portion of the
Deferred Compensation Separation Benefits which do not exceed the Section 409A Limit (as defined
below) may be made within the first six (6) months following Executive’s termination of employment
in accordance with the payment schedule applicable to each such payment or benefit. For these
purposes, each severance payment and benefit is hereby designated as a separate payment and will
not collectively be treated as a single payment. Any portion of the Deferred Compensation
Separation Benefits in excess of the Section 409A Limit shall accrue and, to the extent such
portion of the Deferred Compensation Separation Benefits would otherwise have been payable within
the first six (6) months following Executive’s termination of employment, will become payable on
the first payroll date that occurs on or after the date six (6) months and one (1) day following
the date of
Executive’s termination of employment. All subsequent Deferred Compensation Separation
Benefits, if any, will be payable in accordance with the payment schedule applicable to each
payment or benefit.
(b) Amendment. This provision is intended to comply with the requirements of Section
409A so that none of the severance payments and benefits to be provided hereunder will be subject
to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to
so comply. The Company and Executive agree to work together in good faith to consider amendments
to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable
to avoid imposition of any additional tax or income recognition prior to actual payment to
Executive under Section 409A.
6. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute
payments” within the meaning of Section 280G of the Code and (ii) but for this Section 6, would be
subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits
under Section 4 will be either:
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an
after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some
portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the
Company and Executive otherwise agree in writing, any determination required under this Section 6
will be made in writing by the Company’s independent public accountants immediately prior to Change
of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive
and the Company for all purposes. For purposes of making the calculations required by this Section
6, the Accountants may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the application of Sections 280G
and 4999 of the Code. The Company and Executive will furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a determination under this
Section 6. The Company will bear all costs the Accountants may reasonably incur in connection with
any calculations contemplated by this Section 6.
7. Definition of Terms. The following terms referred to in this Agreement will have
the following meanings:
(a) Affiliate. “Affiliate” means the Company and any other parent or subsidiary
corporation of the Company, as such terms are defined in Section 424(e) and (f) of the Code.
(b) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the
Company sponsors (or participates in) and that immediately prior to Executive’s termination of
employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision
and similar benefits. Benefit Plans do not include any other type of benefit (including, but
not by way of limitation, disability, life insurance or retirement benefits). A requirement that
the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit
Plans will not be satisfied unless the coverage is no less favorable than that provided to
executives of the Company at any applicable time during the period Executive is entitled to receive
severance pursuant to Section 4. The Company may, at its option, satisfy any requirement that the
Company provide coverage under any Benefit Plan by (i) reimbursing Executive’s premiums under Title
X of the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”) after Executive has
properly elected continuation coverage under COBRA (in which case Executive will be solely
responsible for electing such coverage for his eligible dependents), or (ii) providing coverage
under a separate plan or plans providing coverage that is no less favorable or by paying Executive
a lump-sum payment which is, on an after-tax basis, sufficient to provide Executive and Executive’s
eligible dependents with equivalent coverage under a third party plan that is reasonably available
to Executive and Executive’ s eligible dependents.
(c) Cause. “Cause” will mean:
(i) A willful failure by Executive to perform Executive’s duties to the Company;
(ii) A willful act by Executive that constitutes misconduct and that is injurious to the
Company;
(iii) Circumstances where Executive willfully imparts material confidential information
relating to the Company or its business to competitors or to other third parties other than as
authorized in the course of carrying out Executive’s duties;
(iv) A material and willful violation by Executive of a federal or state law or regulation
applicable to the business of the Company; or
(v) Executive’s conviction or plea of guilty or no contest to a felony.
No act or failure to act by Executive will be considered “willful” unless committed without
good faith and without a reasonable belief that the act or omission was in the Company’s best
interest.
(d) Change of Control. “Change of Control” means the occurrence of any of the
following:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent (50%) or more of
the total voting power represented by, or fifty percent (50%) or more of the fair value of, the
Company’s then outstanding voting securities;
(ii) Any action or event occurring within a one (1)-year period, as a result of which less
than a majority of the directors are Incumbent Directors. “Incumbent Directors” will
mean directors who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of a majority of the
Incumbent Directors at the time of such election or nomination;
(iii) The consummation of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving or resulting entity, including any
parent holding company) at least fifty percent (50%) of the total voting power represented by the
voting securities of the Company or such surviving or resulting entity outstanding immediately
after such merger or consolidation; or
(iv) The consummation of the sale, lease or other disposition by the Company of all or
substantially all the Company’s assets.
(e) Disability. “Disability” will mean that Executive has been unable to perform his
Company duties as the result of his incapacity due to physical or mental illness, and such
inability, at least twenty-six (26) weeks after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable to Executive or
Executive’s legal representative (such agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at least thirty (30)
days’ written notice by the Company of its intention to terminate Executive’s employment. In the
event that Executive resumes the performance of substantially all of Executive’s duties hereunder
before the termination of Executive’s employment becomes effective, the notice of intent to
terminate will automatically be deemed to have been revoked.
