Energy Focus, Inc.
ENERGY FOCUS, INC/DE (Form: 8-K, Received: 02/21/2017 06:38:25)


 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of Earliest Event Reported): February 19, 2017
 
ENERGY FOCUS, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
001-36583
 
94-3021850
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
 
 
 
 
 
32000 Aurora Road, Suite B
 
 
Solon, Ohio
 
44139
(Address of principal executive offices)
 
(Zip Code)
 
(440) 715-1300
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))



 






Item 2.05. Costs Associated with Exit or Disposal Activities.

On February 20, 2017, Energy Focus, Inc. (the “Company”) announced a restructuring initiative (the “Restructuring”), which is being implemented during the first quarter of 2017 to achieve higher operating efficiencies and reduce the Company’s annual operating costs by approximately $10 million from 2016 levels. The Restructuring includes a workforce reduction of approximately 15%, consolidation of the Company’s office facilities, reorganization of the commercial sales force, integration of engineering and research and development teams, reconfiguration of certain manufacturing lines, and the reduction in administrative expenses and professional fees. The Company expects to record a one-time restructuring charge of approximately $1.1 million in its first quarter 2017 associated with these actions, consisting of (a) approximately $0.8 million of employee-related costs, including severance; and (b) approximately $0.3 million of lease termination costs. The amounts and timing of all estimates are subject to assumptions where actual results may differ.


Forward-Looking Statements

Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, these statements can be identified by the use of words such as “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could,” “would” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts and include statements regarding our current expectations concerning, among other things, our results of operations, financial condition, strategies, capital expenditures and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this report. We believe that important factors that could cause our actual results to differ materially from forward-looking statements include, but are not limited to: the Company’s expectations regarding the amount and timing of the Restructuring charges, including costs subject to future negotiations with third parties; estimates of the amount of savings that will be realized; the effectiveness of the Restructuring in achieving intended cost reductions and operational efficiencies; our history of operating losses and our ability to effectively implement cost-cutting measures and generate sufficient cash from operations or receive sufficient financing, on acceptable terms, to continue our operations; our reliance on a limited number of customers, in particular our sales of products for the U.S. Navy, for a significant portion of our revenue, and our ability to maintain or grow such sales levels; the entrance of competitors in the market for the U.S. Navy products; general economic conditions in the United States and in other markets in which we sell our products; our ability to utilize our resulting operational structure to implement and manage our growth plans to increase demand, diversify our customer base, increase sales, control expenses and respond to new technologies and market trends; our ability to compete effectively against companies with greater resources, lower cost structures, or more rapid development efforts; our ability to protect our intellectual property rights and other confidential information, manage infringement claims by others, and the impact of any type of legal claim or dispute; our ability to attract and retain qualified personnel, and to do so in a timely manner; and our ability to maintain effective internal controls and otherwise comply with our obligations as a publicly traded company. In light of the foregoing, we caution you not to place undue reliance on our forward-looking statements. Any forward-looking statement that we make in this report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments.







Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

CEO and Board Changes

On February 19, 2017, the Board of Directors of Energy Focus, Inc. (the “Company”) appointed Ted L. Tewksbury III, Ph.D to serve as Chairman of the Board, Chief Executive Officer and President, effective immediately. Dr. Tewksbury has been serving as the Company’s Executive Chairman of the Board of Directors since December 12, 2016.

James Tu has stepped down as Chief Executive Officer and President of the Company and as a member of the Board of Directors, effective February 19, 2017. Mr. Tu’s decision to resign was not as a result of any disagreement with the Company. The Company and Mr. Tu entered into a Separation Agreement and Release dated February 18, 2017, which provides for the continued payment of Mr. Tu’s salary at the rate then in effect for a period of 12 months following his separation date and 12 months of continued benefits.

Simon Cheng has also resigned as a member of the Board of Directors effective February 19, 2017. Mr. Cheng’s decision to resign from the Board was not as a result of any disagreement with the Company.

In addition to serving as the Company’s Executive Chair since December 2016, Dr. Tewksbury, age 60, has been Founder and CEO of Tewksbury Partners, LLC, providing strategic consulting, advisory and board services to private and public technology companies, venture capital and private equity firms, since 2013. He had served as President and Chief Executive Officer (from November 2014) and a director (from September 2010) of Entropic Communications, a public company specializing in semiconductor solutions for the connected home, until its sale to MaxLinear, Inc., another public semiconductor company, in April 2015, and he remains a director of MaxLinear, Inc. He is also a director of Jariet Technologies, a private company specializing in digital microwave integrated circuits for wireless infrastructure, backhaul and military applications. From 2008 to 2013, Dr. Tewksbury had been President and Chief Executive Officer and a director of Integrated Device Corporation, a public semiconductor company.

Dr. Tewksbury’s base salary will increase to $450,000 annually and he is eligible for a performance-based bonus of up to 100% of base salary at target level. In connection with his appointment, he also will be granted restricted stock units (“RSUs”) having a grant date value of $225,000 and options equal to 1.5 times the number of RSUs that will vest over three years. Dr. Tewksbury will also participate in the Company’s Change in Control Plan (the “CIC Plan”) adopted by the Board on February 19, 2017 and described in more detail below, which provides for a severance payment to Dr. Tewksbury upon a qualifying termination occurring within 24 months after a Change in Control (as defined in the CIC Plan) equal to one times his base salary and annual target bonus, a pro-rated portion of any current year bonus, 12 months of continued benefits and full vesting of all outstanding equity awards provided that he remains in compliance with confidentiality, non-competition, non-solicitation and other covenants. Additional terms of the CIC Plan are described below.

Change in Control Plan

On February 19, 2017, the Board of Directors of the Company adopted the CIC Plan, which provides for (a) full vesting of equity awards held by non-employee directors upon a Change in Control and (b) severance payments (“Severance”) to be made in the event of a qualifying termination within 24 months of a Change in Control (a “Qualifying Termination”) to employees designated by the Board for participation in the CIC Plan, payable in the amounts designated by the Board and set forth in a participation agreement with the employee.

The Severance will be reduced by the amount of any similar payments and benefits under any employment agreement or other arrangement with the Company and is subject to the employee’s or director’s compliance with confidentiality, non-competition, non-solicitation, other restrictive covenants and the provision of a full release of claims against the Company and its successors. To the extent any Severance would constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code (the “Code”), the Company would





reduce the employee’s payments and benefits payable under the CIC Plan to the extent necessary so that no portion thereof would be subject to the excise tax imposed by Section 4999 of the Code.

The Board of Directors designated the Chairman of the Board, Chief Executive Officer and President and the Chief Financial Officer for participation in the CIC Plan and each have entered into a participation agreement providing for the following Severance upon a Qualifying Termination: (a) full vesting of all outstanding equity awards, (b) a lump sum equal to one times the sum of base salary and target annual cash bonus and (c) continued company paid participation in group health benefits for 12 months following the termination.
 
A copy of the related press release announcing these changes is attached hereto as Exhibit 99.1. A copy of Dr. Tewksbury’s offer letter, the CIC Plan, Mr. Bradley B. White’s participation agreement under the CIC Plan, and the separation and release agreement with Mr. Tu are attached hereto as Exhibits 10.1, 10.2, 10.3, and 10.4, respectively.


Item 9.01
Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit
 
 
 
Number
Description
 
 
 
 
 
 
10.1
Chairman, Chief Executive Officer and President Offer Letter dated February 19, 2017 between Theodore L. Tewksbury III and Energy Focus, Inc.
10.2
Change in Control Plan and Form of Participation Agreement
10.3
Change in Control Participation Agreement dated February 19, 2017 between Bradley B. White and Energy Focus, Inc.
10.4
Separation Agreement and Release dated February 18, 2017 between James Tu and Energy Focus, Inc.
99.1
Press release dated February 20, 2017






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 21, 2017
 
 
 
 
 
 
 
 
 
ENERGY FOCUS, INC.
 
 
 
 
 
By:
 /s/ Bradley B. White
 
Name:
 Bradley B. White
 
Title:
Chief Financial Officer and Secretary






Exhibit Index

Exhibit
 
 
 
Number
Description
 
 
 
 
 
 
10.1
Chairman, Chief Executive Officer and President Offer Letter dated February 19, 2017 between Theodore L. Tewksbury III and Energy Focus, Inc.
10.2
Change in Control Plan and Form of Participation Agreement
10.3
Change in Control Participation Agreement dated February 19, 2017 between Bradley B. White and Energy Focus, Inc.
10.4
Separation Agreement and Release dated February 18, 2017 between James Tu and Energy Focus, Inc.
99.1
Press release dated February 20, 2017



Exhibit 10.1 February 19, 2017 Theodore L. Tewksbury III 5728 La Seyne Place San Jose, CA 95138 Re: Chief Executive Officer and President Position Dear Ted: It is with great enthusiasm that we extend to you this formal offer to serve as the Chief Executive Officer and President of Energy Focus, Inc., in addition to your continuing role as Chairman of the Board, effective February 19, 2017. In this position you would report directly to the Company’s Board of Directors. Our offer for employment for this new position includes: 1. Base salary – Your starting annualized salary will be $450,000 in lieu of your current salary of $200,000. We pay on a bi-weekly basis, which computes to $17,307.69 per pay period. All salary payments are paid to the current date and are contingent upon your ongoing active employment status. 2. Performance Bonus – You will be eligible to earn an annual bonus with a target payout of 100% of your base salary, based upon the Company’s financial performance and your individual performance. Eligibility to receive the bonus is contingent upon your continued employment with the Company at the time bonus is paid and approval of the Bonus Plan for the applicable fiscal year by the Board. 3. Equity Award – Subject to approval of the Board of Directors or Compensation Committee thereof, you will receive a grant of Stock Options and RSUs having a total grant date value of approximately $450,000, consisting of 50% of such value in RSUs (with the number of units calculated by dividing $225,000 by the 30-day average closing price of the Company’s stock for the period ending on the last trading day prior to the grant date) and a grant of non-qualified stock options for a number of shares equal to the RSU award amount times 1.5. Such Options and RSUs shall have the time-based and/or performance-based vesting conditions as shall be established by the Board or Compensation Committee for the Annual Awards made under the Equity Award Policy for 2017. 4. Change in Control Plan – You will participate in the Company’s Change in Control Plan pursuant to the Participant Agreement entered into contemporaneously herewith and attached hereto as Appendix A. 5. Benefits – You are entitled to participate in the standard benefits program, which the Company offers to its eligible employees. A brief summary of the programs, which are currently in place, is set forth below. The specific terms of each benefit apply. A. Medical, Dental, Vision benefits – You and your eligible dependents will be eligible for Company medical, dental and vision benefit programs effective with your first day of employment. The Company pays full medical, dental and vision premiums for the HSA plan; there is no payroll deduction towards the cost of these premiums. The Company also offers a PPO plan where the employee cost is available to be paid through payroll deduction. B. Life Insurance benefits – You will be eligible for $50,000 of group term life insurance at no cost to you effective with your first day of employment. Additional voluntary life insurance is available for you and your dependents at your own cost. C. STD/LTD benefits – You will be eligible for both short-term and long-term disability benefits at no cost to you effective with your first day of employment. D. Company 401(k) – You will be able to participate in the Company’s 401(k) program on the first of the month following three months of employment.


