EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
Exhibit 10.16
Name of Executive:
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Xxxx X. Xxxxxxxxx | |
Position:
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President and Chief Executive Officer | |
Fiscal Year 2008 Base Salary:
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$291,600 | |
Fiscal Year 2009 Base Salary:
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$460,000 | |
Initial Term:
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Effective date through March 31, 2009 | |
Renewal Periods are:
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2 Years | |
Post-Change of Control Renewal Period is:
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3 Years | |
Severance Multiplier is:
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2x | |
Post-Change of Control Severance Multiplier is:
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3x |
This Agreement (“Agreement”) is between the Executive named above (“Executive”), on the one
hand, and Orion Energy Systems, Inc. (“Orion” and, together with its subsidiaries, the “Company”),
on the other.
WHEREAS, the Executive is employed by Xxxxx in a key employee capacity and the Executive’s
services are valuable to the conduct of the business of the Company; and
WHEREAS, Xxxxx and Executive desire to specify the terms and conditions on which Executive
will continue employment on and after the date the Company’s common stock is first sold to the
public pursuant to an effective registration statement filed under the Securities Act of 1933, as
amended (the “IPO”), and under which Executive will receive severance in the event that Executive
separates from service with the Company;
NOW, THEREFORE, for good and valuable consideration, the parties agree as follows:
1. Effective Date; Term. This Agreement shall become effective on the date of the
Company’s IPO and continue until the end of the initial term set forth above. Thereafter, the
Agreement shall renew automatically for successive renewal periods as set forth above unless and
until either party provides written notice to the other party of the intent not to renew the
Agreement at least ninety (90) days prior to the end of any term. Notwithstanding the foregoing,
if a Change of Control occurs prior to the end of any term, the Agreement shall be automatically
extended for the post- Change of Control renewal period set forth above beginning on the date of
the Change of Control. Expiration of this Agreement will not affect the rights or obligations of
the parties hereunder arising out of, or relating to, circumstances occurring prior to the
expiration of this Agreement, which rights and obligations will survive the expiration of this
Agreement.
2. Definitions. For purposes of this Agreement, the following terms shall have the
meanings ascribed to them:
(a) “Accrued Benefits” shall mean the following amounts, payable as described herein:
(i) all base salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive’s
employment for reasonable and necessary expenses incurred by the Executive on behalf of
the Company for the time period ending with the Termination Date; (iii) any and all other
cash earned through the Termination Date and deferred at the election of the Executive or
pursuant to any deferred compensation plan then in effect; and (iv) all other payments and
benefits to which the Executive (or in the event of the Executive’s death, the Executive’s
surviving spouse or other beneficiary) is entitled on the Termination Date under the terms
of any benefit plan of the Company, excluding severance payments under any Company severance
policy, practice or agreement in effect on the Termination Date. Payment of Accrued
Benefits shall be made promptly in accordance with the Company’s prevailing practice with
respect to clauses (i) and (ii) or, with respect to clauses (iii) and (iv), pursuant to the
terms of the benefit plan or practice establishing such benefits.
(b) “Base Salary” shall mean the Executive’s annual base salary with the Company as in
effect from time to time.
(c) “Board” shall mean the board of directors of Orion or a committee of such Board
authorized to act on its behalf in certain circumstances, including the Compensation
Committee of the Board.
(d) “Cause” shall mean a good faith finding by the Board that Executive has (i) failed,
neglected, or refused to perform the lawful employment duties related to his or her position
or as from time to time assigned to him (other than due to Disability); (ii) committed any
willful, intentional, or grossly negligent act having the effect of materially injuring the
interest, business, or reputation of the Company; (iii) violated or failed to comply in any
material respect with the Company’s published rules, regulations, or policies, as in effect
or amended from time to time; (iv) committed an act constituting a felony or misdemeanor
involving moral turpitude, fraud, theft, or dishonesty; (v) misappropriated or embezzled any
property of the Company (whether or not an act constituting a felony or misdemeanor); or
(vi) breached any material provision of this Agreement or any other applicable
confidentiality, non-compete, non-solicit, general release, covenant not-to-sue, or other
agreement with the Company.
