Exhibit 10.1

July 25, 2007

 

Personal & Confidential

 

Mark D. Morelli

126 Beacon Hill Drive

West Hartford, CT 06117

 

Dear Mark:

We are pleased to confirm to you our offer of employment with Energy Conversion
Devices, Inc. (the "Company") according to the terms set forth in this letter:

Position; Title:

You will serve as the Company’s chief executive with the title of President and
Chief Executive Officer.

You will also be appointed to serve as a member of the Company's Board of
Directors and will continue to hold such position during your tenure as
President and Chief Executive Officer, subject to annual election by the
Company’s shareholders.

Commencement Date:

We expect you to commence your employment on a mutually agreed date (the
“Commencement Date”) as soon as practicable, but in no event later than
September 4, 2007.

Base Salary:

Your base salary will be $450,000 per annum, payable semi-monthly, and subject
to periodic adjustment in accordance with the Company’s executive compensation
program.

Initial Equity Grants:

On the Commencement Date you will receive a combination of stock options and
restricted shares (each, “Stock Awards”) determined and granted by the
Compensation Committee under the Company’s 2006 Stock Incentive Plan (the “Stock
Plan”) as follows:

75,000 Non-Qualified Stock Options (as defined in the Stock Plan”) vesting in
increments over four years, subject to your continued employment, with 30,000
options vesting on the first anniversary of the date of grant and 15,000 options
vesting on each of the second, third and fourth anniversaries of the date of
grant.

30,000 shares of Restricted Stock (as defined in the Stock Plan”) vesting,
subject to your continued employment, on the third anniversary of the date of
grant.

The foregoing Stock Awards will also vest upon either a “Change in Control” (as
defined in the Stock Plan) or a “Qualifying Termination” (as defined in the
Severance Plan).

 

--------------------------------------------------------------------------------

Mark D. Morelli

July 25, 2007

Page 2

 

 

On the Commencement Date you also will receive a Stock Award of 30,000 shares of
Restricted Stock granted by the Compensation Committee under the Stock Plan that
will vest in full, subject to your continued employment, upon such date, if any,
prior to the third anniversary of the Commencement Date, that the average
closing price of the Company’s common stock on Nasdaq for twenty consecutive
trading days (the “20-Day Price”) exceeds $50.

Your Stock Awards will be evidenced by separate Award Agreements issued in
accordance with the Stock Plan.

Severance Plan:

The Company intends in July 2007 to adopt a new Executive Severance Plan for
senior management. The Severance Plan will provide for certain severance
payments and continuation of certain benefits for a period following a
participating employee’s (i) “Qualifying Termination”, including a Qualifying
Termination following a “Change in Control” (as such terms are defined in the
Severance Plan), and (ii) execution and delivery to the Company of a prescribed
form of waiver and release. The Severance Plan also will impose certain
restrictive covenants on a participating employee, including matters pertaining
to confidentiality, cooperation, non-competition, non-solicitation, and
non-disparagement. Your severance payment under the Severance Plan will equal
two times the sum of your base salary and target MIP (defined below) payment
following a Qualifying Termination, or three times if such Qualifying
Termination arises in connection with a Change in Control, plus in each case
your pro rata target MIP payment for the year in which the Qualifying
Termination occurs. Your participation in the Severance Plan will be evidenced
by a separate Participant Agreement issued under the Severance Plan.

Transition Assistance:

Within 30 days following the Commencement Date you will receive a signing bonus
of $100,000. The Company also will reimburse you for all reasonable and
necessary, documented expenses that you incur in connection with your relocation
prior to December 31, 2007 from your current principal residence to a new
principal residence within a 50-mile radius of the Company's headquarters, with
the understanding that your relocation may involve relocation to an interim
principal residence by December 31, 2007, in which case the reimburseable
expenses will also include all reasonable and necessary, documented expenses you
incur in connection with your relocation prior to September 1, 2008 to a
permanent principal residence within this same area. Such reimburseable expenses
will include reasonable costs for (i) moving, storage and related insurance,
(ii) pre-relocation travel and lodging relating to house searches, (iii)
overnight shipment coincident with family relocation of immediate necessities of
family care, (iv) reasonable costs, not to exceed $6,500 per month, associated
with leasing an interim principal residence for a period of up to six months or,
if earlier, the date on which you sell your existing principal residence, (v)
transaction closing costs (excluding purchase price) on the sale of your
existing principal

 

--------------------------------------------------------------------------------

Mark D. Morelli

July 25, 2007

Page 3

 

 

residence and purchase of a new principal residence, which is expected to close
on or before September 1, 2008, and (vi) similar reasonable and customary
relocation reimbursements applicable to chief executive officers.