 
2 E. Employee Stock Purchase Plan – You will be eligible to participate in the Company’s stock purchase plan. This plan allows you to purchase the Company’s stock at a 15% discount through payroll deduction. Entrance dates are January 1 and July 1 every year. F. Vacation/Holidays – In addition to the Company’s 10 paid holidays, we are pleased to offer you paid time off (PTO) hours that will start accruing on your first day of employment. We offer you three weeks of PTO. You will accrue 120 hours or 15 days of PTO over 12 months. PTO hours accrue every two weeks on your pay date. You will be eligible for a fourth week of PTO at your first employment anniversary date. 6. Expenses – Energy Focus will reimburse you for all Company approved business travel and entertainment expenses within the guidelines of the Company’s Travel and Entertainment Expense Policy, including reasonable temporary housing, in the form of a hotel or apartment, for the time spent at the Company’s Solon, Ohio headquarters. All Travel and Entertainment expenses must be submitted via expense reports including receipts. 7. Agreement of Confidentiality and Non-Competition – As a result of your additional role with the Company, you have contemporaneously herewith entered into the Agreement of Confidentiality and Non-Competition attached hereto as Appendix B. 8. At Will Employment – The employment relationship between you and the Company shall be “at will”, terminable by either party at any time for any or no reason. 9. Entire Agreement – This letter agreement supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between you and the Company. We look forward to having you take on these additional roles at Energy Focus. If you have any questions, please do not hesitate to contact me. Best regards, /s/ Ronald D. Black Ronald D. Black Lead Independent Director of the Board of Energy Focus, Inc. Accepted by: /s/ Theodore L. Tewksbury III______ February 19, 2017 Theodore L. Tewksbury III Date


 
3 Appendix A ENERGY FOCUS, INC. CHANGE IN CONTROL BENEFIT PLAN PARTICIPATION AGREEMENT Name: Theodore L. Tewksbury III Section 1. ELIGIBILITY. You have been designated as eligible to participate in the Energy Focus, Inc. Change in Control Benefit Plan (the “Plan”), a copy of which is attached as EXHIBIT A to this Participation Agreement (the “Agreement”). Capitalized terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan. Section 2. SEVERANCE BENEFITS. Subject to the terms of the Plan, if you are terminated in an Involuntary Termination, and meet all the other eligibility requirements set forth in the Plan, including, without limitation, executing the required Release within the applicable time period set forth therein and provided that such Release becomes effective in accordance with its terms, you will receive the severance benefits set forth in this Section 2. Notwithstanding the schedule for provision of severance benefits as set forth below, the provision of any severance benefits under this Section 2 is subject to any delay in payment that may be required under Section 5 of the Plan. (a) Base Compensation Severance Benefit. You will be entitled to receive a single lump sum cash payment equal to one times the sum of (a) your Annual Base Salary plus (b) your Target Bonus (the “Base Compensation Severance Benefit”). The Base Compensation Severance Benefit will be payable to you within 10 business days following the effective date of your Release. (b) Target Bonus Severance Benefit. You will be entitled to receive a single lump sum cash payment equal to a pro-rata portion of your Target Bonus, with such pro-rata portion calculated with reference to the number of days in the calendar year that precedes the date of the Involuntary Termination divided by the number of days in the calendar year that includes the date of the Involuntary Termination. (the “Target Bonus Severance Benefit”). The Target Bonus Severance Benefit will be payable to you within 10 business days following the effective date of your Release. (c) Accelerated Vesting of Stock Awards. (1) Effective as of the effective date of your Release, to the extent not previously vested and notwithstanding anything to the contrary set forth in an applicable award agreement or the applicable Equity Plan under which such award was granted, the restrictions and conditions applicable to any equity awards of the Company held by you (the “Awards”), shall lapse and such Awards shall immediately be fully vested upon a Change in Control and any performance-based Award shall be deemed fully earned at the target amount as of the date on which the Change of Control occurs (collectively, the “Vested Awards”). Unless determined otherwise by the Plan Administrator in accordance with the terms of the applicable Equity Plan (such as to provide for a cash-out of vested


 
4 options) or as otherwise set forth in the Plan, (ii) all Vested Awards that are stock unit awards or other stock-based awards shall be settled or paid within thirty (30) days of vesting hereunder, and (iii) all Vested Awards that are options and stock appreciation rights shall remain exercisable until the earlier of the third anniversary of such Change in Control (or any later date until which it would remain exercisable under such circumstances by its terms) or the expiration of its original term. Notwithstanding the foregoing, this Section 2(c) shall not apply to stock awards issued under or held in any Qualified Plan. (d) Payment of Continued Group Health Plan Benefits. (1) If you timely elect continued group health plan continuation coverage under COBRA the Company shall pay the full amount of your COBRA premiums, or shall provide coverage under any self-funded plan, on behalf of you for your continued coverage under the Company’s group health plans, including coverage for your eligible dependents, for twelve (12) months following your Involuntary Termination (the “COBRA Payment Period”). The appropriate COBRA Payment Period will be determined by your position at the time of your Involuntary Termination but prior to any reduction for which you exercise your right to resign for Good Reason. Upon the conclusion of such period of insurance premium payments made by the Company, or the provision of coverage under a self- funded group health plan, you will be responsible for the entire payment of premiums (or payment for the cost of coverage) required under COBRA for the duration of your eligible COBRA coverage period. For purposes of this Section, (i) references to COBRA shall be deemed to refer also to analogous provisions of state law and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are your sole responsibility. (2) Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of paying COBRA premiums on your behalf, the Company will instead pay you on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the COBRA premium for that month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made without regard to your election of COBRA coverage or payment of COBRA premiums and without regard to your continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period. Section 3. DEFINITIONS. (a) “Equity Plan” means the Company’s 2004 Stock Incentive Plan, 2008 Incentive Stock Plan, 2014 Stock Incentive Plan, as each may be amended, or any successor or other equity incentive plan adopted by the Company which govern your stock awards, as applicable. (b) “Qualified Plan” means a plan sponsored by the Company or an Affiliate that is intended to be qualified under Section 401(a) of the Internal Revenue Code. Section 4. ACKNOWLEDGEMENTS. As a condition to participation in the Plan, you hereby acknowledge each of the following:


 
5 (a) This Agreement and the Plan supersedes any severance benefit plan, policy or practice previously maintained by the Company that may have been applicable to you, including any individually negotiated employment agreement with the Company as it may have been amended from time to time (as so amended, the “Employment Agreement”). (b) The severance benefits that may be provided to you under this Agreement may reduce the severance benefits that would otherwise be provided to you under your Employment Agreement, or otherwise, as further specified in Section 2(c) of the Plan. For the avoidance of doubt, in no event shall you be entitled to receive Duplicative Benefits. To accept the terms of this Agreement and participate in the Plan, please sign and date this Agreement in the space provided below. Energy Focus, Inc. By: /s/ Bradley White Name: Bradley White Title: Chief Financial Officer /s/ Theodore L. Tewksbury III February 19, 2017 Theodore L. Tewksbury III Date


 
6 Appendix B AGREEMENT OF CONFIDENTIALITY AND NON-COMPETITION THIS AGREEMENT OF CONFIDENTIALITY AND NON-COMPETITION (the “Agreement”) is made and entered into this 19th day of February, 2017, by and between ENERGY FOCUS INC., a Delaware corporation which maintains a place of business at 32000 Aurora Road, Solon, Ohio 44139 its successors and assigns (referred to as “Employer” and “Energy Focus”) and Theodore L. Tewksbury III, an individual residing in San Jose, California (hereinafter referred to as “Employee”). A. Employment Relationship. The employment relationship between Employer and Employee shall be “at will,” terminable by either party at any time for any reason or no reason. Employee’s obligations under this Agreement shall survive the termination of the employment relationship. B. Definitions. 1. The “Company” shall mean Energy Focus Inc. as well as its parents, subsidiaries, and affiliated entities, including their successors and predecessors. 2. “Company Business” is the development, production and sale of commercial lighting products. 3. “Confidential Information” shall mean nonpublic information or material (i) that is proprietary to the Company or its customers, is confidential, or is a trade secret, regardless of whether it is specifically designated or labeled as confidential by the Company, or (ii) that Employee creates, discovers, develops in whole or in part, or of which Employee obtains knowledge of or access to, as a result of Employee’s relationship with the Company. Confidential Information generally includes, but is not limited to, designs, works of authorship, mask works, formulas, ideas, concepts, techniques, inventions, devices, improvements, know-how, methods, processes, drawings, specifications, models, data, documentation, diagrams, flow charts, research, developments, procedures, software in various stages of development, source code, object code, marketing techniques and materials, business, marketing, development and product plans, financial information, customer information, strategic information, and other confidential business or technical information. Confidential Information does not include information which (a) is or becomes publicly available (other than by disclosure or other wrongful act by the Employee), or (b) was known to the Employee before the Employee began employment with the Company. 3. “Inventions” shall mean data, ideas, designs, drawings, works of authorship, trademarks, service marks, trade names, service names, logos, mask works, developments, formulas, concepts, techniques, inventions, devices, improvements, know-how, methods, processes, programs, innovations, improvements, and discoveries, whether or not patentable or protectable under applicable copyright or trademark law, or as a mask work, or under other


 
7 similar law, and whether or not reduced to practice or tangible form, together with any improvements thereon or thereto, copy works there from, know-how related thereto, and intellectual property rights therein. 4. “Restricted Period” shall mean the period throughout Employee’s employment with the Company and ending one year after Employee’s termination from the Company, regardless for the reason for such termination. C. Nondisclosure of the Company’s Confidential Information. 1. Obligation to Protect Confidential Information. Employee recognizes and acknowledges that Confidential Information includes valuable, special and unique assets of the Company. Subject to the exceptions described below, (i) Employee shall forever protect and maintain the confidentiality of Confidential Information; and (ii) Employee shall never, directly or indirectly, use, publish, post, copy, duplicate, or disclose Confidential Information, or encourage, aid, or abet such activity, except as required in the course of Employee’s job duties at the Company and, then only to individuals who have a need to know based on such individual’s job responsibilities at the Company. 2. Exceptions to Section C. The restrictions in Section C do not apply to any of the following situations, so long as the Employee takes all reasonable steps to ensure that the scope of disclosure does not exceed the permitted scope and that such disclosure does not extend beyond the parameters of what is permitted. a) Employee may respond to a lawful and valid subpoena or other legal process or court order that seeks the disclosure of Confidential Information but: (1) shall give the Company’s Chief Financial Officer the earliest possible notice of the receipt thereof; (2) shall, as much in advance of the return date as possible, make available to the Company’s Chief Financial Officer the documents and other information sought; and (3) shall assist the Company’s legal counsel, at the Company’s expense, in resisting or otherwise responding to such subpoena or process. b) Employee may disclose Confidential Information to a government agency as part of a report, complaint, or investigation without providing notice to the Company. c) Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (1) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law. In addition, Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Furthermore, in the event Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and use the trade secret information in the court proceeding, if Employee files any document containing the


 
8 trade secret under seal and does not disclose the trade secret, except pursuant to court order. D. Nondisclosure of Others’ Confidential Information. Absent express written permission from the owner of such information, Employee is strictly prohibited, at any time during employment with the Company, from making use of the confidential, proprietary, or trade secret information of a prior employer or of any other entity. Employee shall not incorporate any such information into any Invention or creation that Employees prepares, in whole or in part, for the benefit of the Company. E. Intellectual Property. 1. Inventions and Other Works. During employment, Employee may either alone or with others, author, create, conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, or assist in the authoring, creation, conception, development or reduction to practice of documents, materials, designs, drawings, processes, Inventions, discoveries, ideas, improvements, trade secrets, Confidential Information, and other works which relate to the Company’s business or to the Company’s activities or are otherwise capable of being used by the Company (collectively, “Works”). Employee agrees that any and all Works and the related intellectual property and other rights in those Works including, without limitation, Inventions, patents, copyrights, mask works, design rights, database rights, trademarks, service marks, internet rights/domain names, trade secrets and know-how (whether registered or unregistered and including any applications or rights to apply) subsisting anywhere in the world in any and all media now existing or hereafter created (collectively, “Works IP Rights”) will belong solely to and be the absolute property of the Company. Employee agrees that all original works of authorship which are made by Employee (solely or jointly with others) within the scope of and during the period of employment with the Company and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Employee hereby assigns with full title guarantee to the Company by way of present assignment all Works IP Rights, and all intellectual property rights in the Works. Employee hereby irrevocably and unconditionally waives any moral rights which Employee may have in any Works. 2. During employment with the Company and thereafter, Employee will disclose promptly to the Company or its nominee any and all Works and all Works IP Rights, as defined above. This disclosure requirement applies whether or not any such invention, discovery, idea, or improvement or other Work is patentable, whether or not Employee conceived such item or reduced it to practice during regular working hours, and whether or not such item was conceived or reduced to practice by Employee alone or jointly with others. 3. Employee agrees to assist the Company or its designee, at the Company’s expense, in every proper way (i) to secure the Company’s rights in the Works and all Works IP Rights in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto; and (ii) to execute or cause to be executed all applications, specifications, oaths, assignments and all other instruments which the Company shall deem


