Document:

exhibit10_26.htm

EXHIBIT 10.26

 

CAL DIVE INTERNATIONAL, INC.

DIRECTORS DEFERRED COMPENSATION PLAN

 

1. Purpose.  The purpose of the Cal Dive International, Inc. Directors Deferred Compensation Plan (the “Plan”) is to aid the Company in attracting and retaining experienced outside or non-employee directors by providing them with tax-deferred savings opportunities.  The Plan is intended to comply with Code Section 409A.

 

2. Definitions.  For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

 

“Account” means the bookkeeping account maintained by the Company for each Participant pursuant to Section 4.

 

“Beneficiary” means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Section 6.

 

“Board” means the Board of Directors of the Company.

 

“Cash Compensation” means all compensation payable by the Company in cash to a Non-Employee Director for his or her services as a member of the Board, including, without limitation, any annual retainer, fees for attending meetings of the Board or any committee thereof, fees for acting as chairperson of the Board or any committee, and any other fees as may become payable to a Non-Employee Director, including the additional retainer payable to the lead independent director.  “Cash Compensation” does not include expense reimbursements, any form of noncash compensation, stock-based plan awards, or benefits.

 

“Change of Control” means:

 

(a)           the acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the outstanding shares of the Common Stock; provided, however, that for purposes of this section (a), the following events shall not constitute a Change of Control:

 

(1)           any acquisition of Common Stock directly from the Company,

 

(2)           any acquisition of Common Stock by the Company,

 

(3)           any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or

  

  

  

 

(4)           any acquisition of Common Stock by any entity pursuant to a transaction that complies with paragraphs (1), (2), and (3) of section (c) of this definition; or

 

(b)           individuals who, as of January 1, 2011, constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a director subsequent to such date through an election, or a nomination for election by the Company’s stockholders, approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board; or

 

(c)           consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination:

 

(1)           Persons who were the beneficial owners of the Company’s outstanding common stock and any other securities of the Company entitled to vote generally in the election of directors immediately prior to such Business Combination continue to have collectively the direct or indirect beneficial ownership, respectively, of 50% or more of the then-outstanding shares of common stock, and 50% or more of the Voting Power of the then-outstanding voting securities of the corporation resulting from such Business Combination (which, for purposes of this paragraph (1) and paragraphs (2) and (3), shall include a corporation which as a result of such transaction controls the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries); and

 

(2)           except to the extent that such ownership in the Company existed prior to the Business Combination, no Person (excluding, for the purpose of this clause, any corporation resulting from such Business Combination or any employee benefit plan or related trust of the Company or the corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the then-outstanding shares of common stock of the corporation resulting from such Business Combination or 20% or more of the combined Voting Power of the then-outstanding voting securities of such corporation; and

 

(3)           at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement providing for such Business Combination, or, in the absence of an agreement, of the action taken by the Board approving such Business Combination; or

  

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(d)           approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

Notwithstanding any other provision of this definition of Change of Control, no payment shall be made from this Plan as a result of a Change of Control unless such event qualifies as a Change of Control under Section 409A.

 

“Change of Control Participant” has the meaning set forth in Section 8.2(a).

 

“Code” means the Internal Revenue Code of 1986, as amended, and including, for each Code section referenced, the regulations and guidance issued thereunder.  References to any provision of the Code or regulation (including a proposed regulation) thereunder shall include any successor provisions or regulations.

 

“Common Stock” means the Company’s common stock, $0.01 par value per share.

 

“Committee” means the Compensation Committee of the Board.

 

“Company” means Cal Dive International, Inc., a Delaware corporation, and its successors and assigns, including but not limited to any corporation or entity with or into which such company may merge or consolidate.

 

“Deferral Amount” has the meaning set forth in Section 3.3.

 

“Deferral Period” has the meaning set forth in Section 3.5.

 

“Designee” means any individual(s) to whom the Board or the Committee has delegated the authority to take action under the Plan.  Wherever Board or Compensation is referenced in the Plan, such reference shall be deemed to also refer to such entity’s Designee.

 

“Disabled.”  A Participant shall be considered “Disabled” if the Committee determines, in its discretion exercised in good faith, that:

 

(a)           the Participant has a mental or physical condition that would entitle him, if he were an employee of the Company or its subsidiaries, to disability income payments under the Company’s long-term disability insurance policy or plan for employees then in effect, or

 

(b)           if the Company does not maintain a long-term disability insurance policy or plan, the Participant has a permanent and total disability, as defined in Code Section 22(e)(3).

 

A determination that a Participant is Disabled may be made by a physician selected or approved by the Committee, and, in this respect, the Participant shall submit to an examination by such physician upon request of the Committee.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

  

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“Non-Employee Director” means any member of the Board who is not employed by the Company.

 

“Participant” means any Non-Employee Director who elects to participate by filing a Participation Agreement as provided in Section 3, and any former Non-Employee Director who has an Account balance under the Plan.

 

“Participation Agreement” means the form completed by a Participant in accordance with Section 3.

 

“Person” means a natural person or entity, and shall also mean any partnership, limited partnership, limited liability company, syndicate, or other group that would be treated as a Person under Sections 13(d)(3) or 14(d)(2) of the Exchange Act because it had been formed for the purpose of acquiring, holding, or disposing of a security; provided that “Person” shall not include an underwriter temporarily holding a security pursuant to an offering of the security.

 

“Plan Year” means a twelve-month period beginning January 1 and ending the following December 31.

 

“Restricted Stock Units” means any grant of restricted stock units from the Company to the Participant under a stockholder-approved equity incentive plan of the Company.

 

“Separation from Service” means “separation from service” with the Company as defined in Treasury Regulation Section 1.409A-1(h).  A Participant shall not be considered to have incurred a Separation from Service until the Participant has ceased to provide any services for the Company, its subsidiaries, and any other entity that would be treated as a member of a controlled group that includes the Company under Code Section 414(b) or (c) (as modified by substituting 50% ownership for 80% for all purposes thereof), without any expectation of the Participant being retained to provide future services as a director or independent contractor.

 

“Unforeseeable Emergency” means a severe financial hardship of the Participant or Beneficiary resulting from an illness or accident of the Participant or Beneficiary, the Participant’s or Beneficiary’s spouse, or the Participant’s or Beneficiary’s dependent (as defined in Code Section 152(a)); loss of the Participant’s or Beneficiary’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or Beneficiary.  In addition, the need to pay for medical expenses, including non-refundable deductibles, as well as for the costs of prescription drug medication, may constitute an Unforeseeable Emergency.  Finally, the need to pay for the funeral expenses of a spouse or a dependent (as defined in Code Section 152(a)) may also constitute an Unforeseeable Emergency.  An Unforeseeable Emergency must satisfy the requirements of Treasury Regulation Section 1.409A-3(i)(3) in order for a payment to be made.  Whether a Participant is faced with an “Unforeseeable Emergency” permitting distribution under this Plan is to be determined by the Committee based on the relevant facts and circumstances of each case and in accordance with Code Section 409A.

  

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“Valuation Date” means the last calendar date when the New York Stock Exchange was open, or such other date as the Committee in its sole discretion may determine.

 

“Voting Power” means the rights vested, by law or the Company’s Certificate of Incorporation, in the stockholders, or in one or more classes of stockholders, to vote with respect to the election of directors.

 

3. Participation and Participant Elections.

 

3.1 Participation.  Participation in the Plan shall be limited to those individuals who (a) are Non-Employee Directors and (b) elect to participate in this Plan by filing a Participation Agreement with the Committee or its Designee.

 

3.2 Deferral of Cash Compensation.  Subject to the other terms and conditions of this Plan, a Participant may elect to defer up to a total of 100% of his or her Cash Compensation for a given Plan Year under the Plan (the “Deferral Amount”), expressed as either a dollar amount or a percentage of the Participant’s Cash Compensation for such Plan Year.

