UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934



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ENERGY FOCUS, INC.



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ENERGY FOCUS, INC.

32000 AURORA ROAD, SUITE B

SOLON, OHIO 44139

~~April 28, 2017~~November 7, 2019

Dear Stockholder:

~~This~~You are cordially invited to this year’s Annual Meeting of Stockholders, which will be held virtually on ~~Wednesday, June 21, 2017~~Tuesday, December 17, 2019 at 9:00 A.M., ~~local time, at~~Eastern Time. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/EFOI2019, where you will be able to listen to and participate in the ~~principal executive offices of Energy Focus, Inc., 32000 Aurora Road, Suite B, Solon, Ohio 44139. You are cordially invited~~meeting live, submit questions, and vote online. We believe that a virtual stockholder meeting will provide greater access to ~~attend.~~those who may want to attend, and therefore have chosen to conduct a virtual meeting rather than an in-person meeting. Because the Annual Meeting is virtual and being conducted electronically, stockholders cannot attend the Annual Meeting in person.

The Notice of Annual Meeting of Stockholders and a Proxy Statement, which describe the formal business to be conducted at the meeting, have been made a part of this invitation.

Your vote is important. Whether or not you plan to ~~attend~~participate in the ~~annual meeting,~~Annual Meeting, I hope that you will vote as soon as possible. Please review the instructions on each of your voting options described in the Proxy Statement.

Please also note that if you hold your shares in “street name” through a bank or broker, that custodian cannot vote your shares on all matters without your specific instructions.

~~The Proxy Statement and related proxy form are first being made available on or about April 28, 2017.~~

Thank you for your ongoing support of, and continued interest in, Energy Focus.



	Very truly yours,

	/s/ ~~Theodore L. Tewksbury III~~James Tu
	~~Theodore L. Tewksbury III~~James Tu
	Chairman and Chief Executive Officer ~~and President~~

ENERGY FOCUS, INC.

32000 AURORA ROAD, SUITE B

SOLON, OHIO 44139

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ~~JUNE 21, 2017~~DECEMBER 17, 2019

TO STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of Energy Focus, Inc. (the “Company”) will be held virtually on ~~Wednesday, June 21, 2017~~Tuesday, December 17, 2019 at 9:00 A.M., ~~local time, at~~Eastern Time. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/EFOI2019, where you will be able to listen to and participate in the ~~principal executive offices of Energy Focus, Inc., 32000 Aurora Road, Suite B, Solon, Ohio 44139,~~meeting live, submit questions, and vote online. Because the Annual Meeting is virtual and being conducted electronically, stockholders cannot attend the Annual Meeting in person.

The Annual Meeting is being held for the following purposes:


1.	To elect ~~six~~five directors to serve until the next annual meeting or until their successors are elected and appointed, the nominees for which are as follows: ~~Ronald D. Black, William Cohen, Glenda M. Dorchak, Marc J. Eisenberg, Michael R. Ramelot~~Jennifer Cheng, Geraldine McManus, Philip Politziner, Stephen Socolof and ~~Theodore L. Tewksbury III;~~James Tu;

To ~~consider~~approve, for purposes of NASDAQ Marketplace Rule 5635, the issuance of (a) the shares of Series A Convertible Preferred Stock, $0.0001 par value per share, of the Company (the “Series A Preferred Stock”), which is convertible into shares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”), upon conversion of the outstanding balance of (including interest accrued thereon) the subordinated convertible promissory notes issued by the Company to certain investors on March 29, 2019 (the “Notes”), and ~~vote~~(b) the shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock outstanding as a ~~non-binding advisory proposal to approve~~result of the ~~compensation~~conversion of ~~our named executive officers;~~the Notes;

To consider and vote upon a proposal to amend the ~~Company’s 2014 Stock Incentive Plan (the “2014 Plan”)~~Certificate of Incorporation, as amended, of the Company to increase the number of authorized shares of Common Stock, ~~available for issuance under~~and the ~~2014 Plan;~~number of authorized shares of preferred stock, $0.0001 par value per share, of the Company and to increase the number of shares of Series A Preferred Stock;


4.	To consider a proposal to approve a discretionary amendment to the Company’s certificate of incorporation, as amended, to effect a reverse stock split of the Common Stock at a ratio of at least 1-for-2 and up to 1-for-20, with the exact ratio within the foregoing range to be determined by the company’s board of directors;


5.	To consider and approve on an advisory basis the compensation of our named executive officers;


6.	To consider and approve on an advisory basis the frequency of future advisory votes on compensation of our named executive officers;


7.	To consider and ratify the appointment of ~~Plante & Moran, PLLC~~GBQ Partners LLC as the Company’s independent ~~auditors~~registered public accounting firm for the year ending December 31, ~~2017;~~2019; and


5.8.	To consider and act upon any other matters that may properly come before the Annual Meeting or any adjournment or postponement thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Only stockholders of record at the close of business on ~~April 24, 2017~~October 25, 2019 are entitled to notice of and to vote atduring the Annual Meeting and any adjournments or postponements thereof.

Most stockholders have a choice of voting over the Internet, by telephone or by using a traditional proxy card. Please refer to the attached proxy materials or the information forwarded by your bank, broker or other holder

of record to see which voting methods are available to you. Your vote by proxy will ensure your representation at the Annual Meeting, regardless of whether you. attend the meeting or not. Returning the proxy does not deprive you of your right to attend the meeting and to vote your shares at the virtual meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON ~~JUNE 21, 2017:~~DECEMBER 17, 2019:

This ~~proxy statement~~Proxy Statement and our ~~annual report~~Annual Report on Form 10-K, are available at: http://www.proxyvote.com.



	BY ORDER OF THE BOARD OF DIRECTORS

	/s/ ~~Michael H. Port~~Tod A. Nestor
	~~Michael H. Port~~Tod A. Nestor
	President, Chief Financial Officer and Secretary

Solon, Ohio

~~April 28, 2017~~

November 7, 2019

TABLE OF CONTENTS



Information Concerning Solicitation and Voting of Proxies	56
Proposal No. 1: Election of Directors	79
Proposal No. 2: ~~Advisory~~NASDAQ Stockholder Approval ~~of Named Executive Officer Compensation~~Proposal	1316
Proposal No. 3: Charter Amendment ~~to the 2014 Stock Incentive Plan~~Proposal	1419
Proposal No. 4: ~~Ratification of the Appointment of Independent Auditors~~Reverse Stock Split Proposal	2221
Proposal No. 5: Say-on-Pay Proposal	27
Proposal No. 6: Say-on-Frequency Proposal	28
Proposal No. 7: Independent Registered Public Accounting Firm Ratification Proposal	29
Security Ownership of Principal Stockholders and Management	2330
Executive Compensation and Other Information	2533
Director Compensation	31
~~Independent Registered Public Accounting Firm~~	3238
Certain Relationships and Related Transactions	3239
Section 16(A) Beneficial Ownership Reporting Compliance	3239
Audit Committee Report	3339
Stockholder Proposals for the ~~2018~~2020 Annual Meeting	3441
Householding Information	3441
Other Matters	3441
Annual Report on Form 10-K	35
~~Appendix A: 2014 Stock Incentive Plan~~	3641

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

ENERGY FOCUS, INC.

32000 AURORA ROAD, SUITE B
SOLON, OHIO 44139

INFORMATION CONCERNING SOLICITATION AND VOTING OF PROXIES

General

The enclosed proxy is solicited on behalf of the Board of Directors (“Board of Directors” or “Board”) of Energy Focus, Inc., a Delaware corporation (“Energy Focus” or the “Company”), for use atduring the Annual Meeting of Stockholders (the “Annual Meeting”) to be held virtually on ~~Wednesday, June 21, 2017~~Tuesday, December 17, 2019 at 9:00 A.M., ~~local time,~~Eastern Time, or at any adjournments or postponements thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/EFOI2019, where you will be ~~held at~~able to listen to and participate in the ~~principal executive offices of Energy Focus, Inc., 32000 Aurora Road, Suite B, Solon, Ohio 44139.~~meeting live, submit questions, and vote online.

The cost of soliciting these proxies will be borne by the Company. Regular employees and directors of the Company may solicit proxies in person, by telephone, by mail, or by email. No additional compensation will be given to employees or directors for such solicitation. The Company will request brokers and nominees who hold shares of common stock, par value $.0001 per share, of Energy Focus (“Common Stock”) in their names to furnish proxy material to the beneficial owners of such shares and will reimburse such brokers and nominees for their reasonable expenses incurred in forwarding solicitation material to such beneficial owners.

This Proxy Statement and related proxy form are first being sent to stockholders on or about November 11, 2019.

Record Date and Share Ownership

Only stockholders of record at the close of business on ~~April 24, 2017~~October 25, 2019 (the “Record Date”), will be entitled to notice of and to vote atduring the Annual Meeting and any adjournments or postponements thereof. The Company had ~~11,778,823~~12,370,030 shares of Common Stock issued and outstanding as of the Record Date.

Proposals to be Voted Upon

You are being asked to vote on the following matters at the Annual meeting:


1.	To elect five directors to serve until the next annual meeting or until their successors are elected and appointed, the nominees for which are as follows: Jennifer Cheng, Geraldine McManus, Philip Politziner, Stephen Socolof and James Tu (the “Director Election Proposal”);

To approve, for purposes of NASDAQ Marketplace Rule 5635, the issuance of (a) the shares of Series A Convertible Preferred Stock, $0.0001 par value per share, of the Company (the “Series A Preferred Stock”), which is convertible into shares of Common Stock, upon conversion of the outstanding balance of (including interest accrued thereon) the subordinated convertible promissory notes issued by the Company to certain investors on March 29, 2019 (the “Notes”), and (b) the shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock outstanding as a result of the conversion of the Notes (the “NASDAQ Stockholder Approval Proposal”);

To consider and vote upon a proposal to amend the certificate of incorporation, as amended, of the Company (the “Certificate of Incorporation” or “Charter”) to increase the number of authorized shares of Common Stock, and the number of authorized shares of preferred stock, $0.0001 par value per share, of the Company (the “Preferred Stock”) and to increase the number of shares of Series A Preferred Stock (the “Charter Amendment Proposal”);


4.	To consider a proposal to approve a discretionary amendment to the Certificate of Incorporation to effect a reverse stock split of the Common Stock at a ratio of at least 1-for-2 and up to 1-for-20, with the exact ratio within the foregoing range to be determined by the Board (the “Reverse Stock Split Proposal”);


5.	To consider and approve on an advisory basis the compensation of our named executive officers (the “Say-on-Pay Proposal”);


6.	To consider and approve on an advisory basis the frequency of future advisory votes on compensation of our named executive officers (the “Say-on-Frequency Proposal”);


7.	To consider and ratify the appointment of GBQ Partners LLC as the Company’s independent registered public accounting firm for the year ending December 31, 2019 (the “Independent Registered Public Accounting Firm Ratification Proposal”); and


8.	To consider and act upon any other matters that may properly come before the Annual Meeting or any adjournment or postponement thereof.

Voting

Each share of Common Stock held as of the Record Date entitles its holder to one vote on each matter to be acted upon atduring the Annual Meeting. ~~The presence at~~At the Annual Meeting, ~~either in person or by proxy, of~~ the holders of a majority in voting power of ~~the aggregate number of shares of~~all issued and outstanding Common Stock ~~outstanding on the Record Date will represent~~entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum ~~permitting~~for the ~~conduct~~transaction of business at the ~~meeting.~~ Annual Meeting. Stockholders attending the meeting by remote communication shall be deemed present in person and permitted to vote at the Annual Meeting.

If you are a beneficial owner of shares that are held in “street name” (meaning a broker, trustee, bank or other nominee holds shares on your behalf), you ~~must~~may need to instruct your broker as to how to vote your shares on ~~(1)~~ the proposal to elect directors, (2) the non-binding advisory proposal regarding the compensation of our named executive officers, and (3) the proposal to amend the Company’s 2014 Stock Incentive Plan (the “2014 Plan”),proposals presented in this ~~proxy statement.~~Proxy Statement. Failure to do so may result in a “broker ~~non-vote”~~non-vote,” because a broker ~~does~~may not have discretion to vote on your behalf with respect to ~~these matters at~~such matter during the Annual Meeting. Any proxies received by the Company marked as abstentions or broker non-votes will be included in the calculation of whether a quorum is present atduring the Annual Meeting.

The ~~six nominees receiving~~following describes the ~~greatest number of~~vote required to elect directors and to adopt each other proposal, and the manner in which votes ~~“for” election~~ will be counted:

Director Election Proposal. The five nominees receiving the greatest number of votes “For” election will be elected as directors. If you do not vote for a particular director nominee, or if you indicate “withhold authority” for a particular nominee on your proxy form, your vote will not have an effect on the outcome of the election of directors. If you do not vote for a particular director nominee, or if you indicate “withhold authority” for a particular nominee on your proxy form, your vote will not have an effect on the outcome of the election of directions. Broker non-votes also will not have an effect on the outcome of the election of directors.


2.	NASDAQ Stockholder Approval Proposal. The affirmative vote of a majority of the votes cast is required to approve the NASDAQ Stockholder Approval Proposal. Abstentions and broker non-votes are not considered votes cast. Accordingly, abstentions and broker non-votes will have no effect on the outcome of this proposal.


3.	Charter Amendment Proposal. The affirmative vote of a majority of all of the shares of Common Stock outstanding and entitled to vote at the Annual Meeting is required to approve the Charter Amendment Proposal. Abstentions and broker non-votes will have the same effect as a vote against the Charter Amendment Proposal.


4.	Reverse Stock Split Proposal. The affirmative vote of a majority of all of the shares of Common Stock outstanding and entitled to vote at the Annual Meeting is required to approve the Reverse Stock Split Proposal. Abstentions and broker non-votes will have the same effect as a vote against the Reverse Stock Split Proposal.


5.	Say-on-Pay Proposal. The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the Say-on-Pay Proposal is required to approve Say-on-Pay Proposal. Abstentions will have the same effect as a vote against this proposal, and broker non-votes will have no effect on the outcome of this proposal.

