Document:

exhibit10_1.htm

EXHIBIT 10.1

MODIFICATION NO. 1 TO LOAN AND SECURITY AGREEMENT

This Modification No. 1 to Loan and Security Agreement (“Modification”) is entered into as of March 31, 2011 (the “Effective Date”), by and between Partners for Growth III, L.P., a Delaware limited partnership with its principal place of business at 180 Pacific Avenue, San Francisco, California 94111 ("PFG") and each of Comverge, Inc., a Delaware corporation, Alternative Energy Resources, Inc., a Delaware corporation, Enerwise Global Technologies, Inc., a Delaware corporation, Comverge Giants, LLC, a Delaware limited liability company, Public Energy Solutions, LLC, a New Jersey limited liability company, Public Energy Solutions NY, LLC, , a Delaware limited liability company and Clean Power Markets, Inc., a Pennsylvania corporation (individually and collectively, jointly and severally, "Borrower").

WHEREAS, Borrower has received a $15,000,000 secured convertible loan from PFG (the “Loan”) pursuant to that certain Loan and Security Agreement dated as of November 5, 2010 (the “Loan Agreement”) and certain other Security Documents (as defined below);

WHEREAS, the parties have determined to modify the terms around PFG’s amortization right and loan conversion and make certain other changes to the terms and conditions of the Loan;

NOW THEREFORE, the parties hereby agree as follows:

1.           DESCRIPTION OF EXISTING INDEBTEDNESS:  Borrower is indebted to PFG for the Obligations pursuant to the Loan Documents. The Loan Agreement provides for term loan in the principal amount of Fifteen Million Dollars ($15,000,000), all of which has been disbursed by PFG to Borrower and remains outstanding.  Defined terms used but not otherwise defined herein shall have the same meanings set forth in the Loan Agreement.

2.           DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral, as described in the Loan Agreement and in certain Intellectual Property Security Agreements of even date therewith. The above-described security documents, including the Cross-Corporate Continuing Guaranty of even date therewith, Pledge Agreements, together with all other documents securing repayment of the Obligations, shall be referred to herein as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations are referred to as the "Existing Loan Documents".

3.           DESCRIPTION OF CHANGES IN TERMS.

	
(a)  

	
Modification(s) to Existing Loan Documents.

(1) Section 1 of the Schedule to the Loan Agreement is amended with effect from the Effective Date to read in its entirety as follows:

  

  

  

 

	
1.  LOAN (Section 1.1):

	 

 

	
(a)  The Loan:

	
The Loan shall consist of a term loan in the aggregate principal amount $15,000,000 (the “Credit Limit”), which the parties acknowledge was disbursed in full on November 5, 2010 (the “Funding Date”).

	
Initial Note:

	
(i) On the Funding Date, Agent executed and delivered a Note in the principal amount of $15,000,000 (the “Initial Note”).

	
Subsequent Notes:

	
(ii) After the Initial Note, Borrower may request new Loans by issuing new Notes upon five (5) Business Days advance written notice to PFG (upon the procedures specified in Section 1.4 of the Agreement), in minimum increments of $250,000 (“Subsequent Notes” and together with the Initial Note, the “Notes”) in aggregate amount(s) that do not exceed the lesser of (A) the principal amount of Loans converted under Sections 1(b) and 1(c) of this Schedule, and (B) such amounts that, when combined with the principal amount of the Initial Note, do not exceed $20,000,000 in aggregate principal Loaned under this Agreement (the “Facility Cap”); provided, however, that  Borrower’s right to request Loans shall in all events terminate thirty-six (36) months from the date of the Initial Note (such thirty-six month period, the “Availability Period”); and provided, further, that from and after Borrower’s failure to maintain the requisite threshold of Minimum Revenues such that PFG’s Amortization Right under paragraph (d) of this Schedule Section 1 is triggered, Borrower’s right to issue Subsequent Notes, other than with PFG’s consent in its sole discretion, shall terminate. For example only, if one year from the date hereof PFG were to convert $7,000,000 of the Initial Note under Section 1(b) of this Schedule, Borrower could (subject to the other terms and conditions of this Agreement and Borrower not having triggered the Amortization Right) issue Subsequent Notes during the following 24-month period in a maximum aggregate amount of $5,000,000.

 

 

 

  

  

  

 

	
Repayment:

	
The principal amount of each Note shall accrue interest at the rates set forth in Section 2 of this Schedule and shall, regardless of the date of issue, but subject to “Special Mandatory Payment”, below, and exercise of the Amortization Right in paragraph (d) of this Section 1, be repaid in full on the Maturity Date, unless previously converted, together with accrued and unpaid interest and all other outstanding monetary Obligations.

 

 

 

	
Special Mandatory

Payment:

	
If Borrower consummates an equity financing or financings of not less than an aggregate amount of $20,000,000 (a “Qualifying Financing”) on or before June 30, 2011, and the Effective Price at which the principal securities sold in such Qualifying Financing is greater than the Optional Conversion Price, then Borrower shall promptly repay a principal amount that is equal to the dollar value of the differential in the number of shares of Conversion Stock that would be issuable to PFG upon conversion of each Note at the Optional Conversion Price and the number of shares of Conversion Stock that would be issuable to PFG upon conversion of such Note at the Effective Price of securities sold in the Qualifying Financing (the “Special Mandatory Payment”). For purposes hereof, the term “Effective Price” means, in the event that additional consideration (including Borrower stock or derivatives, such as warrants)  is given by Borrower along with the principal securities issuable in the Qualifying Financing as part of or an inducement to investors in such Qualifying Financing, the true stand-alone value that is fairly attributable to such principal securities. Appended as Exhibit F hereto is an example showing calculation of the Special Mandatory Payment.

	
Prepayment:

	
Notes may not be prepaid by Borrower in whole or in part at any time prior to the Maturity Date without PFG’s consent in its sole and absolute discretion (it being acknowledged that the Loan conversion features negotiated between the parties are a material part of the consideration for PFG making the Loans).

	
Conversion Limits:

	
Notwithstanding anything to the contrary set forth herein, Borrower may not effect any Mandatory Conversion if the aggregate number of shares of Common Stock issuable upon conversion of the Notes subject to such mandatory conversion coupled with the number of shares of Common Stock issued or issuable upon conversion of all other outstanding Notes thereof (whether or not such Notes remain outstanding) exceeds 5,033,770 shares.

	
No Hedging:

	
PFG agrees that while any Note remains outstanding, PFG or its affiliates shall not, without Agent’s consent (in its sole discretion) engage in any shorting activity related to the Borrower’s common stock, including short sales, put options, or similar transactions.

 

 

  

  

  

 

	
(b) Optional Conversion:

	
At any time prior to the Maturity Date, PFG may at its option convert any Notes (or any parts thereof) into the common stock of Borrower (an “Optional Conversion”) at the conversion price which shall be equal to One Hundred Twenty Percent (120%) of the Market Price (as defined below) of Borrower’s Common Stock) set forth in each applicable Note being converted (the “Conversion Price”).  PFG may exercise its right to convert any Notes or parts thereof by sending written notice thereof in accordance with Section 8.5 of the Agreement specifying the Note(s) (or parts thereof) to be converted into Conversion Stock (a “Conversion Notice”).  The date on which a Conversion Notice is sent to Borrower shall be a Conversion Date. Pursuant to the terms of the Conversion Notice, Borrower will use its reasonable best efforts to issue the Conversion Stock within two (2) business days of the delivery of the Conversion Notice and in any event shall issue the Conversion Stock within three (3) business days of the delivery of the Conversion Notice.