 

3.3 Deferral of Restricted Stock Units.

 

(a) Subject to the terms and conditions of this Section 3.3, if director equity compensation is awarded to the Participants in the form of Restricted Stock Units, a Participant may elect to defer, on a grant-by-grant basis, the receipt of all or a portion of the shares of Common Stock that he or she is entitled to receive in connection with the payout of those Restricted Stock Units (including, if applicable, any related dividend equivalent amounts under Section 4.4).  Such deferral election must be made during the applicable Section 3.4 enrollment period for the Plan Year in which the Restricted Stock Units are granted.

 

(b) A Participant’s deferred Restricted Stock Units shall be accounted for separately from his or her Deferral Amounts, and shall be subject to all of the provisions of this Plan except Sections 3.6, 4.1, and 4.2.

 

3.4 Election Timing and Effective Dates.

 

(a) A Participation Agreement must be filed prior to the December 31st immediately preceding the Plan Year for which it is effective or by such earlier deadline as the Committee may prescribe.

 

(b) Notwithstanding Section 3.4(a), a Participant who is newly eligible for the Plan (as determined in accordance with Treas. Reg. Section 1.409A-2(a)(7)) and who does not participate in any other account balance type nonqualified plan (as determined by Treas. Reg. Section 1.409A-1(c)) of the Company may file a Participation Agreement effective for the remainder of the initial Plan Year and applicable to compensation earned in the remainder of such Plan Year, but only if such election is made not more than 30 days after the Participant becomes eligible for the Plan.

  

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3.5 Contents of Participation Agreement.  The Committee shall have the discretion to specify the contents of Participation Agreements.  Subject to Section 7, each Participation Agreement shall set forth: (a) the Deferral Amount and, if Restricted Stock Units will be granted during the Plan Year, whether the Participant is electing to defer payout of those Restricted Stock Units; (b) the period after which payment of the Deferral Amount and, if applicable, either the cash payout of, or the issuance of the Common Stock underlying, the deferred Restricted Stock Units are to be made or begin to be made (the “Deferral Period”); and (c) the form in which payments of the Deferral Amount and the deferred Restricted Stock Units, if applicable, are to be made, which may be a lump sum or in substantially equal annual installments of 2 to 5 years.  The Deferral Period may be expressed as ending on a specified date, upon the occurrence of an event (such as a Participant’s Separation from Service), or in accordance with such other terms and options that may be set forth in the Participation Agreement; provided, however, that the Deferral Period shall end no later than the date of Participant’s Separation from Service.

 

3.6 Modification or Revocation of Election by Participant.

 

(a) A Participant may not change the Deferral Amount during a Plan Year.  However, a Participant may discontinue participation if he or she experiences an Unforeseeable Emergency, by completing such forms, and subject to such limitations and restrictions, as the Committee may prescribe.  If approved by the Committee, revocation shall take effect as of the next regularly-scheduled date on which Cash Compensation is to be paid.  If a Participant discontinues participation during a Plan Year, he or she will not be permitted to participate again in the Plan until the later of six months from the date of discontinuance or the commencement of the following Plan Year.

 

(b) A Participant may make an election to change the time or form of his or her payment from the Plan as set forth in an existing Participation Agreement, but in accordance with Treas. Reg. Section 1.409A-2(b), such a change must include the lengthening of the Deferral Period by no less than five years from the original payment date under the Participation Agreement (as in effect before such amendment).  In addition, such amended Participation Agreement must be filed with the Committee or its Designee at least 12 months prior to the date of the first scheduled payment under the Participation Agreement (as in effect before such amendment), and will not be effective for 12 months.  Under no circumstances may a Participant’s Participation Agreement be retroactively entered into, modified, or revoked.

 

3.7 Vesting of Account.  Subject to Section 9.1, each Participant shall be 100% vested in his or her Account(s) at all times.

 

4. Maintenance, Crediting, and Investment of Accounts.

 

4.1 Maintenance of Accounts.

 

(a) The Deferral Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited by the Committee to the Participant’s Account as and when such Deferral Amount would otherwise have been paid to the Participant.

 

(b) Separate Accounts shall be maintained for each Participant.  More than one Account may be maintained for a Participant as necessary to reflect separate Participation Agreements specifying different Deferral Periods, deferral sources, and/or forms of payment.  A Participant’s Account(s) shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan, and shall not constitute or be treated as a trust fund of any kind.

  

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4.2 Crediting of Accounts.

 

(a) Each Participant’s Account shall accrue interest at a rate determined by reference to Company’s cost of capital, with such accruals to begin as of the date such Participant’s Deferral Amounts are credited to his or her Accounts.

 

(b) The Committee shall determine the balance of each Account, as of each Valuation Date, by adjusting the balance of such Account as of the immediately preceding Valuation Date to reflect changes in the value of the deemed investments thereof, credits and debits pursuant to Section 4.1(a) and Section 4.2(a) and distributions pursuant to Section 5 with respect to such Account since the preceding Valuation Date.

 

4.3 Statement of Accounts.  The Committee shall submit to each Participant quarterly statements of his or her Account(s) in such form as the Committee deems desirable, setting forth the balance to the credit of such Participant in his or her Account(s) as of the end of the most recently-completed quarter.

 

4.4 Treatment of Dividend Equivalents on Deferred Restricted Stock Units.  If a Participant elects to defer Restricted Stock Units that were granted with dividend equivalent rights, the dividend equivalent rights will be accounted for as provided in the applicable award agreement, but shall only be distributed to the Participant in tandem with the related payout of cash or shares of Common Stock underlying the Restricted Stock Units.

 

5. Distribution of Benefits.

 

5.1 Time and Form of Payment.  Unless otherwise stated in this Section 5, at the end of the Deferral Period for each Account, the Company shall pay to the Participant the balance of such Account at the time or times elected by the Participant in the applicable Participation Agreement; provided that if the Participant has elected to receive payments from an Account in a lump sum, the Company shall pay the balance in such Account (determined as of the most recent Valuation Date preceding or coinciding with the payment date) in a lump sum in cash as soon as practicable after the end of the Deferral Period (no later than 90 days after the Deferral Period).  If the Participant has elected to receive payments from an Account in installments, the Company shall make annual cash payments from such Account, each of which shall consist of an amount equal to (i) the balance of such Account as of the most recent Valuation Date preceding or coinciding with the payment date times (ii) a fraction, the numerator of which is one and the denominator of which is the number of remaining installments (including the installment being paid).  The first such installment shall be paid in January of the year specified in the Participation Agreement (for specified date payments), in January of the year following Separation from Service (for payments triggered by a Separation from Service) or as otherwise specified in the Participation Agreement upon reaching the end of the Deferral Period.  Each subsequent installment shall be paid in January of the following years and shall be deemed to be made on a pro rata basis from each of the different deemed investments of the Account (if there is more than one such deemed investment).  If a Participant elects to defer an annual grant of Restricted Stock Units, the cash payout or shares of Common Stock underlying such grant (and any related dividend equivalent amounts under Section 4.4) shall be distributed at the time or times elected by the Participant in the applicable Participation Agreement, provided that if the Participant dies or becomes Disabled prior to such date, the cash payout or shares of Common Stock shall be distributed to in accordance with Section 5.2.

  

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5.2 Death or Disability.  Notwithstanding the provisions of Sections 5.1 hereof and any Participation Agreement, if a Participant dies or becomes Disabled (whether before or after Separation from Service) prior to receiving full payment of his or her Account(s), the Company shall pay the remaining balance of his or her Account (determined as of the most recent Valuation Date preceding or coinciding with such event) to the Participant or, if the Participant is deceased, in accordance with Section 6, in a lump sum in cash as soon as practicable following the occurrence of such event (no later than 90 days after the event occurs).

 

5.3 Hardship Withdrawals.  Notwithstanding the provisions of Section 5.1 and any Participation Agreement, a Participant shall be entitled to early payment of all or part of the balance in his or her Account(s) in the event of an Unforeseeable Emergency, in accordance with this Section 5.3.  A distribution pursuant to this Section 5.3 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Participant’s assets to the extent such liquidation would not itself cause severe financial hardship, or (c) by cessation of deferrals under the Plan.  An application for an early payment under this Section 5.3 shall be made to the Committee in such form and in accordance with such procedures as the Committee shall determine from time to time.  The determination of whether and in what amount and form a distribution will be permitted pursuant to this Section 5.3 shall be made by the Committee.