 
9 necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Works and Works IP Rights. Employee further agrees that Employee’s obligation to execute or cause to be executed, when it is in Employee’s power to do so, any such instrument or papers shall continue after the termination of employment. If Employee is unable because of his or her mental or physical incapacity or for any other reason to secure his or her signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Works or Works IP Rights, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his or her agent and attorney in fact, to act for and in his or her behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Employee. These obligations will also be binding on Employee’s executors, administrators, agents, assigns, and other legal representatives. 4. Notwithstanding the foregoing, Works and Works IP Rights shall not apply to any invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on Employee's own time, unless (a) the invention relates to the Company’s business or to the Company’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by Employee for the Company. 5. Employee agrees that any Invention or Works disclosed by Employee to a third person or described in a patent application filed by Employee or on Employee’s behalf within six (6) months following the termination of employment with the Company shall be presumed to have been conceived or made by Employee during the period of employment with the Company unless proved to have been conceived and made by Employee following the termination of employment with the Company. 6. If Employee claims intellectual property rights or ownership or any prior Inventions or works, and intends to exclude these from the general terms of this Agreement, Employee has listed such Inventions or Works on the attached Exhibit A. F. Conflict of Interest. During the period of Employee’s employment with the Company, Employee shall not accept employment or consulting work or enter into a contract or accept an obligation incompatible with Employee’s obligations under this Agreement. G. Property of Employer. Employee agrees to deliver promptly to the Company all drawings, blueprints, manuals, letters, notes, notebooks, reports, sketches, formulas, computer programs and files, memoranda, customer lists and all other materials relating in any way to the Company Business and in any way obtained by Employee during the period of employment with the Company which are in his possession or under his control, and all copies thereof, (i) upon termination of Employee’s employment with the Company, or (ii) at any other time at the Company’s request. Employee further agrees he will not make or retain any copies of any of the foregoing and will so represent to the Company upon termination of employment.


 
10 H. Non-compete. 1. During the Restricted Period, Employee shall not: (a) directly or indirectly act in concert or conspire with any person employed by the Company in order to engage in or prepare to engage in or to have a financial or other interest in any business or any activity that he knows (or reasonably should have known) to be directly competitive either with Company Business as then being carried on or with any business, activity, product or service which was under active development while Employee was employed by the Company if such development was actively pursued or considered during the two (2) year period preceding the Separation Date; or (b) serve as an employee, agent, partner, shareholder, director, or consultant for, or in any other capacity participate, engage, or have a financial or other interest in any business or any activity that he knows (or reasonably should have known) to be directly competitive either with the Company Business as then being carried on or with any business, activity, product or service which was under active development while Employee was employed by the Company if such development was actively pursued or considered during the two (2) year period preceding the Separation Date (provided, however, that notwithstanding anything to the contrary contained in this Agreement, Employee may own up to two percent (2%) of the outstanding shares of the capital stock of a company whose securities are registered under Section 12 of the Securities Exchange Act of 1934). 2. In the event Employee violates any provision of this Section H as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities as set forth in such provision, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. The foregoing shall in no way limit any of the Company’s rights to enforce this obligation or obtain immediate injunctive relief. 3. Employee has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Section H and this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to the Company, do not stifle the inherent skill and experience of Employee, would not operate as a bar to Employee’s sole means of support, are fully required to protect the legitimate interests of the Company and do not confer a benefit upon the Company disproportionate to the detriment to Employee. I. Non-Solicitation of Employees and Consultants of the Company. During the Restricted Period, Employee shall not, directly or indirectly (i) hire, solicit, or encourage to either leave the employment of or cease working with the Company, any person who is then an employee of the Company, or any consultant who is then engaged by the Company, or (ii) hire any employee or consultant who had left the employment of or had ceased consulting with the Company but who had not yet been a former employee or former consultant of the Company for three months. J. Non-Solicitation of Customers. During the Restricted Period, Employee shall not, directly or indirectly, whether on Employee’s behalf or on behalf of any other person or entity, solicit, divert, or encourage any of the Company’s customers, suppliers, vendors to discontinue or reduce business relations with the Company, nor shall employee attempt to do so.


 
11 K. Rights and Remedies Upon Breach. Both parties recognize that the rights and obligations set forth in this Agreement are special, unique and of extraordinary character. If Employee breaches, or threatens to commit a breach of, or appears imminently likely to commit a breach of, any of the provisions of this Agreement (the “Restrictive Covenants”), then the Company shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or equity: 1. Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide adequate remedy to Employer. As to the covenants contained in this Agreement, specific performance shall be for a period of time equal to the unexpired portion of the Restricted Period. In the event of Employee’s breach of any provision of this section, the running of the Restricted Period shall be automatically tolled (i.e., no part of the Restricted Period shall expire) from and after the date of the first such breach. 2. Accounting. The right and remedy to require Employee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively, “Benefits”) derived or received by it as the result of any transactions constituting a breach of any of the Restrictive Covenants, and Employee shall account for and pay over such Benefits to the Company. 3. Blue-Penciling. If any court determines that any one or more of the Restrictive Covenants, or any part thereof, shall be unenforceable because of the scope, duration and/or geographical area covered by such provision, such court shall have the power to reduce the scope, duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. L. Disclosure. The Company may notify anyone employing Employee or evidencing an intention to employ Employee as to the existence and provisions of this Agreement. M. Governing Law and Jurisdiction. The parties intend that the validity, performance and enforcement of this Agreement shall be governed by the laws of the State of Ohio. In the event of any claim arising out of or related to this Agreement, or the breach thereof, the parties hereby consent and agree that any such claim shall be brought and heard in the state or federal courts in the State of Ohio. The parties hereby consent to personal jurisdiction in the State of Ohio and waive any objections to venue in said courts. N. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives and successors. O. Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, the parties’ intent is that such provision be modified by the court to impose the maximum restriction allowable; but, if such provision is not so modified, then it is the intent of the


 
12 parties that such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. P. Effect of Captions. The captions in this Agreement are included for convenience only and shall not in any way effect the interpretation or construction of any provision hereof. Q. Construction. In this Agreement, unless the context otherwise requires, words in the singular or in the plural shall each include the singular and the plural, and words of masculine gender shall include the feminine and neuter, and, when sense so indicates, words of the neuter gender may refer to any gender. R. Notices. All notices, requests, demands or other communications hereunder shall be sent by registered or certified mail to, to each party at the address of such party set forth in the initial introductory paragraph of this Agreement, or to such other address as a party may designate from time to time, pursuant to notice given in accordance herewith. S. Counterparts. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. The execution of counterparts shall not be deemed to constitute delivery of this Agreement by any party until all of the parties have executed and delivered their respective counterparts. T. Acknowledgment. Employee acknowledges that: (i) Employee has carefully read all of the terms of this Agreement, and that Employee understands such terms and has had sufficient opportunity to ask any questions before signing; (ii) Employee understands the consequences of each and every term of this Agreement; (iii) Employee specifically understands that by signing this Agreement, Employee is giving up certain rights Employee may have otherwise had, and (iv) the limitations contained in this Agreement represent reasonable limitations as to scope, duration and geographical area, and that such limitations are reasonably related to protection which the Company reasonably requires and is entitled to obtain. U. Assignment. This Agreement is a personal services contract and it is expressly agreed that the rights and interests of Employee and the Company hereunder may not be sold, transferred, assigned, pledged or hypothecated; provided, however that the Company may assign its rights and obligations hereunder to a related company, affiliate or successor of the Company, whether presently existing or formed after the date hereof. V. Entire Agreement. This Agreement embodies the entire agreement and understanding between the Company and Employee on the specific subjects addressed herein, and this Agreement supersedes all prior agreements and understandings relating to the subject matter hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the date first hereinabove mentioned.


 
13 ENERGY FOCUS INC. Theodore L. Tewksbury III Bradley White, Chief Financial Officer Print Employee Name Company Representative Name & Title /s/ Theodore L. Tewksbury III /s/ Bradley White Employee Signature Company Representative Signature February 19, 2017 February 19, 2017 Date Date


 
14 EXHIBIT A INVENTIONS The following is a list of all “Inventions” (as defined in the Agreement), whether patented or unpatented, in which I have any interest which I do not assign to Employer pursuant to the Agreement; if no “Inventions” are described below, there are no exclusions from the assignment set forth in Section E of the Agreement:


 
Exhibit 10.2 ENERGY FOCUS, INC. CHANGE IN CONTROL BENEFIT PLAN Section 1. INTRODUCTION. The Energy Focus, Inc. Change in Control Plan (the “Plan”) is hereby established effective [February 19, 2017] (the “Effective Date”). The purpose of the Plan is to provide for the payment of certain benefits to selected eligible employees and directors of Energy Focus, Inc. (the “Company”) in the event of a Change in Control (as defined below). This Plan document also is the Summary Plan Description for the Plan. For purposes of the Plan, the following terms are defined as follows: (a) “Affiliate” means any corporation (other than the Company) in an “unbroken chain of corporations” beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (b) “Annual Base Salary” means the annualized base pay amount (excluding incentive pay, premium pay, commissions, overtime, bonuses, and other forms of variable compensation) as in effect immediately prior to an Involuntary Termination and prior to any reduction that would give rise to an employee’s right to resign for Good Reason. (c) “Board” means the Board of Directors of the Company; provided, however, that if the Board has delegated authority to administer the Plan to the Compensation Committee of the Board, then “Board” shall also mean the Compensation Committee. (d) “Cause” means, with respect to a particular employee, the occurrence of any of the following events: (i) such employee’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (ii) such employee’s intentional, material violation of any contract or agreement between the employee and the Company or of any statutory duty owed to the Company; (iii) such employee’s unauthorized use or intentional unauthorized disclosure of the Company’s confidential information or trade secrets; (iv) such employee’s gross negligence or gross misconduct; (v) such employee’s material failure to competently perform his/her assigned duties for the Company; (vi) sustained poor performance of any material aspect of the employee’s duties or obligations including refusal to follow lawful instructions from the employee’s manager or the then current Board; or (vii) employee’s conviction of, or the entry of a pleading of guilty or nolo contendere by such employee to, any crime involving moral turpitude or any non-vehicular felony; provided, in the case of clauses (v) and (vi), such behavior shall only be deemed Cause if such failure or poor performance has not been substantially cured to the satisfaction of the Board within 30 days after written notice of such failure or poor performance has been given by the Company to the employee. The determination of whether a termination is for Cause shall be made by the Board in its sole and exclusive judgment and discretion. (e) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:


 
2 (1) any “person” (as such term is used in Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company, any majority controlled subsidiary of the Company, or the fiduciaries of any Company benefit plans) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 50% or more of the total voting power of the voting securities of the Company then outstanding and entitled to vote generally in the election of directors of the Company; provided, however, that no Change of Control shall occur upon the acquisition of securities directly from the Company; (2) individuals who, as of the beginning of any 24 month period, constitute the Board (as of the date hereof, the “Incumbent Board”) cease for any reason during such 24 month period to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company; or (3) consummation of (A) a merger, consolidation or reorganization of the Company, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the voting securities of the Company immediately prior to such merger, consolidation or reorganization do not, following such merger, consolidation or reorganization, beneficially own, directly or indirectly, at least 35% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity or entities resulting from such merger, consolidation or reorganization, (B) a complete liquidation or dissolution of the Company, or (C) a sale or other disposition of all or substantially all of the assets of the Company, unless at least 35% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity or entities that acquire such assets are beneficially owned by individuals or entities who or that were beneficial owners of the voting securities of the Company immediately before such sale or other disposition. Notwithstanding the foregoing, (x) if any payment or distribution event applicable to an Award is subject to the requirements of Section 409A(a)(2)(A) of the Code, the determination of the occurrence of a Change of Control shall be governed by applicable provisions of Section 409A(a)(2)(A) of the Code and regulations and rulings issued thereunder for purposes of determining whether such payment or distribution may then occur, and (y) a transaction shall not constitute a Change of Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. (f) “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (g) “Code” means the Internal Revenue Code of 1986, as amended.