(e) “Change of Control” shall mean and be limited to any of the following:
(i) any Person (other than (A) the Company or any of its subsidiaries, (B) a
trustee or other fiduciary holding securities under any employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock in the Company (“Excluded Persons”)) is or
becomes the Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates after the IPO Date, pursuant to
express authorization by the Board that refers to this exception) representing
twenty percent (20%) or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company’s then outstanding voting
securities; or
(ii) the following individuals cease for any reason to constitute a majority of
the number of directors of the Company then serving: (A) individuals
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who, on the IPO Date, constituted the Board and (B) any new director (other
than a director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Act) whose appointment or election by the Board
or nomination for election by the Company’s shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors on the IPO Date, or whose appointment, election or nomination for election
was previously so approved (collectively the “Continuing Directors”); provided,
however, that individuals who are appointed to the Board pursuant to or in
accordance with the terms of an agreement relating to a merger, consolidation, or
share exchange involving the Company (or any direct or indirect subsidiary of the
Company) shall not be Continuing Directors for purposes of this Agreement until
after such individuals are first nominated for election by a vote of at least
two-thirds (2/3) of the then Continuing Directors and are thereafter elected as
directors by the shareholders of the Company at a meeting of shareholders held
following consummation of such merger, consolidation, or share exchange; and,
provided further, that in the event the failure of any such persons appointed to the
Board to be Continuing Directors results in a Change of Control, the subsequent
qualification of such persons as Continuing Directors shall not alter the fact that
a Change of Control occurred; or
(iii) the consummation of a merger, consolidation or share exchange of the
Company with any other corporation or the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange of the Company
(or any direct or indirect subsidiary of the Company), in each case, which requires
approval of the shareholders of the Company, other than (A) a merger, consolidation
or share exchange which would result in the voting securities of the Company
outstanding immediately prior to such merger, consolidation or share exchange
continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at least fifty
percent (50%) of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately after such
merger, consolidation or share exchange, or (B) a merger, consolidation or share
exchange effected to implement a recapitalization of the Company (or similar
transaction) in which no Person (other than an Excluded Person) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates after the IPO Date, pursuant to
express authorization by the Board that refers to this exception) representing
twenty percent (20%) or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company’s then outstanding voting
securities; or
(iv) the consummation of a plan of complete liquidation or dissolution of the
Company or a sale or disposition by the Company of all or substantially all of the
Company’s assets (in one transaction or a series of related transactions within any
period of 24 consecutive months), in each case, which requires approval of the
shareholders of the Company, other than a sale or disposition by the Company of all
or substantially all of the Company’s assets to an entity at
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least seventy-five percent (75%) of the combined voting power of the voting
securities of which are owned by Persons in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no “Change of Control” shall be deemed to have occurred if there is
consummated any transaction or series of integrated transactions immediately following which the
record holders of the common stock of the Company immediately prior to such transaction or series
of transactions continue to own, directly or indirectly, in the same proportions as their ownership
in the Company, an entity that owns all or substantially all of the assets or voting securities of
the Company immediately following such transaction or series of transactions.
For purposes of this Section 2(e):
(i) the term “Person” shall mean any individual, firm, partnership, corporation
or other entity, including any successor (by merger or otherwise) of such entity, or
a group of any of the foregoing acting in concert;
(ii) the terms “Affiliate” and “Associate” shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations of the
Act;
(iii) the term “Act” means the Securities Exchange Act of 1934, as amended; and
(iv) a Person shall be deemed to be the “Beneficial Owner” of any securities
which:
a) such Person or any of such Person’s Affiliates or Associates has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person’s Affiliates or Associates until
such tendered securities are accepted for purchase;
b) such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial
ownership” of (as determined pursuant to Rule l3d-3 of the General Rules and
Regulations under the Act), including pursuant to any agreement, arrangement
or understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this
clause b) as a result of an agreement, arrangement or understanding
to vote such security if the agreement, arrangement or understanding: (A)
arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Act and (B)
is not also then reportable on a Schedule l3D under the Act (or any
comparable or successor report); or
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c) are beneficially owned, directly or indirectly, by any other Person with
which such Person or any of such Person’s Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in
clause b) above) or disposing of any voting securities of the
Company.
(f) “COBRA” shall mean the provisions of Code Section 4980B.
(g) “Code” shall mean the Internal Revenue Code of 1986, as amended, as interpreted by
rules and regulations issued pursuant thereto, all as amended and in effect from time to
time. Any reference to a specific provision of the Code shall be deemed to include
reference to any successor provision thereto.
(h) “Competitive Business Activity” shall mean the design and manufacture of lighting
systems and controls for industrial, commercial and agricultural facilities.
(i) “Disability” shall mean, subject to applicable law, any medically determinable
physical or mental impairment that (i) renders Executive unable to perform the duties of his
or her position with the Company and (ii) is expected to last for a continuous period of not
less than six months, all as certified by a physician reasonably acceptable to the Company
or its Successor.
(j) “General Release” shall mean a release of all claims that Executive, and anyone who
may succeed to any claims of Executive, has or may have against Orion, its board of
directors, any of its subsidiaries or affiliates, or any of their employees, directors,
officers, employees, agents, plan sponsors, administrators, successors (including the
Successor), fiduciaries, or attorneys, including but not limited to claims arising out of
Executive’s employment with, and termination of employment from, the Company, but excluding
claims for (i) severance payments and benefits due pursuant to this Agreement and (ii) any
salary, bonus, equity, accrued vacation, expense reimbursement and other ordinary payments
or benefits earned or otherwise due with respect to the period prior to the date of any
Separation from Service. The General Release shall be in a form that is reasonably
acceptable to the Company or the Board.
(k) “Good Reason” shall mean the occurrence of any of the following without the consent
of Executive: (i) a material diminution in the Executive’s Base Salary; (ii) a material
diminution in the Executive’s authority, duties or responsibilities; (iii) a material
diminution in the authority, duties or responsibilities of the supervisor to whom the
Executive is required to report; (iv) a material diminution in the budget over which the
Executive retains authority; (v) a material change in the geographic location at which the
Executive must perform services; or (vi) a material breach by Orion of any provisions of
this Agreement.
(l) “Separation from Service” shall mean Executive’s termination of employment from Orion and
each entity that is required to be included in Orion’s controlled group of corporations within the
meaning of Code Section 414(b), or that is under common control with Orion within the meaning of
Code Section 414(c); provided that the phrase “at least 50 percent” shall be used in place of the
phrase “ at least 80 percent” each place it appears therein or in the regulations thereunder
(collectively, “409A affiliates”). Notwithstanding the foregoing:
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(i) If Executive takes a leave of absence for purposes of military leave, sick leave or
other bona fide leave of absence, Executive will not be deemed to have incurred a Separation
from Service for the first six (6) months of the leave of absence, or if longer, for so long
as Executive’s right to reemployment is provided either by statute or by contract.
