June 26, 2014
Mr. Joel Gay
Via Email Delivery: jgay@energyrecovery.com
Re: Offer of Promotion
Dear Joel,
I am pleased to offer you a promotion to the position of Chief Financial Officer reporting directly to me and I am confident that you will excel in your new position. Commensurate with your promotion, your compensation and benefits will be as follows:
Base Salary. Effective June 27, 2014 you will receive an annual base salary of $265,000 in bi-weekly payments of $10,192.31, less deductions authorized or required by law.
Benefits. You will receive three (3) weeks of paid time off that accrues each pay period. You will continue to receive employee benefits including medical, dental and vision insurance for you and your dependents, as well as long-term disability and life insurance. Please note that the benefits program may change from time to time at the Company’s discretion.
Annual Incentive Plan. You will participate in the Company’s Annual Incentive Plan (“AIP”). For 2014 there will no maximum or target payout established in advance, but rather your AIP payout will be a function of your performance as determined by me and the Board of Directors.
Future Compensation. Your overall compensation for 2015 will be determined in consultation with a compensation consultant and it is the intent that such compensation be roughly equal in quantum to that received by our former Chief Financial Officer in 2011.
Stock Option Grant. As part of your promotion you will be granted an option to purchase 100,000 shares of Energy Recovery common stock under the standard terms of the Company's Amended and Restated 2008 Equity Incentive Plan (the “Plan”). The effective date of the grant shall be July 3, 2014. The exercise price per share will be equal to the closing price of Energy Recovery's common stock on NASDAQ on July 3, 2014. Said options will vest over four (4) years with twenty-five percent (25%) of the shares vesting on the first anniversary of the grant date, which will be the first day of your promotion to Chief Financial Officer. After the first anniversary of the grant date, one thirty-sixth (1/36th) of the remaining shares will vest each month thereafter. In addition, if after ninety (90) days of your promotion, you have performed to my satisfaction and that of the Board of Director's, you will be granted an additional option to purchase 100,000 shares of Energy Recovery's common stock under similar terms as your initial promotion grant. The grant date will be established by the Compensation Committee of the Board of Directors.
Long-Term Incentive Plan. You will continue to participate in the Long Term Incentive Plan subject to the approval of the company’s Board of Directors or its Compensation Committee.