 
3 (h) “Company” means Energy Focus, Inc. or its successor. (i) “Eligible Employee” means an employee of the Company that meets the requirements to be eligible to receive Plan benefits as set forth in Section 2. (j) “Entity” means a corporation, partnership, limited liability company or other entity. (k) “Good Reason” for an employee’s resignation means the occurrence of any of the following events, conditions or actions taken by the Company without Cause and without such employee’s consent: (i) the assignment to an employee of any duties or responsibilities that results in a material diminution in the employee’s authorities, duties or responsibilities as in effect immediately prior to such reduction; provided, however, that a change solely in the employee’s title or reporting relationships shall not provide the basis for a termination with Good Reason; (ii) a material reduction by the Company in the employee’s annual base salary, as in effect prior to such reduction; (iii) a relocation of the employee’s principal business office to a location that increases the employee’s one-way driving distance by 30 miles or more, except for required travel by the employee on the Company’s business consistent with such employee’s business travel obligations as in effect on the Effective Date; or (iv) a material breach by the Company of any provision of the Plan or any other material agreement between the employee and the Company concerning the terms and conditions of the employee’s employment; provided, however, that in each case above, in order for the employee’s resignation to be deemed to have been for Good Reason, the employee must give the Company written notice of the action or omission giving rise to “Good Reason” within 30 days after the first occurrence thereof, the Company must fail to reasonably cure such action or omission within 30 days after receipt of such notice (the “Cure Period”), and the employee’s resignation must be effective not later than 30 days after the expiration of such Cure Period. (l) “Involuntary Termination” means a termination of employment that is due to: (i) a termination by the Company without Cause or (ii) solely in the case of an employee at the Executive Vice President level or higher, an employee’s resignation for Good Reason. (m) “Participation Agreement” means an agreement between an employee and the Company in substantially the form of Appendix A attached hereto, and which may include such other terms as the Board deems necessary or advisable in the administration of the Plan. (n) “Plan Administrator” means the Board. (o) “Outside Director” means a member of the Board that meets the requirements to be eligible to receive Plan benefits as set forth in Section 2. (p) “Target Bonus” means with respect to an Eligible Employee, if there is a cash bonus plan applicable to such Eligible Employee for the year in which such Involuntary Termination occurs (“Cash Bonus Plan”), the cash bonus payable to such Eligible Employee under such Cash Bonus Plan as if all the applicable performance goals for such year were attained at a level of 100%. If no Cash Bonus Plan is in effect for the year in which such Involuntary Termination occurs, the Target Bonus Amount will be $0.


 
4 Section 2. ELIGIBILITY FOR BENEFITS. (a) Employees. (1) Eligible Employees. An employee of the Company is eligible to participate in the Plan if (i) the Board has designated such employee as eligible to participate in the Plan by providing such person with a Participation Agreement; (ii) such employee has signed and returned such Participation Agreement to the Company within the period specified therein; (iii) such employee’s employment with the Company terminates due to an Involuntary Termination; and (iv) such employee meets the other Plan eligibility requirements set forth in this Section 2. (2) Release Requirement. In order to be eligible to receive benefits under the Plan, the employee also must execute a general waiver and release in a form acceptable to the Company and which form will contain other provisions (the “Release”), within the applicable time period set forth therein, but in no event more than 50 days following the date of the applicable Involuntary Termination, and such Release must become effective in accordance with its terms. The Company, in its sole discretion, may modify the form of the Release to comply with applicable law and shall determine the form of the required Release, which may be incorporated into a termination agreement or other agreement with the employee. (3) Plan Benefits Provided in Lieu of Individual Agreement Severance Benefits. Unless otherwise determined by the Plan Administrator in its discretion, subject to the requirements of Code Section 409A, if applicable, if an employee is an Eligible Employee and eligible to receive severance benefits under this Plan and otherwise eligible to receive severance benefits under the terms of an individually negotiated employment contract or agreement with the Company or any other severance or equity award arrangement with the Company that are of the same category and would otherwise duplicate the severance benefits available under this Plan (“Duplicative Benefits”) such Eligible Employee will receive severance benefits under this Plan in lieu of, and not additional to, such Duplicative Benefits. If an Eligible Employee is eligible to receive Plan benefits, such Eligible Employee will receive severance benefits under any individually negotiated employment contract or agreement only to the extent that such benefits have not been waived or terminated and are not Duplicative Benefits. (4) Exceptions to Benefit Entitlement. An employee who otherwise is an Eligible Employee will not receive benefits under the Plan in the following circumstances, as determined by the Plan Administrator in its sole discretion: (i) The employee voluntarily terminates employment with the Company without Good Reason, or terminates employment due to the employee’s death or disability. Voluntary terminations include, but are not limited to, resignation, retirement, or failure to return from a leave of absence on the scheduled date. (ii) The employee voluntarily terminates employment with the Company in order to accept employment with another entity that is wholly or partly owned (directly or indirectly) by the Company or an Affiliate.


 
5 (iii) The employee is offered an identical or substantially equivalent or comparable position with the Company or an Affiliate. For purposes of the foregoing, a “substantially equivalent or comparable position” is one that provides the employee substantially the same level of responsibility and compensation and would not give rise to the employee’s right to resign for Good Reason. (iv) The employee is offered immediate reemployment by a successor to the Company or an Affiliate or by a purchaser of the Company’s assets, as the case may be, following a change in control of the Company and the terms of such reemployment would not give rise to the employee’s right to resign for Good Reason. For purposes of the foregoing, “immediate reemployment” means that the employee’s employment with the successor to the Company or an Affiliate or the purchaser of its assets, as the case may be, results in uninterrupted employment such that the employee does not incur a lapse in pay or benefits as a result of the change in ownership of the Company or the sale of its assets. (v) The employee is rehired by the Company or an Affiliate and recommences employment prior to the date benefits under the Plan are scheduled to commence. (b) Outside Directors. A member of the Board is eligible to participate in the Plan as an “Outside Director” with respect to any equity awards received by such director while he or she was not an employee of the Company for his or her service on the Board or a committee thereof (“Outside Director Equity Awards”). Section 3. AMOUNT OF BENEFIT. (a) Severance Benefit. (1) Eligible Employees. Benefits under the Plan shall be provided to an Eligible Employee as set forth in the Participation Agreement. (2) Outside Directors. Notwithstanding anything to the contrary set forth in an applicable award agreement or the applicable equity incentive plan under which such award was granted, the restrictions and conditions applicable to any or all Outside Director Awards, shall lapse and such Outside Director Awards shall immediately be fully vested upon a Change in Control and any performance based Outside Director Award shall be deemed fully earned at the target amount as of the date on which the Change of Control occurs (collectively, the “Vested Awards”). Unless determined otherwise by the Plan Administrator in accordance with the terms of the applicable equity plan (such as to provide for a cash-out of vested options) or as otherwise set forth in the Plan, (ii) all Vested Awards that are stock unit awards or other stock-based awards shall be settled or paid within thirty (30) days of vesting hereunder, and (iii) all Vested Awards that are options and stock appreciation rights shall remain exercisable until the earlier of the third anniversary of such Change in Control (or any later date until which it would remain exercisable under such circumstances by its terms) or the expiration of its original term. (b) Additional Benefits. Notwithstanding the foregoing, the Company may, in its sole discretion, provide benefits to employees or directors who are not Eligible Employees (“Non- Eligible Participants”) chosen by the Board, in its sole discretion, and the provision of any such benefits to a Non-Eligible Participant shall in no way obligate the Company to provide such


 
6 benefits to any other Non-Eligible Participant, even if similarly situated. If benefits under the Plan are provided to a Non-Eligible Participant, references in the Plan to “Eligible Employee” (and similar references) shall be deemed to refer to such Non-Eligible Participant. (c) Parachute Payments. (1) Any provision of the Plan to the contrary notwithstanding, if any payment or benefit an Eligible Employee would receive from the Company pursuant to the Plan or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment will be equal to the Reduced Amount (defined below). The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Eligible Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the manner that results in the greatest economic benefit for the Eligible Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata. (2) In the event it is subsequently determined by the Internal Revenue Service that some portion of the Reduced Amount as determined pursuant to clause (x) in the preceding paragraph is subject to the Excise Tax, the Eligible Employee agrees to promptly return to the Company a sufficient amount of the Payment so that no portion of the Reduced Amount is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount is determined pursuant to clause (y) in the preceding paragraph, the Eligible Employee will have no obligation to return any portion of the Payment pursuant to the preceding sentence. (3) Unless the Eligible Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the change in ownership or control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change in ownership or control, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. Section 4. RETURN OF COMPANY PROPERTY. An Eligible Employee will not be entitled to any severance benefit under the Plan unless and until the Eligible Employee returns all Company Property. For this purpose, “Company Property” means all Company documents (and all copies thereof) and other Company property which the Eligible Employee had in his or her possession at any time, including, but not limited to, Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses,


 
7 proposals, agreements, financial information, research and development information, sales and marketing information, operational and personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part). Section 5. TIME OF PAYMENT AND FORM OF BENEFIT. The Company reserves the right to specify in the Participation Agreement whether severance payments under the Plan will be paid in a single sum, in installments, or in any other form and to specify the timing of such payments in the Participation Agreement. All such payments under the Plan will be subject to applicable withholding for federal, state, and local taxes. If an Eligible Employee is indebted to the Company on his or her termination date, the Company reserves the right to offset any severance payments under the Plan by the amount of such indebtedness. All severance benefits provided under the Plan are intended to satisfy the requirements for an exemption from application of Section 409A of the Code to the maximum extent that an exemption is available and any ambiguities herein shall be interpreted accordingly. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under the Plan that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with an Eligible Employee’s termination of employment unless and until the Eligible Employee has also incurred a “separation from service,” as such term is defined in Treasury Regulations Section 1.409A-1(h) (“Separation from Service”), unless the Company reasonably determines that such amounts may be provided to the Eligible Employee without causing the Eligible Employee to incur the adverse personal tax consequences under Section 409A. It is intended that (i) each installment of any benefits payable under the Plan to an Eligible Employee be regarded as a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), (ii) all payments of any such benefits under the Plan satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9)(iii), and (iii) any such benefits consisting of COBRA premiums also satisfy, to the greatest extent possible, the exemption from the application of Section 409A provided under Treasury Regulations Section 1.409A-1(b)(9)(v). However, if the Company determines that any such benefits payable under the Plan constitute “deferred compensation” under Section 409A and the Eligible Employee is a “specified employee” of the Company, as such term is defined in Section 409A(a)(2)(B)(i), then, solely to the extent necessary to avoid the imposition of the adverse personal tax consequences under Section 409A, (i) the timing of such benefit payments shall be delayed until the earlier of (A) the date that is 6 months and 1 day after the Eligible Employee’s Separation from Service and (B) the date of the Eligible Employee’s death (such applicable date, the “Delayed Initial Payment Date”), and (ii) the Company shall (A) pay the Eligible Employee a lump sum amount equal to the sum of the benefit payments that the Eligible Employee would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the