	
(c) Mandatory Conversion:

	
Subject to PFG's reasonable determination that each of the following terms, conditions and limitations have been met, Borrower may at any time and from time to time upon three (3) Business Days’ notice (each, a “Mandatory Conversion Notice”) effect a mandatory conversion of a Note (such Borrower initiated conversion, a “Mandatory Conversion”):

(i) No Default or Event of Default may have occurred and be continuing at the time of any notice of Mandatory Conversion;

(ii) (A) The Conversion Stock issuable under a Mandatory Conversion must be issued without a restrictive legend and be immediately and freely tradable by PFG under Rule 144 of the Securities Act, and (B) PFG is not then and for the preceding six months has not been subject to compliance with Section 16 of the Exchange Act with respect to the Notes or Conversion Stock;

(iii) (A) For any Mandatory Conversion Notices issued and to be effective within the first eighteen months from the Funding Date, the reported closing price of the Common Stock on the date of the Mandatory Conversion Notice must be at least twenty-five percent (25%) greater than the Conversion Price; and (B) for any Mandatory Conversion Notices issued and to be effective eighteen months or later from the Funding Date, the reported closing price of the common stock on the date of the Mandatory Conversion Notice must be at least thirty-five percent (35%) greater than the Conversion Price (each of the conversion prices derived under clauses (A) and (B), a “Mandatory Conversion Price”); and (C) provided, in each of clauses (A) and (B), even though the relevant reported closing price(s) would not permit a Mandatory Conversion, Borrower may still effect a Mandatory Conversion by reducing the conversion price at which such Note is in fact converted to a price that represents no less than a twenty-five percent (25%) discount (if clause (A) is applicable) or thirty-five percent (35%) discount (if clause (B) is applicable) to such reported closing price(s), as necessary to satisfy the conditions set forth in clauses (iii)(A) and (B) and effect a Mandatory Conversion;

               (iv) The number of shares of Conversion Stock issuable upon a Mandatory Conversion may not exceed fifty percent (50%) of the average daily trading volume of Borrower’s Common Stock over the ten (10) trading days prior to any Borrower Mandatory Conversion Notice;

(v) Not more than $1,000,000 in value of the Note may be converted at any one time by Mandatory Conversion;

(vi) There shall be a minimum of five (5) trading days between Mandatory Conversion Notices;

(vii) Accrued and unpaid interest on the Note (or portion thereof) to be converted shall be paid in cash on the effective date of conversion;

(viii) the representations and warranties set forth in Section 3.16(h) of the Agreement are true and correct other than the last proviso set forth in Section 3.16 therein;

(ix) Each Mandatory Conversion Notice shall include the relevant calculations acceptable to Borrower to show that a Mandatory Conversion meets or will at the effective date of conversion meet the foregoing requirements and shall be certified by an executive officer with direct knowledge of the foregoing; and

(x) Borrower is not, as at the date of such Conversion Notice, being required to make amortized payments of principal and interest due to PFG’s exercise of its Amortization Right under Section 1(d), below.

The term “Market Price” shall mean, for the Initial Note, $5.46, and, for Subsequent Notes, the volume-weighted average closing price per share of Borrower’s Common Stock for the ten (10) consecutive trading days prior to the issue date (or deemed issue date, in the case of a Subsequent Note that has been amended or restated) of any Subsequent Note. The term “Conversion Stock” shall mean the shares of Borrower’s Common Stock issuable upon an Optional or Mandatory Conversion.

 

 

  

  

  

 

	
(d) Amortization Right:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	
If (A) Borrower should fail to maintain Minimum Revenues (as defined below), measured as of the end of each calendar quarter, or (B) a Borrower Regulatory Issue has occurred, PFG may elect to amortize all or (at PFG’s sole option) part of the Loan, effective as of the first day of the month following the calendar quarter for which Borrower has failed to maintain such Minimum Revenues, over a period equal to the shorter of thirty-six (36) months from the date such PFG election is made and the period from the date such PFG election is made until the Maturity Date (the “Amortization Right” and such period, the “Amortization Period”), which Amortization Right must be exercised, if at all, not later than the twentieth (20th) Business Day following the date PFG receives the Borrower report certifying compliance (or failure to comply) with the Minimum Revenues Test and, if PFG so elects, Borrower shall thereafter commence to make approximately level monthly payments of principal and interest on the Loan in accordance with an amortization schedule that reflects principal amortization equal to: (i) forty-five percent (45%) of the principal Loan balance outstanding on June 30, 2011, payable in twelve roughly equal monthly installments for each of the first twelve monthly payments made, (ii) thirty-five percent (35%) of the principal Loan balance outstanding on June 30, 2011, payable in twelve roughly equal monthly installments for each of the next twelve monthly payments made, and (iii) the greater of twenty percent (20%) of the principal Loan balance outstanding on June 30, 2011 and the actual principal Loan balance outstanding on the date such third tranche of amortized payments are due to commence to be made, payable in twelve roughly equal monthly installments for each of the next twelve monthly payments made, such that the Loan will be entirely paid at the Maturity Date. PFG may suspend Borrower’s obligation to make amortized payments at any time upon notice in its sole discretion. For example only, if Borrower triggered the Amortization Right based on its quarter ending March 31, 2011, reported no later than April 30, 2011, Borrower would be required to commence making monthly payments of $562,500, plus interest, the first such payment due May 1, 2011. If Borrower was in compliance with the Minimum Revenues test for the quarter ending June 30, 2011, as reported by July 31, 2011 (see “Reinstatement”, below), Borrower would cease making amortized payments as of August 1, 2011. If Borrower again triggered the Amortization Right based on its quarter ending September 30, 2011, Borrower would re-commence making amortized payments of $562,500, plus interest. Since Borrower would already have made three such payments (on May 1, June 1 and July 1), Borrower would, assuming no later Reinstatement, make nine such payments, plus interest, after which the principal payment each month would drop to $437,500, plus interest, for the next twelve payments.

	
       Minimum Revenues Test:

	
“Minimum Revenues” for purposes of this Amortization Right (as distinct from the Financial Covenant set forth in Section 5 of this Schedule), shall mean Borrower’s consolidated GAAP revenues (“Revenues”) on a quarterly cumulative basis in no less than the amounts and for the periods set forth below:

Meas. Period              Min. Revenues                       Quarters Included

	  	
Q1-2011                      $14,747,000                                Q1-2011

Q2-2011                      $37,969,000                                Q1-2011 + Q2-2011

Q3-2011                      $99,658,000                                Q1 through Q3-2011

Q4-2011                      $139,838,000                              Q1 through Q4-2011

 

For periods after Q4-2011, the full fiscal year Minimum cumulative Revenue threshold shall not be less than ninety percent (90%) of the greater of (i) the Revenues specified in Borrower’s Board-approved annual financial plan for each fiscal year (“Annual Plan”), and one hundred twenty percent (120%) of the prior fiscal year Annual Plan (the “Annual Plan Projected Revenues”). The relevant percentages for each quarter of each fiscal year shall be set: (i) in the case of each first and (on a cumulative basis with the first quarter) second quarter, at eighty percent (80%) of Annual Plan Projected Revenues; and in the case of third quarter (on a cumulative basis with the first and second quarters) and the fourth quarter (on a cumulative basis with the first, second and third quarters), at ninety percent (90%) of Annual Plan Projected Revenues. For example only, if the Annual Plan Revenues were $100 for FY2011 and the FY2012 Annual Plan Projected Revenues showed projected Revenues of $110, the Annual Plan Projected Revenues on which Minimum quarterly thresholds would be based (for purposes of the Amortization Right) would be $120 for FY2012 and the Minimum Revenues annual threshold would be $108 (90% of $120). The Q1-2012 Minimum Revenues threshold would be 80% of the (as adjusted) Annual Plan Revenues for Q1-2012 and Q2-2012. The Q3-2012 and Q4-2012 Minimum Revenues thresholds would each be 90% of the Annual Plan Projected Revenues for Q1 through Q3-2012 (in the case of the Q3-2012 threshold) and Q1 through Q4-2012 (in the case of the Q4-2010 threshold).

 

For the avoidance of doubt, Borrower’s failure to meet the Amortization Right Minimum Revenues Test shall not (in the absence of any other Default) be deemed a Default under the Loan Agreement.

 

 

  

  

  

 

	
Reinstatement:

	
If at any time PFG exercises the Amortization Right and Borrower then complies with the Minimum Revenues Test for any succeeding quarterly measurement, then Borrower may prospectively (at its option), cease monthly amortization of the Loan; provided, however, if Borrower fails to meet or exceed the Minimum Revenues Test for any subsequent measurement period, PFG may again exercise its Amortization Right, subject (again) to Borrower’s right to cease monthly amortization by complying in a future measurement period.