(ii) Subject to paragraph (i), Executive shall incur a Separation from Service when the
level of bona fide services provided by Executive to Orion and its 409A affiliates
permanently decreases to a level of twenty percent (20%) or less of the level of services
rendered by Executive, on average, during the immediately preceding 12 months of employment.
(iii) If, following Executive’s termination of employment, Executive continues to
provide services to the Company or a 409A Affiliate in a capacity other than as an employee,
Executive will not be deemed to have Separated from Service as long as Executive is
providing bona fide services at a rate that is greater than twenty percent (20%) of the
level of services rendered by Executive, on average, during the immediately preceding 12
months of service.
(m) “Severance Payment” shall mean the Executive’s Base Salary at the time of the
Termination Date plus the average of the annual bonuses earned by the Executive with respect
to each of the three completed fiscal years of the Company preceding the year in which the
Termination Date occurs (or such lesser number of fiscal years for which the Executive was
employed by the Company, with any partial year’s bonus being annualized with respect to such
fiscal year) multiplied by the severance multiplier set forth above; provided that if
Executive’s Termination Date occurs on or following a Change of Control, the multiplier
described above shall be increased to the post-Change of Control severance multiplier set
forth above and any reduction in Executive’s Base Salary since the date of the Change of
Control shall be ignored.
(n) “Successor” shall mean the person to which this Agreement is assigned upon a Sale
of Business within the meaning of Section 10.
(o) “Termination Date” shall mean the date of the Executive’s termination of employment
from the Company, as further described in Section 4.
3. Employment of Executive
(a) Position.
(i) Executive shall serve in the position set forth above in a full-time
capacity. In such position, Executive shall have such duties and authority as is
customarily associated with such position and shall have such other titles and
duties, consistent with Executive’s position, as may be assigned from time to time
by the Board.
(ii) Executive will devote Executive’s full business time and best efforts to
the performance of Executive’s duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise which would
conflict or interfere with the rendition of such services either directly or
indirectly, without the prior written consent of the Board; provided that nothing
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herein shall preclude Executive, subject to the prior approval of the Board,
from accepting appointment to or continue to serve on any board of directors or
trustees of any business corporation or any charitable organization; further
provided in each case, and in the aggregate, that such activities do not conflict or
interfere with the performance of Executive’s duties hereunder or conflict with
Section 7.
(b) Base Salary. Xxxxx shall pay Executive a Base Salary at the respective annual
rates set forth above for Fiscal Year 2008 and Fiscal Year 2009, payable in regular
installments in accordance with the Company’s usual payroll practices. Executive shall be
entitled to such increases in Executive’s base salary, if any, as may be determined from
time to time by the Board.
(c) Bonus Incentives. Executive shall be entitled to participate in such annual and/or
long-term cash and equity incentive plans and programs of Orion as are generally provided to
the senior executives of Orion. On and after a Change of Control, to assure that Executive
will have an opportunity to earn incentive compensation, the Executive shall be included in
a bonus plan of the Employer which shall satisfy the standards described below (such plan,
the “Bonus Plan”). Bonuses under the Bonus Plan shall be payable with respect to achieving
such financial or other goals reasonably related to the business of the Company as the
Company shall establish (the “Goals”), all of which Goals shall be attainable, prior to the
end of the post-Change of Control renewal period (as set forth above), with approximately
the same degree of probability as the most attainable goals under the Company’s bonus plan
or plans as in effect at any time during the 180-day period immediately prior to the Change
of Control (whether one or more, the “Company Bonus Plan”) and in view of the Company’s
existing and projected financial and business circumstances applicable at the time. The
amount of the bonus (the “Bonus Amount”) that Executive is eligible to earn under the Bonus
Plan shall be no less than 100% of the Executive’s target award provided in such Company
Bonus Plan (such bonus amount herein referred to as the “Targeted Bonus”), and in the event
the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus
Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus
reasonably related to that portion of the Goals which were achieved. Payment of the Bonus
Amount shall not be affected by any circumstance occurring subsequent to the end of the
post-Change of Control renewal period, including termination of Executive’s employment.
(d) Employee Benefits. Executive shall be entitled to participate in the Company’s
employee benefit plans (other than annual and/or long-term incentive programs, which are
addressed in subsection (c)) as in effect from time to time on the same basis as those
benefits are generally made available to other senior executives of Orion. On and after a
Change of Control, Executive shall be included: (i) to the extent eligible thereunder (which
eligibility shall not be conditioned on Executive’s salary grade or on any other requirement
which excludes persons of comparable status to the Executive unless such exclusion was in
effect for such plan or an equivalent plan immediately prior to the Change in Control of the
Company), in any and all plans providing benefits for the Company’s salaried employees in
general (including but not limited to group life insurance, hospitalization, medical,
dental, and long-term disability plans) and (ii) in plans provided to executives of the
Company of comparable status and position to Executive (including but not limited to
deferred compensation, split-dollar life insurance, supplemental retirement, stock option,
stock appreciation, stock bonus, cash
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bonus and similar or comparable plans); provided, that, in no event
shall the aggregate level of benefits under the plans described in clause (i) and the plans
described in clause (ii), respectively, in which Executive is included be less than the
aggregate level of benefits under plans of the Company of the type referred to in such
clause, respectively, in which Executive was participating immediately prior to the Change
in Control.
