| Name of Executive: |
Daniel J. Waibel |
| Position: |
Chief
Financial Officer and Treasurer |
| Fiscal Year
2008 Base Salary: |
$165,000 |
| Fiscal Year
2009 Base Salary: |
$225,000 |
Initial Term: |
Effective
date through March 31, 2009 |
| Renewal
Periods are: |
1
Year |
| Post-Change
of Control Renewal Period is: |
2
Years |
Severance Multiplier is: |
1x |
| Post-Change
of Control Severance Multiplier is: |
2x |
EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
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 Orion in a key employee capacity and
the Executive’s services are valuable to the conduct of the
business of the Company; and
WHEREAS
, Orion 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:
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(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), including those provided pursuant to
Exhibit A, 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. |
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(b)
“ Base Salary ” shall mean the Executive’s
annual base salary with the Company as in effect from time to
time. |
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(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. |
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(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. |
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(e)
“ Change of Control ” shall mean and be limited
to any of the following: |
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(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 |
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(ii)
the following individuals cease for any reason to constitute a
majority of the number of directors of the Company then serving:
(A) individuals 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 |
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(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 |
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(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 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. |
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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):
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(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; |
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(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; |
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(iii)
the term “Act” means the Securities Exchange Act of
1934, as amended; and |
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(iv)
a Person shall be deemed to be the “Beneficial Owner”
of any securities which: |
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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; |
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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. |
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(f)
“COBRA” shall mean the provisions of Code
Section 4980B. |
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(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. |
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(h)
“Competitive Business Activity” shall mean the
design and manufacture of lighting systems and controls for
industrial, commercial and agricultural facilities. |
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(i)
“ Disability ” shall mean, subject to applicable
law, a total and permanent disability consisting of a mental or
physical disability which precludes the disabled Executive from
performing the material and substantial duties of his employment.
Payment of benefits for total disability under a disability
insurance policy shall be conclusive as to the existence of total
disability, although such payments are not required in order to
establish total disability for purposes of this Agreement. The
Executive has a “total and permanent disability” if he
is precluded by mental or physical disability for 180 days during
any twelve (12) month period. For purposes of this Agreement, an
Executive shall be deemed totally and permanently disabled at the
end of such 180th day. In case of a disagreement as to whether an
Executive is totally and permanently disabled and, at the request
of any party, the matter shall be submitted to arbitration as
provided for herein, and judgment upon the award may be entered in
any court having jurisdiction thereof. Any costs of such
proceedings (including the reasonable legal fees of the prevailing
party) shall be borne by the non-prevailing party to such
arbitration. |
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(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. |
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(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 Neal Verfuerth; (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 or any option
agreement with the Company to which the Executive is a
party. |
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(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. |
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(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. |
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(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. |
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(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. |
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(n)
“Successor” shall mean the person to which this
Agreement is assigned upon a Sale of Business within the meaning of
Section 10. |
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(o)
“ Termination Date ” shall mean the date of the
Executive’s termination of employment from the Company, as
further described in Section 4. |
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3.
Employment of Executive
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(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. |
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(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 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
organization 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. |
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