exv10w4



 




EXHIBIT 10.4




SEPARATION AGREEMENT AND MUTUAL RELEASES




          This Separation Agreement (“Agreement”) is between Orion Energy Systems Ltd., a Wisconsin
corporation (“Orion”) and James Prange (“Prange”).



     1. Background. Orion ended Prange’s employment with it, effective March 12, 2007.
Both Prange and Orion desire an amicable separation and to fully and finally compromise and settle
any differences that may exist between them on the terms set forth in this Agreement.



     2. Employment Termination. Prange understands that his employment with Orion ended
effective March 12, 2007, based on reasons that have been explained to him. Orion does not
generally provide severance pay or benefits of any sort to employees when it terminates their
employment. However, subject to the terms and conditions of this Agreement, Orion is willing to
provide the benefits and consideration specified in paragraph 3 below in return for Prange’s
execution of this Agreement, it becoming effective (see paragraph 19), and his continued compliance
with each of the covenants in this Agreement, including those regarding confidentiality,
non-competition, and non-solicitation.



     3. Consideration. In return for the execution of this Agreement, it becoming
effective (see paragraph 19), and Prange honoring all of its terms, Orion will provide/do the
following:




     a. Allegedly Unpaid Back Pay And Compensation. Within 10 business days of the
date on which this Agreement becomes effective (see paragraph 19), Orion shall pay to Prange
the sum of Forty Thousand, Three Hundred, Six dollars and One cent ($40,306.01) in allegedly
owed back pay and compensation, less applicable withholding and deductions. Prange
specifically acknowledges that the payment of the amount specified in this subparagraph is
the full and complete amount of back pay and compensation allegedly owed to him. This
payment shall be made payable to the “Johns, Flaherty & Collins, S.C. Trust Account” and
mailed to Prange’s attorney, Thomas H. Taylor.




     b. Reimbursement of Allegedly Owed Employee Business Expenses. Within 10
business days of the date on which this Agreement becomes effective (see paragraph 19),
Orion shall pay to Prange the sum of Seven Thousand, Seven Hundred, Twenty-five dollars and
Fifty-six cents ($7,725.56) for allegedly owed business expenses incurred by Prange during
the course of his employment. Prange specifically acknowledges that the payment of the
amount specified in this subparagraph is the full and complete amount allegedly owed to him
for reimbursement of business expenses incurred by him during his employment. This payment
shall be made payable to the “Johns, Flaherty & Collins, S.C. Trust Account” and mailed to
Prange’s attorney, Thomas H. Taylor.




     c. Stock Options.




     i. Stock Options Fully Vested. If this Agreement becomes effective
(see paragraph 19), Orion shall amend Prange’s Stock Option Agreement such that
Prange’s rights and interests in Two Hundred Twenty Thousand, Two Hundred Twenty-Two
(220,222) Orion common stock options shall be treated as having fully vested as of
March 11, 2007.



 









 






     ii. Exercise of A Portion of Stock Options. If this Agreement becomes
effective (see paragraph 19), Orion shall amend Prange’s Stock Option Agreement such
that Forty-eight Thousand (48,000) of Prange’s fully-vested common stock options may
be exercised by Prange at a strike price of Sixty-eight and Three-quarters cents
($0.6875) per share at any time within Ninety (90) days of the date on which this
Agreement becomes effective (see paragraph 19). Once exercised, Prange may do
whatever he wishes with the common stock so acquired.




     iii. Identification of Interested Purchaser. If this Agreement becomes
effective (see paragraph 19), then within 5 business days of the date on which this
Agreement becomes effective, Orion shall provide him with the identity of a party
willing to purchase all Forty-Eight Thousand (48,000) shares of common stock at a
price not less than Three dollars and no cents ($3.00) per share. The
identification shall include a firm commitment from the party so identified to
purchase the shares of common stock at a price not less than the amount specified in
this subparagraph.




Prange specifically acknowledges receipt of information from Orion sufficient to
allow him to determine the current fair market value of the common stock referred to
in this subparagraph, and that he has had the opportunity to request any additional
information he deems necessary or appropriate in connection with making such a
determination. Prange further acknowledges that he is not under any obligation to
sell any of his Forty-Eight Thousand (48,000) shares of common stock to the
potential purchaser identified by Orion pursuant to this subparagraph, and that he
may sell any of his shares of common stock to any person he deems appropriate for
whatever price he may negotiate.