(e) Business Expenses. The reasonable business expenses incurred by Executive in the
performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance
with Company policies.
(f) Other Perquisites. Executive shall be entitled to receive the other benefits and
perquisites set forth in Exhibit A.
(g) Intellectual Property Work Product Payments. Executive shall be entitled to
receive any payments with respect to Intellectual Property Work Product (as defined in
Section 7(c)(i)) provided for by any Intellectual Property Assignment Agreement entered into
by and between Executive and the Company (any “IP Agreement”), the form of which is attached
to this Agreement as Exhibit B.
4. Termination of Employment. Executive’s employment with the Company will terminate
during the term of the Agreement, and this Agreement will terminate on the date of such
termination, as follows:
(a) Executive’s employment will terminate upon Executive’s death.
(b) If Executive is Disabled, and if within thirty (30) days after Xxxxx notifies the
Executive in writing that it intends to terminate the Executive’s employment, the Executive
shall not have returned to the performance of the Executive’s duties hereunder on a
full-time basis, Xxxxx may terminate the Executive’s employment, effective immediately
following the end of such thirty-day period.
(c) Orion may terminate Executive’s employment with or without Cause (other than as a
result of Disability which is governed by subsection (b)) by providing written notice to
Executive that indicates in reasonable detail the facts and circumstances alleged to provide
a basis for such termination. If the termination is without Cause, Executive’s employment
will terminate on the date specified in the written notice of termination. If the
termination is for Cause, the Executive shall have thirty (30) days from the date the
written notice is provided, or such longer period as Orion may determine to be appropriate,
to cure any conduct or act, if curable, alleged to provide grounds for termination of
Executive’s employment for Cause. If the alleged conduct or act constituting Cause is not
curable, Executive’s employment will terminate on the date specified in the written notice
of termination. If the alleged conduct or act constituting Cause is curable but Executive
does not cure such conduct or act within the specified time period, Executive’s employment
will terminate on the date immediately following the end of the cure period.
Notwithstanding the foregoing, on and after a Change of Control, a determination of Cause
shall only be made by the Board of Directors of the Successor, which may terminate Executive
for Cause only after providing Executive (i) written notice as set forth above, (ii) the
opportunity to appear before such board and provide rebuttal to such proposed termination,
and (iii) written notice following such appearance confirming such termination and
certifying that the decision to terminate Executive for Cause was approved by at least
sixty-six percent (66%) of the members of
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such board, excluding Executive. Unless otherwise directed by Xxxxx, from and after
the date of the written notice of proposed termination, Executive shall be relieved of his
or her duties and responsibilities and shall be considered to be on a paid leave of absence
pending any final action by Xxxxx or the Board of Directors of the Successor confirming such
proposed termination.
(d) Executive may terminate his or her employment for or without Good Reason by
providing written notice of termination to Orion that indicates in reasonable detail the
facts and circumstances alleged to provide a basis for such termination. If Executive is
alleging a termination for Good Reason, Executive must provide written notice to Orion of
the existence of the condition constituting Good Reason within ninety (90) days of the
initial existence of such condition, and Orion must have a period of at least thirty (30)
days following receipt of such notice to cure such condition. If such condition is not
cured by Orion within such thirty-day period, Executive’s termination of employment from the
Company shall be effective on the date immediately following the end of such cure period.
5. Payments upon Termination.
(a) Entitlement to Severance. Subject to the other terms and conditions of this
Agreement, Executive shall be entitled to the Accrued Benefits, and to the severance
benefits described in subsection (c), in either of the following circumstances while this
Agreement is in effect:
(i) Executive’s employment is terminated by Orion without Cause, except in the
case of death or Disability; or
(ii) Executive terminates his or her employment with the Company for Good
Reason.
If Executive dies after receiving a notice by Xxxxx that Executive is being terminated
without Cause, or after providing notice of termination for Good Reason, the Executive’s
estate, heirs and beneficiaries shall be entitled to the Accrued Benefits and the severance
benefits described in subsection (c) at the same time such amounts would have been paid or
benefits provided to Executive had he or she lived.
(b) General Release Requirement. As an additional prerequisite for receipt of the
severance benefits described in subsection (c), Executive must execute, deliver to Orion,
and not revoke (to the extent Executive is allowed to do so) a General Release.
(c) Severance Benefits; Timing and Form of Payment. Subject to the limitations imposed
by Section 6, if Executive is entitled to severance benefits, then:
(i) Company shall pay Executive the Severance Payment in a lump sum within ten
(10) days following the Executive’s Separation from Service, or if later, the date
on which the General Release is no longer revocable, or if later, the date on which
the amount payable under Section 6 is determined, but in no event may be payment be
made more than 21/2 months after the year in which Executive’s Separation from Service
occurs;
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(ii) At the same time that the Severance Payment is made, Company shall pay
Executive a lump sum amount equal to the Executive’s annual target cash bonus
opportunity (if any) as established by the Board or the Compensation Committee of
the Board for the fiscal year in which the Separation from Service occurs,
multiplied by a fraction, the numerator of which is the number of days that have
elapsed during the annual performance period to the date of the Executive’s
Separation from Service and the denominator of which is 365; and
(iii) Executive shall be entitled to pay premiums for COBRA continuation
coverage for the length of such coverage at the same rate as is being charged to
active employees for similar coverage.