Say-on-Frequency Proposal. The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the Say-on-Frequency Proposal is required to approve Say-on-Frequency Proposal. Abstentions will have the same effect as a vote against this proposal, and broker non-votes will have no effect on the outcome of this proposal.


7.	Independent Registered Public Accounting Firm Ratification Proposal. The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the Independent Registered Public Accounting Firm Ratification Proposal is required to approve Independent

The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote on the proposal at the Annual Meeting is required to approve the non-binding advisory proposal regarding the compensation of our named executive officers and the ratification of the appointment of Plante & Moran, PLLC as the Company’s independent auditors for the year ending December 31, 2017.

Registered Public Accounting Firm Ratification Proposal. Abstentions will have the same effect as a vote against ~~these proposals,~~this proposal, and broker non-votes will have no effect on the outcome of ~~these proposals.~~

The affirmative vote of a majority of votes cast is required for the approval of the proposal to amend the 2014 Plan. Abstentions and broker non-votes will not be considered votes cast on the proposal and will not have an effect on the outcome of this proposal.

The shares represented by the proxies received, properly marked, dated, signed and not revoked will be voted atduring the Annual Meeting. Where such proxies specify a choice with respect to the proposal, the shares will be voted in accordance with the specifications made. Any proxy in the enclosed form which is returned signed but is not marked will be ~~voted~~ voted:~~FOR~~

For the election of each of the ~~six~~five nominees for director listed in this Proxy ~~Statement,~~Statement;

For the ~~non-binding advisory proposal to approve~~NASDAQ Stockholder Approval Proposal;

For the ~~compensation~~Charter Amendment Proposal;

For the Reverse Stock Split Proposal

For the Say-on-Pay Proposal;

For the option of ~~our named executive officers, the amendment to the 2014 Plan and ratification of the appointment of Plante & Moran, PLLC~~once every two years as the ~~Company’s independent auditors for~~preferred frequency with which stockholders will be provided an advisory vote on executive compensation; and

For the ~~year ending December 31, 2017.~~

Independent Registered Public Accounting Firm Ratification Proposal.

Revocability of Proxies

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use either by delivering a written notice of revocation or a duly executed proxy bearing a later date to Energy Focus, Inc., Attention: Secretary, 32000 Aurora Road, Suite B, Solon, Ohio 44139 or by ~~attending~~participating in the virtual Annual Meeting and voting ~~in person.~~electronically. If a proxy is properly signed and not properly revoked, the shares it represents will be voted in accordance with the instructions of the stockholder. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to revoke your proxy or vote atduring the Annual Meeting, you must follow the instructions provided to you by the record holder and/or obtain from the record holder a proxy issued in your name. ~~Attendance at~~Participation in the Annual Meeting will not, by itself, revoke a proxy.

Virtual Stockholder Meeting

The Annual Meeting will be conducted exclusively online via live webcast, allowing all of our stockholders the option to participate in the live, online meeting from any location convenient to them, providing stockholder access to our Board and management, and enhancing participation. Persons who held our Common Stock at the close of business on the Record Date may attend, vote and ask questions at the Annual Meeting by following the instructions provided.

The virtual Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/EFOI2019. We encourage you to access the Annual Meeting before the start time of 9:00 a.m., Eastern Time, on December 17, 2019. Please allow ample time for online check-in, which will begin at 8:45 a.m., Eastern Time, on December 17, 2019.

Stockholders who participate in the virtual Annual Meeting by way of the link above will be deemed to be “present in person,” as such term is used in this Proxy Statement, including for purposes of determining a quorum and counting votes.

PROPOSAL NO. 1: ELECTION OF DIRECTORS

Nominees

The Company’s Bylaws provide that the number of directors of the Company shall be no less than five and no more than nine, with the exact number within such range to be fixed by the Board of Directors. The size of the Board of Directors ~~has fixed the number of directors~~is currently set at six ~~effective~~members following the resignations of Theodore L. Tewksbury III, Ronald Black, Marc Eisenberg and Satish Rishi and the subsequent appointment of James Tu following the filing of the Company’s Annual Report on Form 10-K on April 1, 2019 (the “April 1, 2019 10-K Filing”), Stephen Socolof as of May 20, 2019 and Philip Politziner as of August 9, 2019. Upon the ~~date~~recommendation of the ~~Annual Meeting~~Nominating and Corporate Governance Committee, the Board has ~~recommended and~~ nominated the ~~six~~five nominees listed below, each of ~~which~~whom is a current director. The Board has determined not to re-nominate Michael Ramelot. You will only be able to vote for the five nominees named in this Proxy Statement, even though the Board size is currently set at six directors. The Board has determined that it will have only five directors for the time being. However, the Board will continue to seek and evaluate qualified and suitable directors to be added to the Board.

Unless otherwise instructed, the proxy holders will vote the proxies received by them for the ~~six~~five nominees named below, regardless of whether any other names are placed in nomination by anyone other than one of the proxy holders. If the candidacy of any one or more of such nominees should, for any reason, be withdrawn, the proxy holders will vote in favor of the remainder of those nominated and for such substituted nominees, if any, as shall be designated by the Board of Directors. Please note that if the candidacy of one or more nominees should be withdrawn, the Board may reduce the number of directors to be elected at this time. The Board of Directors has no reason to believe that any of the persons named will be unable or unwilling to serve as a nominee or as a director if elected.

If a quorum is present in person or by proxy at the Annual Meeting, the six nominees receiving the highest number of votes will be elected as directors at the Annual Meeting to serve until the next annual meeting or until their respective successors are duly elected or appointed.

Biographical information concerning each nominee is set forth below:

Name Age
Director
Since
Background

Ronald D. Black, Ph.D. 53 2015 Dr. Black has served on the Board of Directors since July 2015, as the Company’s Lead Director since March 2016, and as Chairman of the Board from August 2016 until December 2016. Dr. Black has served as the Chief Executive Officer and President of Rambus Inc. since June 2012 and as a Director of Rambus Inc. since July 2012. Rambus Inc. is a semiconductor and IP products company, with offerings spanning from memory and interfaces to security, smart sensors and lighting. Dr. Black was previously the Managing Director of R.D. Black & Company, a consulting firm, from August 2011. From September 2010 to August 2011, Dr. Black was the Chief Executive Officer of MobiWire, formerly Sagem Wireless, a privately-held mobile handset company headquartered near Paris, France that offers products and services to original equipment manufacturers and mobile network operators in the mobile phone marketplace. From June 2009 to October 2010, Dr. Black served as Chairman and CEO of UPEK, Inc., a developer of antivirus and security software and system tools. Dr. Black currently serves as a board member of FlexEnable, a privately held United Kingdom company, and Microfabrica, a privately held company in Silicon Valley. Dr. Black formerly served as a board member of EnOcean GmbH, a German-based company that manufactures and markets energy harvesting technology, sensors, and radio frequency communication, from 2012 to March 2015. From September 2010 to November 2012, he served as a board member of AuthenTec, Inc., a semiconductor, identity management, biometrics and touch control solutions company, which he joined following the AuthenTec-UPEK merger in September 2010 and from 2007 to 2013, he served as a board member of Inside Contactless, a France-based company engaged in the semiconductors and information technology industry. Dr. Black holds a Bachelor of Science, a Master’s of Science, and a Ph.D. in materials science and engineering from Cornell University in Ithaca, N.Y.

The Board of Directors believes that Dr. Black’s qualifications to serve as a Board member include his leadership positions in various high-growth technology companies, both domestic and foreign. Dr. Black has served as the Company’s Lead Director since March 2016. He has been a member of the Compensation Committee since July 2015 (serving as Chair from July 2015 to October 2016), and a member of the Nominating and Corporate Governance Committee since August 2016.

William Cohen 63 2014 Mr. Cohen has served as the Chief Executive Officer of Dillon Yarn Corporation since February 2011, and as President from October 1996 to February 2011. Dillon Yarn Corporation manufactures and globally distributes filament yarns, fabrics, flake, chip, staple fiber and non-woven fabric to many segments of the textile industry, including medical, technical, industrial, automotive, home furnishing and apparel. Mr. Cohen is also Chairman and Chief Executive Officer of Atlas Oral Health Care LLC, Chairman and Chief Executive Officer of GAWI, LLC d/b/a Arctic Ease, a Partner in Fabricated Metals, and President of Morristown Helicopter Services Inc. He is a member of the Tel Aviv University Board of Governors and Chairman Emeritus of American Friends of Tel Aviv University. Mr. Cohen attended C.W. Post of Long Island University.

The Board of Directors believes that Mr. Cohen’s qualifications to serve as a Board member include his leadership experience of a global manufacturing and distribution business, as well as his network and experience in sales, marketing and manufacturing, both domestic and foreign. Mr. Cohen has served as a member of the Compensation Committee since July 2014 and as a member of the Audit and Finance Committee since June 2016.

Glenda M. Dorchak 63 2015 Ms. Dorchak has been a member of the Board of Directors of Mellanox Technologies, a leading global supplier of end-to-end InfiniBand and Ethernet interconnect silicon, software and systems, since 2009 and currently serves as the chair of the nominating and governance committee. Ms. Dorchak also currently serves on the board of Mirametrix Inc., a private software company that provides gaze-tracking software and she is an Operating Advisor to OMERS Private Equity and BDC Venture group for Industrial, Clean-tech and Energy. Ms. Dorchak was Executive Vice President and General Manager of Global Business for Spansion, Inc., a Sunnyvale, California based flash memory provider from April 2012 to June 2013. From January 2009 until September 2010, when it was acquired by Red Bend Software, Ms. Dorchak was the Chief Executive Officer and Vice Chairman of VirtualLogix, Inc., a Sunnyvale, California based provider of virtualization software for wireless and embedded devices. Prior to VirtualLogix, Inc., she served as Chairman and Chief Executive Officer of Intrinsyc Software International, Inc. from August 2006 to November 2008 where she had also served as an independent director from September 2003 to December 2004. Ms. Dorchak was an executive with Intel Corporation from 2001 to 2006, including serving as Vice President and Chief Operating Officer of Intel Corporation’s Communications Group; Vice President and General Manager of Intel’s Consumer Electronics Group; and Vice President and General Manager of the Broadband Products Group. Prior to her tenure at Intel Corporation, she served as Chairman and Chief Executive Officer of Value America, Inc., an online retailer, from September 1999 to November 2000.

The Board of Directors believes that Ms. Dorchak’s qualifications to serve as a Board member include her executive and board member experience in the software and technology industries, as well as her expertise, experience and understanding of global markets. Ms. Dorchak has been a member of the Compensation Committee since July 2015, serving as the Chair since November 2016, and has been a member and Chair of the Nominating and Corporate Governance Committee since August 2016. Ms. Dorchak also served on the Audit and Finance Committee from July 2015 until August 2016.

Marc J. Eisenberg 50 2015 Mr. Eisenberg is Chief Executive Officer and a Director of ORBCOMM Inc., positions he has held since March 2008. ORBCOMM is a global provider of machine-to-machine solutions, including network connectivity, devices and web reporting applications. He previously served as its Chief Operating Officer from February 2007 to March 2008, Chief Marketing Officer from June 2006 to February 2007 and Executive Vice President, Sales and Marketing from March 2002 to June 2006. Mr. Eisenberg holds a Bachelor’s of Science degree in Marketing and Management from New York University.

The Board of Directors believes that Mr. Eisenberg’s qualifications to serve as a Board member include his leadership position in a technology company, as well as his expertise and experience in global operations. Mr. Eisenberg has served as a member of the Audit and Finance Committee since July 2015 and as a member of the Nominating and Corporate Governance Committee since August 2016.

Michael R. Ramelot 71 2013 Mr. Ramelot has been a consultant since 2002 on many projects, including serving as project leader on BlackLine system implementations to enhance the financial close process of several multi-million dollar companies; serving as project leader on due diligence, accounting valuations and appraisals related to acquisitions; researching and preparing position papers for companies on complex accounting issues; preparing various SEC filings; and assessing and implementing compliance with Section 404 of Sarbanes-Oxley at several companies. Prior to becoming a consultant, Mr. Ramelot served as the President and Chief Financial Officer of Compro Packaging LLC. Mr. Ramelot received a Master’s degree in Business Administration from the University of Santa Clara and a Bachelor of Science degree in accounting from St. Mary’s College. He is a Certified Public Accountant.

The Board of Directors believes that Mr. Ramelot’s qualifications to serve as a Board member include his significant experience with financial and accounting matters and SEC compliance matters. Mr. Ramelot has been a member and Chair of the Audit and Finance Committee since September 2013.



Name	Age	Director Since	Background

Jennifer Cheng	52	2019	Ms. Cheng has served as a member of the Board of Directors since February 2019. She is the co-founder and has served as director on the board of Social Energy Partners LLC, which develops sustainability and smart building/smart city projects in the U.S., Caribbean, Southeast Asia and the Middle East, since September 2017. Ms. Cheng also served as an Independent Director (within the meaning of the NASDAQ Marketplace Rules) for the Company from 2012 to 2015. From 1997 to 2006, Ms. Cheng was the co-founder and chairwoman of The X/Y Group, a marketing enterprise that markets and distributes global consumer brand products, including JanSport and Skechers in the greater China region. From 1995 to 1998, Ms. Cheng was a marketing director for Molten Metal Technology, a Boston-based clean energy company that developed patented technologies and offered solutions for advanced treatment and energy recycling for hazardous radioactive waste. Ms. Cheng received a Master’s degree in Business Administration from Fairleigh Dickinson University and a Bachelor’s degree in Economics and International Business from Rutgers University.

			The Board of Directors believes that Ms. Cheng’s qualifications to serve as a Board member include her familiarity with the Company due to her prior service as a director and her experience with and insight into businesses focused on energy efficiency. Ms. Cheng has served as a member of the Nominating and Corporate Governance Committee since February 2019.

Theodore L. Tewksbury III, Ph.D. 60 2016 Dr. Tewksbury is the 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 has been a director of Jariet Technologies, a private company specializing in digital microwave integrated circuits for wireless infrastructure, backhaul and military applications, since its spinoff from Semtech in 2015. From 2008 to 2013, Dr. Tewksbury served as President and Chief Executive Officer and a director of Integrated Device Corporation, a public semiconductor company. Dr. Tewksbury received a B.S. degree in Architecture, as well as M.S. and Ph.D. degrees in Electrical Engineering from MIT.