     iv. Exercise of Remaining Stock Options. So long as Prange honors and
continues to honor all of his obligations in this Agreement, and only after the
effective date of this Agreement (see paragraph 19), Orion shall amend Prange’s
Stock Option Agreement in order to allow Prange to exercise his rights and interests
in the remaining One Hundred Seventy-two Thousand, Two Hundred, Twenty-Two (172,222)
Orion common stock options at a strike price of Sixty-Eight and Three-Quarters cents
($0.6875) per share as follows:




     A. Except as otherwise provided in subparagraph 3.c.iv.B. below, Prange
shall be allowed to exercise his rights and interests in the remaining One
Hundred Seventy-Two Thousand, Two Hundred, Twenty-Two (172,222) Orion common
stock options during a ninety (90)-day period (the “Stock Option Exercise
Period”) commencing on March 12, 2009 and expiring at 5:00 p.m. on June 10,
2009, subject to the limitation that all common stock options not exercised
within the Stock Option Exercise Period shall expire at the end of such
period. Except as otherwise provided in subparagraph 3.c.iv.B. below, under
no circumstances shall Prange be permitted to exercise such remaining common
stock options prior to the commencement of the Stock Option Exercise Period.



 









 






     B. In the event of an Initial Public Offering by Orion prior to March
12, 2009, Prange shall be allowed to exercise his rights and interests in
Seventeen Thousand, Two Hundred and Twenty-Two (17,222) Orion common stock
options during the ninety (90)-day period commencing with Orion’s issuance
and sale of common or preferred stock pursuant to the Initial Public
Offering. If Prange should exercise any of the Orion common stock options
referenced in this subparagraph, the amount of Orion common stock options
available for exercise pursuant to subparagraph 3.c.iv.A. above shall be
reduced by the number of Orion common stock options exercised under this
subparagraph. All common stock options not exercised within the ninety
(90)-day period commencing with Orion’s issuance and sale of common or
preferred stock pursuant to the Initial Public Offering under this
subparagraph shall still be available for exercise consistent with
subparagraph 3.c.iv.A. above.




     d. Unemployment Compensation. Orion shall not challenge any claim by Prange
for unemployment compensation benefits.



     4. Acknowledgement. Prange understands that the benefits provided in paragraph 3 will
not be provided unless (a) he accepts this Agreement, (b) it becomes effective (see paragraph 19),
and (c) he continues to comply with all of the applicable terms of this Agreement.



     5. Restrictive Covenants.




     a. Non-competition. Prange agrees that, for a period of twenty-four (24)
months after the date on which his employment ended, he will not, anywhere in the United
States, on his own behalf or for another person, business or organization, provide services
of the same nature that he provided while employed by Orion to any Orion Competitor.
“Competitor” means Cooper Lighting, Ruud Lighting, GE Lighting Systems, Lithonia Lighting,
an Acuity Brands Company or any other person, business or organization that is engaged in
the business of, or makes money from:




     i. designing, developing, manufacturing or selling application-specific high
performance lighting systems for use in industrial, warehouse, retail, commercial,
institutional, agricultural and/or healthcare environments, or controls,
technologies and/or products related thereto, including the “Light Pipe” or similar
technology, and the Tridium control systems or similar technology (hereafter
referred to collectively as “Competing Products”), or 




     ii. providing energy management services or project financing related
to such Competing Products, controls or technologies, including project management
or installation services, emissions offset trading or consulting services,
or energy capacity and/or usage trading or consulting services, for use in
industrial, warehouse, retail, commercial, institutional, agricultural and/or
healthcare environments (hereafter referred to as “Competing Services”).




     b. No Solicitation. Prange agrees that for a period of twenty-four (24) months
after the date on which his employment ended, he will not initiate contact in order



 









 







to induce, solicit, or encourage a client, customer, reseller or shareholder of Orion
or Orion products or services with whom Prange had direct contact, during the 12-month
period prior to the end of his employment, to purchase Competing Products or Competing
Services from an Orion Competitor or to invest in an Orion Competitor. Additionally, Prange
agrees that, for a twenty-four (24) month period after the date on which his employment
ended, he will not initiate contact in order to induce, solicit, or encourage any person to
leave Orion’s employ. Nothing in this paragraph is meant to, nor does it, prohibit an
employee of Orion that is not a party to this Agreement from becoming employed by another
organization or person.