 

5.4 Withholding of Taxes.  Notwithstanding any other provision of this Plan, the Company shall withhold from payments made hereunder any amounts required to be so withheld by any applicable law or regulation.

 

5.5 Acceleration of Payment.  A Participant shall have no right to compel any accelerated payment of amounts due to a Participant.  The Company may accelerate the payment of some or all of the amounts due to a Participant in a given year only in accordance with Code Section 409A and the terms of this Plan.

 

(a) Domestic Relations Orders. The Committee may, in its sole and absolute discretion, accelerate the time or schedule of a payment under the Plan to an individual other than the Participant as may be necessary to fulfill a domestic relations order (as defined in Code Section 414(p)(1)(B)).

 

(b) Conflicts of Interest.  The Committee may, in its sole and absolute discretion, provide for the acceleration of the time or schedule of a payment under the Plan to the extent necessary for any federal officer or employee in the executive branch to comply with an ethics agreement with the federal government.  Additionally, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to the extent reasonably necessary to avoid the violation of an applicable federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant to participate in activities in the normal course of his or her position in which the Participant would otherwise not be able to participate under an applicable rule).

  

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(c) Limited Cash-Outs.  The Committee may, in its sole discretion, require a mandatory lump sum payment of amounts deferred under the Plan that do not exceed the applicable dollar amount under Code Section 402(g)(1)(B), provided that the payment results in the termination and liquidation of the entirety of the Participant’s interest under the Plan, including all agreements, methods, programs, or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single plan under Code Section 409A.

 

(d) Payment Upon Income Inclusion Under Section 409A.  The Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan if at any time the Plan fails to meet the requirements of Code Section 409A.  The payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Code Section 409A.

 

(e) Payment of State, Local, or Foreign Taxes.  The Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to reflect payment of state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred under the Plan before the amount is paid or made available to the participant (the state, local, or foreign tax amount).  Such payment may not exceed the amount of such taxes due as a result of participation in the Plan.  The payment may be made in the form of withholding pursuant to provisions of applicable state, local, or foreign law or by payment directly to the Participant.  Additionally, the Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan to pay the income tax at source on wages imposed under Code Section 3401 as a result of such payment and to pay the additional income tax at source on wages imposed under Code Section 3401 attributable to such additional wages and taxes.  However, the total payment under this acceleration provision must not exceed the aggregate of the state, local, and foreign tax amount, and the income tax withholding related to such state, local, and foreign tax amount.

 

(f) Bona Fide Disputes as to a Right to a Payment.  The Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan where such payments occur as part of a settlement between the Participant and the Company of an arm’s length, bona fide dispute as to the Participant’s right to the deferred amount, if done in accordance with Treasury Regulation Section 1.409A-3(j)(4)(xiv).

 

(g) Plan Terminations and Liquidations.  The Committee may, in its sole discretion, provide for the acceleration of the time or schedule of a payment under the Plan as provided in Section 8.2.

 

(h) Other Events and Conditions.  A payment may be accelerated upon such other events and conditions as the Internal Revenue Service may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

  

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5.6 Delay of Payment.  The Company may delay a payment otherwise due hereunder to a date after the designated payment date under any of the following circumstances:

 

(a) Delay Due to Financial Considerations. Any payment required to be made on a date set forth under the terms of this Plan may be delayed if payment on the originally scheduled date would jeopardize the ability of the Company to continue as a going concern (in such case, payment will be made during the first taxable year after such payment no longer would have such effect).

 

(b) Legal Compliance.  If the Company reasonably anticipates that the making of the payment will violate applicable law, provided that the payment shall be made at the earliest date at which the Company reasonably anticipates that the making of the payment will not cause such violation.  (The making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.)

 

(c) Other Events and Conditions.  Payment may also be delayed upon such other events and conditions as the Commissioner of Internal Revenue may prescribe in generally applicable guidance published in the Internal Revenue Bulletin, if a Participant is subject to the requirements of Exchange Act Section 16(a), the Participant’s balance in his or her Account(s) shall not be distributed on account of a Change in Control prior to the date that is one year after the date of the Change of Control, unless such balance is distributable pursuant to another provision of the Plan.

 

6. Beneficiary Designation.

 

6.1 Right to Designate Beneficiary.  Each Participant shall have the right, at any time, to designate any person, persons, or entity as his or her Beneficiary or Beneficiaries.  A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Committee, on such form and in accordance with such procedures as the Committee shall establish from time to time.

 

6.2 No Beneficiary Designation.  If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant shall be deemed to have designated the surviving spouse of the Participant as the designated Beneficiary.  If the Participant dies without a designated Beneficiary (or spouse as the deemed designated Beneficiary), then the Participant’s Beneficiary shall be deemed to be the Participant’s estate.

 

7. Administration.

 

7.1 Compensation Committee.  The Plan shall be administered by the Committee.  A majority of the members of the Committee shall constitute a quorum.  All resolutions or other action taken by the Committee shall be by a vote of a majority of its members present at any meeting or, without a meeting, by an instrument in writing signed by all its members.  Members of the Committee may participate in a meeting of such committee by means of a conference telephone or similar communications equipment that enables all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting and waiver of notice of such meeting.

  

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7.2 Committee Responsibilities.  The Committee shall be responsible for the administration of this Plan and shall have all powers necessary to administer this Plan, including discretionary authority to determine eligibility for benefits and to decide claims under the terms of this Plan, except to the extent that any such powers are vested in any other person.  The Committee may from time to time establish rules for the administration of this Plan, and it shall have the exclusive right to interpret this Plan and to decide any matters arising in connection with the administration and operation of this Plan.  All rules, interpretations, and decisions of the Committee shall be conclusive and binding on the Company, Participants, and Beneficiaries.

 

7.3 Ability to Delegate Responsibilities.  The Committee’s responsibilities shall include, but shall not be limited to, determining in the first instance issues related to eligibility, distribution of Deferral Amounts, determination of account balances, crediting of earnings and of distributions, in-service withdrawals, deferral elections and any other duties concerning the day-to-day operation of this Plan.  The Committee may designate one of its members as a chairperson and may retain and supervise outside providers, third party administrators, record keepers, and professionals (including in-house professionals) to perform any or all of the duties delegated to it hereunder.

 

7.4 Limitation of Liability.  Neither a member of the Board nor any member of the Committee shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or for anything done or omitted to be done in connection with this Plan.  The Committee shall keep records of all of its proceedings and shall keep records of all payments made to Participants or Beneficiaries and payments made for expenses or otherwise.

 

7.5 Recusal.  Any member of the Committee who is due a benefit under the Plan shall recuse himself or herself from any Committee deliberations that concern such member’s benefits, including deliberations concerning such member’s eligibility for a benefit or his or her level of benefits.  The previous sentence shall not apply to deliberations that apply to Participants generally rather than the particular member at issue.

 

7.6 Recovery of Administration Expenses.  Any expense incurred by the Company or the Committee relative to the administration of this Plan shall be paid by the Company and/or may be deducted from the Accounts of the Participants, as determined by the Committee.

 

8. Amendment and Termination of Plan.

 

8.1 Amendment.  The Committee or its Designee may at any time amend this Plan in whole or in part, provided, however, that no amendment shall be effective to decrease the balance in any Account as accrued at the time of such amendment.  The Committee shall have authority to approve administrative and technical amendments that do not materially increase the cost of the Plan.  The Company may amend the Plan in any other manner that does not cause adverse consequences under Code Section 409A or other guidance from the Treasury Department or IRS, provided that no amendments shall divest otherwise vested rights of Participants, or their Beneficiaries.