The Board of Directors believes that Dr. Tewksbury’s qualifications to serve as a Board member include his role as the Company’s Chief Executive Officer and President since February 2017, his executive leadership experience with public and private technology companies, and his distinguished track record of transforming and building visionary businesses.



Geraldine McManus	62	2019	Ms. McManus has served as a member of the Board of Directors since February 2019. She has been a Managing Member of Granger Management, an independent investment business, since May 2014. Previously, she was a Managing Director in the Investment Management Division at Goldman Sachs, where she worked from February 1998 until February 2014 and helped build its Private Wealth Management business, including structuring its business model and key functions focused on ultra-high net worth individuals and family groups. Prior to joining Goldman Sachs, Ms. McManus spent six years at Merrill Lynch as a Managing Director heading the Yankee Debt Capital Markets Group, advising sovereigns, supranational and international corporations on global debt issuance and liability management. Before working at Merrill Lynch, Ms. McManus spent six years at Salomon Brothers, two years as an associate in Corporate Finance and four years as a Product Specialist in the Hedge Management/Derivatives Group. Ms. McManus received a B.S. from Cornell University and an M.B.A. from Wharton. She serves on the Board of Trustees for The Delbarton School in Morristown, New Jersey, The Caron Foundation in Wernersville, Pennsylvania and The Jane Goodall Institute.

			The Board of Directors believes that Ms. McManus’s qualifications to serve as a Board member include experience in evaluating businesses for investment, her achievements in building organizational structures and non-profit board service. Ms. McManus serves as member of the Compensation Committee and Chairperson of the Nominating and Corporate Governance Committee.

Philip Politziner	78	2019	Mr. Politziner was a founder, President and a member of the Board of Directors of Amper Politziner and Mattia. Amper Politziner and Mattia is one of two predecessor firms to Eisner Amper LLC, a full service advisory and accounting firm. Mr. Politziner retired from Eisner Amper in 2015, last serving as Chairman Emeritus. Mr. Politziner was appointed as a member of the Board of Directors of Jensyn Acquisition Corporation (NASDAQ: JSYN) in 2016, where he had been the chairman of the audit committee until June 2019 when it consummated its merger with Peck Electric Co. He had served on the Board of Directors of Baker Tilly International North America, the Board of Directors of New Jersey Technology Council and the Board of Directors of Middlesex County Regional Chamber of Commerce. He has served on the Advisory Board of Jump Start New Jersey Angel Fund. He was awarded the Chamber of Commerce “Community Leader of Distinction” and was inducted into NJBiz Hall of Fame for businesspeople in New Jersey. He also appears in Who’s Who in Corporate Finance. Mr. Politziner received his B.S. in accounting from New York University and is currently licensed as a CPA in New Jersey. He is a member of the American Institute of Certified Public Accountants (AICPA) and the New Jersey Society of Certified Public Accountants (NJSCPA).

			The Board of Directors believes that Mr. Politziner’s qualifications to serve as a Board member include his considerable experience with financial and accounting matters and Securities and Exchange Commission (“SEC”) compliance matters as the chairman of the audit committee of a public company. Mr. Politziner has been a member of the Audit Committee since August 2019.




Stephen Socolof	59	2019	Mr. Socolof has served as a member of our Board of Directors since May 2019. Mr. Socolof is Managing Partner of Tech Council Ventures, an early-stage venture capital firm, since 2017 and remains a Managing Partner of New Venture Partners, a venture capital firm that he co-founded in 2001. Previously, Mr. Socolof worked at Lucent Technologies, Inc. from 1996 to 2001 where he established Lucent’s New Ventures Group. Before joining Lucent, Mr. Socolof spent eight years with Booz, Allen & Hamilton Inc., where he was a leader of the firm’s innovation consulting practice. Mr. Socolof is currently a director or observer on the boards of Stratis IoT, SunRay Scientific, Vydia Inc., and Everspin Technologies Inc., which is a semiconductor and electronics technology company listed on the NASDAQ Global Market. He was a director of Gainspan Corporation before its acquisition by Telit Communications, Silicon Hive, until its acquisition by Intel Corporation, SyChip, Inc. before its acquisition by Murata, and an observer of Flarion Technologies, Inc., until its acquisition by Qualcomm Inc. Mr. Socolof holds a Bachelor of Arts degree in economics and a Bachelor of Science degree in mathematical sciences from Stanford University and received his M.B.A. from the Amos Tuck School at Dartmouth College, where he was a Tuck Scholar. He currently serves on the Board of Advisors of the Center for the Study of Private Equity at the Tuck School.

			The Board of Directors believes that Mr. Socolof’s qualifications to serve as a Board member include his long history of investing in technology growth companies, significant leadership experience in the corporate venture community, and experience as a public company board member, as well as his financial, business, and investment expertise. Mr. Socolof currently serves on the Audit Committee and the Compensation Committee.

James Tu	50	2019	Mr. Tu has served as our Chairman and Chief Executive officer since April 2019. He is also the founder and Chief Executive Officer of Social Energy Partners LLC, which develops energy efficiency and smart building projects, and founder and Chief Investment Officer of 5 Elements Global Advisors LLC, which focuses on investing in the cleantech sector and is a stockholder of the Company. Mr. Tu served as the Executive Chairman and Chief Executive Officer of the Company from May 2013 to February 2017, and as the non-Executive Chairman of the Board of Directors from December 2012 to April 2013. Previously, he served as the Director of Investment Management of Gerstein Fisher & Associates, and an equity analyst at Dolphin Asset Management Corp. Mr. Tu received an MBA in finance from Baruch College and a B.S. in electrical engineering from Tsinghua University. A Chartered Financial Analyst (CFA) since 1997, he received an “E&Y Entrepreneur of the Year” award in the Technology category in 2016.

			The Board of Directors believes that Mr. Tu’s qualifications to serve as a Board member include his role as the Company’s Chief Executive Officer, as well as his experience in and advising clean energy companies.

Board of Directors Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.

Executive Officers and Certain Significant Employees

The following table sets forth certain information about the executive officers and certain significant employees of the Company as of the Record Date. [There are no family relationships among any of our directors and executive officers.] For biographical information regarding our executive officers, see the discussion under “Biographical Information” below.



Name	Age	Position
James Tu	50	Chairman and Chief Executive Officer
Tod Nestor	56	President, Chief Financial Officer and Secretary
John Davenport	74	Chief Scientist

Biographical Information

James Tu

See the discussion under “--Nominees” above.

Tod Nestor

From 2017 to 2018, Mr. Nestor served as Executive Vice President and Chief Financial Officer of Alumni Ventures Group, a Manchester, New Hampshire based venture capital firm with the most active global transaction volume according to PitchBook. Between 2013 and 2016, Mr. Nestor served as the Chief Financial Officer of Merchants Automotive Group, Inc., a privately held, $300 million fleet management, short-term rental, automobile retail and consumer financing company. Previously, Mr. Nestor also served as Senior Vice President and Chief Financial Officer of The Penn Traffic Company, a $1.5 billion publicly traded grocery distribution company, and Chief Financial Officer for Fairway Holdings Corp., a privately held, $750 million iconic grocery store chain based in the greater New York City region. Earlier in his career, Mr. Nestor held other senior leadership roles across a wide array of functions in large organizations such as American Eagle Outfitters, HJ Heinz, and WR Grace. Mr. Nestor received a Bachelor of Business Administration degree in Accounting from the University of Notre Dame and an MBA in Finance and Entrepreneurial Management from The Wharton School of the University of Pennsylvania. He is also a licensed Certified Public Accountant (CPA), Certified Management Account (CMA), Certified Financial Manager (CFM), and Chartered Financial Analyst (CFA).

John Davenport

John Davenport currently serves as Chief Scientist for Energy Focus. Mr. Davenport joined Energy Focus in November 1999 as Vice President and Chief Technology Officer and served as Chief Operating Officer from July 2005 until May 2008 and President from May 2008 until July 2012. Prior to joining Energy Focus, Mr. Davenport served as President of Unison Fiber Optic Lighting Systems, LLC from 1998 to 1999. Mr. Davenport began his career at GE Lighting in 1972 as a research physicist and thereafter served 25 years in various capacities, including GE Lighting’s research and development manager and as development manager for high performance LED projects. He is a recognized global expert in light sources, lighting systems and lighting applications, with special emphasis in low wattage discharge lamps, electronic ballast technology and distributed lighting systems. Mr. Davenport developed numerous advanced lighting products for GE Lighting, including the blue Xenon headlamp currently used in automobiles. During his tenure with Energy Focus, Mr. Davenport led the development of a range of LED lighting products, including Intellitube®, Energy Focus’ unique tubular LED retrofit lamp. He is the author of more than 125 patents.

Mr. Davenport received a Master’s degree in Physics and a Bachelor of Science degree in Physics from John Carroll University.

Corporate Governance

Director Independence

The Board of Directors has determined that each of the following current directors and/or nominees is independent within the meaning of the ~~listing standards of The~~ NASDAQ ~~Stock Market:~~Marketplace Rules:

~~Ronald D. Black~~Jennifer Cheng

~~William Cohen~~Geraldine McManus

~~Glenda M. Dorchak~~

~~Marc J. Eisenberg~~

~~Jiangang Luo~~Philip Politziner

Michael R. Ramelot

Stephen Socolof

In this Proxy Statement these ~~current~~ directors ~~and director nominees~~ are referred to individually as an “Independent Director” and collectively as the “Independent Directors.”

In addition, to the knowledge of the current management, each of the following persons that served as a director during the last completed fiscal year was independent within the meaning of the NASDAQ Marketplace Rules: Ronald D. Black, William F. Cohen, Glenda M. Dorchak, Marc J. Eisenberg and Satish Rishi.

Board Meetings and Committees; Annual Meeting Attendance

The Board of Directors held a total of ~~nine~~eleven meetings during the fiscal year ended December 31, ~~2016.~~2018. All current directors attended at least 75% of the aggregate number of meetings of the Board of Directors and of the committees on which such directors served.

The Company does not have a policy regarding attendance by the directors at the Company’s Annual Meeting. ~~Seven~~The Company generally encourages, but does not require, directors to attend the Company’s annual meetings of stockholders. All of the ~~eight~~ then serving six directors were present virtually at the last Annual Meeting of stockholders held June ~~15, 2016.~~20, 2018.

Compensation Committee

The Company has a standing Compensation Committee of the Board of Directors, currently consisting of Mr. Socolof, as chair, and Ms. ~~Dorchak, as chairman, Dr. Black, and Mr. Cohen.~~McManus. Each of the members of the Compensation Committee is an Independent Director and is also independent under the criteria established by NASDAQ Marketplace Rules for compensation committee membership. The Compensation Committee held ~~five~~three meetings in ~~2016.~~2018. The Board has approved a charter for the Compensation Committee. A copy of this charter can be found on the Company’s website at http://www.energyfocus.com.

10The Compensation Committee’s primary functions are to:

~~The Compensation Committee receives~~receive proposals from management and ~~reviews~~review and ~~recommends~~recommend to the Board the corporate goals and objectives relevant to compensation of the Chief Executive Officer, ~~evaluates~~evaluate his performance in light of such goals and objectives, and ~~recommends~~recommend to the Board for approval his compensation level based on this evaluation; ~~develops~~

develop and ~~recommends~~recommend to the Board compensation arrangements for other executive officers of the ~~Company, reviews~~Company;

review and ~~recommends~~recommend to the Board incentive compensation plans and equity-based plans, and ~~administers~~administer such plans; ~~reviews~~

review and ~~recommends~~recommend to the Board all other employee benefit plans for the Company; and ~~reviews~~

review and ~~makes~~make recommendations to the Board regarding compensation of the Board of Directors.

The authority of the Compensation Committee may be delegated to a subcommittee of the Compensation Committee, consisting of one or more directors. The Chief Executive Officer may provide recommendations regarding compensation of other executive officers. The Compensation Committee is empowered to retain consultants for advice on compensation matters.

No director currently serving on the Compensation Committee is or has been an officer or employee of the Company or any of the Company’s subsidiaries. No interlocking relationships exist between our Board of Directors or Compensation Committee and the board of directors or compensation committee of any other entity, nor has any interlocking relationship existed in the past.

During ~~2016,~~2018, the Compensation Committee engaged Compensia, Inc. to assist with the review of the Company’s executive and Board compensation by providing data on market trends and, more specifically, with respect to a group of peer companies having similar size and other characteristics to the Company and how the Company’s compensation levels compared with such peers.

Audit and Finance Committee

The Company’s Audit and Finance Committee acts as the standing audit committee of the Board of Directors. The Audit and Finance Committee of the Board of Directors, which currently consists of Mr. Ramelot, as ~~chairman,~~chair, Mr. ~~Cohen, Mr. Eisenberg~~Socolof, and Mr. ~~Luo,~~Politziner, held ~~six~~five meetings in ~~2016.~~2018. Each of the members of the Audit and Finance Committee is an Independent Director and is also independent under the criteria established by the SEC and the NASDAQ Stock Market for audit committee membership. The Board of Directors has determined that Mr. ~~Ramelot~~Politziner is an “audit committee financial expert,” as defined under the rules of the SEC. The Board has approved a charter for the Audit and Finance Committee. A copy of this charter can be found on the Company’s website at http://www.energyfocus.com.

The Audit and Finance Committee’s primary functions are to assist the Board of Directors in its oversight of the integrity of the Company’s financial statements and other financial information, the Company’s compliance with legal and regulatory requirements, the qualifications, independence and performance of the Company’s independent registered public accounting firm. ~~Other specific duties and responsibilities of~~More specifically, the Audit ~~and Finance Committee are to: appoint, compensate, evaluate~~Committee:

appoints, compensates, evaluates and, when appropriate, ~~replace~~replaces the Company’s independent registered public accounting firm; ~~review~~

reviews and ~~pre-approve~~pre-approves audit and permissible non-audit services; ~~review the scope of the annual audit; monitor~~

monitors the independent registered public accounting firm’s relationship with the Company; and ~~meet~~

meets with the independent registered public accounting firm and management to discuss and review the Company’s financial statements, internal controls, and auditing, accounting and financial reporting processes.