     6. Release. Prange understands and agrees that his acceptance of this Agreement means
that, except as stated in paragraph 9, he is forever waiving and giving up any and all claims he
may have, whether known or unknown, against Orion, its subsidiaries, and related companies, their
employees and agents for any personal monetary relief for himself, benefits or remedies that are
based on any act or failure to act that occurred before he signed this Agreement. He understand
that this release and waiver of claims includes claims relating to his employment and the
termination of his employment; any Orion policy, practice, contract or agreement; any tort or
personal injury; any policies, practices, laws or agreements governing the payment of wages,
commissions or other compensation; any laws governing employment discrimination including, but not
limited to, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act, the
Employee Retirement Income Security Act, the Americans with Disabilities Act, the Wisconsin Fair
Employment Act and/or any state or local laws; any laws governing whistle blowing or retaliation,
including but not limited to, the Sarbanes-Oxley Act; any laws or agreements that provide for
punitive, exemplary or statutory damages; and any laws or agreements that provide for payment of
attorney fees, costs or expenses.



     7. No Disparagement. Prange agrees not to make critical, negative or disparaging
remarks about Orion, its services, its products, its employees, officers, directors, shareholders,
investors or agents to any other person, business or organization. He also agrees not to disclose
personal or private information about Orion or its employees, officers or directors, agents or
clients to any other person, business or organization. Prange understands that Orion is relying
upon Prange’s promises in this Agreement, including this paragraph, in agreeing to provide the
benefits outlined in subparagraph paragraph 3.c. above. Orion similarly agrees not to make any
critical, negative or disparaging remarks about Prange to any other person, business or
organization.



     8. Future Employment. Prange agrees that he is not now or hereafter entitled to
employment or reemployment with Orion and he agrees not to knowingly seek such employment, whether
directly on his own or through an employment agency. Prange further agrees and acknowledges that
should he apply for any position in contradiction of this paragraph, Orion may completely ignore
such application and fail to consider it based on this paragraph.



     9. Claims Not Waived. Prange understands that this Agreement does not waive
any claims that he may have: (a) for compensation for illness or injury or medical expenses under
any worker’s compensation statute; (b) for benefits under any plan currently maintained by Orion
that provides for retirement benefits; (c) under any law or any policy or plan currently maintained
by Orion that provides health insurance continuation or conversion rights; or (d) any claim that by
law cannot be released or waived.



 









 





     10. Government Cooperation. Nothing in this Agreement prohibits Prange from
cooperating with any government agency.



     11. Confidentiality/Non-Disclosure. Prange agrees that Orion is a private corporation
whose stock is not publicly held. Information about its financing (debt and equity), financial
performance, stock valuation, capital structure, revenues, expenses, profits, ownership, investors,
business strategies, financial strategies, sales and marketing strategies, management salaries and
compensation, consultants and consultant relationships (current and former), customers and customer
relationships (current and former), shareholder and shareholder relationships (current and former),
suppliers and supplier relationships (current and former), products, services, engineering and
manufacturing, research and development, computer systems, training materials, business strategies
and plans, including financial, marketing, sales and other matters, and other information stamped,
marked or kept as confidential information is considered private and confidential by Orion
(“Confidential Information”). Prange further agrees to not use or disclose any Confidential
Information without Orion’s prior written consent. Nothing in this provision is intended to, nor
shall it, restrict Prange from any employment opportunities or employment with another. Future
employment restrictions are provided in paragraph 5.a. above.



          In addition, Prange agrees that the existence and terms of this Agreement are not to be
disclosed to anyone other than his attorneys, tax advisors, or immediate family, except as required
by law, and that whenever disclosure is made, Prange will advise such persons to whom disclosure is
provided that they may not disclose the existence or terms of this Agreement to others except as
required by law. However, Prange may be required to share the terms of the restrictive covenants
in paragraphs 5.a. and 5.b. with a future employer as Orion requests or instructs, and in such
case, such disclosure shall be permitted.




     12. Trade Secret Law Unaffected. Prange agrees and understands that this Agreement
does not reduce his obligations to comply with applicable laws relating to trade secrets,
confidential information or unfair competition.



     13. No Admission of Liability or Wrongdoing. Nothing in this Agreement shall be
construed or represented by either party to be an admission of liability or wrongdoing by either
party. Any and all allegations of liability or wrongdoing are expressly denied by each party. Nor
is anything in this Agreement meant to suggest that Orion has violated any law or contract or that
Prange has any claim against Orion.



     14. Voluntary Agreement. Prange acknowledges and states that he has entered into this
Agreement knowingly and voluntarily.



     15. Consulting An Attorney. Prange acknowledges that Orion has told him that he
should consult an attorney of his own choice about this Agreement and every matter that it covers
before signing this Agreement. Prange further acknowledges that he has consulted Attorney Thomas
H. Taylor of Johns, Flaherty & Collins, S.C. regarding the terms of this Agreement and every matter
that it covers.