  

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8.2 Company’s Right to Terminate.  The Committee may terminate the Plan (or, where allowed by Code Section 409A, a portion of the Plan) and accelerate any payments due (or that may become due) under the Plan under the following circumstances:

 

(a) Section 409A Change of Control.  The Plan termination occurs pursuant to an irrevocable action of the Committee that is taken within the 30 days preceding or the 12 months following a Section 409A Change of Control, and all other plans sponsored by the Company that are required to be aggregated with this Plan under Code Section 409A are also terminated with respect to each participant therein who provided services to the Company that underwent the Section 409A Change of Control (“Change of Control Participant”).  In the event of such a termination, the Accounts, together with amounts due to each Change of Control Participant under all aggregated plans, shall be paid at the time and pursuant to the schedule specified by the Committee, so long as all payments are required to be made no later than 12 months after the date that the Committee or its Designee irrevocably approves the termination.

 

(b) Company’s Discretion.  In the discretion of the Committee, provided that: (i) all arrangements sponsored by the Company that would be aggregated with the Plan under Treasury Regulation Section 1.409A-1(c) if the same service provider participated in all of the arrangements are terminated; (ii) no payments other than payments that would be payable under the terms of the arrangements if the termination had not occurred are made within 12 months of the termination of the arrangements; (iii) all payments are made within 24 months of the termination of the arrangements; and (iv) the Company does not adopt a new arrangement that under Treasury Regulation Section 1.409A-1(c) that would be aggregated with the Plan if the same service provider participated in both arrangements, at any time within three years following the date of termination of the Plan.

 

(c) Dissolution or Bankruptcy Court Order.  Within 12 months of a corporate dissolution of the Company taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participant’s gross income in the latest of (i) the calendar year in which the termination occurs, (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (iii) the first calendar year in which the payment is administratively practicable.

 

(d) Other.  Due to such other events and conditions as the Commissioner of the IRS may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

 

9. Miscellaneous.

 

9.1 Unfunded Plan.  This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for Non-Employee Directors.  All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment.  No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan.  Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of the Company’s creditors, to assist it in accumulating funds to pay its obligations under the Plan.  Participants shall have no right to compel the investment of any amounts deposited in any such trust(s).

  

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9.2 Nonassignability.  Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate, or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

 

9.3 Validity and Severability; Code Section 409A.  The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  If any provision of the Plan is capable of being interpreted in more than one manner, to the extent feasible, the provision shall be interpreted in a manner that does not result in an excise tax under Code Section 409A.

 

9.4 Governing Law.  The validity, interpretation, construction, and performance of this Plan shall in all respects be governed by the laws of the State of Texas, without reference to principles of conflict of law, except to the extent preempted by federal law.

 

9.5 Status.  Nothing in this Plan or any instrument executed pursuant to this Plan will confer upon any Participant any right to continue as a director of the Company or affect the right of the Company to terminate the services of any Participant.

 

9.6 Underlying Plans and Programs.  Nothing in this Plan shall prevent the Company from modifying, amending or terminating the compensation or the plans and programs pursuant to which compensation is earned and which is deferred under this Plan.

 

* * * * * * * * * * * * *

 

As approved by the Compensation Committee and adopted by the Board of Directors on December 6, 2011.

 

 

 13ex10_1.htm

Exhibit 10.1

EXECUTION COPY

SETTLEMENT AND STANDSTILL AGREEMENT

This SETTLEMENT AND STANDSTILL AGREEMENT dated as of February 27, 2012 (the “Agreement”) is by and among Comverge, Inc. (the “Company”), the persons identified on Schedule A (collectively, the “Ardsley Group” and each individually a “member” of the Ardsley Group) and, solely for purposes of Sections 4(g), 7, 8 and 9, the persons identified on Schedule B (collectively, the “Designee Directors” and each individually a “Designee Director”).

WHEREAS, the Company and the Ardsley Group have engaged in various discussions and communications concerning the Company’s business;

WHEREAS, the Ardsley Group previously provided notice to the Company of its intention to nominate certain individuals for election as directors to the Board of Directors of the Company (the “Board”) at the Company’s 2012 annual meeting of stockholders (the “2012 Annual Meeting”); and

WHEREAS, each of the Company and the Ardsley Group has determined that it is in each party’s best interests to come to an agreement with respect to certain matters relating to the composition of the Board, the election of directors at the 2012 Annual Meeting and certain related matters.

NOW, THEREFORE, in consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.           Definitions.  For purposes of this Agreement:

“Affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act.

"Associate" shall have the meaning set forth in Rule 12b-2 under the Exchange Act.

“beneficial owner” and “beneficial ownership” shall have the meanings set forth in Rule 13d-3 under the Exchange Act.

“Common Stock” means the common stock of the Company, par value $0.001 per share.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature.

“SEC” means the United States Securities and Exchange Commission.

“Standstill Period” means the period from the date hereof until the earliest of the following: (i) 10 days prior to the last date (the "2014 Notification Deadline") upon which a notice to the Secretary of the Company of nominations of directors for election to the Board or the proposal of business at the Company's 2014 Annual Meeting would be considered timely under the certificate of incorporation and bylaws of the Company, if by 30 days prior to the 2014 Notification Deadline either (A) the Company has not notified the Ardsley Group pursuant to Section 13(g) below that the Board has resolved
to nominate both David R. Kuzma and James J. Moore, Jr. (or their replacements designated by the Ardsley Group) for reelection to the Board at the Company's 2014 annual meeting (the "2014 Annual Meeting"), or (B) the Company has so notified the Ardsley Group that it has resolved to nominate Mr. Kuzma and Mr. Moore but the Ardsley Group has declined to have Mr. Kuzma and Mr. Moore (or their replacements designated by the Ardsley Group) stand for re-election to the Board as Company nominees and has notified the Company of same; (ii) 10 days prior to the last date upon which a notice to the Secretary of the Company of nominations of directors for election to the Board or the proposal of business at the Company's 2015 annual meeting (the “2015 Annual Meeting”) would be considered timely under the certificate of incorporation and by-laws of the Company; (iii) such date, if any,
as the Company has materially breached any of its covenants or obligations under this Agreement, which such breach remains uncured (if capable of being cured) for a period of twenty (20) days following written notice by the Ardsley Group and (iv) the date upon which no Designee Director remains as a member of the Board.

2.           Representations and Warranties of the Company.  The Company represents and warrants to the Ardsley Group, as of the date hereof, that (a) the Company has the corporate power and authority to execute, deliver and perform the terms and provisions of this Agreement and to consummate the transactions contemplated hereby, (b) this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid and binding obligation and agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting the rights of creditors and subject to general equity principles and (c) the execution, delivery and performance of this Agreement by the Company does not and will not (i) violate or conflict with any law, rule, regulation, order, judgment or decree, in each case that is applicable to the Company, (ii) result in any material breach or material violation of, or constitute a material default (or an event which with notice or lapse of time or both could become a material default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any agreement, contract, commitment, understanding or arrangement, in each case to which the Company is a party or by which it is
bound and which is material to the Company’s business or operations or (iii) violate or conflict with the Company’s certificate of incorporation or by-laws.

3.           Representations and Warranties of the Ardsley Group.  Each member of the Ardsley Group severally, and not jointly, represents and warrants to the Company, with respect to itself or himself, as the case may be, as of the date hereof, that (a) such member, in the case of an individual, has the power and authority to execute, deliver and perform the terms and provisions of this Agreement and to consummate the transactions contemplated hereby, (b) such member, in the case of an entity, has the corporate, limited partnership or limited liability company power and authority, as
applicable, to execute, deliver and carry out the terms and provisions of this Agreement and to consummate the transactions contemplated hereby, (c) this Agreement has been duly and validly authorized, executed, and delivered by such member, constitutes a valid and binding obligation and agreement of such member, and is enforceable against such member in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting the rights of creditors and subject to general equity principles, (d) the execution, delivery and performance of this Agreement by such member does not and will not (i) violate or conflict with any law, rule, regulation, order, judgment or decree applicable to it or him, (ii) result in any material breach or material violation of, or constitute a
material default (or an event which with notice or lapse of time or both could become a material default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any agreement, contract, commitment, understanding or arrangement, in each case to which one or more members of the Ardsley Group is a party or by which it or he is bound and which is material to the Ardsley Group’s business or operations or (iii) in the case of any entity, violate or conflict with its certificate of incorporation or by-laws or other organizational document or documents, (e) such member is the beneficial owner of the number of shares of Common Stock set forth with respect to such member in the report of beneficial ownership of the Company’s Common Stock on Amendment No. 2 to Schedule 13D filed by the
Ardsley Group with the SEC on January 6, 2012 (the “Schedule 13D”) and (f) except as set forth in such Schedule 13D, no  Affiliate or Associate of any member of the Ardsley Group owns any shares of Company Common Stock.