	
(e) Deposit:

	
If Borrower fails to consummate the Qualifying Financing on or before June 30, 2011, then Borrower shall within one (1) Business Day thereafter pay PFG the sum of $2,000,000 (the “Deposit”), which Deposit shall be held by PFG as additional security for repayment of the Loan and either applied against outstanding Obligations at maturity or returned to Borrower if the Loan is converted in whole. PFG shall not be required to segregate the Deposit from its general accounts. If Borrower consummates a Qualifying Financing, the Deposit shall be promptly returned to Borrower.

	
(f) Conditions to Each Note

     Issuance / Borrowing:

	
As a condition to the issuance of each Note and Loan, counsel to Borrower shall issue and deliver an opinion of counsel in favor of PFG in the form appended as Exhibit E hereto to the effect that the Notes and Conversion Stock (when issued under each Note) will be exempt from registration under the Securities Act or that such Conversion Stock will be covered by an existing registration of Borrower.

(2) Exhibit C to the Loan Agreement is amended and restated in the form appended to this Modification as Schedule 1.

 

(3) A new Exhibit F is appended to the Loan Agreement in the form appended to this Modification as Schedule 2, showing a sample calculation of the Special Mandatory Payment.

 

(4) Section 4 of the Schedule to the Loan Agreement is amended to read in its entirety as follows:

 

	
  

	
“4.  MATURITY DATE

	
(Section 5.1):

	
      November 5, 2015, or such earlier date as results from PFG’s exercise of the Amortization Right.”

 

 

  

  

  

 

(5) The last clause of Section 5 of the Schedule to the Loan Agreement entitled “Amendment of Financial Covenants” is hereby amended and restated in its entirety as follows:

 

	
  

	
          “Amendment of

	
          Financial Covenants:

	
PFG and Borrower each acknowledge their mutual intention that the Financial Covenants specified in this Schedule Section 5 approximate those similar covenants in effect in the Senior Debt Documents, from time to time. Without limiting the parties obligations under Sections 4.13 and 8.21 of the Agreement, if such Senior Debt Document financial covenants should materially change, the Financial Covenants set forth in this Section 5 shall be set by PFG in consultation with Borrower so as to approximate the then existing or proposed Senior Lender financial covenants.”

4.           CONSISTENT CHANGES.  The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

5.           PAYMENT OF LOAN FEE AND EXPENSES.  Borrower shall pay to PFG all of PFG’s reasonable and documented out-of-pocket costs and expenses in connection with this Modification.

6.           BORROWERS’ REPRESENTATIONS AND WARRANTIES.  Each Borrower represents and warrants that:

 

(a) immediately upon giving effect to this Modification (i) the representations and warranties contained in the Existing Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (ii) no Event of Default has occurred and is continuing;

 

(b) each Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Existing Loan Documents, as amended by this Modification;

 

(c) the certificate of incorporation, bylaws and other organizational documents of each Borrower delivered to PFG remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

 

(d) the execution and delivery by each Borrower of this Modification and the performance by each Borrower of its obligations under the Existing Loan Documents, as amended by this Modification, have been duly authorized by all necessary corporate action on the part of each Borrower;

 

(e) this Modification has been duly executed and delivered by each Borrower and is the binding obligation of each Borrower, enforceable against it in accordance with the terms of this Modification, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights;

 

(f) as of the date hereof, each Borrower has no defenses against its obligation to repay the Obligations and it has no claims of any kind against PFG.  Each Borrower acknowledges that PFG has acted in good faith and has conducted in a commercially reasonable manner its relationship with such Borrower in connection with this Modification and in connection with the Existing Loan Documents;

 

(g) the Security Documents relating to Intellectual Property either disclose an accurate, complete and current listing of all Collateral that consists of Intellectual Property or Borrower has included revised and updated Intellectual Property schedules as part of an update to the Representations required in Section 8 of this Modification; and

 

 

  

  

  

(h) Each Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in the Representations dated as of November 5, 2010, and acknowledges, confirms and agrees that the disclosures and information Borrower provided to PFG in Part A - Sections 1-6 (except as further noted in this sentence) and Part B - Sections 11, 12 and 13 of the Representations have not changed as of the date hereof, and all other Sections of the Representations, including Part A Section 3(d),(e) (g) and (i) have not changed as of the date hereof in any material respect or, if the Representations require additional disclosure in order to be true, accurate and complete as of the date hereof, Borrower shall have provided the update to the Representations required in Section 8 hereof.

 

Each Borrower understands and acknowledges that PFG is entering into this Modification in reliance upon, and in partial consideration for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate.

 

7.           CONTINUING VALIDITY.  Each Borrower understands and agrees that in modifying the existing Obligations, PFG is relying upon each Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents.  Except as expressly modified pursuant to this Modification, the terms of the Existing Loan Documents remain unchanged and in full force and effect.  PFG's agreement to modifications to the existing Obligations in no way shall obligate PFG to make any future consents, waivers or modifications to the Obligations.  Nothing in this Modification shall constitute a satisfaction of the Obligations or a waiver of any default under the Existing Loan Documents.  It is the intention of PFG and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by PFG in writing.  Unless expressly released herein, no maker, endorser, or guarantor will be released by virtue of this Modification.  The terms of this paragraph apply not only to this Modification, but also to all subsequent loan modification agreements.

8.           CONDITIONS.  The effectiveness of this Modification is conditioned upon each of:

(a)           Execution and Delivery.  Each Borrower and Guarantor shall have duly executed and delivered to PFG on or before March 31, 2011, a counterpart of each of this Modification and the Amended and Restated Senior Convertible Promissory Note appended as Schedule 1 hereto.

 

(b)           Payment of PFG Expenses.  Borrower shall have paid upon demand all PFG expenses (including all reasonable attorneys’ fees and expenses) incurred in connection with this Modification in accordance with Section 5 hereof.

 

(c)           Updates to Borrower Information. If required to render Part A - Sections 1-6 (except Section 3(d),(e) (g) and (i)) and Part B - Section 11 of the Representations identified in Section 7(i) hereof true, correct, accurate and complete as of the date hereof, and all other Sections of the Representations, including Part A Section 3(d),(e) (g) and (i) true, correct, accurate and complete in all material respects as of the date hereof, Borrower shall have delivered to PFG true and current information and versions of such documents.

 

(d)           Constitutional and Authority Documents. To the extent the same may have been modified or superseded or are no longer accurate since the date of the Loan Agreement, PFG shall have received copies, certified by a duly authorized officer of each Borrower, to be true and complete as of the date hereof, of each of (i) the governing documents of each Borrower as in effect on the date hereof, (ii) any necessary resolutions of each Borrower authorizing the execution and delivery of this Modification, the other documents executed in connection herewith and each Borrower’s performance of all of the transactions contemplated hereby, and (iii) an incumbency certificate giving the name and bearing a specimen signature of each individual who shall be so authorized on behalf of each Borrower.

 

(e)           No Default under Senior Debt Documents. There shall be no default under the Senior Debt Documents that has not been cured or waived.

 

 

  

  

  

(f)           Consent of Senior Lender to Modification, Deposit and Special Mandatory Payment. On or before April 22, 2011 (the “Consent Date”), the Senior Lender shall have given its consent to this Modification and given its irrevocable consent to the payment of each of the Deposit and the Special Mandatory Payment. For the avoidance of doubt, if the Senior Lender has not given its consent by the Consent Date, this Modification shall be of no force and effect and the parties rights and obligations shall be determined under the Loan Agreement, unmodified by this Modification, and PFG shall not be deemed to have expressly or impliedly agreed to any modification or waiver of the terms of the Loan Agreement or to forbear from exercising any remedies it may have thereunder.

9.           FURTHER ASSURANCES.  Borrower agrees to execute such further documents and instruments and to take such further actions as PFG may request in its good faith business judgment to carry out the purposes and intent of this Modification.

10.           INTEGRATION; CONSTRUCTION.  This Modification and any documents executed in connection herewith or pursuant hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Modification; provided, however, that any financing statements or other agreements or instruments filed by PFG with respect to Borrower shall remain in full force and effect. The quotation marks around modified clauses set forth herein and any differing font styles in which such clauses are presented herein are for ease of reading only and shall be ignored for purposes of construing and interpreting this Modification. This Modification is subject to the General Provisions of Section 8 of the Loan Agreement.