Nominating and Corporate Governance Committee

The Company has a Nominating and Corporate Governance Committee of the Board of Directors (“Nominating Committee”), currently consisting of Ms. ~~Dorchak~~McManus as ~~chairman, Dr. Black,~~chair, and ~~Mr. Eisenberg.~~Ms. Cheng. Each of the members of the Nominating Committee is an Independent Director. The Nominating Committee held ~~two~~three meetings in ~~2016.~~2018. The Board has approved a charter for the Nominating Committee. A copy of this charter can be found on the Company’s website at http://www.energyfocus.com.

The Nominating Committee’s primary functions are to carry out the responsibilities delegated by the Board relating to the Company’s director nominations process and procedures, developing and maintaining the Company’s corporate governance policies, and any related matters required by the NASDAQ Stock Market or federal securities laws. More specifically, the Nominating Committee:

determines, makes recommendations, and reviews periodically with the Board, the appropriate number of directors that shall constitute the Board, along with the qualifications required to be a director, the Board’s leadership structure and its committee structure and composition;

conducts searches for and reviews individuals qualified to become members of the Board;

makes recommendations to the Board regarding the selection and approval of the nominees for director to be submitted atduring the annual meeting of stockholders and identifies and makes recommendations to the Board regarding the selection and approval of candidates to fill vacancies on the Board;

evaluates and makes a recommendation to the Board with respect to the “independence” of directors;

oversees the Company’s corporate governance practices, procedures, corporate governance guidelines and other governing documents, and other governance matters required by the ~~Securities and Exchange Commission~~SEC or ~~Nasdaq~~NASDAQ Stock Market and makes related recommendations to the Board;

oversees the Board’s and committees’ evaluation and charter review process; and

develops and recommends to the Board for approval, after taking into account any input provided by the Compensation Committee, a Chief Executive Officer succession plan.

The Nominating Committee will consider various candidates for Board membership, including those suggested by other Board members, by any executive search firm engaged by the Nominating Committee, and by stockholders. A stockholder who wishes to suggest a prospective nominee for the Board to consider should notify the Secretary of the Company or any member of the Nominating Committee in writing, with any supporting material the stockholder considers appropriate, at the following address: Energy Focus, Inc., 32000 Aurora Road, Suite B, Solon, Ohio 44139.

Board Leadership Structure and Role in Risk Oversight

~~Dr. Tewksbury~~Mr. Tu currently serves as both Chairman of the Board and Chief Executive Officer. The Nominating Committee periodically considers whether the roles of Chief Executive Officer and Chairman should be separate, but believes at this time that the Company and its stockholders are best served by its current leadership structure. Combining the roles of Chairman and Chief Executive Officer fosters accountability, effective decision-making and alignment between interests of the Board and management. In ~~March 2016,~~September 2019, the Board of Directors established a lead independent director position (“Lead Director”) and the Board appointed Mr. Socolof as the Lead Director. The Lead Director ~~position to serve~~serves as a liaison between the Independent Directors and the Chairman and the Chief Executive Officer and the full Board, ~~consult~~consults with and ~~advise~~advises the Chairman regarding Board matters, ~~call~~calls and ~~chair~~chairs meetings of Independent Directors and ~~chair~~chairs meetings of the Board when the Chairman is not present. ~~The Board of Directors elected Dr. Black to serve as Lead Director.~~

It is management’s responsibility to manage risk and bring material risks to the attention of the Board. The Board administers its risk oversight role by reviewing strategic, financial and execution risks and exposures associated with the Company’s operations and financial condition; litigation and other matters that may present material risk to our operations, plans, prospects or reputation; acquisitions and divestitures; and senior management succession planning. This oversight role is performed directly and through the committee structure and the committees’ regular reports to the Board of Directors. The Audit and Finance Committee reviews risks associated with legal, compliance, and major financial and accounting matters, including financial reporting, accounting, disclosure, internal controls over financial reporting and ethics and compliance programs. The Compensation Committee reviews risks related to executive compensation and the design of compensation programs, plans and arrangements. The Nominating Committee reviews risks associated with the Company’s corporate governance policies, as well as NASDAQ Stock Market rules and federal securities laws.

Stockholder Communications with the Board of Directors

Stockholders may communicate with the Board of Directors through our Secretary of the Company by writing to the following address: Energy Focus, Inc., Attention: Board of Directors, 32000 Aurora Road, Suite B, Solon, Ohio 44139. Any such communication should indicate whether the communication is intended to be directed to the entire Board of Directors or to a particular director(s), and must indicate the number of shares of Company stock beneficially owned by the stockholder. Our Secretary will forward ~~all~~ appropriate ~~correspondence~~communications to the Board of ~~Directors.~~Directors and/or the appropriate director(s). Inappropriate communications include correspondence that does not relate to the business or affairs of the Company or the functioning of the Board of Directors or its committees, advertisements or other commercial solicitations or communications, and communications that are frivolous, threatening, illegal or otherwise not appropriate for delivery to directors.

1215

PROPOSAL NO. 2: ~~ADVISORY~~NASDAQ STOCKHOLDER APPROVAL PROPOSAL

We are asking stockholders to approve the issuance of (a) shares of Series A Preferred Stock issuable upon conversion of the Notes and (b) shares of Common Stock issuable upon conversion of such shares of Series A Preferred Stock in accordance with NASDAQ Marketplace Rule 5635.

Background

On March 29, 2019, the Company entered into a Note Purchase Agreement with Fusion Park LLC (“Fusion Park”), F&S Electronic Technology (HK) Co., Ltd, Brilliant Start Enterprise Inc. (“Brilliant Start”), Vittorio Viarengo and Amaury Furmin (the “Investors”) for the purchase of an aggregate $1.7 million in subordinated convertible promissory notes (referred to in this Proxy Statement as the “Notes”). The Notes, which were issued to the Investors on March 29, 2019 and amended on May 29, 2019 (the “Financing”), have a maturity date of December 31, 2021 (the “Maturity Date’) and bear interest at a rate of five percent per annum until June 30, 2019, and at a rate of ten percent thereafter. The outstanding principal amount of each Note, together with accrued interest (such principal and interest, the “Aggregate Outstanding Amount”), is convertible into shares of Series A Preferred Stock at a conversion rate determined by the arithmetic average of the volume-weighted average closing price of the Common Stock measured over a specified ten-trading-day period, which equaled $0.67 (the “Conversion Rate”).

The Notes will automatically convert into Series A Preferred Stock on the first business day following the date on which the Company’s stockholders approve the transactions contemplated by the Notes, including (a) the issuance of shares of the Common Stock upon conversion of the shares of Series A Preferred Stock in excess of the number of shares of Common Stock permitted to be issued without stockholder approval by NASDAQ Marketplace Rules 5635(d) and 5635(b), as applicable (“NASDAQ Stockholder Approval”), and (b) the increase in the number of authorized and available shares of Series A Preferred Stock pursuant to the Certificate of Incorporation (“Amendment to Certificate Stockholder Approval,” and, together with NASDAQ Stockholder Approval, “Stockholder Approval”). See “Proposal No. 3: Charter Amendment Proposal.”

To calculate the number of shares of Series A Preferred Stock into which each Note may convert, the Aggregate Outstanding Amount of such Note will be divided by the Conversion Rate. By way of example, if the Notes were to convert on the first business day after the Annual Meeting, it is expected that the Aggregate Outstanding Amount with respect to all of the Notes will be $1,801,068 and the Notes would convert into 2,688,161 shares of Series A Preferred Stock.

Terms of the Series A Preferred Stock

The Series A Preferred Stock was created by filing a certificate of designation with the Secretary of State of the State of Delaware for the Company’s 2,000,000 authorized shares of Preferred Stock on March 29, 2019. In addition, an amendment to the certificate of designation was filed on May 30, 2019 (as amended, the “Certificate of Designation”). If the Aggregate Outstanding Amount of all outstanding notes converted into Series A Preferred Stock on the Maturity Date, the Conversion Rate results in the issuance of an aggregate of 3,206,051 shares of Series A Preferred Stock. Because this exceeds the 2,000,000 currently authorized shares of Preferred Stock and designated shares of Series A Preferred Stock, the Certificate of Incorporation, which includes the Certificate of Designation, will need to be amended to permit such conversion. See “Proposal No. 3: Charter Amendment Proposal.”

Shares of Series A Preferred Stock (a) are entitled to a number of votes equal to 55.37% of the number of shares of Common Stock into which each such share is convertible, (b) have a preference upon liquidation equal to the Conversion Rate per share and then participate on an as-converted basis with the Common Stock with respect to any additional distributions, (c) receive any dividends declared and payable on the Common Stock on an as-converted basis, and (d) are convertible at the option of the holder into shares of Common Stock on a one-for-one basis (subject to adjustment for any stock splits, stock dividends, recapitalizations or similar transaction with respect to the Common Stock).

Why We Need Stockholder Approval

Our Common Stock is listed on the NASDAQ Capital Market, and we are subject to NASDAQ Marketplace Rules. NASDAQ Marketplace Rule 5635(b) requires stockholder approval prior to the issuance of securities that will result in a change of control of a listed company, which for purposes of the NASDAQ Marketplace Rule 5635(b) is generally deemed to occur when an investor or investor group acquires or has the right to acquire 20% or more of a company’s outstanding

common stock or voting power. NASDAQ Marketplace Rule 5635(d) requires stockholder approval prior to the issuance of securities in connection with a transaction (other than a public offering) involving the sale, issuance or potential issuance by the Company of Common Stock (or securities convertible into or exercisable for Common Stock) equal to 20% or more of Common Stock or 20% more of the voting power outstanding before the issuance at price that is less than the “Minimum Price.” Under NASDAQ Marketplace Rule 5635(d), “Minimum Price” means a price that is the lower of: (i) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average closing price of the Common Stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement.

The maximum Aggregate Outstanding Amount under all of the Notes combined through the Maturity Date is $2,148,055, which is convertible into a maximum of 3,206,051 shares of Series A Preferred Stock. Each share of Series A Preferred Stock has a vote equal to 55.37% of the number of shares of Common Stock into which each such share is convertible, which would be an aggregate of 1,775,190 votes by the holders of the Series A Preferred Stock if the notes converted on the Maturity Date. If the Series A Preferred Stock is converted into Common Stock, it is entitled to one vote per share, or a maximum aggregate of 3,206,051 votes by the then holders of such Common Stock if the notes converted on the Maturity Date.

As of the date the Notes were issued, there were 12,191,120 shares of Common Stock outstanding. Because the Series A Preferred Stock may result in an issuance of Common Stock that is greater than 20% of the outstanding Common Stock or voting power as of the issuance date (and as of the Record Date), we are asking stockholders to approve the transactions contemplated by the Financing for purposes of NASDAQ Marketplace Rule 5635(d). We are also seeking stockholder approval of the transactions contemplated by the Financing pursuant to NASDAQ Marketplace Rule 5635(b) in the event that the issuance of shares of Series A Preferred Stock results in a change in control as defined in NASDAQ Marketplace Rule 5635(b).

Two of the Investors, including our Chairman and Chief Executive Officer, James Tu, as owner of Fusion Park, and Brilliant Start, controlled by Gina Huang, invested $580,000 and $500,000, respectively. Fusion Park and Brilliant Start were among the parties to the Schedule 13D filed with the SEC on November 30, 2018, as amended on February 26, 2019 and further amended April 3, 2019, reporting that the filing group (the “Schedule 13D Parties”) held a collective 17.2% beneficial ownership position in the Company. Pursuant to the agreement entered into by the Schedule 13D Parties with the Company on February 21, 2019, the Company agreed to (a) appoint Ms. Cheng and Ms. McManus to the Board for the term ending at the 2019 Annual Meeting and nominate Ms. Cheng and Ms. McManus for election as director to the Board at the 2019 Annual Meeting; (b) recommend that the Company’s stockholders vote in favor of the election of Ms. Cheng and Ms. McManus; and (c) solicit proxies for the election of Ms. Cheng and Ms. McManus at the 2019 Annual Meeting. Ms. Cheng and Ms. McManus also serve as members of the Nominating and Corporate Governance Committee and Ms. McManus serves as a member of the Compensation Committee.

Prior to the transaction, Ms. Huang held an aggregate of 1,017,390 shares of Common Stock through Brilliant Start and Jag International, Ltd. and Mr. Tu beneficially owned 300,000 shares of Common Stock through his voting and dispositive power over the Common Stock held by 5 Elements Global Fund L.P. Assuming conversion of the Notes on the business day after the Annual Meeting, Ms. Huang would beneficially own 790,635 shares of Series A Preferred Stock (or Common Stock, if such shares of Series A Preferred Stock are converted), and Mr. Tu would beneficially own 917,137 shares of Series A Preferred Stock (or Common Stock, if such shares of Series A Preferred Stock are converted). As a result, based on the number of shares of Common Stock outstanding as of the Record Date and assuming Stockholder Approval is received:

Ms. Huang’s total beneficial ownership would increase to 1,808,025 shares, or 13.7%, of the Common Stock;

Mr. Tu’s beneficial ownership would increase to 1,217,137 shares, or 9.2%, of the Common Stock;

the Schedule 13D Parties’ collective beneficial ownership would increase to 3,834,620 shares, or 27.2%, of the Common Stock;

However, until the Series A Preferred Stock is converted into Common Stock, because the shares of Series A Preferred Stock are only entitled to a number of votes equal to 55.37% of the number of shares of Common Stock into which each such share is convertible, Ms. Huang, Mr. Tu and the Schedule 13D Parties would only have voting power over 10.5%, 5.8% and 22.2% of the Common Stock.

Impact of Approval on Stockholders

The issuance of Series A Preferred Stock upon conversion of the Notes would have a dilutive effect on current stockholders who did not participate in the Financing, in that the percentage ownership and voting power of the Company held by current stockholders would decline as a result and therefore have less ability to influence significant corporate decisions requiring stockholder approval.