All payments shall be subject to payroll taxes and other withholdings in accordance with the
Company’s (or the applicable employer of record’s) standard payroll practices and applicable
law.
(d) Other Termination of Employment. If Executive’s employment terminates for any
reason other than those described in subsection (a), the Executive (or the Executive’s
estate in the event of his or her death), shall be entitled to receive only the Accrued
Benefits.
(e) IP Agreement. Notwithstanding any other provision of this Agreement, the termination of
Executive’s employment shall not affect payments under any IP Agreement.
6. Limitations on Severance Payments and Benefits. Notwithstanding any other
provision of this Agreement, if any portion of the Severance Payment or any other payment under
this Agreement, or under any other agreement with or plan of the Company (in the aggregate “Total
Payments”), would constitute an “excess parachute payment,” then the Total Payments to be made to
Executive shall be reduced such that the value of the aggregate Total Payments that Executive is
entitled to receive shall be One Dollar ($1) less than the maximum amount which Executive may
receive without becoming subject to the tax imposed by Code Section 4999 or which the Company may
pay without loss of deduction under Code Section 280G(a); provided that the foregoing reduction in
the amount of Total Payments shall not apply if the After-Tax Value to Executive of the Total
Payments prior to reduction in accordance herewith is greater than the After-Tax Value to Executive
if Total Payments are reduced in accordance herewith. For purposes of this Agreement, the terms
“excess parachute payment” and “parachute payments” shall have the meanings assigned to them in
Code Section 280G, and such “parachute payments” shall be valued as provided therein. Present
value for purposes of this Agreement shall be calculated in accordance with Code Section
1274(b)(2). Within twenty (20) business days following delivery of the notice of termination or
notice by Orion to Executive of its belief that there is a payment or benefit due Executive that
will result in an excess parachute payment as defined in Code Section 280G, Executive and Orion, at
Orion’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized
tax counsel selected by Xxxxx’s independent auditors and acceptable to Executive in Executive’s
sole discretion, which opinion sets forth: (A) the amount of the Base Period Income, (B) the amount
and present value of Total Payments, (C) the amount and present value of any excess parachute
payments without regard to the limitations of this Section 6, (D) the After-Tax Value of the Total
Payments if the reduction in Total Payments contemplated under this Section 6 did not apply, and
(E) the After-Tax Value of the Total Payments taking into account the reduction in Total Payments
contemplated under this Section 6. As used in this Section 6, the term “Base Period
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Income” means an amount equal to Executive’s “annualized includible compensation for the base
period” as defined in Code Section 280G(d)(1). For purposes of such opinion, the value of any
noncash benefits or any deferred payment or benefit shall be determined by Orion’s independent
auditors in accordance with the principles of Code Sections 280G(d)(3) and (4), which determination
shall be evidenced in a certificate of such auditors addressed to Orion and Executive. For
purposes of determining the After-Tax Value of Total Payments, Executive shall be deemed to pay
federal income taxes and employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Termination Payment is to be made and state
and local income taxes at the highest marginal rates of taxation in the state and locality of
Executive’s domicile for income tax purposes on the date the Termination Payment is to be made, net
of the maximum reduction in federal income taxes that may be obtained from deduction of such state
and local taxes. Such opinion shall be dated as of the Termination Date and addressed to Orion and
Executive and shall be binding upon the Company and Executive. If such opinion determines that
there would be an excess parachute payment and that the After-Tax Value of the Total Payments
taking into account the reduction contemplated under this Section is greater than the After-Tax
Value of the Total Payments if the reduction in Total Payments contemplated under this Section did
not apply, then the Termination Payment hereunder or any other payment determined by such counsel
to be includible in Total Payments shall be reduced or eliminated as specified by Executive in
writing delivered to Orion within five business days of Executive’s receipt of such opinion or, if
Executive fails to so notify Orion, then as Orion shall reasonably determine, so that under the
bases of calculations set forth in such opinion there will be no excess parachute payment. If such
legal counsel so requests in connection with the opinion required by this Section, Executive and
Orion shall obtain, at Xxxxx’s expense, and the legal counsel may rely on in providing the opinion,
the advice of a firm of recognized executive compensation consultants as to the reasonableness of
any item of compensation to be received by Executive. Notwithstanding the foregoing, the
provisions of this Section 6, including the calculations, notices and opinions provided for herein,
shall be based upon the conclusive presumption that the following are reasonable: (1) the
compensation and benefits provided for in Section 3 and (2) any other compensation, including but
not limited to the Accrued Benefits, earned prior to the date of Executive’s Separation from
Service by the Executive pursuant to the Company’s compensation programs if such payments would
have been made in the future in any event, even though the timing of such payment is triggered by
the Change in Control or the Executive’s Separation from Service. If the provisions of Code
Sections 280G and 4999 are repealed without succession, then this Section 6 shall be of no further
force or effect.