11.           GOVERNING LAW; VENUE.  THIS MODIFICATION SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.  Each Borrower and PFG submit to the exclusive jurisdiction of the State and Federal courts in San Francisco County, California, in connection with any proceeding or dispute arising in connection herewith.

This Modification is executed as of the date first written above.

	
Borrower:

Comverge, Inc.

 

 

By    /s/ Michael Picchi

         Michael Picchi, Executive Vice President

 

By    /s/ Matthew Smith

        Secretary or Ass't Secretary

	
PFG:

PARTNERS FOR GROWTH III, L.P. 

 

 

By   /s/ Andrew Kahn

Name:    Andrew Kahn

Title: Manager, Partners for Growth III, LLC

           Its General Partner

	
Borrower:

Comverge Giants, LLC

By  /s/ Michael Picchi

Name:   Michael Picchi

Title:   Vice President

 

	
Borrower:

Public Energy Solutions, LLC

By  /s/ Michael Picchi

Name:   Michael Picchi

Title:   Vice President

 

	
Borrower:

Public Energy Solutions NY, LLC

By  /s/ Michael Picchi

Name:   Michael Picchi

Title:  Vice President

 

	
Borrower:

Clean Power Markets, Inc.

By  /s/ Michael Picchi

       Michael Picchi, Vice President

By  /s/ Michael Picchi

Secretary or Ass't Secretary

 

	
Borrower:

Enerwise Global Technologies, Inc.

By  /s/ Michael Picchi

       Michael Picchi, Vice President

By /s/ Matthew Smith

      Secretary or Ass't Secretary

	
Borrower:

Alternative Energy Resources, Inc.

By  /s/ Michael Picchi

       Michael Picchi, Vice President

By  /s/ Matthew Smith

       Secretary or Ass't Secretary

 

 

 

  

  

  

 

Schedule 1

Amended and Restated Senior Convertible Promissory Note

(Exhibit C to the Loan Agreement)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 

Schedule 2

Calculation of Special Mandatory Payment (Exhibit F to Loan Agreement)exhibit10_2.htm

EXHIBIT 10.2

 

COMVERGE, INC.

 

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of this 7th day of March 2011, by and between Michael D. Picchi, an individual (“Executive”), and Comverge, Inc., a Delaware corporation (the “Company”).  The Executive and Company are collectively referred to as “Parties” and individually as “Party”.

 

WHEREAS, the Company has employed and wishes to continue to employ Executive to provide personal services to the Company and wishes to provide Executive with certain compensation and benefits in return for such services;

 

WHEREAS, the Executive and Company desire to mutually terminate the past employment agreement and now wish to enter the current Agreement; and

 

WHEREAS, Executive wishes to be employed by the Company, and to provide personal services to the Company in return for certain compensation and benefits.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the Executive and the Company hereby agree as follows:

 

	
SECTION 1.  

	
EMPLOYMENT BY THE COMPANY.

 

1.1 Prior Employment Agreement.  Executive’s employment with the Company has been pursuant to an Executive Employment Agreement, as amended, originally dated  September 1, 2010 (hereafter “Prior Agreement”).  Upon the date of execution of this Agreement (the “Employment Date”), the Prior Agreement is hereby terminated and Executive’s continued employment with the Company shall be pursuant to the terms stated herein.

 

1.2 Position and Duties.

 

(a) Executive shall serve in the position of President of Comverge International, with such powers, duties, and/or responsibilities as are assigned to Executive by the Company’s Chief Executive Officer or his delegate.  Executive will devote his best efforts, time, and attention exclusively to the business of the Company, and shall faithfully and efficiently discharge all duties and responsibilities assigned to him hereunder.  Executive shall comply with all Company policies, procedures and practices as may now exist or which from time to time be implemented.

 

(b) Executive acknowledges that, for a period of time as determined solely by the Company’s Chief Executive Officer, he will also be in the position of Chief Financial Officer (“CFO”) and shall assist in the transition of the Chief Financial Officer role and responsibilities and, upon such successful transition and the achievement of the objectives set forth in Exhibit A hereto, Executive shall be entitled to the compensation set forth in Exhibit A.

 

 

  

  

  

1.3 Location.  Executive’s primary office location shall be in Atlanta, Georgia.  Executive acknowledges that the Company’s business extends across the entire United States and elsewhere and that, from time to time, however, Executive’s duties may require him to travel and to work at other locations, including but not limited to other Company office locations.

 

1.4 Term.  The term of Executive’s employment hereunder shall commence as of the Employment Date and shall continue through June 1, 2013, unless earlier terminated pursuant to the provisions of this Agreement.  Unless, within ninety (90) days prior to any then-scheduled expiration of the Term, either party notifies the other in writing of its desire not to renew this Agreement, the Term shall automatically be extended for an additional period of one (1) year from the applicable succeeding anniversary of the Employment Date.

 

	
SECTION 2.  

	
COMPENSATION, BENEFITS AND OWNERSHIP.

 

2.1 Compensation.  Executive shall be paid a salary, and shall be eligible to receive incentive compensation, as described in Exhibit A attached hereto.  All compensation payable pursuant to any plan or program described in Exhibit A shall be governed by and subject to the applicable plan or program documents, which may from time to time be amended, modified or terminated on such terms and in such manner as is permitted in respect of the applicable plan or program. Comverge will revisit, at least annually, at the sole discretion of the Chief-Executive Officer, offering executive an expatriate compensation if a permanent move is required commensurate to other expatriate agreements that have been in effect at the Company, if any.

 

2.2 Company Benefits.  Subject to the satisfaction of the general rules for eligibility and participation under the Company’s standard employee benefit plans and practices, Executive shall be allowed to participate in the Company’s standard employee benefit plans and practices which may be in effect from time to time during the term of Executive’s employment and are provided by the Company to its employees generally.  Such participation shall be governed by the applicable plan documents, and the Company reserves the right, in its discretion, to amend, modify, or discontinue any benefit plan or practice.

 

2.3 Section 280G Limitation.  In the event that any payments to which Executive becomes entitled in accordance with the provisions hereof, or in connection with any plans or programs referred to in Exhibit A or Section 2.2 hereof, would otherwise be deemed to constitute “parachute payments” (each one, a “Parachute Payment”) within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended and the regulations and administrative guidance thereunder (the “Code”), then such payments will be subject to reduction to the extent necessary to assure that Executive receives only the greater benefit of receiving (a) the amount of those payments which would constitute such a Parachute Payment or (b) the amount which yields Executive the greatest after-tax amount of benefits after taking into account any excise tax imposed on the payments provided to Executive pursuant to this Agreement (or on any other benefits to which Executive may be entitled in connection with the Change in Control or the subsequent termination of service) under Section 4999 of the Code.

 

 

  

  

  

 

	
SECTION 3.  

	
ASSIGNMENT OF INTELLECTUAL PROPERTY.

 

3.1 Ownership and Assignment of Intellectual Property.  All processes, products, methods, improvements, discoveries, inventions, ideas, creations, trade secrets, know-how, machines, programs, designs, routines, subroutines, techniques, ideas for formulae, writings, books and other works of authorship, business concepts, plans, projections and other similar items, as well as all business opportunities discovered, conceived, designed, devised, developed, perfected or made by Executive, whether alone or in conjunction with others and within the course of Executive’s job responsibilities to the Company, and related in any manner to the actual or anticipated business of the Company or to actual or anticipated areas of research and development of the Company (all of the foregoing collectively, the “Intellectual Property”), shall be promptly disclosed to and are the property of the Company, and Executive hereby assigns, transfers and conveys all of the Intellectual Property and all of Executive’s rights therein to the Company.  The term “Intellectual Property” shall be given the broadest interpretation possible and shall include any Intellectual Property conceived, designed, devised, developed, perfected or made by Executive during off-duty hours and away from the Company’s premises, as well as those conceived, designed, devised, developed, perfected or made in the regular course of Executive’s performance under this Agreement.