4.           Agreement Regarding Board Composition; Appointment and Nomination of Designee Directors.

	
(a)  

	
Solely to facilitate the settlement and to create vacancies on the Board for the Ardsley Nominees, two existing directors have agreed to resign from the Board and (i) effective with the execution of this agreement by the Company and Ardsley,  Scott Ungerer will resign as a Class I director and (ii) Joseph O’Donnell, currently a Class II director, has informed the Company that he does not intend to stand for re-election at the Company’s 2012 Annual Meeting.

(b)           Concurrently herewith, the Board is appointing David R. Kuzma and James J. Moore, Jr. as directors in Class I with terms to expire at the Company’s 2014 Annual Meeting, and Rudolph J. Hoefling as a director in Class II with a term to expire at the Company’s 2012 Annual Meeting.  The Company shall (i) nominate Mr. Hoefling for election as a Class II director in connection with the 2012 Annual Meeting, (ii) recommend that the Company’s stockholders vote in favor of the election of Mr. Hoefling at the Company’s 2012 Annual Meeting and (iii) solicit proxies in favor of
such election at such Annual Meeting and otherwise support Mr. Hoefling for election in a manner no less favorable than the manner in which the Company supports other nominees for election as director in connection with the 2012 Annual Meeting.  The Company shall nominate only two other nominees for election as Class II directors in connection with the 2012 Annual Meeting, such that there will be a total of three nominees for election as director in Class II in connection with the 2012 Annual Meeting.

(c)           In furtherance of the foregoing, concurrently herewith, the Board has:

(i)           adopted a resolution, in accordance with the Company’s certificate of incorporation and by-laws, increasing the size of the Board by two directors, such that the Board is now comprised of ten directors in the aggregate, and has designated one such director to be a Class I director (with term expiring in 2014) and one such director to be a Class II director (with term expiring in 2012);

(ii)           appointed Mr. Kuzma as a Class I director to fill the vacancy in Class I resulting from the increase in the size of the Board as specified in Section 4(c)(i) (with term expiring in 2014);

(iii)           appointed Mr. Moore as a Class I director (with term expiring in 2014) to fill the vacancy resulting from the resignation of Mr. Ungerer;

(iv)           appointed Mr. Hoefling as a Class II director (with term expiring at the 2012 Annual Meeting) to fill the vacancy in Class II resulting from the increase in the size of the Board as specified in Section 4(c)(i);

(v)           appointed Mr. Kuzma to the Compensation Committee of the Board and as chairman thereof;

(vi)           appointed Mr. Hoefling to the Audit Committee of the Board (which shall have no more than four members), with the Audit Committee having authority during the Standstill Period, in addition to its other duties and authority, to examine Company-wide cost reduction measures and to make recommendations to the Board regarding budget approval; and

(vii)           appointed Mr. Moore to the ad hoc Transaction Committee of the Board (which shall have no more than four members and which shall be re-named the “Strategy Committee”), which Committee shall continue in existence during the Standstill Period and be charged by the Board during the Standstill Period with responsibility for examining all shareholder value-enhancing alternatives, provided that such responsibilities do not conflict with the responsibilities of the Audit Committee as specified in such Committee’s
charter.

(d)           Promptly following the 2012 Annual Meeting, the Board shall adopt a resolution, in accordance with the Company’s certificate of incorporation and by-laws, decreasing the size of the Board by one director, such that the Board is then comprised of nine directors in the aggregate, with such action reducing the number of directors in Class II from four to three.

(e)           The Company shall not increase or decrease the size of the Board during the Standstill Period unless such increase or decrease shall have been approved by the majority of the Designee Directors; provided, however, that this Section 4(e) shall not apply to the reduction in the number of directors from ten directors to nine directors following the Company’s 2012 Annual Meeting, as contemplated by Sections 4(a) and 4(d).  In addition, if the Board forms any
additional Committees (including an Executive Committee) during the Standstill Period, a Designee Director shall be appointed to each such Committee.

(f)           The Company shall have no further obligations hereunder in the event of any material breach of any covenant or obligation of the Ardsley Group, or any member thereof, which such breach remains uncured (if capable of being cured) for a period of twenty (20) days following written notice of such breach by the Company.

(g)           Each of the Designee Directors hereby irrevocably tenders his resignation as a director of the Company effective as of the date, if any, of the termination of the Company’s obligations as specified in Section 4(f), and the Board, in its sole discretion, may accept any or all of such resignations, by a majority vote of the directors (excluding the Designee Directors).

5.           Voting.  At all meetings of Company stockholders during the Standstill Period, each member of the Ardsley Group shall cause all shares of Company’s Common Stock beneficially owned by it or him or by its or his respective Affiliates to be present for quorum purposes and to be voted in favor of all directors nominated by the Board for election.

 

6.            Standstill.  Each member of the Ardsley Group agrees that other than as may be required by applicable law, order or regulation, during the Standstill Period, it or he will not, and it or he will cause each of its or his Affiliates or agents or other persons acting on its or his behalf not to:

(a)           without the prior written agreement of the Company (as authorized by the Board by a majority vote, excluding the Designee Directors), acquire, offer to acquire or agree to acquire, alone or in concert with any other individual or entity, by purchase, tender offer, exchange offer, agreement or business combination or any other manner, beneficial ownership of any securities of the Company, if, after completion of such acquisition or proposed acquisition, such party would beneficially own more than 14.99% of the outstanding Common Stock (calculated based on the Company’s latest annual or quarterly
report with the SEC pursuant to Section 13 or 15(d) of the Exchange Act); provided, however, that such limitation shall not apply to shares acquired in connection with stock dividends or similar distributions or offerings of Company Common Stock made available generally on a pro rata basis to holders of Company Common Stock;

(b)           submit any stockholder proposal (pursuant to Rule 14a-8 under the Exchange Act or otherwise) or any notice of nomination or other business for consideration, or nominate any candidate for election to the Board or oppose the director candidates nominated by the Board, other than as expressly permitted by this Agreement;

 

(c)           form, join in or in any other way participate in a “partnership, limited partnership, syndicate or other group” within the meaning of Section 13(d)(3) of the Exchange Act with respect to the Common Stock or deposit any shares of Common Stock in a voting trust or similar arrangement or subject any shares of Common Stock to any voting agreement or pooling arrangement, other than solely with other members of the Ardsley Group or one or more Affiliates of a member of the Ardsley Group with respect to the Common Stock currently owned as set forth in the Ardsley Group’s latest amendment to
its Schedule 13D or Common Stock acquired in the future (subject to the limitations set forth in Section 6(a) hereof) or to the extent such a group may be deemed to result with the Company or any of its Affiliates as a result of this Agreement;

 

(d)           solicit proxies or written consents of stockholders, or engage in or conduct any binding or  nonbinding referendum with respect to the Common Stock, or make, or in any way participate in, any “solicitation” of any “proxy” within the meaning of Rule 14a-1 under the Exchange Act to vote, or advise, encourage or influence any person with respect to voting, any shares of Common Stock with respect to any matter, or become a “participant” in any contested “solicitation” for the election of directors with respect to the Company (as such terms are
defined or used under the Exchange Act), other than a “solicitation” or acting as a “participant” in support of all of the nominees of the Board at any stockholder meeting, provided that the foregoing shall not be deemed to restrict such actions in connection with a proposed merger or sale of the Company, change in control of the Company, recapitalization or liquidation of the Company, acquisition or disposition by the Company;