7. Covenants by Executive.
(a) Confidentiality and Non-Disclosure; Return of Company Property. During Executive’s
employment with the Company and thereafter, he or she agrees that he or she will not, except
in furtherance of the business of the Company, disclose, furnish, or make available to any
person or use for the benefit of himself or herself or any other person any confidential or
proprietary information or data of the Company including, but not limited to, trade secrets,
customer and supplier lists, pricing policies, operational methods, marketing plans or
strategies, product development techniques or plans, business acquisition or disposition
plans, new personnel employment plans, methods of manufacture, technical process, and
formulae, designs and design projects, inventions and research projects and financial
budgets and forecasts except (i) information which at the time is available to others in the
business or generally known to the public other than as a result of disclosure by Executive
not permitted hereunder, and
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(ii) when required to do so by a court of competent jurisdiction, by any governmental
agency or by any administrative, legislative or regulatory body; provided that in this
instance Executive shall make reasonable efforts to inform the Company of any such request
prior to any disclosure so as to permit the Company a meaningful opportunity to seek a
protective order or similar adjudication. Upon termination of his or her employment with
the Company, Executive will immediately return to the Company all written or electronically
stored confidential or proprietary information in whatever format it is contained, and will
deliver to the Company promptly all other items which belong to the Company or which by
their nature are for the use of Company employees only including, without limitation, all
written and other materials which are of a secret or confidential nature relating to the
business of the Company.
(b) Non-Competition/Non-Solicitation.
(i) During Executive’s employment with the Company and for a period of two
years following Executive’s Separation from Service, Executive agrees not to
directly or indirectly engage, or assist any business or entity, in Competitive
Business Activity in any capacity, including without limitation as an employee,
officer, or director of, or consultant or advisor to, any person or entity engaged
directly or indirectly in a business which engages in Competitive Business Activity,
in North America or anywhere that Orion or its Successor does business at the time
of Executive’s termination of employment, without the written consent of the Board.
(ii) During Executive’s employment with the Company and for a period of two
years following Executive’s Separation from Service, Executive agrees not to, in any
form or manner, directly or indirectly, on his or her own behalf or in combination
with others (1) solicit, induce or influence any customer, supplier, lender, lessor
or any other person with a business relationship with the Company to discontinue or
reduce the extent of such business relationship, or (2) recruit, solicit or
otherwise induce or influence any employee of the Company to discontinue their
employment with the Company.
(c) Intellectual Property Work Product.
(i) For purposes of this Agreement, the term “Intellectual Property Work
Product” means all writings, documents, inventions, ideas, drawings, artwork,
research, processes, procedures, techniques, designs, technologies, computer
hardware or software, programming code, templates, forms, formulas, discoveries,
products, marketing and business plans and all improvements, know-how, data, rights
and claims related to those items and all work product of any type, whether or not
copyrightable or patentable, which Executive makes, conceives, discovers or
develops, or has made, conceived, discovered or developed at any time during the
term of this Agreement or during the term of the Employment Agreement, dated as of
April 1, 2005, by and between Executive and the Company (the “2005 Employment
Agreement”). Executive’s work on such Intellectual Property Work Product shall be
considered permitted personal and not Company business activity. Executive’s
Intellectual Property Work Product shall initially be the property of Executive upon
its creation, but thereafter the Company shall have the option to acquire and own
all such
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Intellectual Property Work Product pursuant to an IP Agreement, subject to
Section 7(c)(ii). Executive agrees to make full disclosure to the Company of all
such Intellectual Property Work Product and agrees to do everything necessary or
desirable to transfer absolute title thereto in the Company and to protect
Executive’s rights in the Intellectual Property Work Product should the Company
exercise its option to acquire any such Work Product. Executive will assist the
Company (at the Company’s expense) to obtain and enforce patents, copyrights or
other rights or registrations relating to or arising out of any Intellectual
Property Work Product so transferred and this obligation shall continue after
Executive’s termination of his employment with the Company (regardless of whether
the termination is voluntary or involuntary). To the extent that Executive is
transferring such Intellectual Property Work Product, he hereby irrevocably agrees
to assign and transfer to the Company all rights, title and interest in and to such
Intellectual Property Work Product under patent, copyright, trade secret and
trademark law developed during the term of this Agreement or during the term of the
2005 Employment Agreement, in each case in accordance with an IP Agreement.
(ii) Each IP Agreement shall govern the respective rights of Executive and the
Company to the Intellectual Property Work Product until March 31, 2008; provided
that, beginning on the effective date of this Agreement, any sales, assignments or
transfers under an IP Agreement shall be subject to, and contingent upon, approval
of such sale, assignment or transfer by the Audit and Finance Committee of the
Board.
(iii) Executive hereby waives and quitclaims to Company any and all claims, of
any nature whatsoever, which Executive may now have or may hereafter have for
infringement of any patent or copyright resulting from any United States or foreign
application for letters patent or copyright for any Intellectual Property Work
Product.
(d) Remedies Not Exclusive. In the event that Executive breaches any terms of this
Section 7, Executive acknowledges and agrees that said breach may result in the immediate
and irreparable harm to the business and goodwill of the Company and that damages, if any,
and remedies of law for such breach may be inadequate and indeterminable. The Company, upon
Executive’s breach of this Section 7, shall therefore be entitled (in addition to and
without limiting any other remedies that the Company may seek under this Agreement or
otherwise at law or in equity) to (1) seek from any court of competent jurisdiction
equitable relief by way of temporary or permanent injunction and without being required to
post a bond, to restrain any violation of this Section 7, and for such further relief as the
court may deem just or proper in law or equity, and (2) in the event that the Company shall
prevail, its reasonable attorneys fees and costs and other expenses in enforcing its rights
under this Section 7.
(e) Severability of Provisions. If any restriction, limitation, or provision of this
Section 7 is deemed to be unreasonable, onerous, or unduly restrictive by a court of
competent jurisdiction, it shall not be stricken in its entirety and held totally void and
unenforceable, but shall remain effective to the maximum extent possible within the bounds
of the law. If any phrase, clause or provision of this Section 7 is declared invalid or
unenforceable by a court of competent jurisdiction, such phrase, clause, or provision
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shall be deemed severed from this Section 7, but will not affect any other provision of
this Section 7, which shall otherwise remain in full force and effect. The provisions of
this Section 7 are each declared to be separate and distinct covenants by Executive.