The maximum number of shares of Series A Preferred Stock (or Common Stock, if such shares of Series A Preferred Stock are converted) of 3,206,051 shares represents 26.3% of the number of shares of Common Stock outstanding as of the date the Notes were issued. The following table shows the pro forma impact of the issuance of the maximum number of shares of Series A Preferred Stock (or Common Stock, if such shares of Series A Preferred Stock are converted) on the ownership of our stock as of the Record Date, including with respect to the Schedule 13D Parties of which Mr. Tu and Ms. Huang are members:



	Before Note Conversion			Pro Forma for the Note Conversion
	No. of Shares	Percentage of Stock		No. of Shares	Percentage of Stock
Existing holders of Common Stock (other than the Schedule 13D Parties)	10,243,182	82.8	%	11,412,448	73.3	%
Schedule 13D Parties	2,126,848	17.2	%	4,163,633	26.7	%
Total	12,370,030	100.0	%	15,576,081	100.0	%

Issuance of our Series A Preferred Stock and Common Stock upon conversion of the Series A Preferred Stock could also have a dilutive effect on book value per share and any future earnings per share. Dilution of equity interests could also cause prevailing market prices for our Common Stock to decline.

Consequences of Not Approving This Proposal

If we do not obtain NASDAQ Stockholder Approval, the Notes will not convert, and an aggregate amount of $2,148,055 in principal and accrued interest will become due and payable, to the extent not already paid, on the Maturity Date. We have relied on the Financing to sustain our business and continue as a going concern, and a failure of the Notes to convert and an inability to obtain additional financing could have a material adverse effect on our business, future prospects, and financial condition, and could even force us to sell certain assets or discontinue or curtail our operations. As a result, investors in the Company could lose their entire investment.

The increase in the authorized number of shares of Common Stock and Preferred Stock pursuant to the Charter Amendments (as described in Proposal No. 3) is not necessary if this Proposal No. 2 is not approved and is therefore contingent upon stockholder approval of this Proposal No. 2. If Proposal No. 2 is not approved by stockholders, then the Charter Amendments will not become effective, even if stockholders vote in favor of the Charter Amendments.

Board of Directors Recommendation

THE BOARD OF ~~NAMED EXECUTIVE OFFICER COMPENSATION~~DIRECTORS RECOMMENDS A VOTE FOR THE NASDAQ STOCKHOLDER APPROVAL PROPOSAL.

PROPOSAL NO. 3: CHARTER AMENDMENT PROPOSAL

On October 28, 2019, the Board adopted, subject to stockholder approval, an amendment to the Certificate of Incorporation to increase the number of authorized shares of Common Stock from 30,000,000 shares to 50,000,000 shares, and to increase the number of authorized shares of Preferred Stock from 2,000,000 shares to 5,000,000 shares and to increase the number of shares of Series A Preferred Stock (the “Charter Amendments”).

Background

As described above, the Notes issued pursuant to the Financing will automatically convert into Series A Preferred Stock on the first business day following the date on which Stockholder Approval is obtained.

The Notes are convertible into a maximum of 3,206,051 shares of Series A Preferred Stock. Currently, we do not have a sufficient number of shares of Preferred Stock authorized for issuance to cover the maximum issuance of Series A Preferred Stock upon conversion of the Notes.

The conversion of the Notes (as described in Proposal No. 2) is also contingent upon stockholder approval of Proposal No. 2. If Proposal No. 2 is not approved by stockholders, then the Charter Amendments will not become effective, even if stockholders vote in favor of the Charter Amendments.

Form of the Charter Amendments

The Board has deemed the Charter Amendments to be advisable and in the best interests of the Company and is accordingly is submitting it to stockholders for approval. The Charter Amendments would revise the Company’s Certificate of Incorporation by replacing paragraph (A) of Article FOUR with the following language:

“(A) The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is Fifty-Five Million (55,000,000) shares, each with a par value of $0.0001 per share. Fifty Million (50,000,000) shares shall be Common Stock and Five Million (5,000,000) shares shall be Preferred Stock.”

In addition, Section 1 of the Certificate of Designation shall be amended, such that 3,300,000 shares of Preferred Stock are designated as Series A Preferred Stock. The full text of the proposed Charter Amendments are set forth in Appendix A of this Proxy Statement.

Purpose of the Amendment and Impact on Stockholders

The Charter Amendments are intended to allow the Notes to convert into Series A Preferred Stock and ensure that the Company will continue to have an adequate number of authorized and unissued shares of Common Stock and Preferred Stock available for future use. As of the Record Date, the Company had 12,370,030 shares of Common Stock issued and outstanding and an additional 1,518,772 shares reserved for issuance as future awards or upon exercise or settlement of outstanding awards pursuant to our equity incentive plans, or for purchase under our employee stock purchase plan. In addition, a maximum of 3,206,051 shares of Common Stock may be issuable upon conversion of the Series A Preferred Stock issuable upon the conversion of the Notes. In determining the size of the proposed authorized share increase, the Board considered a number of factors, including the number of shares issuable upon conversion of the Notes and reserved for future and outstanding equity awards.

The Board believes that the current level of authorized shares could impair the Company’s ability to pursue strategies intended to enhance stockholder value and support the Company’s plans for growth and capital needs. Increasing the number of authorized shares would provide the Company with additional flexibility to issue stock in connection with a variety of general corporate purposes that the Board may at times deem to be desirable for the Company. These general corporate purposes may include, without limitation, acquisitions, capital-raising transactions, including public or private equity or convertible debt financings, and equity-based incentive plans. Further, the availability of additional authorized shares of Common Stock could discourage, delay, or prevent a third-party takeover attempt, because the Company would be capable of engaging in actions that would be dilutive to a potential acquirer, although this proposal is not being presented with the intent to prevent or discourage any attempt to obtain control of the Company. Except with respect to the issuance of Series A Preferred Stock upon conversion of the Notes, the Company currently has no plans, arrangements, commitments or

understandings with respect to the issuance of any of the additional shares of Common Stock or Preferred Stock that would be authorized by the proposed Charter Amendments. Any new issuance of Series A Preferred Stock will enjoy the same preferential rights upon liquidation as the shares of Series A Preferred Stock issued upon conversion of the Notes.

The holders of any of the additional shares of Common Stock issued in the future would have the same rights and privileges as the holders of any shares of Common Stock currently issued and outstanding. The proposed increase in authorized shares would not have an immediate effect on the rights of existing stockholders. However, as is the case with the shares of Common Stock and Preferred Stock that are currently authorized but unissued, if the Charter Amendments are adopted by the stockholders, the Board will have the authority to issue additional shares of Common Stock and Preferred Stock from time to time without further action on the part of stockholders, except as may be required by the Certificate of Incorporation, the rules of NASDAQ Stock Market or other applicable law and regulations. Future issuances of Common Stock or Preferred Stock (or securities convertible into Common Stock or Preferred Stock) could have a dilutive impact on, among other things, the earnings per share, the voting power of existing stockholders, and, depending on the issue price of future shares, the value of the currently outstanding shares. If both Proposal No. 2 and Proposal No. 3 are approved by stockholders, the dilution and concentration of ownership described above under “Proposal 2: NASDAQ Stockholder Approval Proposal-Impact of Approval on Stockholders” will apply.

Consequences of Not Approving this Proposal

If we do not obtain stockholder approval to amend the Certificate of Incorporation and increase the number of authorized shares of Preferred Stock, the Notes will not convert, and an aggregate amount of $2,148,055 in principal and accrued interest will become due and payable, to the extent not already paid, on the Maturity Date of December 31, 2021. We have relied on the Financing to sustain our business and continue as a going concern, and a failure of the Notes to convert and an inability to obtain additional financing could have a material adverse effect on our business, future prospects, and financial condition, and could even force us to sell certain assets or discontinue or curtail our operations. As a result, investors in the Company could lose their entire investment.

Effectiveness of the Amendment and Required Vote

Upon receipt of the necessary stockholder approval, the Board has authorized and directed the Company’s officers to prepare, execute and file the Charter Amendments with the Secretary of State of the State of Delaware. The Charter Amendments would become effective upon such filing. Our Board reserves the right, notwithstanding stockholder approval of the Charter Amendments and without further action by our stockholders, not to proceed with the amendment at any time before the filing of the Charter Amendments.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CHARTER AMENDMENT PROPOSAL.

PROPOSAL NO. 4: REVERSE STOCK SPLIT PROPOSAL

The Board has unanimously approved and declared advisable an amendment to our Certificate of Incorporation to effect a reverse stock split of all outstanding shares of our Common Stock, in a ratio at least 1-for-2 and up to 1-for-20] The precise ratio of the proposed reverse stock split shall be a whole number within this range, determined in the sole discretion of the Board.

By approving this proposal, stockholders would give our Board authority, but not the obligation, to effect the reverse stock split and full discretion to approve the ratio at which shares of Common Stock will be reclassified, from and including a ratio of 1-for-2 and up to and including a ratio of 1-for-20 at any time up to six months after stockholder approval is obtained. The Board believes that providing it with this generalized grant of authority with respect to setting the split ratio and determining the timing for implementation of the reverse stock split, rather than mere approval of a pre-defined reverse stock split or a specific date for implementation, will give our Board the flexibility to set the ratio in accordance with current market conditions and therefore allow our Board to act in the best interests of the Company and our stockholders. If the Board decides to implement the reverse stock split, the reverse stock split will become effective upon the filing of the amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Reverse Split Amendment”).

The Board reserves the right, even after stockholder approval, to abandon the proposed Reverse Split Amendment if the Board determines that it is not in the best interests of the Company and our stockholders. If the Reverse Split Amendment is not implemented by our Board within six months after stockholder approval is obtained, the proposal will be deemed abandoned, without any further effect.

The form of the proposed Reverse Split Amendment to accomplish the reverse stock split is attached to this Proxy Statement as Appendix B.

Purpose of Proposed Reverse Stock Split

We are submitting this proposal to our stockholders for approval in order to raise the per share trading price of our Common Stock. In particular, this will help us to maintain the listing of our Common Stock on the NASDAQ Capital Market.

Our Common Stock is listed on the NASDAQ Capital Market, which has as one of its continued listing requirements a minimum bid price of at least $1.00 per share. Recently our Common Stock has traded significantly below $1.00 per share. On January 18, 2019, the Company received a letter from the NASDAQ Stock Market informing the Company that, for the last 30 consecutive business days, the closing bid price for the Common Stock had been below the minimum $1.00 per share required pursuant to NASDAQ Marketplace Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with NASDAQ Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until July 17, 2019, to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule, the bid price of our Common Stock had to close at $1.00 per share or more for a minimum of ten consecutive trading days. The Company did regain compliance with the Bid Price Rule prior to July 17, 2019.

On May 15, 2019, the Company once again received a notification from the NASDAQ Stock Market informing the Company that, for the last 30 consecutive business days, the closing bid price for the Common Stock had been below the $1.00 minimum bid price and that the Company was not in compliance with the Bid Price Rule. In accordance with NASDAQ Marketplace Rule 5810(c)(3)(A), the Company has been provided an initial period of 180 calendar days, or until November 11, 2019 (the “Compliance Date”), to regain compliance with the Bid Price Rule. During the initial compliance period, the Common Stock will continue to trade on the NASDAQ Capital Market. If, at any time before the Compliance Date, the closing bid price for the Common Stock is at least $1.00 for a minimum of 10 consecutive trading days, the NASDAQ Stock Market staff will provide written notification to the Company that it complies with the Bid Price Rule.

If the Company does not regain compliance by November 11, 2019, an additional 180 calendar days may be granted to regain compliance (the “Second Compliance Period”), so long as the Company meets the NASDAQ initial listing criteria (except for the Bid Price Rule) and notifies the NASDAQ Stock Market in writing of its intention to cure the deficiency during the Second Compliance Period. If the Company does not qualify for the second compliance period or fails to regain compliance during the additional 180-calendar-day period, then the NASDAQ Stock Market will notify the Company of its

determination to delist the Common Stock, at which point the Company would have an opportunity to appeal the delisting determination to a hearings panel.

The Company has not regained compliance with the Bid Price Rule and has requested a Second Compliance Period from the NASDAQ Stock Market. In its request for a Second Compliance Period, the Company notified the NASDAQ Stock Market of its intention to regain compliance with the Minimum Bid Price Rule by conducting a reverse stock split of the Common Stock, if necessary.

The Reverse Stock Split Proposal is intended primarily to increase the per share bid price of our Common Stock and satisfy the NASDAQ Capital Market continued listing requirement. Reducing the number of outstanding shares of our Common Stock should, absent other factors, increase the per share market price of our Common Stock, although we cannot provide any assurance that we will be able to meet or maintain a bid price over the minimum bid price requirement for continued listing on the NASDAQ Capital Market or any other exchange.

If our Common Stock is delisted from NASDAQ Capital Market, our ability to raise additional financing through the public or private sale of equity securities, may be adversely affected and may negatively affect the value and liquidity of our Common Stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investors or interest in our business development opportunities.

If we are delisted from NASDAQ Capital Market and we are not able to list our Common Stock on another exchange, our Common Stock could be quoted on the OTC Bulletin Board or in the “pink sheets.” As a result, we could face significant adverse consequences including, among others:

a limited availability of market quotations for our securities;

a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

a limited amount of news and little or no analyst coverage of our company;

we would no longer qualify for exemptions from state securities registration requirements, which may require us to comply with applicable state securities laws; and

a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3) or obtain additional financing in the future.

Moreover, an increase in the per share trading value of our Common Stock would be beneficial because it would:

improve the perception of our Common Stock as an investment security;

reset our stock price to more normalized trading levels in the face of potentially extended market dislocations;

assist with future potential capital raises;

appeal to a broader range of investors to generate greater investor interest in us; and

reduce stockholder transaction costs because investors would pay lower commission to trade a fixed dollar amount of our stock if our stock price were higher than they would if our stock price were lower.