 

(e)           call, seek to call, or to request the calling of, a special meeting of the stockholders of the Company, or seek to make, or make, a stockholder proposal at any meeting of the stockholders of the Company or make a request for a list of the Company’s stockholders (or otherwise induce, encourage or assist any other person to initiate or pursue such a proposal or request) or otherwise acting alone, or in concert with others, seek to control or influence the governance or policies of the Company, except as expressly permitted by this Agreement, provided that the foregoing shall not be deemed to
restrict such actions in connection with a proposed merger or sale of the Company, change in control of the Company, recapitalization or liquidation of the Company, acquisition or disposition by the Company;

(f)           vote for any nominee or nominees for election as directors other than those nominated by or supported by the Board or seek the removal of any member of the Board;

(g)           without the prior written agreement of the Company (as authorized by the Board by a majority vote, excluding the Director Designees), effect, offer or propose (i) any acquisition of any material assets or businesses of the Company or any of its subsidiaries by the Ardsley Group, (ii) any tender offer or exchange offer, merger, acquisition or other business combination involving the Company or any of its subsidiaries and the Ardsley Group, or (iii) any recapitalization, restructuring, liquidation, dissolution or other similar extraordinary transaction with respect to the Company or any of its
subsidiaries; provided, however, that limitations in this Section 6(g) shall not prohibit (A) the tender of shares of Company Common Stock in response to a bona fide tender offer made in compliance with the Exchange Act, (B) the voluntary exchange of shares of Company Common Stock in response to a bona fide exchange offer made in compliance with the Securities Act of 1933, as amended, Exchange Act, (C) the voting of shares of Company Common Stock in connection with a bona fide merger proposal, sale of material assets, recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction for which stockholder approval is solicited pursuant to the Company’s certificate of incorporation and/or applicable law or (D) purchases or sales
of Company Common Stock in the open market (subject to the limitations described in Section 6(a)); provided, further, that the limitations in this Section 6(g) shall not apply in the event that a third party unrelated to the Ardsley Group signs an agreement with the Company effectuating any of the transactions described in clauses (i) through (iii) above;

(h)           publicly disclose, or cause or facilitate the public disclosure (including without limitation the filing of any document or report with the SEC or any other governmental agency or any disclosure to any journalist, member of the media or securities analyst) of, any intent, purpose, plan or proposal to obtain any waiver, or consent under, or any amendment of, any of the provisions of this Section 6, or otherwise seek, in any manner that would require public disclosure by any of the members of the Ardsley Group or their Affiliates or Associates, to obtain any waiver, consent under, or amendment of, any
provision of this Agreement;

(i)           engage in any short sale or any purchase, sale or grant of any option, warrant, convertible security, stock appreciation right, or other similar right (including, without limitation, any put or call option or “swap” transaction) with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from a decline in the market price or value of the Company’s securities;

(j)           enter into any arrangements, understandings or agreements (whether written or oral) with, or advise, finance, assist or encourage, any other person that engages, or offers or proposes to engage, in any of the foregoing; provided, that the provisions of this subsection 6(j) shall not be deemed to prohibit any action with respect to a proposed transaction described in Section 6(g) above except to the extent such transaction involves a member of the Ardsley Group as a party; or

(k)      take or cause or induce or assist others to take any action inconsistent with any of the foregoing; provided, that the provisions of this subsection 6(k) shall not be deemed to prohibit any action with respect to a proposed transaction described in Section 6(g) above except to the extent such transaction involves a member of the Ardsley Group as a party.

 

The foregoing shall not be deemed to prohibit the Designee Directors from engaging in any lawful act in their capacities as directors of the Company.

7.      Confidential Information.  The Designee Directors, in their capacity as directors, will be provided with Confidential Information.  Each Designee Director acknowledges the confidential and proprietary nature of the Confidential Information and agrees that he will (i) keep the Confidential Information strictly confidential and (ii) not disclose the Confidential Information to any person, including any member of the Ardsley Group or any Affiliate of any such member, except (X) with the specific prior written consent of the Company or (Y) to the extent required by applicable legal process or
requested by applicable legal authority or stock exchange. Notwithstanding the foregoing, it is understood and agreed that this Agreement shall not be deemed to prohibit the Designee Directors from engaging in any lawful act in their capacity as directors of the Company.

As used in this Agreement, the term “Confidential Information” means and includes any and all of the information concerning the business and affairs of the Company that may hereafter be disclosed to a Designee Director by the Company or by the directors, officers, employees, agents, consultants, advisors or other representatives, including legal counsel, accountants and financial advisors (collectively, “Representatives”) of the Company; provided, however, that “Confidential Information” shall not include
information that is or was (i) in the public domain or was or becomes generally available to the public other than as a result of disclosure by a Designee Director, (ii) independently acquired by a Designee Director without violating any of their obligations under this Agreement or under any other contractual, legal, fiduciary or other binding obligation of a Designee Director with or to the Company, or (iii) was available, or becomes available, to a Designee Director on a non-confidential basis other than as a result of its disclosure to a Designee Director by the Company or any Representative of the Company.

The Company represents and warrants to the Ardsley Group that each of the other directors of the Company are subject to substantially equivalent confidentiality obligations with respect to Confidential Information.

8.      Company Policies.  The Designee Directors each agree to abide by the provisions of the Company policies identified on Exhibit A applicable to members of the Board during his service as a director of the Company. The Company acknowledges that this Agreement will not be deemed to constitute an agreement or representation by any person or entity that the Designee Directors will not seek to change any of the policies or requirements referred to or incorporated herein.

 

9.           Compensation; Directors’ and Officers’ Insurance; Indemnification.  Each of the Designee Directors shall be (i) compensated for his service as a director and shall be reimbursed for his expenses on the same basis as all other non-employee directors of the Company and shall be eligible to be granted equity-based compensation on the same basis as all other non-employee directors of the Company, (ii) entitled to the same rights of indemnification as the other directors of the Company as such rights may exist from time to time and (iii) added to the Company’s
directors’ and officers’ liability insurance policy as insured persons thereunder, with such rights to compensation, indemnification and insurance coverage beginning on the date hereof.

10.           Withdrawal of Proposed Nominations.  On or promptly following the date hereof (but in no event later than the filing of the amendment to the Ardsley Group’s Schedule 13D and the filing of the current report on Form 8-K by the Company, as contemplated by Section 11 and Section 12, respectively) the Company and the Ardsley Group shall issue a joint press release in the form annexed hereto as Exhibit B (the “Joint Press Release”), including the statement that, pursuant to this Agreement, the
Ardsley Group has withdrawn its letter to the Company dated December 13, 2011 providing notice of its intent to nominate persons for election as directors at the 2012 Annual Meeting (the “Nominating Notice”).  The members of the Ardsley Group hereby withdraw the Nominating Notice. Neither the Company nor any member of the Ardsley Group shall make any public statements with respect to the matters covered by this Agreement that are inconsistent with, or otherwise contrary to, this Agreement or the statements in the Joint Press Release.

11.           Ardsley Group SEC Filing.  The members of the Ardsley Group shall promptly file with the SEC an amendment to the Ardsley Group’s Schedule 13D, as amended to date, which amendment shall (i) report entry into this Agreement, (ii) announce the withdrawal of the Ardsley Group’s intent to nominate directors, as contemplated by Section 10 and (iii) otherwise comply with the requirements of Schedule 13D. The Ardsley Group shall provide the Company and its counsel with a reasonable opportunity to review and comment on such amendment in advance of filing with the SEC, and
shall accept any such reasonable and timely comments of the Company and its counsel.

12.           Company SEC Filing.  The Company shall promptly file with the SEC a current report on Form 8-K, which filing shall (i) report entry into this Agreement and (ii) otherwise comply with the requirements of Form 8-K. The Company shall provide the Ardsley Group and its counsel with a reasonable opportunity to review and comment on such Form 8-K in advance of filing with the SEC, and shall accept any such reasonable and timely comments of the Ardsley Group and its counsel.