 

3.2 Post-Employment Assignment of Intellectual Property.  In consideration of the benefits provided pursuant to this Agreement, particularly those benefits conferred by Section 6.5 and any stock option or similar rights pursuant to any Company plans in which Executive was a participant, all Intellectual Property discovered, conceived designed, devised, developed, perfected or made by Executive following the termination of this Agreement shall be Intellectual Property covered by the scope of Section 3.1 if it was conceived, in whole or in part, while this Agreement remains in effect.  All Intellectual Property conceived, designed, devised, developed, perfected or made by Executive within twelve (12) months after termination of this Agreement shall be disclosed to the Company, and shall be presumed to have been conceived, designed, devised, developed, perfected or made by Executive during the Term, and Executive shall have the burden of proving otherwise by clear and convincing evidence in order to successfully rebut such presumption.

 

3.3 Written Assignments.  Executive shall execute and deliver, both during the Term and thereafter in connection with a severance agreement required under Section 7.5(g) to and in favor of the Company such assignments (including patent, trademark and copyright assignments), documents, instruments and applications (including patent, trademark or copyright applications) as the Company may deem appropriate or necessary to claim, secure, acquire, perfect, defend, enforce and/or assign any and all rights and privileges in and to or arising from the Intellectual Property.  Executive shall also, both during the Term and thereafter, cooperate with the Company, and to render such assistance as the Company may reasonably require, in connection with any process (whether administrative, judicial or otherwise) associated with the Company’s efforts to claim, secure, protect, perfect, defend, assign and/or enforce such rights and privileges in favor of the Company and its successors, licensees and assigns.  Executive shall also, both during the Term and thereafter, promptly disclose to the Company fully and in writing any Intellectual Property that Executive may conceive, make, or develop, in whole or in part, by himself or jointly with others, (a) whether or not it is conceived, made, developed or worked on by Executive during his Term with the Company; (b) whether or not the Intellectual Property was created at the suggestion of the Company; (c) whether or not the Intellectual Property was reduced to drawings, written description, documentation, models or other tangible form; and (d) whether or not the Intellectual Property is related to the business of the Company.

 

 

  

  

  

 

3.4 Work Made for Hire.  Executive acknowledges and agrees that any work of authorship comprising Intellectual Property shall be deemed to be a “Work Made for Hire,” to the extent permitted by the United States Copyright Act (17 U.S.C. § 101 (2000)).  To the extent that any such work of authorship may not be deemed to be a Work Made for Hire, Executive hereby irrevocably assigns all ownership rights in and to such work to the Company.  If any such work of authorship cannot be assigned, Executive hereby grants to the Company an exclusive, assignable, irrevocable, perpetual, worldwide, sub-licensable (through one or multiple tiers), royalty-free, unlimited license to use, copy, reproduce, distribute, modify, adapt, alter, translate, improve, create derivative works of, practice, publicly perform, publicly display and digitally perform and display such work in any media now known or hereafter known.  Outside the scope of his employment, Executive agrees not to (a) practice, display, copy, reproduce, distribute, transfer, modify, adapt, alter, translate, improve, or create derivative works from, or otherwise use, any such work of authorship or (b) incorporate any such work of authorship into any product or invention unrelated to the Company’s business.  To the extent moral rights (as defined by applicable law) may not be assignable under applicable law and to the extent the following is allowed by the laws in the various countries where moral rights exist, Executive hereby irrevocably waives such moral rights and consents to any action of the Company that would violate such moral rights in the absence of such consent.

 

3.5 No License Granted.  Executive acknowledges and agrees that nothing in this Agreement shall be deemed to grant, by implication, estoppel, certain rules of construction, or otherwise, (a) a license from the Company to Executive to make, develop, use, license, disclose, or transfer in any way a Intellectual Property or (b) a license from the Company to Executive regarding any of the Company’s existing or future ownership rights.

 

	
SECTION 4.  

	
CONFIDENTIALITY.

 

4.1 Confidentiality Obligation.  Executive acknowledges and agrees that he has and will have access to Proprietary, Trade Secret and Confidential Information (as those terms are defined below in Section 4.2) as a result of his employment with the Company, and that such information constitutes valuable, special and unique property of the Company.  Without limiting the generality of the foregoing, Executive expressly acknowledges that, in the course of performing his services pursuant to this Agreement, he will obtain or learn Confidential and Proprietary Information regarding the Company including, without limitation information regarding the Company’s operations, financial results, pricing, customers, suppliers and other matters.  Accordingly, at all times while employed by the Company, and continuing for a period of three (3) years with respect to Proprietary and Confidential Information, and for whatever time Trade Secret Information remains a Trade Secret under applicable law, following the termination of his employment with the Company for whatever reason, Executive shall neither use nor disclose, nor permit any person or entity within his reasonable control to use or disclose, any Proprietary, Trade Secret, and Confidential Information, and shall maintain and protect the secrecy of the Proprietary, Trade Secret, and Confidential Information, except to the extent required in the ordinary course of Executive’s employment with the Company, and then only subject to the direction and control of the Company.  Additionally, Executive shall cause all persons and entities within his reasonable control to use their respective best effort(s), to maintain and protect the secrecy of the Proprietary, Trade Secret and Confidential Information.  Executive further acknowledges that in the performance of his job duties to this Agreement, he will have access to and be informed of the Proprietary and Confidential Information (as described in Section 4.2) belonging to customers of Company, and that he shall return to the Company any such information within his actual or indirect position and comply with any restrictions concerning such information within his possess and comply with any restrictions concerning such information that have been imposed upon by its customer with respect to the use, disclosure, or return information.

 

4.2 Definition of Proprietary, Trade Secret and Confidential Information.  As used in this Agreement the term “Proprietary, Trade Secret and Confidential Information” means any non-public knowledge, information or property relating to, or used or possessed by, the Company (or its customers, as the case may be), and includes, without limitation, the following:  trade secrets, patents, copyrights, software (including, without limitation, all programs, specifications, applications, routines, subroutines, techniques, code and ideas for formulae); ideas, information, concepts, data, drawings, designs and documents; names of clients, customers, but not limited to employees, agents, contractors and suppliers; business plans, marketing plans and marketing information; financial, pricing, and cost information and other business records; and all copies of any of the foregoing.   Trade Secrets shall be such information defined by applicable law as a Trade Secret.

 

 

  

  

  

 

4.3 Return of Confidential Information.  Executive agrees that he shall immediately, upon the request of the Company, return to the Company all Proprietary, Trade Secret, and  Confidential Information and any other tangible material containing, prepared on the basis of, or reflecting any Proprietary, Trade Secret, and  Confidential Information (whether prepared by the Company, Executive or otherwise) and shall not retain any copies, extracts or other reproductions, in whole or in part, of such Proprietary, Trade Secret, and  Confidential Information.

 

4.4 Return of Company Property.  All products, records, designs, patents, trademarks, copyrights, plans, manuals, memoranda, lists and other documents or other property of the Company or any of its affiliates in the possession or control of Executive and all records compiled by the Executive which pertain to the business of the Company or its affiliates, shall be and remain the property of the Company and shall be subject at all times to its discretion and control.  Likewise, all correspondence with customers or affiliates of the Company, all reports, records, charts, and advertising materials and any data pertaining to the Company, its affiliates or the business of the Company or its affiliates that are held by or on behalf of Executive shall be delivered promptly to the Company without request on the date Executive’s employment with the Company terminates or at any other time promptly upon request by the Company.

 

4.5 Nature of Obligation.  The obligations of Executive set forth in this Section 4 are in addition to, and not in lieu of, any of Executive’s duties or the Company’s rights and remedies, at law or in equity, with respect to the Company’s Proprietary, Trade Secret, and Confidential Information and property.  The Company may pursue all such rights and remedies, as well as remedies for the breach of the provisions set forth herein.  Also, the Proprietary, Trade Secret, and  Confidential Information and other property referenced in this Section 4 constitute valuable property of the Company or its customers, the ownership of which is not dependent upon the performance by the Company of any of its obligations under this Agreement or the performance of any legal, statutory or other duty, if any, to Executive.  Accordingly, Executive shall perform its obligations under this Section 4 regardless of any alleged or actual breach or failure to perform by the Company.