You should consider that, although the Board believes that a reverse stock split will in fact increase the trading price of our Common Stock, in many cases, because of variables outside of our control (such as market volatility, investor response to the news of a proposed reverse stock split and the general economic environment), the market price of our Common Stock may in fact decline in value after effecting the reverse stock split. You should also keep in mind that the implementation of a reverse stock split does not have an effect on the actual or intrinsic value of our business or a stockholder’s proportional ownership in our company. However, should the overall value of our Common Stock decline after the proposed reverse stock split, then the actual or intrinsic value of the shares of our Common Stock held by you will also proportionately decrease as a

result of the overall decline in value.

Potential Effects of the Proposed Reverse Stock Split

If this proposal is approved and the reverse stock split is effected, the reverse stock split will be realized simultaneously and in the same ratio for all of our issued and outstanding shares of Common Stock. The immediate effect of a reverse stock split would be to reduce the number of shares of our Common Stock outstanding and to increase the trading price of our Common Stock.

However, we cannot predict the effect of any reverse stock split upon the market price of our Common Stock over an extended period, and in many cases, the market value of a company’s common stock following a reverse stock split declines. We cannot assure you that the trading price of our Common Stock after the reverse stock split will rise in inverse proportion to the reduction in the number of shares of our Common Stock outstanding as a result of the reverse stock split. Also, we cannot assure you that a reverse stock split would lead to a sustained increase in the trading price of our Common Stock. The trading price of our Common Stock may change due to a variety of other factors, including our operating results and other factors related to our business and general market conditions.

Examples of Potential Reverse Stock Split at Various Ratios. The table below provides examples of reverse stock splits at various ratios up to 1-for-20, without giving effect to the treatment of fractional shares. The actual number of shares outstanding after giving effect to the reverse stock split, if effected, will depend on the actual ratio that is determined by the Board in accordance with the amendment to the Certificate of Incorporation.



Shares outstanding at the Record Date(1)	Reverse Stock Split Ratio	Shares outstanding after Reverse Stock Split	Reduction in Shares Outstanding
12,370,030	1-for-2	6,095,560	6,274,470
12,370,030	1-for-5	2,438,224	9,931,806
12,370,030	1-for-10	1,219,112	11,150,918
12,370,030	1-for-20	609,556	11,760,474

(1) Does not include shares of Common Stock that could be issued as a result of the approval of the NASDAQ Stockholder Approval Proposal and the Charter Amendment Proposal.

The resulting decrease in the number of shares of our Common Stock outstanding could potentially adversely affect the liquidity of our Common Stock, especially in the case of larger block trades.

Effects on Ownership by Individual Stockholders. If we implement a reverse stock split, the number of shares of our Common Stock held by each stockholder would be reduced by multiplying the number of shares held immediately before the reverse stock split by the appropriate ratio and then rounding down to the nearest whole share. We would pay cash to each stockholder in lieu of any fractional interest in a share to which each stockholder would otherwise be entitled as a result of the reverse stock split, as described in further detail below. The reverse stock split would not affect any stockholder’s percentage ownership interest in the Company or proportionate voting power, except to the extent that interests in fractional shares would be paid in cash.

Effect on Restricted Stock, Options, Warrants. In addition, we would adjust all outstanding shares of any restricted stock, options and warrants entitling the holders to purchase shares of our Common Stock as a result of the reverse stock split, as required by the terms of these securities. In particular, we would reduce the conversion ratio for each instrument, and would increase the exercise price in accordance with the terms of each instrument and based on the 1-for-2, up to 1-for-20 ratio of the reverse stock split (i.e., the number of shares issuable under such securities would decrease by 50%, up to 95%, respectively, and the exercise price per share would be multiplied by 2, up to 20, respectively). Also, we would reduce the number of shares reserved for issuance under our existing 2014 Stock Incentive Plan, as amended, and our 2013 Employee Stock Purchase Plan, proportionately based on the ratio of the reverse stock split. A reverse stock split would not otherwise affect any of the rights currently accruing to holders of our Common Stock, or options or warrants exercisable for our Common Stock.

Other Effects on Outstanding Shares. If we implement a reverse stock split, the rights pertaining to the outstanding shares of our Common Stock would be unchanged after the reverse stock split. Each share of our Common Stock issued

following the reverse stock split would be fully paid and nonassessable.

The reverse stock split would result in some stockholders owning “odd-lots” of less than 100 shares of our Common Stock. Brokerage commissions and other costs of transactions in odd-lots may be higher than the costs of transactions in “round-lots” of even multiples of 100 shares.

After the effective time of the reverse stock split, our Common Stock will have a new Committee on Uniform Securities Identification Procedures (CUSIP) number, which is a number used to identify our equity securities, and stock certificates with the older CUSIP number will need to be exchanged for shares of Common Stock with the new CUSIP number by following the procedures described below. However, until such exchange is made, the old stock certificates will automatically represent the new, post-split number of shares. After the reverse stock split, we will continue to file periodic reports and comply with other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our Common Stock will continue to be listed on the NASDAQ Capital Market under the symbol “EFOI” subject to any decision of our Board to list our securities on a different stock exchange or a decision by the NASDAQ Stock Market to delist our Common Stock.

Authorized Shares of Stock

The reverse stock split would affect all issued and outstanding shares of Common Stock and outstanding rights to acquire Common Stock. We will not change the number of shares of Common Stock currently authorized. However, upon the effectiveness of the reverse stock split, the number of authorized shares of Common Stock that are not issued or outstanding would increase due to the reduction in the number of shares of Common Stock issued and outstanding as a result of the reverse stock split.

As of October 25, 2019, the Record Date we had (i) 30,000,000 shares of authorized Common Stock, of which 12,370,030 shares of Common Stock were issued and outstanding, and (ii) 2,000,000 shares of authorized Preferred Stock, all of which were designated as Series A Preferred Stock, none were issued and outstanding. If we issue additional shares, the ownership interest of holders of Common Stock will be diluted. However, if the Nasdaq Stockholder Approval Proposal and Charter Amendment Proposal are approved, we will have 50,000,000 shares of authorized Common Stock and 5,000,000 shares of authorized Preferred Stock.

We will reserve for issuance any authorized but unissued shares of Common Stock that would be made available as a result of the proposed reverse stock split.

We do not have any plans, arrangements or understandings for the remaining portion of the authorized but unissued shares that will be available following the reverse stock split.

Procedure for Effecting the Proposed Stock Split and Exchange of Stock Certificates

If stockholders approve this proposal and the Board does not otherwise abandon the amendment contemplating the reverse stock split, we will file with the Delaware Secretary of State a Certificate of Amendment to our Certificate of Incorporation, in the form attached to this proxy statement as Appendix B (the “Certificate of Amendment”). The reverse stock split will become effective at the time and on the date of filing of, or at such later time as is specified in, the Certificate of Amendment, which we refer to as the “effective time” and “effective date,” respectively. Beginning at the effective time, each certificate representing shares of Common Stock will be deemed for all corporate purposes to evidence ownership of the number of whole shares into which the shares previously represented by the certificate were combined pursuant to the reverse stock split.

Upon the reverse stock split, we intend to treat stockholders holding our Common Stock in “street name,” through a bank, broker or other nominee, in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding our Common Stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split. If you hold your shares with a bank, broker or other nominee and if you have any questions in this regard, we encourage you to contact your nominee.

Following the reverse stock split, stockholders holding physical certificates must exchange those certificates for new certificates and a cash payment in lieu of any fractional shares.

Our transfer agent will advise registered stockholders of the procedures to be followed to exchange certificates in a letter of transmittal to be sent to stockholders. No new certificates will be issued to a stockholder until the stockholder has surrendered the stockholder’s outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the transfer agent. Any old shares submitted for transfer, whether pursuant to a sale, other disposition or otherwise, will automatically be exchanged for new shares. Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) until requested to do so.

Fractional Shares

We would not issue fractional shares in connection with the reverse stock split. Instead, any fractional share resulting from the reverse stock split because the stockholder owns a number of shares not evenly divisible by the reverse stock split ratio would instead receive cash upon surrender to the exchange agent of the certificates and a properly completed and executed letter of transmittal. The cash amount to be paid to each stockholder would be equal to the resulting fractional interest in one share of our Common Stock to which the stockholder would otherwise be entitled, multiplied by the closing trading price of our Common Stock on the trading day immediately preceding the effective date of the reverse stock split. We do not anticipate that the aggregate cash amount paid by our company for fractional interests will be material to us.

No Appraisal Rights

No appraisal rights are available under the General Corporation Law of the State of Delaware or under our Certificate of Incorporation or Bylaws with respect to the reverse stock split.

Accounting Consequences

The par value of our Common Stock would remain unchanged at $0.0001 per share after the reverse stock split. Also, our capital account would remain unchanged, and we do not anticipate that any other accounting consequences would arise as a result of the reverse stock split.

No Going Private Transaction

Notwithstanding the decrease in the number of outstanding shares following the reverse stock split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.

Potential Anti-Takeover Effect

SEC rules require disclosure and discussion of the effects of any proposal that could be used as an anti-takeover device. This proposal, if adopted and implemented, will result in a relative increase in the number of authorized but unissued shares of our Common Stock vis-à-vis the outstanding shares of our Common Stock and could, under certain circumstances, have an anti-takeover effect, although that is not the purpose or intent of the proposal. A relative increase in the number of authorized but unissued shares of Common Stock could have other effects on our stockholders, depending upon the exact nature and circumstances of any actual issuances of authorized shares. A relative increase in our authorized but unissued shares of Common Stock could potentially deter takeovers, including takeovers that the Board determines are not in the best interest of our stockholders, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover more difficult. The Board is not aware of any attempt to take control of our business and has not considered the reverse stock split to be a tool to be utilized as a type of anti-takeover device. We currently have no plans, proposals or arrangements to issue any shares of Common Stock that would become newly available for issuance as a result of the reverse stock split.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following is a summary of the material U.S. federal income tax consequences of the reverse stock split to holders of our shares. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations promulgated thereunder, and administrative rulings and court decisions in effect as of the date of this document, all of which may be subject to change, possibly with retroactive effect. This summary only addresses holders who hold their shares as capital assets within the meaning of the Code and does not address all aspects of U.S. federal income taxation that may be relevant to holders subject to special tax treatment, such as financial institutions, dealers in securities, insurance

companies, foreign persons and tax-exempt entities. In addition, this summary does not consider the effects of any applicable state, local, foreign or other tax laws.

We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”), or an opinion from counsel with respect to the U.S. federal income tax consequences discussed below. There can be no assurance that the tax consequences discussed below would be accepted by the IRS or a court. The tax treatment of the reverse stock split to holders may vary depending upon a holder’s particular facts and circumstances.

We urge holders to consult with their own tax advisors as to any U.S. federal, state, local or foreign tax consequences applicable to them that could result from the reverse stock split.

Except as described below with respect to cash received in lieu of fractional shares, the receipt of Common Stock in the reverse stock split should not result in any taxable gain or loss to a holder for U.S. federal income tax purposes. The aggregate tax basis of the Common Stock received by a holder as a result of the reverse stock split (including the basis of any fractional share to which a holder is entitled) will be equal to the aggregate basis of the existing Common Stock exchanged for such stock. A holder’s holding period for the Common Stock received in the reverse stock split will include the holding period of the Common Stock exchanged therefor.

A holder who receives cash in lieu of a fractional share of Common Stock will be treated as first receiving such fractional share and then receiving cash in redemption of such fractional share. A holder generally will recognize capital gain or loss on such deemed redemption in an amount equal to the difference between the amount of cash received and the adjusted basis of such fractional share.

Board Discretion to Implement the Reverse Stock Split

The Board has reserved the right to abandon the amendment at any time before the effectiveness of the filing of the Certificate of Amendment with the Delaware Secretary of State, even if the adoption of the amendment is approved by the stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REVERSE STOCK SPLIT PROPOSAL.

PROPOSAL NO. 5: SAY-ON-PAY PROPOSAL

We are asking our stockholders to vote to approve, on a non-binding, advisory basis, the compensation of our ~~named executive officers~~Named Executive Officers as disclosed in this ~~proxy statement.~~Proxy Statement. This proposal is commonly referred to as a “say-on-pay” vote and is required by Section 14A of the ~~Securities~~ Exchange ~~Act of 1934.~~Act.

Our policy is to provide a compensation program that will attract, motivate and retain persons of high quality and provide incentives that align the interests of our employees and directors with those of our stockholders. Your advisory vote on this particular proposal is not intended to address any specific element of the compensation of our ~~named executive officers;~~Named Executive Officers; rather, the vote relates to our general executive compensation program, which is described in greater detail under the “Executive Compensation and Other Information” heading of this ~~proxy statement.~~Proxy Statement.

Although this vote is not binding on the Company, we value your opinion and our Compensation Committee will consider the results of your vote on this proposal when making future decisions relating to our executive compensation program.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ~~NON-BINDING ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.~~SAY-ON-PAY PROPOSAL.

~~PROPOSAL NO. 3: AMENDMENT TO THE 2014 STOCK INCENTIVE PLAN~~

On April 11, 2017, the Board resolved to submit for stockholder approval a second amendment to the Company’s 2014 Stock Incentive Plan (the “2014 Plan”). The 2014 Plan, as approved by our stockholders on July 15, 2014, and amended on July 22, 2015, authorized an aggregate of 1,200,000 shares of Common Stock for issuance as equity awards. If approved by our stockholders, the second amendment would increase the number of authorized shares of Common Stock available for issuance under the 2014 Plan by an additional 1,300,000 shares to 2,500,000 shares.

~~Purpose of the 2014 Plan and Amendment~~

The 2014 Plan is an important part of the Company’s overall compensation program by allowing the Company to grant incentive awards to our current and prospective officers, employees, directors, and consultants. The purpose of the 2014 Plan is to:

enhance stockholder value by linking the compensation of our officers, non-employee directors and key employees to increases in the price of our Common Stock and the achievement of other performance objectives;

~~encourage ownership in our Common Stock by key personnel whose long-term employment is considered essential to our continued progress and success;~~

~~assist the Company in recruiting new directors and employees; and~~

~~motivate, retain and encourage such directors and employees to act in the stockholders’ interest and share in our success.~~

As of April 24, 2017, we had awards outstanding under the 2014 Plan representing a total of 683,520 shares, consisting of 331,353 stock options with a weighted average exercise price of $6.69 per share and 352,167 restricted stock units (“RSUs”) with a weighted average grant date fair value of $4.26. As of April 24, 2017, there were a total of 398,493 shares available for future awards and a total of 117,987 shares have been issued upon the exercise of options, settlement of RSUs, or as now-vested restricted stock. The Company’s closing stock price on April 24, 2017 was $3.11 per share.

