Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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(e)
On November 7, 2017, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Ormat Technologies, Inc. (the “Company”) and the Board approved certain changes to the compensation of the Company’s chief executive officer (“CEO”), chief financial officer (“CFO”) and other named executive officers (collectively, the “NEOs”), effective immediately. The changes impact the cash and / or equity components of each NEO’s base salary and / or incentive compensation payable pursuant to the Company’s Amended and Restated 2012 Incentive Compensation Plan, effective as of and approved by the Company’s stockholders on May 8, 2012 (the “Plan”), in each case as further described below.
The Compensation Committee and the Board approved these changes, following consultation and discussion with executive compensation consultants and review of a commissioned benchmarking report as well as publicly available information regarding peer comparison data, in each case, for mid-cap companies and energy sector companies, in order to ensure that the Company’s senior management team is incentivized to continue to deliver strong performance, strengthen alignment of the Company’s senior management team with the recently revised Board and the Company’s stockholders, strike the appropriate balance between short, medium and long-term goals, ensure that the compensation arrangements reflect evolving market trends and investor concerns, and update the performance hurdles to ensure alignment with evolving corporate targets.
The Committee and the Board, which previously approved the grant by the Company of solely stock options and stock appreciation rights (“SARs”) to all NEOs pursuant to the Plan as the equity component of the NEOs
’ annual incentive compensation, replaced a portion of such stock options and SARs with restricted stock units (“RSUs”) so that from November 7, 2017, the Company will grant to its NEOs and certain other executive officers equity compensation with a target value mix of two-thirds of SARs and one-third of RSUs. The RSUs and SARs are time-vested and will vest according to the following schedules: RSUs and SARs granted to the CEO will vest 22%, 22%, 28% and 28%, respectively, on the one, two, three and four year anniversaries of the date of grant, and RSUs granted to the other NEOs, including the CFO, will vest 25% on each of the one, two, three and four year anniversaries of the date of grant. Each RSU represents the right to receive one share of the Company’s Common Stock upon vesting and is valued on the date of grant based on the closing price of the Company’s Common Stock on the next business day following such date of grant. SARs will continue to vest according to the following schedule: SARs granted to all NEOs, except the CEO, will vest 25% on each of the one, two, three and four year anniversaries of the date of grant and are valued based on the closing price of the Company’s Common Stock on the next business day following the date of grant. All SARs will be paid in shares of the Company’s Common Stock with a value equal to the amount by which the market value of all shares of the Company’s Common Stock in respect of which the SAR is exercised exceeds the grant price of such SAR. RSUs and SARs granted to the CEO and CFO are subject to clawback under certain circumstances.
The Form of Restricted Stock Unit Agreement for restricted stock units awarded to directors and certain executive officers from and after November 7, 2017 is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
CEO
Following approval by the Committee and the Board as described above, the CEO, Mr. Isaac Angel, will receive cash compensation consisting of an annual base salary of approximately $609,000, representing an increase in annual base salary of approximately 31%, and an annual cash bonus opportunity of up to $900,000. Mr. Angel’s annual cash bonus will be awarded 75% based on achievement of specific performance metrics that measure the financial performance of the Company and are set by the Committee at the beginning of each fiscal year and 25% at the discretion of the Committee based on the achievement of other goals, such as diversity, social and environmental responsibility and merger and acquisition activities. Previously, Mr. Angel received cash compensation consisting of an annual base salary of $464,840 and an annual cash bonus opportunity of 0.75% of the Company’s annual consolidated net income up to and including $50,000,000 plus 1.00% of the portion of the Company’s annual consolidated net income above $50,000,000, not to exceed $750,000. On November 7, 2017, Mr. Angel was granted equity incentive compensation with an aggregate value of $6,445,000 that will vest over time as described above and that has a target value mix of two-thirds of SARs and one-third of RSUs, with the actual number of SARs and RSUs granted to Mr. Angel based on the closing price of the Company’s Common Stock on the next business day following the date of grant. The Company and Mr. Angel are finalizing a supplemental agreement reflecting Mr. Angel’s compensation package approved by the Committee and the Board on November 7, 2017, which will be promptly filed with the Securities and Exchange Commission (“SEC”) once finalized.
CFO
Following approval by the Committee and the Board as described above, the CFO, Mr. Doron Blachar, will receive cash compensation consisting of an annual base salary of approximately $381,250, representing an increase in annual base salary of approximately 4%, and an annual cash bonus opportunity of up to $297,000. Mr. Blachar’s annual cash bonus will be awarded 75% based on achievement of specific performance metrics that measure the financial performance of the Company and are set by the Committee at the beginning of each fiscal year and 25% at the discretion of the Committee based on the achievement of other goals, such as diversity, social and environmental responsibility and merger and acquisition activities. Previously, Mr. Blachar received cash compensation consisting of an annual base salary of $366,587 and an annual cash bonus awarded pursuant to the Company’s annual management incentive plan, subject to the approval of the Board. On November 7, 2017, Mr. Blachar was granted equity incentive compensation with an aggregate value of $1,808,000 that will vest over time as described above and that has a target value mix of two-thirds of SARs and one-third of RSUs, with the actual number of SARs and RSUs granted to Mr. Blachar based on the closing price of the Company’s Common Stock on the next business day following the date of grant. The Company and Mr. Blachar are finalizing a supplemental agreement reflecting Mr. Blachar’s compensation package approved by the Committee and the Board on November 7, 2017, which will be promptly filed with the SEC once finalized.
Other NEOs
On November 7, 2017 following approval by the Committee and the Board, Mr. Zvi Krieger, the Company’s Executive Vice President of the Electricity Segment, and Mr. Bob Sullivan, the Company’s Executive Vice President of Business Development, Sales and Marketing, both NEOs, were each granted equity incentive compensation with an aggregate value of $250,000 that will vest over time as described above and that has a target value mix of two-thirds of SARs and one-third of RSUs, with the actual number of SARs and RSUs granted to each of Mr. Krieger and Mr. Sullivan based on the closing price of the Company’s Common Stock on the next business day following the date of grant.