 
8 benefits had not been delayed pursuant to this paragraph and (B) commence paying the balance, if any, of the benefits in accordance with the applicable payment schedule. In no event shall payment of any benefits under the Plan be made prior to an Eligible Employee’s termination date or prior to the effective date of the Release. If the Company determines that any payments or benefits provided under the Plan constitute “deferred compensation” under Section 409A, and the Eligible Employee’s Separation from Service occurs at a time during the calendar year when the Release could become effective in the calendar year following the calendar year in which the Eligible Employee’s Separation from Service occurs, then regardless of when the Release is returned to the Company and becomes effective, the Release will not be deemed effective any earlier than the latest permitted effective date (the “Release Deadline”). If the Company determines that any payments or benefits provided under the Plan constitute “deferred compensation” under Section 409A, then except to the extent that payments may be delayed until the Delayed Initial Payment Date pursuant to the preceding paragraph, on the first regular payroll date following the effective date of an Eligible Employee’s Release, the Company shall (i) pay the Eligible Employee a lump sum amount equal to the sum of the benefit payments that the Eligible Employee would otherwise have received through such payroll date but for the delay in payment related to the effectiveness of the Release and (ii) commence paying the balance, if any, of the benefits in accordance with the applicable payment schedule. Section 6. RIGHT TO INTERPRET AND ADMINISTER PLAN; AMENDMENT AND TERMINATION. (a) Interpretation and Administration. The Board shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan. The rules, interpretations, computations and other actions of the Board shall be binding and conclusive on all persons, including all Eligible Employees. (b) Amendment. The Board reserves the right to amend this Plan at any time; provided, however, that any amendment of the Plan will not be effective as to a particular employee who is or may be adversely impacted by such amendment or termination and has an effective Participation Agreement without the written consent of such employee. Any action amending the Plan shall be in writing and executed by the Chairman of the Board. (c) Termination. The Plan will automatically terminate upon the earliest of: (i) the date 5 years after the Effective Date, or (ii) following satisfaction of all the Company’s obligations under the Plan. Section 7. NO IMPLIED EMPLOYMENT CONTRACT. The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the Company or (ii) to interfere with the right of the Company to


 
9 discharge any employee or other person at any time, with or without cause, which right is hereby reserved. Section 8. LEGAL CONSTRUCTION. This Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”) and, to the extent not preempted by ERISA, the laws of the State of Ohio. Notwithstanding the foregoing, the Plan is intended to be an unfunded employee welfare benefit plain maintained primarily to provide benefits for a “select group of management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. Section 9. CLAIMS, INQUIRIES AND APPEALS. (a) Applications for Benefits and Inquiries. Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or his or her authorized representative). The Plan Administrator is: Energy Focus, Inc. 32000 Aurora Road, Suite B Solon, Ohio 44139 Attention: Human Resources (b) Denial of Claims. In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial. Any electronic notice will comply with the regulations of the U.S. Department of Labor. The notice of denial will be set forth in a manner designed to be understood by the applicant and will include the following: (1) the specific reason or reasons for the denial; (2) references to the specific Plan provisions upon which the denial is based; (3) a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and (4) an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review of the claim, as described in Section 9(d) below. This notice of denial will be given to the applicant within 90 days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional 90 days for processing the


 
10 application. If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial 90-day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application. (c) Request for a Review. Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within 60 days after the application is denied. A request for a review shall be in writing and shall be addressed to: Energy Focus, Inc. 32000 Aurora Road, Suite B Solon, Ohio 44139 Attention: Human Resources A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent. The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim. The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim. The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. (d) Decision on Review. The Plan Administrator will act on each request for review within 60 days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional 60 days), for processing the request for a review. If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial 60-day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review. The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U.S. Department of Labor. In the event that the Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following: (1) the specific reason or reasons for the denial; (2) references to the specific Plan provisions upon which the denial is based; (3) a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and


 
11 (4) a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA. (e) Rules and Procedures. The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims. The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense. (f) Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until the applicant (i) has submitted a written application for benefits in accordance with the procedures described by Section 9(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 9(c) above, and (iv) has been notified that the Plan Administrator has denied the appeal. Notwithstanding the foregoing, if the Plan Administrator does not respond to an Eligible Employee’s claim or appeal within the relevant time limits specified in this Section 9, the Eligible Employee may bring legal action for benefits under the Plan pursuant to Section 502(a) of ERISA. Section 10. BASIS OF PAYMENTS TO AND FROM PLAN. The Plan shall be unfunded, and all cash payments under the Plan shall be paid only from the general assets of the Company. Section 11. OTHER PLAN INFORMATION. (a) Employer and Plan Identification Numbers. The Employer Identification Number assigned to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is [_________]. The Plan Number assigned to the Plan by the Plan Sponsor is 50_. (b) Ending Date for Plan’s Fiscal Year. The date of the end of the fiscal year for the purpose of maintaining the Plan’s records is December 31. (c) Agent for the Service of Legal Process. The agent for the service of legal process with respect to the Plan is: Energy Focus, Inc. 32000 Aurora Road, Suite B Solon, Ohio 44139 Attention: Human Resources In addition, service of legal process may be made upon the Plan Administrator. (d) Plan Sponsor. The “Plan Sponsor” is: Energy Focus, Inc. 32000 Aurora Road, Suite B


 
12 Solon, Ohio 44139 Attention: Human Resources (e) Plan Administrator. The Plan Administrator is the Board. The Plan Administrator’s contact information is: Energy Focus, Inc. 32000 Aurora Road, Suite B Solon, Ohio 44139 Attention: Human Resources The Plan Administrator is the named party charged with the responsibility for administering the Plan. The Plan is self-administered by the Company.


 
Appendix A-1 APPENDIX A ENERGY FOCUS, INC. CHANGE IN CONTROL BENEFIT PLAN PARTICIPATION AGREEMENT Name: Section 1. ELIGIBILITY. You have been designated as eligible to participate in the Energy Focus, Inc. Change in Control Benefit Plan (the “Plan”), a copy of which is attached as EXHIBIT 1 to this Participation Agreement (the “Agreement”). Capitalized terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan. Section 2. SEVERANCE BENEFITS. Subject to the terms of the Plan, if you are terminated in an Involuntary Termination, and meet all the other eligibility requirements set forth in the Plan, including, without limitation, executing the required Release within the applicable time period set forth therein and provided that such Release becomes effective in accordance with its terms, you will receive the severance benefits set forth in this Section 2. Notwithstanding the schedule for provision of severance benefits as set forth below, the provision of any severance benefits under this Section 2 is subject to any delay in payment that may be required under Section 5 of the Plan. (a) Base Compensation Severance Benefit. You will be entitled to receive a single lump sum cash payment equal to [______] times [the sum of (a) ]your Annual Base Salary [plus (b) your Target Bonus] (the “Base Compensation Severance Benefit”). The Base Compensation Severance Benefit will be payable to you on the tenth business day following the effective date of your Release. (b) [Target Bonus Severance Benefit. You will be entitled to receive a single lump sum cash payment equal to a pro-rata portion of your Target Bonus, with such pro-rata portion calculated with reference to the number of days in the calendar year that precedes the date of the Involuntary Termination divided by the number of days in the calendar year that includes the date of the Involuntary Termination. (the “Target Bonus Severance Benefit”). The Target Bonus Severance Benefit will be payable to you on the tenth business day following the effective date of your Release.] (c) [Accelerated Vesting of Stock Awards. (1) Effective as of the effective date of your Release, to the extent not previously vested and notwithstanding anything to the contrary set forth in an applicable award agreement or the applicable Equity Plan under which such award was granted, the restrictions and conditions applicable to any equity awards of the Company held by you (the “Awards”), shall lapse and such Awards shall immediately be fully vested upon a Change in Control and any


 
Appendix A-2 performance-based Award shall be deemed fully earned at the target amount as of the date on which the Change of Control occurs (collectively, the “Vested Awards”). Unless determined otherwise by the Plan Administrator in accordance with the terms of the applicable Equity Plan (such as to provide for a cash-out of vested options) or as otherwise set forth in the Plan, (ii) all Vested Awards that are stock unit awards or other stock-based awards shall be settled or paid within thirty (30) days of vesting hereunder, and (iii) all Vested Awards that are options and stock appreciation rights shall remain exercisable until the earlier of the third anniversary of such Change in Control (or any later date until which it would remain exercisable under such circumstances by its terms) or the expiration of its original term. Notwithstanding the foregoing, this Section 2(c) shall not apply to stock awards issued under or held in any Qualified Plan.] (d) Payment of Continued Group Health Plan Benefits. (1) If you timely elect continued group health plan continuation coverage under COBRA the Company shall pay the full amount of your COBRA premiums on behalf of you for your continued coverage under the Company’s group health plans, including coverage for your eligible dependents, for [____] months following your Involuntary Termination (the “COBRA Payment Period”). Upon the conclusion of such period of insurance premium payments made by the Company you will be responsible for the entire payment of premiums (or payment for the cost of coverage) required under COBRA for the duration of your eligible COBRA coverage period. For purposes of this Section, (i) references to COBRA shall be deemed to refer also to analogous provisions of state law and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are your sole responsibility. (2) Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or causing the Company’s group health plan to fail to comply with the nondiscrimination requirements of Section 105(h) of the Code, then in lieu of paying COBRA premiums on your behalf, the Company will instead pay you on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the COBRA premium for that month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made without regard to your election of COBRA coverage or payment of COBRA premiums and without regard to your continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period. Section 3. DEFINITIONS. (a) “Equity Plan” means the Company’s 2004 Stock Incentive Plan, 2008 Incentive Stock Plan, 2014 Stock Incentive Plan, as each may be amended, or any successor or other equity incentive plan adopted by the Company which govern your stock awards, as applicable. (b) “Qualified Plan” means a plan sponsored by the Company or an Affiliate that is intended to be qualified under Section 401(a) of the Internal Revenue Code.


 
Appendix A-3 Section 4. ACKNOWLEDGEMENTS. As a condition to participation in the Plan, you hereby acknowledge each of the following: (a) This Agreement and the Plan supersedes any severance benefit plan, policy or practice previously maintained by the Company that may have been applicable to you, including any individually negotiated employment agreement with the Company as it may have been amended from time to time (as so amended, the “Employment Agreement”). (b) The severance benefits that may be provided to you under this Agreement may reduce the severance benefits that would otherwise be provided to you under your Employment Agreement, or otherwise, as further specified in Section 2(c) of the Plan. For the avoidance of doubt, in no event shall you be entitled to receive Duplicative Benefits. To accept the terms of this Agreement and participate in the Plan, please sign and date this Agreement in the space provided below and return it to _____________________ no later than _______________________. Energy Focus, Inc. By: Name: Title: ______________________________ _____________________________________ [Eligible Employee] Date


 
Exhibit 10.3 1 ENERGY FOCUS, INC. CHANGE IN CONTROL BENEFIT PLAN PARTICIPATION AGREEMENT Name: Bradley B. White Section 1. ELIGIBILITY. You have been designated as eligible to participate in the Energy Focus, Inc. Change in Control Benefit Plan (the “Plan”), a copy of which is attached as EXHIBIT 1 to this Participation Agreement (the “Agreement”). Capitalized terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan. Section 2. SEVERANCE BENEFITS. Subject to the terms of the Plan, if you are terminated in an Involuntary Termination, and meet all the other eligibility requirements set forth in the Plan, including, without limitation, executing the required Release within the applicable time period set forth therein and provided that such Release becomes effective in accordance with its terms, you will receive the severance benefits set forth in this Section 2. Notwithstanding the schedule for provision of severance benefits as set forth below, the provision of any severance benefits under this Section 2 is subject to any delay in payment that may be required under Section 5 of the Plan. (a) Base Compensation Severance Benefit. You will be entitled to receive a single lump sum cash payment equal to one (1) times the sum of (a) your Annual Base Salary plus (b) your Target Bonus (the “Base Compensation Severance Benefit”). The Base Compensation Severance Benefit will be payable to you on the tenth business day following the effective date of your Release. (b) Target Bonus Severance Benefit. You will be entitled to receive a single lump sum cash payment equal to a pro-rata portion of your Target Bonus, with such pro-rata portion calculated with reference to the number of days in the calendar year that precedes the date of the Involuntary Termination divided by the number of days in the calendar year that includes the date of the Involuntary Termination. (the “Target Bonus Severance Benefit”). The Target Bonus Severance Benefit will be payable to you on the tenth business day following the effective date of your Release. (c) Accelerated Vesting of Stock Awards. (1) Effective as of the effective date of your Release, to the extent not previously vested and notwithstanding anything to the contrary set forth in an applicable award agreement or the applicable Equity Plan under which such award was granted, the restrictions and conditions applicable to any equity awards of the Company held by you (the “Awards”), shall lapse and such Awards shall immediately be fully vested upon a Change in Control and any performance-based Award shall be deemed fully earned at the target amount as of the date on which the Change of Control occurs (collectively, the “Vested Awards”). Unless determined