Annual Incentive Plan:

You will participate with other senior management in the Company's Annual
Management Incentive Plan (the "MIP") administered by the Compensation
Committee. The amounts awarded each year will be determined by the Compensation
Committee typically targeting a percentage of a participating employee’s base
salary, multiplied by factors determined by reference to the level of
achievement of various personal and Company performance objective(s) established
by the Compensation Committee early in the fiscal year, with the resulting
amount subject to reduction based on other subjective criteria at the discretion
of the Committee. Such amounts, once determined by the Committee, will be paid
within six months following the end of the fiscal year.

For the initial year your target payout under the MIP will be 75% of your base
salary, prorated for the portion of the year between the Commencement Date and
the end of the fiscal year, but in all events the initial year MIP payout will
not be less than $300,000, 40% of which will be paid six months following the
Commencement Date. Your participation in and rights under the MIP will be
evidenced by a separate award letter pursuant to the terms of the MIP

The Company intends to seek shareholder approval of the MIP at its annual
meeting in 2007 so that awards under the MIP may qualify in future years as
“performance-based compensation” under Section 162(m) of the Internal Revenue
Code.

Other Stock Awards:

The Company currently intends to include annual Stock Awards under the Stock
Plan as a component of its executive compensation program. The amounts, terms
and timing of the Stock Awards will be determined by the Compensation Committee
based on various factors, including competitive market factors evaluated by the
Committee’s independent consultants, but typically awards will be made in
conjunction with annual MIP determinations and salary reviews. Subject to these
considerations, you will receive annual Stock Awards with an aggregate fair
value on the date of grant of approximately 100% of your annual base salary for
the preceding fiscal year (rounded to limit the grant to whole shares). The
valuation will be based on application of the stock-based compensation pricing
model as then adopted by the Company. Your annual Stock Awards will be evidenced
by separate Award Agreements issued in accordance with the Stock Plan.

Other Benefit Plans:

You will be eligible for the standard retirement and other health and welfare
benefit programs provided for officers of the Company, subject to the right of
the Company to amend or rescind such programs in accordance with their terms.
Without limiting the generality of the foregoing, these benefits

 

--------------------------------------------------------------------------------

Mark D. Morelli

July 25, 2007

Page 4

 

 

currently include: medical, dental, life, accidental death and disability
insurance and a 401(k) savings plan.

Separation:

Your employment will be "at will". Either you or the Company may terminate your
employment at any time for any reason. Upon any termination of your employment
you shall resign as a member of the Company's Board of Directors.

Representations:

You represent and warrant to the Company that there are no contractual or legal
impediments that restrict your acceptance of this employment in accordance with
the terms set forth herein and that you will not bring to your employment or use
in connection with such employment any confidential or proprietary information
or property that you used or had access to by reason of any previous employment
that is the property of any previous employer.

Assignment; Successors:

This letter agreement is personal in its nature and none of the parties hereto
shall, without the consent of others, assign or transfer this letter agreement
or any rights or obligations hereunder, provided that, in the event of the
merger, consolidation, transfer, or sale of all or substantially all of the
assets of the Company with or to any other individual or entity, this letter
agreement shall, subject to the provisions hereof, be binding upon and inure to
the benefit of such successor and such successor shall discharge and perform all
the promises, covenants, duties, and obligations of the Company hereunder, and
all references herein to the “Company” shall refer to such successor.

Governing Law; Disputes

Any disputes that may arise involving the terms of this letter agreement or your
employment with the Company will be resolved exclusively by final and binding
arbitration before the American Arbitration Association; provided that the
Company may seek equitable relief for violations of this letter agreement by you
pending the outcome of arbitration proceedings. The award of the arbitrator will
be entered in any court of competent jurisdiction. The validity, interpretation
and performance of this letter agreement will be governed by the laws of
Michigan, regardless of the laws that might be applied under applicable
principles of conflicts of laws.

The obligations of the Company set forth in this letter agreement are subject to
approval of this letter agreement by the Company's Board of Directors. All cash
amounts referred to herein are subject to applicable tax withholding. This
letter agreement, including the various separate agreements referred to herein,
embodies our entire understanding and supersedes all prior understandings,
whether oral or written, relating to this offer. If there is any conflict
between a term of this letter agreement and the applicable separate agreement
referred to herein, the separate agreement will govern. This letter agreement
cannot be amended or otherwise modified except by a writing signed by you and
the Company.

 

--------------------------------------------------------------------------------

Mark D. Morelli

July 25, 2007

Page 5

 

 

We look forward to welcoming you to the Company.

Sincerely yours,

ENERGY CONVERSION DEVICES, INC.

 

 

/S/ Stephen Rabinowitz

Stephen Rabinowitz

Lead Director

 

Accepted:

/S/ Mark D. Morelli

 

MARK D. MORELLI