13.           Other Agreements.  

(a)           During the Standstill Period, the Company shall not publicly disparage any member of the Ardsley Group or any Affiliate thereof; provided, however, that this provision shall not apply to compelled testimony, either by legal process, subpoena or otherwise, or to communications that are required by an applicable legal obligation and are subject to contractual provisions providing for confidential disclosure.

(b)           During the Standstill Period, no member of the Ardsley Group shall, nor shall any member of the Ardsley Group permit any Affiliate of such member to, publicly disparage the Company or any director (including Ungerer and O’Donnell), officer, employee, Affiliate or Associate of the Company or privately disparage Ungerer or O’Donnell; provided, however, that this provision shall not apply to compelled testimony, either by legal process, subpoena or otherwise, or to
communications that are required by an applicable legal obligation and are subject to contractual provisions providing for confidential disclosure.

(c)           At a meeting of the Compensation Committee of the Board to be held promptly following the execution and delivery of this Agreement, the Compensation Committee shall (A) adopt a Board compensation plan providing for total yearly compensation for each non-employee member of the Board (other than compensation relating to service on a Board committee or as Chairman) of (i) $40,000 in cash (with the directors having the option to receive such amount instead in the form of restricted Common Stock, subject to any restrictions thereon included in the Company’s equity compensation plans) and (ii)
equity-based compensation of $85,000 in the form of restricted Common Stock, and the Board, at its next regularly-scheduled meeting, shall adopt and approve such plan, subject, if required by law or Nasdaq corporate governance requirements, to Company stockholder approval; and (B) provide that each Committee Chair (other than the Audit Committee Chair) shall receive $10,000 in additional cash compensation.

(d)           Promptly following the execution and delivery of this Agreement, the Ardsley Group shall take reasonable steps to inform those Company stockholders reasonably agreed by the Company and the Ardsley Group that the Ardsley Group (i) has withdrawn its Nominating Notice and (ii) will be voting its shares at the Company’s 2012 Annual Meeting in favor of the Board’s nominees for election as directors; provided, however, that in no event will any member of the Ardsley
Group be required to take any action that would constitute a “solicitation” (as such term is defined in Regulation 14A under the Exchange Act) or require any member of the Ardsley Group to file with the SEC proxy solicitation materials pursuant to such Regulation 14A.

(e)           Except with the approval of a majority of the Designee Directors, the Company shall not award, modify or renew any employment agreement with the Company’s Chief Executive Officer, Chief Operating Officer or Chief Financial Officer for a period of 180 days following the date of this Agreement.

(f)           The Company shall not award or authorize any discretionary bonuses to the Company's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer in respect of fiscal year 2011 without the approval of a majority of the Designee Directors.

(g)           At least 30 days prior to 2014 Nomination Deadline, the Company shall notify the Ardsley Group whether the Board has resolved to recommend Mr. Kuzma and Mr. Moore (or their replacements designated by the Ardsley Group) for re-election to the Board at the 2014 Annual Meeting.  If the Board has so resolved and agrees, then (i) the Board shall nominate Mr. Kuzma and Mr. Moore (or any such replacement) for election as directors at the 2014 Annual Meeting and (ii) the Board shall recommend that the Company’s stockholders vote, and shall solicit proxies, in favor of their election at such
meeting and otherwise support Mr. Kuzma and Mr. Moore for election in a manner no less rigorous and favorable than the manner in which the Company supports its other nominees.

(h)           In the event any of the Designee Directors resign from the Board, or die or become disabled prior to the end of their term as directors, the Ardsley Group shall have the right to designate a replacement director to serve in the Class of such director, provided that such replacement director is reasonably acceptable to the Company and shall qualify as an independent director under the Nasdaq Stock Market Rules.

14.           Releases.

(a)           Each member of the Ardsley Group hereby agrees for the benefit of the Company, and each controlling person, officer, director (including Ungerer and O’Donnell), stockholder, agent, Affiliate, employee, partner, attorney, heir, assign, executor, administrator, predecessor and successor, past and present, of the Company (the Company and each such person, a “Company Released Person”) as follows:

(i)           Each member of the Ardsley Group, for itself or himself and for its or his members, officers, directors, assigns, agents and successors, past and present, hereby agrees and confirms that, effective from and after the date of this Agreement, hereby acknowledges full and complete satisfaction of, and covenants not to sue, and forever fully releases and discharges each Company Released Person of, and holds each Company Released Person harmless from, any and all rights, claims, warranties, demands, debts, obligations, liabilities, costs, attorneys’ fees, expenses, suits, losses and causes of action
of any nature whatsoever, whether known or unknown, suspected or unsuspected (collectively, “Claims”) that the Ardsley Group or any member or members thereof may have against the Company Released Persons, in each case with respect to events occurring prior to the date of the execution of this Agreement.

(ii)           Each member of the Ardsley Group understands and agrees that the Claims released by the Ardsley Group and each of its members above include not only those Claims presently known but also include all unknown or unanticipated claims, rights, demands, actions, obligations, liabilities, and causes of action of every kind and character that would otherwise come within the scope of the Claims as described above. Each member of the Ardsley Group understands and agrees that it or he may hereafter discover facts different from or in addition to what it or he now believes to be true, which if known, could have
materially affected this release of Claims, but each member nevertheless waives any claims or rights based on different or additional facts.

(iii)           Each member of the Ardsley Group agrees that, during the term of the Agreement, (A) it or he shall not, without the consent of the Company, instigate, solicit, assist, intervene in, or otherwise voluntarily participate in any litigation or arbitration in which the Company or any of Company Released Persons are named as parties with respect to events occurring prior to the date of execution of this Agreement; provided, however, the foregoing shall not (x) include any
litigation or arbitration arising out of or related to any obligations under, or breach of, this Agreement, and does not extend to any acts which are criminal, or (y) prevent any member of the Ardsley Group from responding to a validly issued legal process; and (B) the Ardsley Group agrees to give the Company at least five (5) business days notice of the receipt of any legal process requesting information regarding the Company or any of the Company Released Persons, to the extent that such notice is legally permissible.  Notwithstanding the foregoing, the Ardsley Group shall not be prohibited from receiving proceeds in any class action lawsuit initiated by a person unaffiliated with the Ardsley Group on the same basis as the Company's other non-initiating stockholders within such class.

(iv)           The Company agrees that, during the term of the Agreement, (A) it shall not, without the consent of the Ardsley Group, instigate, solicit, assist, intervene in, or otherwise voluntarily participate in any litigation or arbitration in which any member of the Ardsley Group is named as a party with respect to events occurring prior to the date of execution of this Agreement; provided, however, the foregoing shall not (x) include any litigation or arbitration arising out of or
related to any obligations under, or breach of, this Agreement, and does not extend to any acts which are criminal, or (y) prevent the Company from responding to a validly issued legal process; and (B) the Company agrees to give the Ardsley Group at least five (5) business days notice of the receipt of any legal process requesting information regarding any member of the Ardsley Group, to the extent that such notice is legally permissible.

(b)           The Company hereby agrees for the benefit of the Ardsley Group, each member thereof, and each controlling person, officer, director, stockholder, agent, Affiliate, employee, partner, attorney, heir, assign, executor, administrator, predecessor and successor, past and present, thereof, (the Ardsley Group, each member of the Ardsley Group and each such other person, an “Ardsley Released Person”) as follows:

(i)           The Company, for itself and for its Affiliates, officers, directors, assigns, agents and successors, past and present, hereby agrees and confirms that, effective from and after the date of this Agreement, it hereby acknowledges full and complete satisfaction of, and covenants not to sue, and forever fully releases and discharges each Ardsley Released Person of, and holds each Ardsley Released Person harmless from, any and all Claims of any nature whatsoever, whether known or unknown, suspected or unsuspected, that the Company may have against the Ardsley Released Persons, in each case with respect to
events occurring prior to the date of the execution of this Agreement.