 
Exhibit 10.3 2 otherwise by the Plan Administrator in accordance with the terms of the applicable Equity Plan (such as to provide for a cash-out of vested options) or as otherwise set forth in the Plan, (ii) all Vested Awards that are stock unit awards or other stock-based awards shall be settled or paid within thirty (30) days of vesting hereunder, and (iii) all Vested Awards that are options and stock appreciation rights shall remain exercisable until the earlier of the third anniversary of such Change in Control (or any later date until which it would remain exercisable under such circumstances by its terms) or the expiration of its original term. Notwithstanding the foregoing, this Section 2(c) shall not apply to stock awards issued under or held in any Qualified Plan. (d) Payment of Continued Group Health Plan Benefits. (1) If you timely elect continued group health plan continuation coverage under COBRA the Company shall pay the full amount of your COBRA premiums on behalf of you for your continued coverage under the Company’s group health plans, including coverage for your eligible dependents, for twelve (12) months following your Involuntary Termination (the “COBRA Payment Period”). Upon the conclusion of such period of insurance premium payments made by the Company you will be responsible for the entire payment of premiums (or payment for the cost of coverage) required under COBRA for the duration of your eligible COBRA coverage period. For purposes of this Section, (i) references to COBRA shall be deemed to refer also to analogous provisions of state law and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are your sole responsibility. (2) Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or causing the Company’s group health plan to fail to comply with the nondiscrimination requirements of Section 105(h) of the Code, then in lieu of paying COBRA premiums on your behalf, the Company will instead pay you on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the COBRA premium for that month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made without regard to your election of COBRA coverage or payment of COBRA premiums and without regard to your continued eligibility for COBRA coverage during the COBRA Payment Period. Such Special Severance Payment shall end upon expiration of the COBRA Payment Period. Section 3. DEFINITIONS. (a) “Equity Plan” means the Company’s 2004 Stock Incentive Plan, 2008 Incentive Stock Plan, 2014 Stock Incentive Plan, as each may be amended, or any successor or other equity incentive plan adopted by the Company which govern your stock awards, as applicable. (b) “Qualified Plan” means a plan sponsored by the Company or an Affiliate that is intended to be qualified under Section 401(a) of the Internal Revenue Code.


 
Exhibit 10.3 3 Section 4. ACKNOWLEDGEMENTS. As a condition to participation in the Plan, you hereby acknowledge each of the following: (a) This Agreement and the Plan supersedes any severance benefit plan, policy or practice previously maintained by the Company that may have been applicable to you, including any individually negotiated employment agreement with the Company as it may have been amended from time to time (as so amended, the “Employment Agreement”). (b) The severance benefits that may be provided to you under this Agreement may reduce the severance benefits that would otherwise be provided to you under your Employment Agreement, or otherwise, as further specified in Section 2(c) of the Plan. For the avoidance of doubt, in no event shall you be entitled to receive Duplicative Benefits. To accept the terms of this Agreement and participate in the Plan, please sign and date this Agreement in the space provided below. Energy Focus, Inc. By: /s/ Theodore L. Tewksbury III Name: Theodore L. Tewksbury III Title: Chief Executive Officer and President /s/ Bradley B. White February 19, 2017 Bradley B. White Date


 
Exhibit 10.4 SEPARATION AGREEMENT AND RELEASE This Separation Agreement and Release (the “Agreement”) is entered into by James Tu (“Employee”) and Energy Focus, Inc. (“Energy Focus” or the “Company”). Employee and Energy Focus are collectively referred to in this Agreement as the “Parties.” In consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, Energy Focus and Employee hereby agree as follows: 1. Employee Resignation from the Board and Separation from Employment. Employee hereby tenders his resignation (a) as a member of the Company’s Board of Directors (the “Board”),(b) from all offices of any entity that is a subsidiary of, or is otherwise related to or affiliated with, the Company, and (c) as Chief Executive Officer and President and an employee of the Company, effective February 19, 2017 (the “Separation Date”). Energy Focus hereby accepts Employee’s resignation, and the parties agree that Employee’s employment with Energy Focus will end on the Separation Date. 2. Accrued Unused Vacation Days. Regardless of whether Employee signs this Agreement, Employee will be paid for accrued unused PTO time, which the Parties agree is 200 hours and which is equivalent to $38,461.55. Such payout will be made subject to applicable taxes and withholdings. Energy Focus will pay Employee this amount on the first regular paydate after the Separation Date. 3. Severance Pay and Other Consideration. Subject to, and in consideration of Employee’s execution and non-revocation of this Agreement, and provided that Employee is not in material breach of any of the terms of this Agreement, Energy Focus will provide Employee the following pay and benefits: (a) Energy Focus will pay Employee separation pay equal to twelve (12) months of pay at Employee’s regular base salary of $33,333.33 per month. These payments amount to a total sum of a total of $400,000, less deductions and withholdings as required by applicable law, and will be made in equal periodic installments corresponding to Energy Focus’s regular biweekly payroll dates (the “Severance Pay Period”). These payments will not begin until after the Separation Date and after the seven (7) day revocation period described below has expired without any revocation having been made, but the first bi-weekly payment will include make-up payments, without interest, for any bi-weekly pay periods between the Separation Date and the first severance payment. (b) Employee agrees that he will not receive any bonus or cash incentive payment for calendar year 2016. (c) If Employee and his dependents were enrolled in the Company’s health plan on the Separation Date, Employee’s and such dependents’ benefits will continue for twelve (12) months from the effective date of this Agreement for medical, dental and vision benefits; and all other benefits will cease on the Separation Date. Employee may elect to continue his participation and that of his eligible dependents in those plans after the expiration of this twelve- month period for a period of time under the federal law known as COBRA. Within 2 to 3 weeks after expiration of the twelve-month period Employee will receive a letter mailed to Employee’s address on file explaining options available under COBRA laws to extend health, dental and vision insurance coverage at Employee’s sole expense, plus any administrative charges that may be applicable. (d) All outstanding and vested stock options that are vested as of the Separation


 
Separation and Release Agreement Page 2 of 9 Date shall remain exercisable for such period as provided under the applicable award agreement and plan but in no event later than the last day of the option term. Any unvested stock options and restricted stock units shall terminate as of the Separation Date. (e) Within two (2) weeks after the Separation Date, Employee will file a final expense report with all supporting documentation covering any last expenses incurred on behalf of the Company. Thereafter, the Company will either (i) reimburse Employee for any pending, reasonable business-related credit card charges for which Employee has not already been reimbursed, or (ii) pay such charge directly to the card-issuing bank. Such reimbursement will be made no later than thirty (30) days after the final expense reimbursement request has been submitted to the Company. Employee hereby authorizes the Company to deduct from monies to be paid to Employee under this Agreement any balance remaining on Employee’s Company credit card account after such (i) reimbursement or (ii) direct payment. Only those expenses incurred by Employee prior to the Separation Date shall be eligible for reimbursement. (f) Up to an aggregate of $10,000 of (i) attorney’s fees and related expenses payable to Reavis Parent and Lehrer LLP for legal advice rendered in connection with this matter, and (ii) for any executive coaching or outplacement services provided to the Employee during the Severance Pay Period, in each case, directly to the provider of these services upon receipt of an invoice of services rendered. Employee acknowledges that the payment(s) and other consideration provided in this Section 3 are solely in exchange for the promises in this Agreement. 4. No Other Payments. Other than the payments described in this Agreement, Employee acknowledges and agrees that Employee has not earned, and is not eligible for any other monies, bonuses or other compensation from Energy Focus; provided, however, that Employee remains eligible to receive such benefits as Employee may otherwise be entitled under the qualified retirement plans of Energy Focus, subject to the terms of such plans and the applicable law. The Parties agree that any employer contributions or matching for any retirement plan contributions shall cease as of the Separation Date, except that any contributions that have accrued through the Separation Date but have not yet been contributed to such plans shall be contributed in accordance with the plan terms. 5. Release. (a) Scope of Release. Employee, on behalf of himself, his spouse, heirs, executors, administrators and assigns, and anyone else claiming on Employee’s behalf, releases and discharges Energy Focus, Inc., its shareholders, parents, subsidiaries, affiliates, predecessors, successors and assigns, and all of their respective current and former directors, trustees, officers, attorneys, agents, and employees in their corporate as well as personal capacities (collectively, the “Released Parties”) from liability for all claims, demands, rights, actions, causes of actions, obligations, suits and controversies, known or unknown, (collectively, “Claims”) arising prior to and up to and including the date Employee signs this Agreement. This release includes, but is not limited to: (a) all Claims arising out of or in any way related to Employee’s employment or separation from employment with Energy Focus, including but not limited to any action sounding in tort or contract (express or implied), any claim for promissory estoppel, emotional distress, pain and suffering, punitive damages, attorneys’ fees, benefits, wages or any other compensation, wrongful discharge, any violation of public policy, any claim of discrimination, harassment or retaliation on any basis including, but not limited to age, race, religion, sex, national origin or disability, whether arising under common law or under any federal, state or local law, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (including as amended by the Older Workers Benefit


 
Separation and Release Agreement Page 3 of 9 Protection Act), the Americans with Disabilities Act, the Family and Medical Leave Act, the New York Executive Law, the New York State Human Rights Law, the New York City Human Rights Law, the New York Labor Law, the New York Equal Pay Law, the New York Civil Rights Law, the New York Rights of Persons With Disabilities Law, the New York Equal Rights Law, the New York City Administrative Code, Ohio Revised Code Chapter 4112, and any other law relating to employment, and any Claims growing out of any legal restriction on an employer’s right to discharge its employees or executives; and (b) any and all Claims of any sort arising from events or circumstances occurring prior to when Employee signs this Agreement. (b) Limitation. (i) The foregoing release does not waive rights or claims that may arise after the date this Agreement is executed or that cannot be waived as a matter of law. The foregoing release does not waive any rights that Employee may have to continue health or other benefits at Employee’s expense, pursuant to COBRA or applicable state law. Nothing in any part of this Agreement is intended to, or shall, interfere with Employee’s right to file or otherwise participate in a charge, investigation, or proceeding conducted by the Equal Employment Opportunity Commission or other federal, state, or local government agency. (ii) Employee shall not, however, be entitled to any relief, recovery, or monies in connection with any such matter brought against any of the Released Parties, regardless of who filed or initiated any such charge, investigation, or proceeding. Employee agrees that Employee will neither seek nor accept, from any source whatsoever, any further benefit, payment, or other consideration relating to any rights or claims that have been released in this Agreement. The prohibitions on further recovery in this paragraph 5(B)(ii) shall not apply to any monetary award from a government-administered whistleblower award program for providing information directly to a government agency. 6. Will Not Seek Re-Employment. Employee understands and agrees that the employment relationship with Energy Focus will end as of the Separation Date, and Employee agrees not to seek re-employment with Energy Focus at any time in the future. If Employee should become re-employed by Energy Focus in the future, this section shall be sufficient grounds to terminate such employment. 7. Return of Property. Employee acknowledges that before signing this Agreement, or within two days thereafter, Employee has returned or will return to Energy Focus any and all Energy Focus property in Employee’s possession. Such property includes, but is not limited to Energy Focus keys, credit cards, records, files, lists and/or any other materials prepared by Employee or any other Energy Focus employee which relate in any way to Energy Focus. Employee shall also, by the same deadline, provide to the Chairman of the Board a list of passwords or access codes to Employee’s work computer and any internal systems or external subscriptions paid for by Energy Focus to which Employee has password-restricted access. 8. No Admission of Liability. The Parties agree that: (a) this Agreement is a means of amicably resolving any differences relating to Employee’s employment and separation from employment; (b) this Agreement is not intended to be, and should not be construed as, an admission of liability on the part of Energy Focus or Employee; and (c) this Agreement was proposed and entered into solely for the purpose of amicably resolving all issues arising out of Employee’s employment and separation from employment. 9. Nondisclosure of the Company’s Confidential Information. (a) Definitions.