 

4.6 Post Termination Activities.  Executive acknowledges and agrees that, during the course of his employment with the Company, he had access to the Company’s Proprietary, Trade Secret and Confidential Information, and that disclosure to or use of such information by a competitor of the Company would cause the Company irreparable harm.  Executive agrees and acknowledges that should he engage in the restricted activities as set forth in Section 5 hereof, he will inevitably disclose the Company’s Proprietary, Trade Secret and Confidential Information.

	
SECTION 5.  

	
NONCOMPETITION AGREEMENT.

 

In consideration of the compensation paid or payable to Executive by the Company pursuant to this Agreement (including, but not limited to, Section 2 hereof), Executive hereby agrees as follows:

 

5.1 Executive acknowledges that the Company’s business is international in scope, that its customers may not be restricted to any country, and that in the performance of his duties as set forth in this Agreement, Executive shall perform services on behalf of the Company in all countries in which the Company does business.  During the term of this Agreement, Executive will devote all of his working time and energies to the Company, and will not, without the Company’s express written permission, own, work for or provide services to any other entity, whether as an owner, partner, agent, representative, consultant, officer, director, independent contractor or employee.  Notwithstanding the foregoing, Executive is permitted to own up to 1% of any class of securities of any corporation in competition with the Company that is actively traded on a national securities exchange or through NASDAQ.

 

5.2

(a) As and for the consideration granted herein, Executive hereby covenants that he will not, for a period of twelve (12) months from the date Executive ceases to perform the services of a Chief Financial Officer, be employed in such position or in a similar capacity on behalf of any corporation, partnership, venture or other business entity which is engaged in the Restricted Business (as defined in Section 5.2(b)).

 

 

  

  

  

(b) As and for the consideration granted herein, Executive hereby covenants that he will  not, within the Territory and during the Noncompetition Period, without the prior written consent of the Company, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which is engaged in the Restricted Business. The term “Noncompetition Period” means the period beginning on the date of this Agreement and ending one year after the date Executive’s employment with the Company ends or is terminated for any reason. The term “Restricted Activities” means having ownership of or being employed by as an employee, agent, or representative, or as an independent contractor or otherwise, and providing services similar to the services Executive provides to the Company.  The term “Restricted Business” means the business of providing energy load control or demand management products and services, energy capacity, energy efficiency, advanced metering solutions, or other alternative energy solutions, which Participant acknowledges and agrees is the business in which the Company is engaged. The term “Territory” means the United States of America and any country where, under Executive’s leadership the Company is actively seeking or conducting business which Executive acknowledge is included within the geographic scope of the Company’s business and is the territory for or in which Executive performs services for the Company.

SECTION 6.  NONSOLICITATION AGREEMENT

 

6.1           During the term of this Agreement and for a period of one (1) year after Executive’s employment is terminated for any reason, Executive will not, directly or indirectly, individually or on behalf of any other person, firm, partnership, corporation, or business entity of any type, solicit, assist or in any way encourage any current employee or consultant of the Company, whom Executive supervised or had responsibility for during the twenty-four (24) months prior to the termination of employment, to terminate his or her employment relationship or consulting relationship with or for the Company, nor will Executive solicit the services of any former employee or consultant of the Company whom Executive supervised or had responsibility for during the twenty-four (24) months prior to the termination of employment, whose service with the Company has been terminated for less than six (6) months.

 

6.2           During the term of this Agreement and for a period of one (1) year after Executive’s employment is terminated for any reason, Executive will not, directly or indirectly, individually or on behalf of any other person, firm, partnership, corporation, or business entity of any type, solicit, divert, or take away, or attempt to solicit, divert, or take away, in whole or in part, any Customer of the Company or otherwise interfere with the Company’s relationship with any Customer, for the purpose of competing with the Company in the Business.  For purposes of this Agreement, “Customer” shall mean any person, company or business entity to which the Company sells or licenses goods or services at the time Executive’s employment with the Company terminated, any person, company or business entity to which the Company has, under Executive’s leadership, made a proposal to provide services during the twelve (12) months prior to his termination of employment and/or with whom Executive had material business contact during the twelve (12) months prior to his termination of employment, and “Business” shall mean providing energy related services, including without limitation energy load control or demand management products and services, energy capacity, energy efficiency, advanced metering solutions, or other alternative energy solutions engaged in by the Company.

 

6.3           Enforcement.  The existence of any claim or cause of action of Executive against the Company, whether predicated on this Agreement or otherwise, shall not preclude the Company’s enforcement of these covenants.

6.4           Reasonable Covenants.  Executive acknowledges and agrees that the covenants set forth in this Section 5 are necessary and reasonable to protect the Company and the conduct of its business and are a fair and reasonable restraint on Executive in light of the activities and business of the Company on the date of execution of this Agreement and the future plans of the Company; and that such covenants also be construed and enforced in light of the activities and business of the Company (including business activities in the planning stage) on the date of termination of Executive’s employment with the Company.  Executive acknowledges that he will not suffer any undue hardship as a result of the covenants set forth in Sections 4, 5 and 6 and that he will be able to pursue his occupation notwithstanding his obligations under Sections 4, 5 and 6.

 

6.5           Survival.  The provisions of this Section 6 shall survive any termination of this Agreement and are subject to paragraph 8 of this Agreement.

 

 

  

  

  

 

SECTION 7.  TERMINATION OF EMPLOYMENT.

7.1Certain Definitions.  As used herein, the following terms shall have the following definitions:

 

(a) Affiliate.  “Affiliate” shall mean an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended from time to time.

 

(b) Cause.  A termination by the Company with “Cause” shall include (without limitation) (i) non-performance in the roles and duties, as assigned; (ii) Executive’s breach of any material provision of this Agreement; (ii) Executive’s material breach of any written Company policy contained in the Company’s manual of policies and procedures; or material non-compliance with any lawful direction given by the Company’s Chief Executive Officer or his/her delegate; (iii) Executive’s Disability (subject to Company’s legal obligations); (iv) Executive’s fraud with respect of the business or affairs of the Company; (v) the commission by Executive, or entering of a plea of nolo contendere with regard to, a felony or a crime involving moral turpitude; or (vi) alcohol abuse or illegal drug use by Executive; provided however, that in the event of Executive’s breach as set forth in Sections 7(b)(i) and (ii) above, no Cause for termination shall be deemed to exist for any such breach that is curable and which in fact is cured by Executive within thirty (30) days after notice of such termination has been delivered to Executive, and in the event of Executive’s breach, as set for in Section 7(b)(vi) above, no Cause shall be deemed to exist if the Executive and Company agree on a remedial program for Executive and so long as Executive in all respects complies with the requirements of such program.  During the time of Executive’s participation in any remedial program as set forth above, Executive shall, if directed by the Company, be on a paid leave of absence away from the Company’s premises.

 

(c) Change in Control.  For purposes of this Agreement, “Change in Control” means the occurrence of any of the following events if, following such occurrence, a Board Change (as hereinafter defined) occurs:

 

(i) any person becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities; or

 

(ii) a merger or consolidation of the Company is consummated with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving or parent equity outstanding immediately after such merger or consolidation; or

 

(iii) there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale, provided that such transferee entity confirms in writing that it is bound by the terms of this Agreement.

 

In the event that the foregoing definition of Change in Control does not comply with the requirements of Section 409A of the Code, and an amount, benefit or item of compensation hereunder would be subject to Section 409A of the Code, but would not be so subject if the definition of Change in Control above complied with the requirements of Section 409A of the Code, then with respect only to such amount, benefit or item of compensation, the term “Change in Control” shall mean a “change in control event” within the meaning of Treas. Reg. §1.409A-3(i)(5).

 

(d) Board Change.  “Board Change” means any change in directors after giving effect to any of the transactions described above as a result of which the individuals serving on the Board prior to such transaction no longer comprise at least a majority of the directors on the Board immediately after giving effect to such transaction.