8. Notice. Any notice, request, demand or other communication required or permitted
herein will be deemed to be properly given when personally served in writing or when deposited in
the United States mail, postage prepaid, addressed to Executive at the address appearing at the end
of this Agreement and to the Company with attention to the Chief Executive Officer of Orion and the
General Counsel of Orion. Either party may change its address by written notice in accordance with
this paragraph.
9. Set Off; Mitigation. The Company’s obligation to pay Executive the amounts and to
provide the benefits hereunder shall be subject to set-off, counterclaim or recoupment of amounts
owed by Executive to the Company. However, Executive shall not be required to mitigate the amount
of any payment provided for pursuant to this Agreement by seeking other employment or otherwise.
10. Benefit of Agreement. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective executors, administrators, successors and assigns. If
Orion experiences a Change of Control, or otherwise sells, assigns or transfers all or
substantially all of its business and assets to any person or if Orion merges into or consolidates
or otherwise combines (where Orion does not survive such combination) with any person (any such
event, a “Sale of Business”), then Orion shall assign all of its right, title and interest in this
Agreement as of the date of such event to such person, and Orion shall cause such person, by
written agreement in form and substance reasonably satisfactory to Executive, to expressly assume
and agree to perform from and after the date of such assignment all of the terms, conditions and
provisions imposed by this Agreement upon the Company. Failure of Orion to obtain such agreement
prior to the effective date of such Sale of Business shall be a breach of this Agreement
constituting “Good Reason” hereunder, except that for purposes of implementing the foregoing the
date upon which such Sale of Business becomes effective shall be the Termination Date. In case of
such assignment by Xxxxx and of assumption and agreement by such person, as used in this Agreement,
“Orion” shall thereafter mean the person which executes and delivers the agreement provided for in
this Section 10 or which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such
person. Executive shall, in his or her discretion, be entitled to proceed against any or all of
such persons, any person which theretofore was such a successor to Orion, and Xxxxx (as so defined)
in any action to enforce any rights of Executive hereunder. Except as provided in this Section 10,
this Agreement shall not be assignable by Xxxxx. This Agreement shall not be terminated by the
voluntary or involuntary dissolution of Orion.
11. Arbitration. Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement that cannot be mutually resolved by the Executive and the
Company, including any dispute as to the calculation of the Executive’s Benefits, Base Salary,
Bonus Amount or any Severance Payment hereunder, shall be submitted to arbitration in Milwaukee,
Wisconsin, in accordance with the procedures of the American Arbitration Association. The
determination of the arbitrator shall be conclusive and binding on the Company and the Executive,
and judgment may be entered on the arbitrator’s award in any court having jurisdiction.
14
12. Applicable Law and Jurisdiction. This Agreement is to be governed by and
construed under the laws of the United States and of the State of Wisconsin without resort to
Wisconsin’s choice of law rules. Each party hereby agrees that the forum and venue for any legal
or equitable action or proceeding arising out of, or in connection with, this Agreement will lie in
the appropriate federal or state courts in the State of Wisconsin and specifically waives any and
all objections to such jurisdiction and venue.
13. Captions and Paragraph Headings. Captions and paragraph headings used herein are
for convenience only and are not a part of this Agreement and will not be used in construing it.
14. Invalid Provisions. Subject to Section 7(e), should any provision of this
Agreement for any reason be declared invalid, void, or unenforceable by a court of competent
jurisdiction, the validity and binding effect of any remaining portion will not be affected, and
the remaining portions of this Agreement will remain in full force and effect as if this Agreement
had been executed with said provision eliminated.
15. No Waiver. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
16. Entire Agreement. This Agreement contains the entire agreement of the parties
with respect to the subject matter of this Agreement except where other agreements are specifically
noted, adopted, or incorporated by reference. This Agreement otherwise supersedes any and all
other agreements, either oral or in writing, between the parties hereto with respect to the
employment of Executive by Company, except for any IP Agreement to the extent not inconsistent with
the provisions of this Agreement. All such agreements shall be void and of no effect. Each party
to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral
or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement, or promise not contained in this Agreement
will be valid or binding.
17. Modification. This Agreement may not be modified or amended by oral agreement,
but only by an agreement in writing signed by Xxxxx and Executive.
15
18. Counterparts. This Agreement may be signed in counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
EXECUTIVE
| By: |
| Name: |
| Title: |
16
EXHIBIT A
17
EXHIBIT B
INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
For good and valuable consideration set forth below, the receipt and sufficiency of which are
hereby acknowledged, Xxxx X. Xxxxxxxxx, an adult resident of the state of Wisconsin (hereinafter
referred to as “ASSIGNOR”), has agreed pursuant to that certain Employment Agreement dated
_________, 2007 (the “Employment Agreement”) to offer to sell, assign, and transfer unto Orion Energy
Systems, Inc., a Wisconsin corporation having offices at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxx
00000, its successors and assigns (hereinafter collectively referred to as “ASSIGNEE”), the full
and exclusive right, title and interest for the United States, its territories and possessions, and
all foreign countries in and to any part of the Intellectual Property Work Product (as that term is
defined in the Employment Agreement) requested by Assignee, including the right to sue for past
infringement, such right, title, and interest to be held and enjoyed by ASSIGNEE, its successors
and assigns, including the right to sue for damages for infringement of any of the Intellectual
Property Work Product occurring prior to the date of this assignment, to the full end of the term
or terms for the Intellectual Property Work Product as fully and entirely as would have been held
and enjoyed by ASSIGNOR had this Assignment not been made.