 
Separation and Release Agreement Page 4 of 9 (i) “Company Business” is the development, production and sale of commercial lighting products. (ii) “Confidential Information” shall mean nonpublic information or material (1) that is proprietary to the Company or its customers, is confidential, or is a trade secret, regardless of whether it is specifically designated or labeled as confidential by and of the Company, or (2) that Employee creates, discovers, develops in whole or in part, or of which Employee obtains knowledge of or access to, as a result of Employee’s relationship with the Company. Confidential Information generally includes, but is not limited to, designs, works of authorship, mask works, formulas, ideas, concepts, techniques, inventions, devices, improvements, know-how, methods, processes, drawings, specifications, models, data, documentation, diagrams, flow charts, research, developments, procedures, software in various stages of development, source code, object code, marketing techniques and materials, business, marketing, development and product plans, financial information, customer information, strategic information, and other confidential business or technical information. Confidential Information does not include information which (x) is or becomes publicly available (other than by disclosure or other wrongful act by the Employee), or (y) was known to the Employee before the Employee began employment with the Company. (b) Obligation to Protect Confidential Information. Employee recognizes and acknowledges that Confidential Information includes valuable, special and unique assets of the Company. Subject to the exceptions described below, (i) Employee shall forever protect and maintain the confidentiality of Confidential Information; and (ii) Employee shall never, directly or indirectly, use, publish, post, copy, duplicate, or disclose Confidential Information, or encourage, aid, or abet such activity, except as required in the course of Employee’s job duties at the Company and, then only to individuals who have a need to know based on such individual’s job responsibilities at the Company. (c) Exceptions to Section 9(b). The restrictions in Section 9(b) do not apply to any of the following situations, so long as the Employee takes all reasonable steps to ensure that the scope of disclosure does not exceed the permitted scope and that such disclosure does not extend beyond the parameters of what is permitted: (i) Employee may respond to a lawful and valid subpoena or other legal process or court order that seeks the disclosure of Confidential Information but: (1) shall give the Company’s Chief Executive Officer or Chief Financial Officer the earliest possible notice of the receipt thereof; (2) shall, as much in advance of the return date as possible, make available to the Company’s Chief Executive Officer or Chief Financial Officer the documents and other information sought; and (3) shall assist the Company’s legal counsel, at the Company’s expense, in resisting or otherwise responding to such subpoena or process. (ii) Employee may disclose Confidential Information to a government agency as part of a report, complaint, or investigation without providing notice to the Company. (iii) Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (1) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law. In addition, Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Furthermore, in the event Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and use the trade secret


 
Separation and Release Agreement Page 5 of 9 information in the court proceeding, if Employee files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. 10. Non-Disparagement. (a) Employee will not make any statements or disclose any untrue information concerning Energy Focus, its directors, officers, management, staff, employees, representatives, or agents (collectively, “Energy Focus or its management”), which are likely to disparage Energy Focus or its management, which are likely to damage the reputation or business prospects of Energy Focus or its management, or which are likely to interfere in any way with the business relations Energy Focus has with its customers (including potential customers), suppliers, vendors, employees, investors, or shareholders. Energy Focus acknowledges that nothing in this Paragraph shall limit Employee from testifying in or otherwise cooperating with any federal, state, or civil action, investigation or inquiry. (b) Energy Focus’s executive officers and directors will not make any statements or disclose any untrue information concerning Employee, which are likely to disparage or damage the Employee’s reputation or stature in the business community. Employee acknowledges that nothing in this Paragraph shall limit Energy Focus or any of its employees or directors from testifying in or otherwise cooperating with any federal, state, or civil action, investigation or inquiry; or from releasing truthful information or making truthful statements. 11. Non-Solicitation. Employee agrees that, for a period of one (1) year after the Separation Date, Employee will not personally, and will not instruct or directly or indirectly assist any other individual or entity to, persuade or encourage, or attempt to persuade or encourage, (a) any producer, manufacturer, licensor, supplier, vendor or any other person providing goods or services to Energy Focus not to conduct business with Energy Focus or to reduce the amount of business it conducts with Energy Focus; (b) any customer or potential customer not to conduct business with Energy Focus or to reduce the amount of business it conducts with Energy Focus; or (c) any employee of Energy Focus to leave Energy Focus’s employ. For the purposes hereof, “customer” shall include any prospective customer to whom Energy Focus made a presentation (or similar offering of services) within a period of ninety (90) days immediately preceding the Separation Date. These restrictions shall be in addition to the restrictions described in the Confidentiality Agreement, including but not limited to Sections G and H, which remain in full force and effect. 12. Non-Competition. (a) For a period of one (1) year after the Separation Date, Employee shall not: (i) directly or indirectly act in concert or conspire with any person employed by the Company in order to engage in or prepare to engage in or to have a financial or other interest in any business or any activity that he knows (or reasonably should have known) to be directly competitive either with Company Business as then being carried on or with any business, activity, product or service which was under active development while Employee was employed by the Company if such development was actively pursued or considered during the two (2) year period preceding the Separation Date; or (ii) serve as an employee, agent, partner, shareholder, director, or consultant for, or in any other capacity participate, engage, or have a financial or other interest in any business or any activity that he knows (or reasonably should have known) to be directly competitive either with the Company Business as then being carried on or with any business, activity, product or service which was under active development while Employee was employed by the Company if such development was actively pursued or considered during the two (2) year period preceding the Separation Date (provided, however, that notwithstanding anything to the contrary contained in this Agreement, Employee may own


 
Separation and Release Agreement Page 6 of 9 up to two percent (2%) of the outstanding shares of the capital stock of a company whose securities are registered under Section 12 of the Securities Exchange Act of 1934). (b) In the event Employee violates any provision of this Section 12 as to which there is a specific time period during which he is prohibited from taking certain actions or from engaging in certain activities as set forth in such provision, such violation shall toll the running of such time period from the date of such violation until such violation shall cease. The foregoing shall in no way limit the Company’s rights under Section 16 of this Agreement. (c) Employee has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Section 12 and this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to the Company, do not stifle the inherent skill and experience of Employee, would not operate as a bar to Employee’s sole means of support, are fully required to protect the legitimate interests of the Company and do not confer a benefit upon the Company disproportionate to the detriment to Employee. Employee further acknowledges that his obligations in this Section 12 are made in consideration of, and are adequately supported by the payments by the Company to Employee described herein. 13. Disclosure. From the date of this Agreement through the end of the applicable restricted period, Employee will communicate the contents of Sections 9, 10, 11 and 12 of this Agreement to any person, firm, association, or corporation which he intends to be employed by, associated in business with, or represent. 14. Standstill and Voting Agreement. (a) Employee agrees that, unless approved in advance in writing by the Board, the Employee agrees that neither he nor any of his affiliates, and his and their respective directors, officers, employees, managing members, general partners, agents and consultants (including attorneys, financial advisors and accountants) (collectively, “Representatives”) acting on behalf of or in concert with the Employee (or any of its Representatives) will, for a period of one year after the date of this Agreement, directly or indirectly: (i) make any statement or proposal to the Board, any of the Company’s Representatives or any of the Company’s stockholders regarding, or make any public announcement, proposal or offer (including any “solicitation” of “proxies” as such terms are defined or used in Regulation 14A of the Exchange Act) with respect to, or otherwise solicit, seek or offer to effect (including, for the avoidance of doubt, indirectly by means of communication with the press or media) (A) any business combination, merger, tender offer, exchange offer or similar transaction involving the Company or any of its subsidiaries, (B) any restructuring, recapitalization, liquidation or similar transaction involving the Company or any of its subsidiaries, (C) any acquisition of any of the Company's loans, debt securities, equity securities or assets, or rights or options to acquire interests in any of the Company's loans, debt securities, equity securities or assets, (D) any proposal to seek representation on the Board or otherwise seek to control or influence the management, Board or any policies of the Company, (E) any request or proposal to waive, terminate or amend the provisions of this Agreement, or (F) any proposal, arrangement or other statement that is inconsistent with the terms of this Agreement, including this Section 14(a)(1); (ii) instigate, encourage or assist any third party (including forming a “group” with any such third party) to do, or enter into any discussions or agreements with any third party with respect to, any of the actions set forth in clause (i) above;


 
Separation and Release Agreement Page 7 of 9 (iii) take any action which would reasonably be expected to require the Company or any of its affiliates to make a public announcement regarding any of the actions set forth in clause (i) above; or (iv) acquire (or propose or agree to acquire), of record or beneficially, by purchase or otherwise, any loans, debt securities, equity securities or assets of the Company or any of its subsidiaries, or rights or options to acquire interests in any of the Company's loans, debt securities, equity securities or assets, except that Employee may (A) exercise any vested stock options issued by the Company and held by him upon effectiveness of this Agreement and (B) beginning six (6) months after the date of this Agreement, Employee may request advance written approval from the Board to acquire the Company’s securities, which approval shall be granted solely within the discretion of the Board. (b) At the Company’s annual meeting of stockholders held in 2017, Employee shall vote all shares of the Company’s Common Stock over which the Employee has voting control and shall take all other necessary or desirable actions within such Employee’s control to vote in favor the proposals recommended by the Board and to elect to the Board any individual nominated by the Board, as reflected in the Company’s proxy statement for such meeting. (c) Notwithstanding the foregoing provisions of this Section 14, the restrictions set forth in this Section 14 shall terminate and be of no further force and effect if the Company enters into a definitive agreement with respect to, or publicly announces that it plans to enter into or is seeking to enter into, a transaction involving all or a controlling portion of the Company’s equity securities or all or substantially all of the Company's assets (whether by merger, consolidation, business combination, tender or exchange offer, recapitalization, restructuring, sale, equity issuance or otherwise). 15. Attorney’s Fees. Both parties agree to bear their own attorney’s fees and related expenses, if any, in connection with this matter. 16. Choice of Law and Availability of Injunctive Relief. This Agreement shall in all respects be interpreted, enforced under, and governed by the laws of the State of Ohio. Notwithstanding the choice or conflict of law rules of any court or competent jurisdiction, the laws of the State of Ohio should be used to interpret and enforce this Agreement. Any litigated dispute over this Agreement or any of the matters addressed in this Agreement shall be brought and maintained solely in the state or federal courts within the State of Ohio. In addition, in connection with any such court action, Employee acknowledges and agrees that the remedy at law available to the Company for breach by Executive of any of his obligations under Sections 9, 10, 11, 12 and 14 of this Agreement would be inadequate and that damages flowing from such a breach would not readily be susceptible to being measured in monetary terms. Accordingly, Employee acknowledges, consents and agrees that, in addition to any other rights or remedies which the Company may have at law, in equity or under this Agreement, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach of any provisions in Sections 9, 10, 11, 12, or 14 of this Agreement, without the necessity of proof of actual damage. 17. Modifications. No provisions of this Agreement may be modified, amended, or terminated, except in a writing signed by Employee and by the Chairman of the Board of Energy Focus. 18. Entire Agreement. The only pay, benefit or other consideration for signing this Agreement is described herein. In exchange for signing this Agreement, Employee is being provided consideration to which Employee would not otherwise be entitled under the Company’s