(ii)           The Company understands and agrees that the Claims released by the Company above include not only those Claims presently known but also include all unknown or unanticipated claims, rights, demands, actions, obligations, liabilities, and causes of action of every kind and character that would otherwise come within the scope of the Claims as described above. The Company understands that it may hereafter discover facts different from or in addition to what it now believes to be true, which if known, could have materially affected this release of Claims, but it nevertheless waives any claims or rights
based on different or additional facts.

(c)           The Parties intend that the foregoing release be broad with respect to the matters released; provided, however, this release of Claims shall not include claims to enforce the terms of this Agreement; and provided further that nothing in the foregoing release shall be deemed or construed, now or hereafter, as limiting in any manner any right of
indemnification inuring to the benefit of any director or former director of the Company arising under the Company’s certificate of incorporation, by-laws or otherwise.

15.           Fees and Expenses.  All fees and expenses incurred in connection with this Agreement and all matters relating hereto shall be paid by the party incurring such fees or expenses; provided, however, that the Company concurrently herewith is shall reimbursing the Ardsley Group’s reasonable attorneys fees and out-of-pocket expenses incurred in connection with its Nominating Notice, this Agreement and the matters relating thereto and hereto
(including its preparation of proxy materials) in the amount of $40,000.

16.           Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given when received if delivered personally; when transmitted if transmitted by facsimile (with written confirmation of transmission) or by electronic mail; the business day after it is sent, if sent for next day delivery to a domestic address by overnight courier (providing proof of delivery), in each case to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Ardsley Group:

Ardsley Advisory Partners

262 Harbor Drive, 4th Floor

Stamford, CT 06902

Attention:                      Steven Napoli

Facsimile:                      (203) 564-4250

E-mail:                            steve@ardsley.com

with a copy (which shall not constitute notice) to:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention:                      David E. Rosewater, Esq. and Marc Weingarten, Esq.

Facsimile:                      (212) 593-5955

E-mail:                            david.rosewater@srz.com; marc.weingarten@srz.com

If to the Company:

Comverge, Inc.

5390 Triangle Parkway, Suite 300

Norcross, Georgia 30092

Attention:                      Matthew H. Smith, General Counsel

Facsimile:                      (770) 696-7665

E-mail:                            msmith@comverge.com

with a copy (which shall not constitute notice) to each of:

SNR Denton US LLP

1301 K Street, N.W.,

Suite 600, East Tower

Washington, DC 20005

Attention:                      Thomas L. Hanley, Esq.

Facsimile:                      (202) 408-6399

E-mail:                            tom.hanley@snrdenton.com

17.           Entire Agreement; Amendment and Waiver.

(a)           This Agreement contains the entire understanding of the parties hereto with respect to and supersedes all prior agreements, both written and oral, between the parties, or any of them, relating to, the subject matter hereof.

(b)           This Agreement may be amended only by a written instrument duly executed by the parties hereto or their respective successors or assigns. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

18.           Governing Law.  This Agreement and any action, claim or legal proceeding directly or indirectly based upon, relating to arising out of this Agreement or the negotiation, execution or performance hereof, shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

19.           Jurisdiction; Service of Process; Waiver of Jury Trial.

(a)           Each of the parties irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction, the United States District Court sitting in New Castle County in the State of Delaware, for the purpose of any action, claim or legal proceeding directly or indirectly based upon, relating to arising out of this Agreement or the negotiation, execution or performance hereof, and each of the parties hereby irrevocably agrees that all claims in respect to such action, claim or legal proceeding shall be brought in, and may be heard and
determined, exclusively in such state or federal courts. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue in, and any defense of inconvenient forum to the maintenance of, any action or proceeding so brought. Each of the parties agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b)           Each of the parties irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party at the addresses set forth in Section 16. Nothing in this Section 19 shall affect the right of any party to serve legal process in any other manner permitted by law.

           (c)           EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF OR THEREOF.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATION OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

20.           Specific Performance.  Each party hereto acknowledges and agrees, on behalf of itself and its Affiliates, that irreparable harm would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties will be entitled to specific relief hereunder, including, without limitation, an injunction or injunctions to prevent and enjoin breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any state or federal
court in the State of Delaware, in addition to any other remedy to which they may be entitled at law or in equity.  Each party hereto agrees, on behalf of itself or himself and its or his Affiliates and Associates, that any requirements for the securing or posting of any bond with such remedy are hereby waived.

21.           Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties (whether by operation of law or otherwise) without the prior written consent of the other parties.  No assignment by any party shall relieve such party of any of its obligations hereunder.  Subject to the foregoing, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns

22.           No Third-Party Beneficiaries.  Nothing in this Agreement is intended to confer on any person other than the parties hereto or their respective successors and assigns, and their respective Affiliates to the extent provided herein, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

23.           Mutual Drafting.  Each party has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties.  Accordingly, the parties agree that in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

24.           Counterparts; Facsimile or Electronic Signatures. This Agreement may be executed in one or more counterparts, and by the different parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  This Agreement or any counterpart may be executed and delivered by facsimile copies or delivered by electronic communications by portable document format (.pdf), each of which shall be deemed an original.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized signatories of the parties as of the date first written above.

Signature Page Follows

  

  

  

Signature Page - Settlement and Standstill Agreement

 

                      COMVERGE,INC.

By:           /s/ R. Blake Young                                           

President & CEO                                                      

(Name and Title)

ARDSLEY PARTNERS FUND II, L.P.

By:           ARDSLEY PARTNERS I,

                        GENERAL PARTNER

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

ARDSLEY PARTNERS INSTITUTIONAL FUND, L.P.

By:           ARDSLEY PARTNERS I,

GENERAL PARTNER

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

ARDSLEY OFFSHORE FUND, LTD.

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

ARDSLEY PARTNERS RENEWABLE ENERGY FUND, L.P.

By:           ARDSLEY PARTNERS I,

GENERAL PARTNER

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

ARDSLEY RENEWABLE ENERGY OFFSHORE FUND, LTD.

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

ARDSLEY ADVISORY PARTNERS

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

-  -

  

  

  

Signature Page - Settlement and Standstill Agreement

ARDSLEY PARTNERS I

By:           /s/ Steve Napoli                                                      

General Partner                                                      

(Name and Title)

PHILIP J. HEMPLEMAN

/s/ Phillip J. Hempleman                                                      

SPENCER HEMPLEMAN

/s/ Spencer Hempleman                                                      

BENJAMIN IAN BLOCK

/s/ Benjamin Ian Block                                                      

STEVEN NAPOLI

/s/ Steve Napoli                                                      

AS TO SECTIONS 4(g), 7, 8 AND 9 ONLY:

RUDOLF JOACHIM HOEFLING

/s/ Rudolf J. Hoefling                                                      

DAVID R. KUZMA

/s/ David R. Kuzma                                           

JAMES J. MOORE, JR.

/s/ James J. Moore, Jr.                                                      

-  -

  

  

  

Schedule A

Ardsley Partners Fund II, L.P.

Ardsley Partners Institutional Fund, L.P.

Ardsley Offshore Fund, Ltd.

Ardsley Partners Renewable Energy Fund, L.P.

Ardsley Renewable Energy Offshore Fund, Ltd.

Ardsley Advisory Partners

Ardsley Partners I

Philip J. Hempleman

Spencer Hempleman

Benjamin Ian Block

Steven Napoli

  

  

  

Schedule B

Rudolf Joachim Hoefling

David R. Kuzma

James J. Moore, Jr.

  

  

  

Exhibit A

Code of Business Conduct and Ethics

Insider Trading Policy

Related Party Transaction Policy

Whistleblower Policy

8-K Compliance Policy

Stockholder Communication Procedures

Corporate Governance Guidelines

Audit Committee Charter

Compensation Committee Charter

Nominating/Corporate Governance Committee Charter

Stock Ownership Guidelines

  

  

  

Exhibit B

[attached]

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