(f) Good Reason. “Good Reason” will mean the occurrence of one or more of the
following, without the Executive’s consent:
(i) A material reduction of Executive’s duties, title, authority or responsibilities in effect
immediately prior to a Change of Control;
(ii) A material reduction in Executive’s base salary;
(iii) The failure of the Company to obtain the assumption of the Agreement by the successor;
or
(iv) A material change in the geographic location at which Executive must perform services (in
other words, the relocation of Executive to a facility or a location more than fifty (50) miles
from Executive’s then present location).
Provided, however, that before Executive may resign for Good Reason, (A) Executive must provide the
Company with written notice within ninety (90) days of the event that Executive believes
constitutes “Good Reason” specifically identifying the acts or omissions constituting the grounds
for Good Reason and (B) the Company must have an opportunity within thirty (30) days following
delivery of such notice to cure the Good Reason condition.
(g) Section 409A Limit. “Section 409A Limit” will mean the lesser of two (2) times:
(i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during
the Company’s taxable year preceding the Company’s taxable year of Executive’s termination of
employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal
Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken
into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in
which Executive’s employment is terminated.
8. Successors.
(a) The Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or otherwise) or to all or
substantially all of the Company’s business and/or assets will assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such obligations in the absence
of a succession. For all purposes under this Agreement, the term “Company” will include any
successor to the Company’s business and/or assets which executes and delivers the assumption
agreement described in this Section 8(a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) Executive’s Successors. The terms of this Agreement and all rights of Executive
hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
9. Notice.
(a) General. Notices and all other communications contemplated by this Agreement will
be in writing and will be deemed to have been duly given when personally delivered or when mailed
by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of
Executive, mailed notices will be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed notices will be
addressed to its corporate headquarters, and all notices will be directed to the attention of its
President.
(b) Notice of Termination. Any termination by the Company for Cause or by Executive
for Good Reason will be communicated by a notice of termination to the other party hereto given in
accordance with Section 8(a) of this Agreement. Such notice will indicate the specific termination
provision in this Agreement relied upon, will set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so indicated, and will
specify the termination date (which will be not more than thirty (30) days after the giving of such
notice).
10. Arbitration. Executive and the Company agree that any and all disputes arising
out of, or relating to, the terms of this Agreement, their interpretation, and any of the matters
herein, will be subject to binding arbitration in Middlesex County, Massachusetts before the
Judicial Arbitration & Mediation Services (“JAMS”) pursuant to its employment arbitration rules &
procedures (“JAMS
Rules”). The arbitrator shall administer and conduct any arbitration in accordance with
Massachusetts law, including the Massachusetts Code of Civil Procedure, and the arbitrator shall
apply substantive and procedural Massachusetts law to any dispute or claim, without reference to
any conflict-of-law provisions of any jurisdiction. To the extent that the JAMS Rules conflict
with Massachusetts law, Massachusetts law will take precedence. The Company and Executive agree
that the prevailing party in any arbitration will be entitled to injunctive relief in any court of
competent jurisdiction to enforce the arbitration award. The Company and Executive agree that the
prevailing party in any arbitration will be awarded its reasonable attorneys’ fees and costs. The
Company and Executive hereby agree to waive their right to have any dispute with the other party
resolved in a court of law by a judge or jury. This Section 10 will not prevent either party from
seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over
the parties and the subject matter of their dispute relating to Executive’s obligations under this
Agreement and the agreements incorporated herein by reference.
11. Miscellaneous Provisions.
(a) No Duty to Mitigate. Executive will not be required to mitigate the amount of any
payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that
Executive may receive from any other source.
(b) Waiver. No provision of this Agreement will be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by
an authorized officer of the Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement by the other party
will be considered a waiver of any other condition or provision or of the same condition or
provision at another time.
(c) Headings. All captions and section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.
(d) Entire Agreement. This Agreement, together with any Employment Agreement,
constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or written and whether
expressed or implied) of the parties with respect to the subject matter hereof. Except as provided
in Section 5 of this Agreement, no waiver, alteration, or modification of any of the provisions of
this Agreement will be binding unless in writing and signed by duly authorized representatives of
the parties hereto and which specifically mention this Agreement.
(e) Choice of Law. The validity, interpretation, construction and performance of this
Agreement will be governed by the laws of the State of Massachusetts (with the exception of its
conflict of laws provisions). Any claims or legal actions by one party against the other arising
out of the relationship between the parties contemplated herein (whether or not arising under this
Agreement) will be commenced or maintained in any state or federal court located in the
jurisdiction where Executive resides, and Executive and the Company hereby submit to the
jurisdiction and venue of any such court.
(f) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement will not affect the validity or enforceability of any other provision hereof,
which will remain in full force and effect.
(g) Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.
(h) Counterparts. This Agreement may be executed in counterparts, each of which will
be deemed an original, but all of which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.
| COMPANY | EVERGREEN SOLAR, INC. | |||
| By: | ||||
| Title: | ||||
EXECUTIVE |
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