In proposing the amendment to the 2014 Plan, the Compensation Committee and the Board considered a number of factors, including share usage over the past several years, shares expected to be required over the next three years based upon historical practices, as well as plans for our executive compensation program going forward.

The Board believes additional shares are needed to (i) recruit additional executives to complement and complete our new leadership team and fill other key positions needed to execute our growth strategy and achieve our goal of returning to profitability and (ii) continue to make awards, which will be targeted to our key employees, that tie a significant portion of total compensation to our stock value to encourage retention and align with stockholder interests.

Historically, equity grants were made to most of our employee base. In addition, due to a high level of turn-over, forming our current management team has required additional shares to recruit talent from successful positions and other opportunities, which has significantly impacted our burn rate. For the most part, unvested awards were forfeited upon departure and such shares were again available for issuance under the 2014 Plan. However, as we continue our efforts to recruit talent at various levels of the organization, we expect to utilize additional shares in 2017 for this purpose and in subsequent years will provide grants to executives, key employees, and non-employee directors that motivate, retain, and encourage such directors and employees to act in the stockholders’ interest and share in our success. Thus, we believe that the proposed increase is necessary to continue to support our growth efforts and any inability to adequately compensate and incentivize our officers, directors, and employees through equity awards could adversely impact our ability to recruit, motivate, and retain talent and align pay with performance.

~~The Board believes that the 2014 Plan and the proposed amendment will promote the interests of stockholders and is consistent with principles of good corporate governance, including:~~

~~Independent Committee.~~ ~~The 2014 Plan is to be administered by the Compensation Committee, which is composed entirely of independent directors who meet NASDAQ standards for independence.~~

~~No Discounted Stock Options or SARs.~~ ~~All stock option and SAR awards under the 2014 Plan must have an exercise or base price that is not less than the fair market value of the underlying common stock on the date of the grant.~~

~~No Re-pricing; No Cash Buyout of Underwater Options.~~ ~~Other than in connection with stockholder approval, the 2014 Plan prohibits any repricing of options or SARs.~~

~~No “Evergreen” Share Reserve.~~ ~~The 2014 Plan includes a limited share reserve.~~

1427

~~Individual Limits on Awards.~~ ~~The 2014 Plan limits:~~


▪	~~The number of shares that may be granted pursuant to stock options, SARs, stock awards, or other stock-based awards to any plan participant in any fiscal year, and~~


▪	~~The maximum amount of any dollar-denominated award granted to any plan participant in a 12-month period that is intended to qualify for the exception under Section 162(m).~~

~~No “Liberal” Change in Control Definition; No Single-Trigger Vesting Upon a Change in Control.~~ The Change in Control definition in the 2014 Plan is not “liberal” and, for example, would not occur merely upon stockholder approval of a transaction. A Change in Control must actually occur in order for the Change in Control provisions in the 2014 Plan to be triggered. The 2014 Plan also does not provide for the automatic acceleration of equity awards in connection with a Change in Control (other than in a situation where a successor corporation refuses to assume or provide an equivalent substitute award). Instead, the 2014 Plan provides the Committee with the discretion to determine the treatment of outstanding awards in connection with a Change in Control or in award agreements.

~~New Plan Benefits~~

Grants under the 2014 Plan are discretionary, so it is not possible to predict the number of shares of Common Stock that will be awarded or who will receive awards under the 2014 Plan as proposed to be amended.

~~Summary of the 2014 Plan~~

The 2014 Plan is an “omnibus” plan that provides for several different kinds of awards, including stock options, stock appreciation rights (“SARs”), stock awards and other stock-based awards, as well as performance-based cash awards. The 2014 Plan does not have an “evergreen” feature, so any increase in the number of authorized shares other than as specifically set forth in the 2014 Plan requires stockholder approval.

~~The following summary of the material terms of the 2014 Plan is qualified in its entirety by reference to the full text of the 2014 Plan, as proposed to be amended, a copy of which is attached as~~ ~~Appendix A~~ ~~to this proxy statement.~~

~~Shares Authorized for Issuance under the 2014 Plan; Share Counting Procedure~~

~~The proposed amendment would increase the maximum number of shares that may be issued under the 2014 Plan from 1,200,000 to 2,500,000.~~

Shares (i) delivered (or withheld upon settlement) under the 2014 Plan, in payment of the exercise price of a stock option or in payment of tax withholding obligations with respect to stock options or SARS, and (ii) subject to a SAR under the 2014 Plan that are not issued in connection with a stock settlement on exercise of the SAR, will not be added back to the total shares available under the 2014 Plan. Similarly, shares reacquired by us using cash proceeds from the exercise of stock options under the 2014 Plan will not be added back to the total shares available under the 2014 Plan. The limitation described above with respect to shares delivered or withheld in payment of tax withholding obligations does not apply to shares underlying awards other than stock options and SARs.

~~Limitations on Awards~~

~~The maximum number of shares underlying incentive stock options (within the meaning of Section 422 of the Code) that may be granted under the 2014 Plan is 100,000.~~

~~The 2014 Plan also contains limitations on the size of awards that can be provided to an individual participant, as follows:~~

~~The maximum number of shares underlying stock options or SARs that can be granted to an employee in any calendar year is 150,000.~~

The maximum number of shares underlying stock awards and other stock-based awards granted to an employee in any 12-month period that are intended to qualify for the exemption from the $1 million deduction limit under Section 162(m) of the Code is 80,000.

~~The maximum dollar amount of a dollar-denominated award granted to a participant in any 12-month period that is intended to qualify for the exemption under Section 162(m) of the Code is $750,000.~~PROPOSAL NO. 6: SAY-ON-FREQUENCY PROPOSAL

~~Eligible Participants~~

~~As of April 24, 2017, we had an aggregate of 108 non-employee directors~~The Dodd-Frank Wall Street Reform and ~~officers, as well as other employees who may be selected by the Board or Board committee administering the 2014 Plan as eligible~~Consumer Protection Act added Section 14A to receive awards under the 2014 Plan. Consultants who provide bona fide services to us also are eligible to participate in the 2014 Plan, provided that the consultants’ services are not in connection with the offer and sale of our securities in a capital-raising transaction and the consultants do not directly or~~indirectly promote or maintain a market in our securities. Incentive stock options may only be granted to our employees and employees of our “subsidiaries” (as defined in the 2014 Plan).~~

~~Administration~~

The 2014 Plan is administered by our Compensation Committee, which satisfies the applicable independence requirements of standards of The NASDAQ Stock Market. The administrator has the authority, among other things, to determine the employees, directors and consultants to whom awards may be granted, determine the number of shares subject to each award, determine the type and the terms of any award to be granted, approve forms of award agreements, interpret the terms of the 2014 Plan and awards granted under the Plan, adopt rules and regulations relating to the 2014 Plan and amend awards, subject to limitations set forth in the 2014 Plan, including a limitation generally prohibiting an amendment that materially impairs any outstanding award without the written agreement of the participant. The administrator may delegate day-to-day administration of the 2014 Plan to one or more individuals.

To the extent that the administrator determines it desirable that an award to a person who is, or may in the future be, a “covered employee” (as defined under Section 162(m) of the Code) should qualify as “qualified performance-based compensation” within the meaning of Section 162(m), the award will be made by a committee consisting of at least two “outside directors” as defined for purposes of Section 162(m) (which, if it so qualifies, may be the administrator). In addition, in order to meet the requirements imposed under Section 16 of the Securities Exchange Act of 1934, as amended, awards granted to officers and directors under the 2014 Plan may only be made by the entire Board or a committee of “non-employee directors,” as defined under Section 16 of the Exchange Act, ~~(which, if it so qualifies, may be the administrator).~~

~~Term~~

~~The 2014 Plan became effective upon approval by the Company’s~~which requires that we provide stockholders ~~on July 15, 2014, and will terminate on July 15, 2024.~~

~~Types of Awards~~

~~Stock Options.~~ The 2014 Plan authorizes the grant of stock options (which may be either incentive stock options within the meaning of Section 422 of the Code, which are eligible for special tax treatment, or nonqualified stock options). The aggregate fair market value of shares, determined as of the date of grant, for which any employee may be granted incentive stock options that are exercisable for the first time in any calendar year may not exceed $100,000. To the extent that an incentive stock option exceeds the $100,000 threshold, or otherwise does not comply with the ~~applicable conditions of Section 422 of~~opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently to vote on future advisory votes on the ~~Code, the stock option will be treated as a non-qualified stock option.~~

The term of a stock option granted under the 2014 Plan cannot be longer than 10 years from the date of grant, and the exercise price per share underlying the option may not be less than the fair market value of a sharecompensation of our Common Stock on the date of grant. The administrator will determine the acceptable forms of consideration for exercise of the option, which may include cash, check or wire transfer; shares of our Common Stock held for at least six months; our withholding of shares otherwise issuable upon exercise of the stock option; a broker assisted sale and remittance program acceptable to the administrator that complies with applicable law; and such other considerationNamed Executive Officers as is permitted by applicable law; or any combination of the foregoing. Re-pricing of options (i.e., reducing the exercise price or cancelling an option in exchange for cash, another award or an option with a lower exercise price) is not permitted under the 2014 Plan without approval of our stockholders.

~~Stock Appreciation Rights.~~ The 2014 Plan permits the grant of SARs related to a stock option or other award, which is commonly referred to as a “tandem SAR.” A SAR may be granted in tandem with a stock option either at the time of the stock option grant or thereafter during the term of the stock option. The 2014 Plan also permits the grant of SARs separate and apart from the grant of another award, which is commonly referred to as a “freestanding SAR.” Tandem SARs typically may be exercised upon surrender of a related stock option to the extent of an equivalent number of shares of Common Stock. SARs entitle the grantee, upon exercise of SARs, to receive a payment equal to the excess of the fair market value (on the date of

exercise) of the designated number of shares of Common Stock underlying the SAR over the fair market value of such shares of Common Stock on the date the SAR was granted or, in the case of a SAR granted in tandem with a stock option, on the date the stock option was granted. Payments by us in respect of a SAR may be made in shares of our Common Stock, in cash, or partly in cash and partly in shares of Common Stock, as the administrator may determine. The term of SARs granted under the 2014 Plan cannot be longer than ten years from the date of grant, and otherwise will be subject to the same terms and conditions applicable to stock options.

~~Stock Awards and Other Stock-Based Awards.~~Under the 2014 Plan, the administrator may grant participants stock awards, which may involve the award of shares or the award of stock units representing an amount equivalent in value to the fair market value of a share, payable in cash, property or shares. The administrator may also grant participants any other type of equity-based or equity-related award, including the grant or offer for sale of unrestricted shares of Common Stock, as well as cash-based bonuses subject to the attainment of one or more of the performance criteria described below under “Qualified Performance-Based Compensation.” Stock awards and other stock-based awards are subject to terms and conditions determined by the administrator and set forth in an award agreement, which may include conditions on vesting, achievement of performance conditions and other provisions consistent with the 2014 Plan as may be determined by the administrator.

~~Qualified Performance-Based Compensation~~

The administrator may specify that all or a portion of an award is intended to satisfy the requirements for “qualified performance-based compensation” under Section 162(m) of the Code. Section 162(m) of the Code generally limits to $1 million the deductibility for federal income tax purposes of annual compensation paid by a publicly held company to its chief executive officer and other specified executive officers, as described under “Code Section 162(m)” below. “Qualified performance-based compensation” is specifically excluded from this deduction limit.

The 2014 Plan permits the administrator to impose objective performance criteria to be met with respect to stock awards and other stock-based awards so that the grants are considered “qualified performance-based compensation.” If an award (other than a stock option or SAR) is intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code, the performance criteria must be based on one or more business criteria which apply to the individual, business unit or corporation as a whole, such as stock price, market share, sales, earnings per share, return on equity, or costs.

The administrator will (within the first quarter of the performance period, but in no event more than 90 days into that period) establish the specific performance criteria (including thresholds for payment and whether to exclude certain extraordinary, non-recurring, or similar items) and amounts to be paid if the performance criteria is met (subject to the right of the administrator to exercise discretion to reduce payment amounts following the conclusion of the performance period).

~~Dividends~~

The administrator may provide for payment of dividends or dividend equivalents on the shares of Common Stock subject to an award, other than stock options and SARs, prior to vesting. However, dividends and dividend equivalents will not be paid on any stock award or stock-based award that vests upon the achievement of performance goals prior to the date the performance goals are satisfied and the award is earned, and then shall be payable only with respect to the number of shares or stock units actually earned under the award. Dividends or dividend equivalent payments may be paid in cash, shares or stock units, or may be credited to a participant’s account and settled in cash, shares or a combination of cash or shares upon vesting of the underlying award. The administrator may, in its discretion, provide that payment of dividend equivalents is subject to specified conditions and contingencies.

~~Transferability~~

Unless determined otherwise by the administrator, awards are not transferable, other than by beneficiary designation, will or the laws of descent and distribution. The administrator may make an award transferable by a participant only if the participant does not receive consideration for the transfer.

~~Termination of Board Membership or Employment~~

The administrator may specify the effect of termination of service as a director or termination of employment on an award at the time of grant, subject to the administrator’s right to modify the award terms after the date of grantdisclosed in accordance with the ~~terms~~compensation disclosure rules of the ~~2014 Plan. In~~SEC.

Stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every one, two or three years. Stockholders also may abstain from casting a vote on this proposal.

After careful consideration, our Board has determined that an advisory vote on executive compensation once every two years is the ~~absence~~best approach for the Company, and therefore our Board recommends that you vote for a two-year interval for the advisory vote on executive compensation.