 

 

  

  

  

 

(e) Good Reason.  A termination by the Executive for “Good Reason” means termination by Executive following (i) a reduction in Executive’s Annual Salary or other material component of compensation (excluding stock options or similar grants) required to be paid pursuant hereto without Executive’s prior written consent; or (ii) the Company’s relocation of the Executive, without the Executive’s consent, to a permanent location more than seventy-five (75) miles from the location specified in Section 1.2 of this Agreement; provided however, that no Good Reason for Executive’s termination shall be deemed to exist if the Company requires Executive to temporarily relocate to an office within Executive’s Territory to ensure that Executive is able to adequately perform his job requirements and/or unless (i) Executive gives notice to the Company of the action or condition which would constitute Good Reason within sixty (60) days of the initial existence of such action or condition, (ii) the action or condition which would constitute Good Reason is not cured by the Company within the 30-day period after the timely provision of the notice required herein, and (iii) Executive effects the termination for Good Reason within thirty (30) days after the expiration of the 30-day cure period.  After such thirty (30) day period, Executive shall be deemed to have waived any right to terminate this Agreement pursuant to this Section 7.1(e).

 

                         (f) Non-Renewal.  A non-renewal of this Agreement as provided in Section 1.4 shall not be considered a termination under any provision of this Section 7 and, upon such non-renewal by either party and the termination of this Agreement, and Company shall be required to pay to Executive only the amounts specified in Section 7.5 (a

 

7.2         Death by Executive.  This Agreement shall terminate upon Executive’s death.

 

7.3         By the Company.  The Company shall have the right to terminate Executive’s employment with the Company, at any time, with or without Cause.  For avoidance of doubt, the parties agree that Executive has no right to continue at any time in any office of the Company after being removed from such office in the manner provided in the Company’s bylaws or other applicable provisions of the Company’s governing law and instruments.

 

   7.4  By Executive.  Executive may terminate his employment with the Company at any time, upon providing thirty (30) days advance notice, either with or without Good Reason.  In the event Executive terminates his employment with the Company with Good Reason, such notice shall specify the grounds for such termination, and the Company shall have the opportunity to cure such grounds for termination in accordance with the provisions of Section 7.1(e).

 

    7.5 Severance Pay, Other Post-Employment Payments and Acceleration of Benefits Upon Certain Terminations.  

 

(a) Termination by the Company for Cause or by Executive without Good Reason.  If the Company terminates Executive’s employment for Cause, or Executive terminates his employment without Good Reason, then in either such event, Executive shall not be entitled to any severance pay, and shall only be entitled to (i) any unpaid, but earned, salary, (ii) any unpaid but earned vacation in accordance with Company policy then in effect and (iii) any incurred but unpaid ordinary and necessary business expenses properly documented by Executive in accordance with the Company’s then effective expense reimbursement policy.

 

 

  

  

  

 

(b) Termination by the Company Without Cause, or by Executive for Good Reason.  Subject to subsection 7.5(c) below, if the Company terminates Executive’s employment without Cause, or Executive terminates his employment with Good Reason, then in such event Executive shall be entitled to all payments allowed pursuant to subsection 7.5(a) above and severance pay in the amount of the sum of (i) twelve (12) months’ annual base salary as specified in Exhibit A, plus (ii) an amount equal to the amount of Executive’s bonus payment for the last complete year of service prior to termination, times a fraction, the numerator of which is the number of days in the year of Executive’s termination through the date of such termination, and the denominator of which is 365 (or in the case of leap years, 366).  The benefits provided pursuant to this Section 7.5(b) shall not include any stock option or similar grants and Executive’s rights concerning any stock option or similar grants shall be exclusively determined by applicable Company policies or plans concerning such grants.

 

(c) Certain Terminations Following a Change in Control.  Notwithstanding the provisions of Section 7.5(b) above, in the event the Company terminates Executive’s employment without Cause, or Executive terminates his employment with Good Reason, concurrently with or within twelve (12) months following a Change in Control, then, in lieu of the payments specified in Section 7.5(b), Executive shall be entitled to all payments allowed pursuant to subsection 7.5(a) above and severance pay in the amount of eighteen (18) months’ annual base salary as specified in Exhibit A, plus one and one- half times (1.5x) the amount of Executive’s bonus payment for the last complete calendar year prior to Executive’s termination of employment.  In such event, all unvested options to purchase Company stock held by Executive shall immediately vest and become exercisable and all restricted stock granted to Executive shall immediately vest and the legend providing restrictions on the sale or transfer of such stock related to such vesting shall be removed at the request of the Executive.

 

(d) Continuation of Benefits.  In the event the Company terminates Executive’s employment without Cause, or Executive terminates his employment with Good Reason, and Executive qualifies for and becomes entitled to the severance pay provided pursuant to Section 7.5(b) or (c) above, as applicable: (1) the Company shall continue to provide benefits referred to in Section 2.2 during the period Executive is entitled to severance payments under this Agreement, subject to and in accordance with Executive’s COBRA rights and the provisions of the applicable plan documents, and the Company reserves the right, in its discretion, to amend, modify, or discontinue any benefit plan or practice; and (2) if Executive elects to participate in COBRA coverage for which he and/or his family is eligible under the Company’s then-effective health plans, the Executive shall pay to the Company on a monthly or quarterly basis, as the case may be, an amount equal to the co-payment amount for which the Executive would have been responsible had he remained an employee during the COBRA coverage period and the Company shall pay to the plan administrator on behalf of Executive the entire cost of the COBRA coverage.  Executive agrees to a netting of payments where applicable.

 

(e) Death or Disability.  Any termination of this Agreement by reason of Executive’s death or disability shall not give rise to any severance payment hereunder, but shall be without prejudice to any benefits payable to Executive or his estate under applicable company benefits relating to such event.  For purposes of this Agreement, the term “Disability” shall mean the Executive’s inability to perform his duties, in all material respects, because of illness, physical or mental disability, or other incapacity that continues for an uninterrupted period of one hundred eighty (180) days.  Executive’s unvested stock options and restricted stock not otherwise vested shall vest upon the death or disability of Executive as provided in, and subject to the provisions of, applicable Company policies or plans concerning the grants to Executive of unvested stock options and restricted stock.

 

  

  

  

 

(f) Timing of Payments.  All severance payments provided pursuant to Section 6.5(b) above, as applicable, that are measured by Executive’s annual base salary shall begin as provided by Section 7.5(g) (except as otherwise required by Section 10.11) and shall thereafter be paid at such times and in accordance with the Company’s payroll policies and procedures as if Executive were still employed by the Company; and all amounts of severance pay with respect to bonus payments shall be pro rated over the period of such payment, and payments of a proportional amount of such bonus payments shall begin as provided by Section 7.5(g) (except as otherwise required by Section 10.11) and shall thereafter be paid at such times as base salary payments are made.   All severance payments provided pursuant to Section 7.5(c) above, as applicable, that are measured by Executive’s annual base salary shall be paid in one lump sum amount as provided by Section 6.5(g) (except as otherwise required by Section 10.12).

 

(g) Requirements Regarding Eligibility to Receive Severance Payments.  Notwithstanding any of the other provisions hereof, the Company shall not be obligated to make and shall not make the severance payments provided under Section 7.5(b) or (c) above unless Executive executes and delivers to the Company within thirty (30) days from the date on which the Executive’s employment is terminated, and does not at any time after execution and delivery withdraw or revoke, a Severance Agreement containing a general release in a form reasonably acceptable to the Company and the assignment as set forth in Section 3.3. Furthermore, in the event Executive initially qualifies to receive the payments and benefits provided under this Section 7.5, but then fails to comply with his obligations under this Agreement (including without limitation Sections 3, 4, 5 and 6 hereof), the Company’s obligations under this Section 7.5 shall terminate.

 

(h) Termination of other Compensation and Benefits.  Except as otherwise required by applicable law or as provided above in this Section 7.5, Executive’s eligibility for or entitlement to any other compensation or benefits shall cease immediately upon termination of this Agreement and Executive’s employment with the Company.

 

(i) Characterization of Payments under Section 409A.  For purposes of Section 409A of the Code (including, but not limited to, to application of the exceptions for short-term deferrals and for “separation pay only upon an involuntary separation from service”): (i) each payment provided for under this Section 7.5 is hereby designated as a separate payment, rather than a part of a larger single payment or one of a series of payments; and (ii) with respect to the severance payments and benefits to which Executive may become entitled under Section 7.5 of this Agreement and which are not in substitution or replacement of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code), a termination of Executive’s employment by the Company without Cause or by Executive for Good Reason is intended to constitute an “involuntary separation from service” and, in turn, a “substantial risk of forfeiture” (within the meanings of Section 409A of the Code).