 
Separation and Release Agreement Page 8 of 9 usual policies and practices. This Agreement constitutes the complete and final agreement between the Parties, and supersedes any and all prior representations or agreements, whether written or oral; except that the agreements evidencing equity awards that have vested as of the date hereof remain in full force and effect. No other representations, promises or agreements of any kind have been made by any person or entity to induce Employee to sign this Agreement. Notwithstanding the foregoing, this Agreement will not affect Employee’s rights to indemnification or defense as a former officer and employee of Energy Focus or any of its affiliates under any articles of incorporation, codes of regulations, other charter documents, insurance policies, or other laws to the extent any are applicable. 19. Cooperation. After the Separation Date, Employee agrees to cooperate with the Company, including its representatives and attorneys, to provide information or testimony that may relate to the Company or to matters within the Employee’s knowledge, if called upon by the Company to do so, for purposes related to any lawsuits, proceedings, administrative actions, public filings, or to provide other factual information in preparation or anticipation of any such matter, or to assist with other internal or external Company matters. Employee shall not receive compensation for providing such cooperation, but if such cooperation is requested by the Company, Employee shall be entitled to reimbursement from the Company for reasonable out- of-pocket expenses that are necessarily and reasonably incurred as a result of providing such cooperation, including for example, airfare, hotel, and related travel expenses, if travel is requested. If Employee is asked by any person other than the Company (or its representatives or attorneys) to provide information or testimony related to any matter connected to his employment or the Company, Employee agrees to provide advance notice to the Company and to take all reasonable steps to ensure that the Company has an opportunity to respond and/or to participate in such proceedings, except that Employee need not provide advance notice to the Company before participating in any whistleblower investigation/proceeding before a government agency. If Employee is providing testimony for any reason whatsoever, Employee agrees that he shall give only truthful testimony and shall provide only truthful information, to the best of his knowledge. 20. Severability. If for any reason any term or provision set forth herein, or part thereof, containing a restriction on Employee’s activities after the Separation Date is invalid or unenforceable because it is held to cover an area or to be for a length of time or otherwise have a scope that is unreasonable or is otherwise construed to be too broad, such term or provision, or part thereof, shall be reformed and/or modified to provide for a restriction having the maximum enforceable area, time period and/or other scope (not greater than those contained herein) as shall be valid and enforceable under applicable law. Otherwise, if any part, term, or provision of this Agreement be determined by any court of competent jurisdiction to be illegal, invalid or unenforceable, the validity of the remaining parts, terms or provisions shall not be affected thereby and the illegal, invalid, or unenforceable part, term, or provision shall be deemed not to be a part of this Agreement; except, however, that if any portion of the Release in Section 5 is determined by a judicial order invalid or unenforceable, then the Company shall have seven days to decide whether (a) to invalidate this entire Agreement, in which case the entire Agreement will be void and Employee will have to pay back all money that he already received under Section 3(a) of this Agreement; or (b) to waive its right to invalidate the Agreement and instead, to keep the Agreement valid and fully enforceable, subject to the changes needed to remove or modify the portion of the Release that was judicially determined to be invalid or unenforceable.


 
Separation and Release Agreement Page 9 of 9 21. Time to Consider/Advised To Consult Counsel. Employee is being given a period of at least twenty-one (21) calendar days to consider the terms and conditions of this Agreement before executing it. The Parties agree that any modifications made to this Agreement, material or otherwise, will not restart and/or affect the running of this 21 day period. Employee is advised to consult with an attorney of Employee’s choice prior to executing this Agreement. Employee acknowledges that Employee has carefully read this Agreement, understands the content and effect of this Agreement, and intends to be bound by it. 22. Time to Revoke/Effective Date. This Agreement shall become effective seven (7) days after Employee has signed it. Prior to the expiration of the 7-day period, Employee has the right to revoke this Agreement by delivering written notice of cancellation to the CEO and Chairman of the Board, Energy Focus, Inc., Empire State Building, 350 Fifth Avenue, Suite 6705, New York, NY 10118, in a manner such that the revocation is received before the 7-day period ends. If Employee does not revoke this Agreement with the 7-day revocation period, this Agreement shall become effective upon the expiration of the revocation period. 23. Other Representations. Employee represents and warrants that (a) if Employee has incurred any workplace injury at Energy Focus, Employee has previously reported such injury in writing, and Employee is unaware of any facts that could give rise to any workers compensation claim that has not already been filed, (b) Employee has reported, and has been paid for, all time worked through the date Employee signed this Agreement, with the possible exception of time worked during the last pay period and through the Separation Date, which may not yet have been paid but will be paid to Employee as described above, and (c) Employee has been provided all leave that Employee requested, and Employee is unaware of any facts that would give rise to any claim under the Family Medical Leave Act or any other state or local leave law. If Employee disagrees with any of the representations in this section, Employee has fully explained all applicable details in writing next to Employee’s signature at the end of this Agreement, attaching additional pages if necessary. 24. Counterparts. This Agreement may be executed in counterparts, all of which taken together shall constitute an instrument enforceable and binding upon the undersigned parties. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS THE CONTENT AND CONSEQUENCES OF SIGNING THIS AGREEMENT. EMPLOYEE FURTHER ACKNOWLEDGES THAT EMPLOYEE EXECUTES THIS AGREEMENT KNOWINGLY AND VOLUNTARILY WITH THE INTENT TO BE LEGALLY BOUND BY IT. Having agreed to the foregoing terms of this Agreement, the Parties have executed it on the date indicated below. ENERGY FOCUS, INC. EMPLOYEE By: /s/ Theodore L. Tewksbury III /s/ James Tu Name: Theodore L. Tewksbury III Signature Executive Chairman of the Board James Tu Title Print Name February 18, 2017 February 18, 2017 Date Date


 
Exhibit 99.1 Energy Focus Appoints Current Executive Chair to Serve as CEO and Announces His Plan to Rejuvenate Revenue Growth while Reducing Annual Operating Expenses by $10 Million SOLON, Ohio, February 20, 2017 -- Energy Focus, Inc. (NASDAQ:EFOI), a leader in LED lighting technologies, announced that, effective as of February 19, 2017, Dr. Ted Tewksbury, the Company’s Executive Chairman, will now serve as the Company’s Chairman of the Board, Chief Executive Officer and President. James Tu has stepped down as Chief Executive Officer and President and both Mr. Tu and Simon Cheng resigned from the Board of Directors effective February 19, 2017. The leadership change was part of an initiative that is being implemented during the first quarter of 2017 to achieve higher operating efficiencies and reduce the Company’s annual operating costs by approximately $10 million from 2016 levels. The plan includes a workforce reduction of approximately 15%, consolidation of the Company’s office facilities, reorganization of the commercial sales force, integration of engineering and research and development teams, reconfiguration of certain manufacturing lines, and reduction in administrative expenses and professional fees. The Company expects to record a one-time restructuring charge of approximately $1.1 million in its first quarter 2017 associated with these actions. “James joined the Company as Chairman in 2012 and, through his role on the Board and then as our Chief Executive Officer and President, he has played a pivotal role in our evolution as a leader in LED lighting. During his tenure, the Company was restructured to focus on the sale of our LED lighting products, in particular our military and commercial tubular LED lines of products, into targeted markets. I sincerely thank him for his leadership in executing on this vision for the Company and for setting the stage for future growth,” said Dr. Ron Black, the Company’s lead independent director and former Chairman. “I also thank Simon Cheng for his contributions to the Board and continuing role as an employee. I wish James the best in his future endeavors,” Dr. Black continued. “Ted’s wealth of experience has allowed him to quickly integrate into the Energy Focus team and identify opportunities to return to profitability and growth. Expanding his role allows him to have a more hands-on approach to drive change, including his recent business restructuring, and we look forward to his leadership of the Company into its next chapter,” commented Dr. Black.


 
“Serving in a combined role as Chairman, Chief Executive Officer and President and with a smaller Board will further our strategic efforts to evolve as a more efficient and streamlined organization. Together with other restructuring actions, these first steps will serve as the foundation to return the company to profitable growth in 2017 and beyond. I look forward to discussing these matters with our investors on the Company’s fourth quarter and year-end earnings call,” said Dr. Tewksbury. Earnings Conference Call As previously announced, the Company is hosting a public teleconference call to discuss financial results for its quarter and year ended December 31, 2016 at 11:00 a.m. Eastern Time on February 23, 2017. To participate in the call, please dial 888-690-2876 if calling within the United States or 913-312-0971 if calling internationally. A replay will be available until March 2, 2017, which can be accessed by dialing 844-512-2921 if calling within the United States or 412-317-6671 if calling internationally. Please use passcode 5192928 to access the replay. The call will additionally be broadcast live and archived for 90 days over the internet accessible in the Investors portion of the Company’s corporate website, under “Events and Presentations” at http://investors.energyfocus.com/events.cfm. Ted Tewksbury Biographical Information Dr. Tewksbury is a well-known semiconductor industry executive with a distinguished track record of transforming and building visionary businesses. As the former CEO of Integrated Device Technology, Dr. Tewksbury architected the company's turnaround from 2008 to 2013, putting it in new businesses such as analog, wireless charging and radio frequency (RF) products. Dr. Tewksbury served on the Board of Directors of Entropic Communications from 2010 to 2015 and, as CEO from 2014 to 2015, led the company's return to profitability and sale to MaxLinear, where he currently serves on the Board of Directors. Dr. Tewksbury was President and COO of AMI Semiconductor from 2006 to 2008, Managing Director at Maxim Integrated from 2000 to 2006 and held a variety of engineering and management positions at IBM Microelectronics and Analog Devices. Dr. Tewksbury served on the Board of Directors of the Global Semiconductor Alliance (GSA) from 2011 to 2013 and has been a Board Director at Jariet Technologies since its spinoff from Semtech in 2015. Dr. Tewksbury received the B.S. degree in Architecture, as well as M.S. and Ph.D. degrees in Electrical Engineering from MIT.


 
Forward-Looking Statements Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, these statements can be identified by the use of words such as “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could,” “would” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts and include statements regarding our current expectations concerning, among other things, our results of operations, financial condition, strategies, capital expenditures and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward- looking statements on assumptions that we believe are reasonable when made, we caution you that forward- looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this report. We believe that important factors that could cause our actual results to differ materially from forward-looking statements include, but are not limited to: the Company’s expectations regarding the amount and timing of the Restructuring charges, including costs subject to future negotiations with third parties; estimates of the amount of savings that will be realized; the effectiveness of the Restructuring in achieving intended cost reductions and operational efficiencies; our history of operating losses and our ability to effectively implement cost-cutting measures and generate sufficient cash from operations or receive sufficient financing, on acceptable terms, to continue our operations; our reliance on a limited number of customers, in particular our sales of products for the U.S. Navy, for a significant portion of our revenue, and our ability to maintain or grow such sales levels; the entrance of competitors in the market for the U.S. Navy products; general economic conditions in the United States and in other markets in which we sell our products; our ability to utilize our resulting operational structure to implement and manage our growth plans to increase demand, diversify our customer base, increase sales, control expenses and respond to new technologies and market trends; our ability to compete effectively against companies with greater resources, lower cost structures, or more rapid development efforts; our ability to protect our intellectual property rights and other confidential information, manage infringement claims by others, and the impact of any type of legal claim or dispute; our ability to attract and retain qualified personnel, and to do so in a timely manner; and our ability to maintain effective internal controls and otherwise comply with our obligations as a publicly traded company. In light of the foregoing, we caution you not to place undue reliance on our forward-looking statements. Any forward- looking statement that we make in this report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments.


 
About Energy Focus Energy Focus is an industry-leading innovator of energy-efficient LED lighting technology. As the creator of the so far first and only UL-verified low-flicker LED products on the U.S. market, Energy Focus products provide extensive energy and maintenance savings, and aesthetics, safety, health and sustainability benefits over conventional lighting. Our customers include U.S. and foreign navies, U.S. federal, state and local government, healthcare and educational institutions, as well as Fortune 500 companies. Energy Focus is headquartered in Solon, Ohio, with additional offices in New York, NY and Taipei, Taiwan. Contact: Energy Focus, Inc. (440) 715-1300 ir@energyfocus.com Darrow Associates, Inc. Peter Seltzberg, Managing Director (516) 419-9915 pseltzberg@darrowir.com ###