     16. Obligation to Pay Attorney Fees and Costs. Prange understands and agrees that if
he violates the commitments he has made in this Agreement, Orion may seek to recover any



 









 







payments and/or benefits provided in this Agreement and that, except as provided in paragraph 17,
he will be responsible for paying the actual attorney fees and costs incurred by Orion in enforcing
this Agreement or in defending a claim released by paragraph 6.



     17. Exception to Attorney Fees Obligation. The obligation to pay Orion’s attorney
fees and costs does not apply to an action by Prange regarding the validity of this Agreement under
the ADEA.



     18. Complete Agreement. Prange understands and agrees that this document contains the
entire agreement between he and Orion relating to his employment and the termination of his
employment, that this Agreement supersedes and displaces any prior agreements and discussions
relating to such matters and that he may not rely on any such prior agreements or discussions.



     19. Effective Date and Revocation. This Agreement shall not be effective until seven
days after Prange signs it and returns it to Orion’s attorney — Daniel A. Kaplan of Foley &
Lardner LLP. During that seven-day period Prange may revoke his acceptance of this Agreement by
delivering to Kaplan a written statement stating he wishes to revoke this Agreement or not be bound
by it.



     20. Severability. Paragraphs 5.a., 5.b., 11, or 24 of this Agreement shall be
considered separate and independent from the other paragraphs of this Agreement (as well as
separate and independent of each other) and no invalidity of any one of those paragraphs shall
affect any other paragraph or provision of this Agreement.



     21. Final and Binding Effect. Prange understands that if this Agreement becomes
effective it will have a final and binding effect and that by signing and not timely revoking this
Agreement he may be giving up legal rights.



     22. Return of Property. Prange represents and warrants that he has an obligation and
agrees to return and has returned all Orion property. This includes all files, working papers and
notes, memoranda, documents, records, including customer and client and potential customer and
client business cards and information, credit cards, keys and key cards, computers, laptops,
personal digital assistants, cellular telephones, Blackberry devices or similar instruments,
printers, other equipment of any sort, badges, vehicles, and any other property of Orion. In
addition, to the extent he has not already done so, Prange agrees to provide any and all access
codes or passwords necessary to gain access to any computer, program or other equipment that
belongs to Orion or is maintained by Orion or on Orion property. Further, he acknowledges an
obligation and agrees not to destroy, delete or disable any Orion property, including items, files
and materials on computers and laptops.



     23. Future Cooperation. Prange agrees to cooperate with Orion in the future and to
provide to Orion with answers to questions and truthful information, testimony or affidavits
requested in connection with any matter that arose during his employment. This cooperation may be
performed at reasonable times and places and in a manner as to not interfere with any other
employment Prange may have at the time of request. Orion agrees to reimburse Prange for expenses
incurred in providing such cooperation, so long as such expenses are approved in advance by Orion.



 









 





     24. No Contact. Prange agrees that for a period of twenty-four (24) months after the
date on which his employment ended, he will not initiate contact with any client, customer,
reseller or shareholder of Orion or Orion products or services for the purpose of circumventing any
obligation, restriction or covenant in this Agreement.



     25. Representations. By signing this Agreement Prange represents that he has read
this entire document and understands all of its terms.



     26. 21-Day Consideration Period. Prange may consider whether to sign and accept this
Agreement for a period of twenty-one days (21) from the day he received it. If this Agreement is
not signed, dated and returned to Kaplan within twenty-two (22) days, the offer of benefits
described in paragraph 3.c. will no longer be available.



          Date Agreement was given to Prange: June 29, 2007.



	 	 	 	 	 	 	 	 	 	 	 
	ACCEPTED:	 	 	 	ACCEPTED:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Orion Energy Systems, Ltd.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ James Prange	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	James Prange	 	 	 	By:	 	/s/ Neal Verfuerth	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	Dated:

	 	July 5, 2007
	 	 	 	Name:
	 	Neal Verfuerth	 	 
	 

	 	 	 	 	 	Title:
	 	President	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Reviewed and Approved as to Form:	 	 	 	Reveiwed and Approved as to Form	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Johns, Flaherty & Collins, S.C.	 	 	 	Foley & Lardner LLP	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	/s/ Thomas H. Taylor	 	 	 	/s/ Danial A. Kaplan	 	 
	 	 	 	 	 	 	 
	Thomas H. Taylor, Esq.	 	 	 	Daniel A. Kaplan, Esq.	 	 
	Attorneys for James Prange	 	 	 	Attorneys for Orion Energy Systems, Ltd.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated: July 10, 2007	 	 	 	Dated: July 11, 2007