As consideration for such assignment, for each Intellectual Property Work Product developed
after the date hereof for which ASSIGNOR has or intends to have a patent filed, for which ASSIGNOR
submits to ASSIGNEE an Invention Disclosure Form in the form attached hereto as Exhibit 1, and for
which ASSIGNEE elects in writing to exercise its option to purchase, ASSIGNEE shall pay to ASSIGNOR
an amount to be agreed upon in writing by ASSIGNOR and ASSIGNEE (but in no event more than $1,500
per month per Intellectual Property Work Product) from the time of exercise for as long as such
Intellectual Property Work Product is significantly used or relied upon by ASSIGNEE (as determined
by ASSIGNEE, in its sole discretion), but not after abandonment, rejection, determination of
invalidity or expiration of any applicable patent filing therefore; provided, however, that
ASSIGNEE shall not be required to make any such payment in the event of the earlier to occur of (i)
ASSIGNEE electing not to actively pursue the filing of such patent or (ii) ASSIGNEE providing
ASSIGNOR written notice that ASSIGNEE will not be actively relying upon such Intellectual Property
Work Product. For any and all other Intellectual Property Work Product for which ASSIGNOR does not
intend to have a patent filed and that Assignee elects to purchase, the price shall be an
aggregated flat fee of $1,000. To insure payment when due, ASSIGNOR may be granted a security
interest in any such transferred Intellectual Property Work Product if he so requests.
ASSIGNOR hereby agrees (a) to communicate to ASSIGNEE or its representative or agents, all
facts and information known or available to ASSIGNOR respecting the Intellectual Property Work
Product, improvements, and modifications including evidence for interference, reexamination,
reissue, opposition, revocation, extension, or infringement purposes or other legal, judicial, or
administrative proceedings, whenever requested by ASSIGNEE; (b) to testify in person or by
affidavit as required by ASSIGNEE in any such proceeding in the United States
18
or a country foreign thereto; (c) to execute and deliver, upon request by ASSIGNEE, all lawful
papers including, but not limited to, original, divisional, continuation, and reissue applications,
renewals, assignments, powers of attorney, oaths, affidavits, and declarations, depositions; and
(d) to provide all reasonable assistance to ASSIGNEE in obtaining and enforcing proper title in and
protection for the Intellectual Property Work Product, improvements, and modifications under the
intellectual property laws of the United States and countries foreign thereto after any such
Intellectual Property Work Product is acquired by ASSIGNEE.
ASSIGNOR hereby represents and warrants that ASSIGNOR has the full and unencumbered right to
sell, assign, and transfer any interests to be sold, assigned, and transferred herein, and that
ASSIGNOR has not executed and will not execute any document or instrument in conflict herewith.
ASSIGNOR hereby grants to the law firm of Xxxxx & Xxxxxxx LLP the power and authority to
insert in this Assignment or any future transfer documentation any further identification which may
be necessary or desirable to comply with the rules of the U.S. Patent and Trademark Office for
recordation of this Assignment or the other transfer documents .
XXXXXXXX understands and agrees that the attorneys and agents of the law firm of Xxxxx &
Xxxxxxx LLP do not personally represent ASSIGNOR OR ASSIGNOR’s legal interests in this matter, but
instead represent the interests of ASSIGNEE; since said attorneys and agents cannot provide legal
advice to ASSIGNOR with respect to this Assignment, ASSIGNOR acknowledges its right to seek its own
independent legal counsel.
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Executed this _____ day of November, 2007.
| ASSIGNOR |
||||
State of Wisconsin
|
) | |||||
| ) | ss. | |||||
County of
|
) |
On this ___day of November, 2007, before me, a notary public in and for said county, appeared
Xxxx X. Xxxxxxxxx, who is personally known to me to be the same person whose name is subscribed to
the foregoing instrument, and he acknowledged that he signed, sealed, and delivered the said
instrument as his free and voluntary act for the uses and purposes therein set forth.
| Notary Public My Commission Expires: __________________________________________ |
||||
(Seal)
20
| ORION ENERGY SYSTEMS, LTD. (“ASSIGNEE”) |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
State of Wisconsin
|
) | |||||
| ) | ss. | |||||
County of
|
) |
On this ___day of November, 2007, before me, a notary public in and for said county, appeared
________, who is personally known to me to be the same person whose name is subscribed
to the foregoing instrument, and he/she acknowledged that he/she signed, sealed, and delivered the
said instrument as his/her free and voluntary act for the uses and purposes therein set forth.
Notary Public My Commission Expires: |
||||
(Seal)
21
ORION ENERGY SYSTEMS, LTD.
INVENTION DISCLOSURE
INVENTION DISCLOSURE
| TITLE OF INVENTION: |
| PRODUCT NAME (IF APPLICABLE): |
| MODEL NUMBER (IF APPLICABLE): |
| BRIEF DESCRIPTION OF INVENTION |
The undersigned person prepared this Invention Disclosure. It is believed to be accurate and
complete.
Signature:
|
||||
Printed Name: |
||||
Date: |
||||
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