 

7.6           Effect of Termination.  Termination of Executive’s employment with the Company shall not limit, affect, or discharge Executive’s obligations under Sections 3, 4 5 and 6 of this Agreement and shall not release the Company from its obligations to make payments or provide benefits required by Sections 2.2 and 7.5 of this Agreement following such termination (subject to the limitations provided in Section 7.3).  All other obligations as to periods after the date of termination shall cease, without prejudice to the rights and remedies for events or breaches prior to the date of termination.

 

7.7           Waiver.  The Company may waive or defer exercising its power to terminate this Agreement, but such waiver or deferral shall not thereby (a) establish a policy, interpretation, or course of performance that may be used to construe, limit or affect the express terms of this Agreement, (b) preclude the Company from exercising its rights or remedies hereunder or otherwise on any other occasion or from using the breach as support for the exercise of its power to terminate on any future occasion or (c) limit the ability of the Company to revoke such waiver or deferral and exercise its power to terminate this Agreement if it determines that the condition giving rise to a power to terminate has continued, or if the Company determines in good faith that it was not fully aware of all facts and circumstances of such condition, or if such waiver or deferral may be retracted at common law.

 

 

  

  

  

 

  SECTION 8.  CERTAIN REMEDIES.

 

With respect to each and every breach or violation or threatened breach or violation by Executive of Sections 3, 4, 5 and 6 of this Agreement, the Company, in addition to all other remedies available at law or in equity, including, but not limited to, specific performance of the provisions hereof, shall be entitled to enjoin the commencement or continuance thereof and may, without notice to Executive, apply to any court of competent jurisdiction for entry of an immediate restraining order or injunction, without the necessity of proving either inadequacy of legal remedies or irreparable harm and without the necessity of posting a bond.  The Company shall also be entitled to the recovery of reasonable attorney’s fees and expenses incurred in conjunction with any such proceeding.

 

	
  

	
SECTION 9.  SEVERABILITY AND REFORMATION.

 

The provisions of this Agreement are severable, and any judicial determination that one or more of such provisions, or any portion thereof, is invalid or unenforceable shall not affect the validity or enforceability of any other provisions, or portions thereof, but rather shall cause this Agreement to first be construed in all respect as if such invalid or unenforceable provisions, or portions thereof, were modified to terms that are valid and enforceable and provide the greatest protection to the Company’s business and interests; provided, however, that if necessary to render this Agreement enforceable, it shall be construed as if such invalid or unenforceable provisions, or portions thereof, were omitted.

 

	
  

	
SECTION 10.  GENERAL PROVISIONS.

 

10.1  Notices.  Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by fax) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at Executive’s address as listed on the Company payroll.

 

10.2  Waiver.  If either party should waive any breach of any provision of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

 

10.3  Complete Agreement.  This Agreement constitutes the complete, final and exclusive embodiment of the agreement of the Company and Executive with regard to the subject matter hereof, and supersedes and replaces in all respects any previous agreements solely regarding Executive’s employment by the Company or the terms thereof.  This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein, and this Agreement cannot be modified or amended except in a writing signed by Executive and an authorized officer of the Company.

 

10.4  Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

 

10.5  Headings.  The headings of the sections hereof are inserted for convenience of reference only and shall not be deemed to constitute a part hereof or affect the meaning or interpretation of any of the provisions hereof.

 

10.6  Successors and Assigns.  This Agreement is intended to bind, inure to the benefit of, and be binding upon, the successors and assigns of the Company, including the surviving entity of any merger, consolidation, share exchange or combination of the Company with any other entity.  Notwithstanding the foregoing, Executive may not assign, transfer or delegate any of Executive’s duties or obligations hereunder, and Executive may not assign or transfer any of Executive’s rights hereunder without the written consent of the Company.

 

 

  

  

  

 

10.7  Choice of Law and Venue.  All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the law of the State of Georgia.  Any dispute arising out of, or concerning, this Agreement or the employment relationship between the parties, shall be resolved exclusively in a federal or state court of competent jurisdiction located in Georgia.  To the extent necessary, the parties hereby submit to, and agree not to contest, the jurisdiction of such courts.

 

10.8  Representations.  Each party represents and warrants to the other that he or it has full power and authority to enter into and perform this Agreement and that his or its execution and performance of this Agreement shall not constitute a default under or breach of any of the terms of any agreement to which he or it is a party or under which he or it is bound.  Each party represents that no consent or approval of any third party is required for his or its execution, delivery and performance of this Agreement or that all consents or approvals of any third party required for his or its execution, delivery and performance of this Agreement have been obtained.

 

10.9  Withholding.  Any and all amounts payable under this Agreement, including without limitation, amounts payable under Section 2.1 or Section 6.1(c) hereof, are subject to withholding for such federal, state, and local taxes as the Company, in its reasonable judgment, determines to be required pursuant to any applicable law, rule or regulation.

 

10.10  Survival.  The provisions of Sections 3, 4, 5, 7, 8, 9 and 10 of this Agreement shall survive the termination of this Agreement for whatever reason.

 

10.11  Section 409A.   If the Executive is a “key employee,” as defined in Section 416(i) of the Code (without regard to paragraph 5 thereof), except to the extent permitted under Section 409A of the Code, no benefit or payment that is subject to Section 409A of the Code (after taking into account all applicable exceptions to Section 409A of the Code, including but not limited to the exceptions for short-term deferrals and for “separation pay only upon an involuntary separation from service”) shall be made under this Agreement on account of the Executive’s “separation from service,” as defined in Section 409A of the Code, with the Company until the later of the date prescribed for payment in this Agreement and the first day of the seventh calendar month that begins after the date of the Executive’s separation from service (or, if earlier, the date of death of the Executive).

 

  

  

  

IN WITNESS WHEREOF, the Company and Executive have executed this Agreement to be effective as of the day and year first above written.

THE “COMPANY”

COMVERGE, INC.

By:      /s/ R. Blake Young

Name: R. Blake Young

Title:   Chief Executive Officer

“EXECUTIVE”

By:      /s/ Michael Picchi

Name: Michael D. Picchi

Title:   Chief Financial Officer and President, Comverge International

 

 

 

 

  

  

  

 

Exhibit A

 

	
Annual Salary

 

	
Executive shall be paid at the rate of $300,000 per annum.

	
Annual Cash Incentive1

	
Executive will have the opportunity to earn an annual bonus equal to 25% (threshold), 50% (target) or 100% (maximum) of his annual salary based on the achievement of performance criteria established by the Compensation Committee.

 

 

	
Annual Equity Incentive1

 

 

 

 

 

 

One-time Performance Based Equity Grant

 

	
Executive will have the opportunity to earn an annual equity award comprised of a combination of restricted stock and options valued at 1.13 times salary (threshold), 1.50 times salary (target) or 1.88 times salary (maximum) based on the achievement of performance criteria established by the Compensation Committee.

 

In addition, conditioned upon the effectiveness of the Agreement to which this Exhibit is attached, Executive will receive a grant of:

 

(1) 17,513 performance based options at a strike price of $5.71, which shall be earned and vest, and an additional $50,000 in cash, if in the sole discretion of the Chief Executive Officer, the Executive successfully completes (a) the analyst day; (b) the capital raise; and (c) a transition to a new CFO; and,

 

(2)  35,026 performance based stock options at a strike price of $5.71, which shall be earned and vest, if in the sole discretion of the Chief Executive Officer, the Executive successfully completes the installation of the first 500 megawatts in an international project including joint venture international projects; and

 

(3) 35,026 performance based stock options at a strike price of $5.71, which shall be earned and vest, if in the sole discretion of the Chief Executive Officer, the Executive successfully completes the installation of an 500 megawatts in an international project including joint venture international projects in addition to the 500 megawatts provided for in clause (2) above.

  

1   The compensation committee will set Target, Threshold, and Maximum performance levels for Annual Cash and Equity incentives.  The Threshold performance level is the minimum level of performance required as a condition of earning any incentive.  The Target performance level is the level of performance at which the executive, operating division or company is expected to perform.  The Maximum performance level is the highest level of payout.  The committee has discretion to grant or not grant such Annual Cash or Annual Equity Incentives, if in its reasonable discretion, is in the best interests of the Company.

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