Our Board recognizes the importance of ~~such specification,~~stockholder input on executive compensation and has determined that a say-on-pay vote every two years will provide our stockholders with adequate input. The Board believes that a two-year vote cycle gives the ~~following provisions apply:~~

~~Stock Options and SARs~~

~~Non-vested stock options held by non-employee directors will be forfeited upon~~Board sufficient time to thoughtfully consider the ~~termination from Board membership~~results of the ~~director.~~

~~Vested stock options held by a non-employee director whose membership~~advisory vote and implement any desired changes to our executive compensation policies and procedures, and will provide investors sufficient time to evaluate the effectiveness of our executive compensation program as it relates to the business outcomes of the Company. Finally, the two-year interval will avoid the additional administrative burden on the ~~Board terminates will remain exercisable for the lesser~~Company of ~~one year from the termination or the remaining term of the option.~~

~~Upon termination of an employee or termination from membership~~engaging in annual votes on ~~the Board by a non-employee director due~~executive compensation. Any stockholder who desires to death or disability, any unvested stock options will vest, and all stock options held by the employee or non-employee director on the date of such termination will remain exercisable for the lesser of one year after such termination or the remaining term of the stock option.

~~Upon termination of employment due to retirement, vested stock options will remain outstanding for the lesser of one year or the remaining term of the stock option.~~

Any other termination of employment, other than termination for cause, will result in immediate cancellation of all unvested stock options; vested stock options will remain exercisable for the lesser of 90 days after such termination or the remaining term of the stock option.

Upon termination for “cause” (as defined in the 2014 Plan, subject to a different definition that may be included in a participant’s award agreement, employment agreement or severance agreement), all outstanding stock options will be immediately cancelled.

~~Stock and Other Stock-Based Awards~~

Unless otherwise provided in an award agreement, unvested stock awards or other stock-based awards will fully vest upon termination from Board membership of a non-employee director or termination of employment of an employee due to disability or death; in the case of stock awards or other stock-based awards that vest upon the achievement of performance goals, the vested amount will be based upon the target award.

~~Upon any other termination of employment or termination from membership on the Board by a non-employee director, all outstanding unvested stock awards and other stock-based awards will be cancelled.~~

~~Change of Control~~

~~In the event of a change of control of the Company (as defined in the 2014 Plan), unless the administrator has determined otherwise with respect to a particular award:~~

All outstanding unvested stock options and SARs become fully vested and exercisable if not assumed, or substituted with a new award, by the successor to the Company. If assumed or substituted by the successor to the Company, such unvested stock options and SARs will become fully exercisable and vested if a participant’s employment is terminated (other than a termination for cause) within two years following a change of control.

If an employee’s employment is terminated within two years after a change of control for any reason other than death, retirement, disability or termination for cause, each outstanding stock option or SAR that is vested following such termination will remain exercisable until the earlier of the third anniversary of termination orprovide input before the expiration of two years is welcome to contact the ~~term~~Board. Please see the contact information above under the section titled “Proposal No. 1: Election of Directors-Corporate Governance-Stockholder Communications with the Board of Directors.”

The frequency vote is non-binding. Stockholder approval of a one, two, or three‑year frequency vote will not require us to implement an advisory vote on executive compensation every one, two or three years. The final decision on the frequency of the ~~stock option~~ advisory vote on executive compensation remains with our Board and/or ~~SAR.~~its committees. Although the frequency vote is non-binding, our Board and the Compensation Committee will consider the outcome of the frequency vote when making future decisions regarding the frequency of future say-on-pay votes.

~~All restrictions and conditions on outstanding unvested stock awards, stock unit awards, and other stock-based awards that are not assumed~~The proxy card provides stockholders with four choices (every year, every two years, every three years or ~~substituted with a new award by the successor~~abstain). Proxies submitted without direction pursuant to ~~the Company will lapse and such awards shall become fully vested, and any such awards that are performance-based~~this solicitation will be deemed fully earned at the target amount. All stock awards, stock unit award and other stock-based awards shall be settled or paid within thirty days of vesting. If assumed or substituted by the successorvoted to the Company, any stock awards, stock unit awards and other stock-based awards (other than awards held by directors, which fully vest irrespective of whether they have been assumed under the Company’s Change in Control Benefit Plan) shall become fully vested ifhold a ~~participant’s employment is terminated (other than a termination for cause) within~~say-on-pay vote every two ~~years following a change of control, and any performance based award shall be deemed fully earned at the target amount.~~

~~Amendment and Termination of 2014 Plan~~

The administrator may at any time amend, alter or discontinue the 2014 Plan or any award made under the plan, subject to approval by our stockholders to the extent required by applicable law. Unless approved by our stockholders, the administrator may not increase the maximum aggregate number of shares of Common Stock that may be subject to awards granted under the 2014 Plan, reduce the minimum exercise price for stock options or SARs, or reprice (i.e., reduce the exercise price or cancel in exchange for cash, another award or an option or SAR with a lower exercise price) outstanding stock options or SARs, as prohibited by the 2014 Plan. As noted above, an amendment to an award under the 2014 Plan may not, without the written agreement of the participant, materially impair the award.

~~Capitalization Adjustments~~

Upon the occurrence of an event that affects our capital structure (such as a stock dividend, stock split, reverse stock split or recapitalization), an extraordinary cash dividend or a merger, consolidation, acquisition of property or shares, reorganization, liquidation or similar event affecting us, our Board or the administrator may make such substitutions or adjustments as it deems appropriate and equitable, including with respect to (i) the number of shares issuable under the 2014 Plan, (ii) the number and kind of shares covered by each outstanding award, (iii) the price per share subject to each such outstanding award, (iv) individual limits with regard to stock options and SARs, (v) individual limits with regard to stock awards, other stock-based awards and dollar-denominated awards intended to qualify for the exemption under Section 162(m) of the Code, and (vi) the performance criteria listed under “Qualified Performance-Based Compensation” above.

~~Deferred Compensation~~

Unless the administrator determines otherwise, it is intended that no award granted under the 2014 Plan will be “deferred compensation” for purposes of Section 409A of the Code. If the administrator determines that an award is subject to Section 409A, the terms and conditions governing that award, including rules for elective or mandatory deferral of delivery of cash or shares of Common Stock and rules relating to treatment of awards in the event of a change of control, will be set forth in the applicable award agreement and will be required to comply with Code Section 409A.

~~Conversion Awards~~

The 2014 Plan permits the administrator to authorize conversion or substitution under the 2014 Plan of all stock options, SARs or other stock awards held by awardees of any entity acquired by us. These conversion awards would not be subject to several limitations in the 2014 Plan, including limitations on shares authorized for issuance under the 2014 Plan, limitations on individual awards under the 2014 Plan, and minimum exercise price of stock options.

~~Tax Matters~~

The following is a general summary of the United States federal income tax consequences to us and participants in the 2014 Plan. The following is only a general description intended for the information of stockholders and not as tax guidance for participants as consequences may vary depending on the types of awards granted, the identity of the participants and the method of payment or settlement. This summary is based on the federal tax laws in effect as of the date of this proxy statement. In addition, this summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Internal Revenue Code regarding nonqualified deferred compensation. Changes to these laws could alter the tax consequences described below. In addition, this summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local or foreign tax laws.

~~Incentive Stock Options~~

In general, a participant will not recognize income upon the grant of an incentive stock option. A participant will recognize income upon the sale of the stock acquired under an incentive stock option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the stock. If a participant sells the stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain and we will not be entitled to a tax deduction (although, for alternative minimum tax purposes, a participant must include the excess of the fair market value of the stock over the exercise price in alternative minimum taxable income for the year of exercise). If a participant sells the stock prior to satisfying these waiting periods, then the participant will have engaged in a “disqualifying disposition” and will recognize ordinary income at the time of the disposition equal to the difference between the fair market value of the shares on the date of exercise (or the amount realized on the disposition, if less) and the exercise price; we will be entitled to a tax deduction equal to that amount. The gain, if any, in excess of the

~~amount recognized as ordinary income will be long-term or short-term capital gain, depending upon the length of time a participant holds shares prior to the disposition.~~

~~Nonqualified Stock Options~~

In general, a participant will not recognize income upon the grant of a nonqualified stock option. A participant will recognize ordinary income upon the exercise of a nonqualified stock option equal to the fair market value of the stock on the day the participant exercised the option less the exercise price. At the time the participant recognizes ordinary income, we generally will be entitled to a compensation deduction in the same amount. Upon sale of the stock, the participant will have short-term or long-term capital gain or loss, depending on the length of time the participant held the shares, equal to the difference between the sales proceeds and the value of the stock on the day the option was exercised.

~~SARs~~

In general, the grant of a SAR will result in no tax consequences for the participant or us. A participant generally will recognize ordinary income upon the exercise of a SAR equal to the amount of the cash and the fair market value of any stock received less the exercise price, and we will be entitled to a tax deduction in that amount. Upon the sale of any stock received, the participant will have short-term or long-term capital gain or loss, depending on the length of time the participant held the shares, equal to the difference between the sales proceeds and the value of the stock on the day the SAR was exercised.

~~Stock Awards and Other Stock-Based Awards~~

As a general rule, a participant will recognize ordinary income at the time of delivery of shares of Common Stock or payment of cash under the 2014 Plan. Future appreciation on shares of Common Stock held beyond the ordinary income recognition event will be taxable as long-term or short-term capital gain, depending on the length of time the participant held the shares, when the shares are sold. We, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the participant. However, if shares of Common Stock, when delivered, are subject to substantial risk of forfeiture by reason of any employment or performance related condition, ordinary income taxation and our tax deduction will be delayed until the risk of forfeiture lapses, unless the participant makes a special election to accelerate taxation under Section 83(b) of the Code.

~~Code Section 162(m)~~years.

Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to a company’s chief executive officer or any of its other four most highly paid executive officers (not including the chief financial officer). Performance-based compensation is specifically exempt from the deduction limit if it otherwise meets the requirements of Section 162(m). Stock options and SARs granted under the 2014 Plan are intended to qualify as “qualified performance-based compensation.” Other awards will be “qualified performance-based compensation” if they are so designated and if their grant, vesting or settlement is subject to the performance criteria set forth in the 2014 Plan. Stock awards and other stock-based awards that vest solely upon the passage of time do not qualify as “qualified performance-based compensation.”

~~Securities Authorized for Issuance under Equity Compensation Plans~~

~~The following table details information regarding our existing equity compensation plans as of December 31, 2016:~~

Equity Compensation Plan Information
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders 780,849
$ 7.48
(2) 990,079
(1)


~~(1)~~	Includes 443,441 shares available for issuance under the 2013 Employee Stock Purchase Plan and 546,638 shares available for issuance under our 2014 Stock Incentive Plan, which may be issued in the form of options, restricted stock, RSUs, and other equity-based awards.


~~(2)~~	~~Does not include 250,115 shares that are RSUs and do not have an exercise price.~~

THE BOARD OF DIRECTORS RECOMMENDS ATHAT YOU VOTE FORTHE ~~APPROVAL~~OPTION OF ONCE EVERY TWO YEARS AS THE ~~AMENDMENT TO THE COMPANY’S 2014 STOCK INCENTIVE PLAN.~~PREFERRED FREQUENCY FOR ADVISORY VOTES ON EXECUTIVE COMPENSATION.

PROPOSAL NO. 4:7: INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM RATIFICATION ~~OF THE APPOINTMENT OF INDEPENDENT AUDITORS~~PROPOSAL

General

The Board of Directors recommends that the stockholders ratify the selection of ~~Plante & Moran, PLLC~~GBQ Partners LLC (“GBQ”) as the Company’s independent registered public accounting firm to audit our accounts and those of our subsidiaries for the fiscal year ending December 31, ~~2017. Plante & Moran, PLLC has served as our independent registered public accounting firm since 2009 and the~~2019. The Audit and Finance Committee approved the selection of ~~Plante & Moran, PLLC~~GBQ as our independent registered public accounting firm for fiscal year ~~2017.~~2019, and we engaged GBQ as our independent registered public accounting firm on May 24, 2019 (the “Engagement Date”). We expect that ~~representatives~~a representative of ~~Plante & Moran, PLLC~~GBQ will ~~be present at~~attend the Annual ~~Meeting. They~~Meeting, and the representative will ~~be given the~~have an opportunity to make a statement if ~~they desire to do~~he or she so ~~and~~chooses. The representative will also be available to respond to appropriate questions from ~~stockholders~~stockholders.

On April 5, 2019, the Company was informed by its independent registered public accounting firm, Plante & Moran PLLC (“Plante Moran”) of Plante Moran’s decision to decline to stand for reappointment as independent registered public accounting firm for the Company (the “Declination Date”). We do not expect a representative of Plante Moran to attend the Annual Meeting.

Plante Moran’s reports on the financial statements of the Company as of and for the years ended December 31, 2017 and December 31, 2018 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except the audit report for the fiscal year ended December 31, 2018 contained a “going concern” qualification.

During the years ended December 31, 2017 and December 31, 2018 and the subsequent interim period through Declination Date, the date Plante Moran informed the Company that it had determined to decline to stand for re-election (the “Declination Date”), there were no disagreements with Plante Moran on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to Plante Moran’s satisfaction would have caused Plante Moran to make reference thereto in connection with its reports on the financial statements for such years. During the years ended December 31, 2017 and December 31, 2018 and the subsequent interim period through the Declination Date, there were no reportable events of the types described in Item 304(a)(1)(v) of Regulation S-K.

During the years ended December 31, 2017 and December 31, 2018, and the subsequent interim period through the Engagement Date, neither the Company nor anyone on its behalf consulted with GBQ regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements or (ii) any matter that was either the subject of a “disagreement” or a “reportable event” (within the meaning of Item 304(a)(1)(iv) and Item 304(a)(i)(v) of Regulation S-K, respectively).

There is no requirement that the Company submit the selection of its independent registered public accounting firm to its stockholders for ratification. In addition, the Sarbanes-Oxley Act of 2002 requires our Audit and Finance Committee to be directly responsible for the appointment, compensation and oversight of the audit work of our independent ~~auditors.~~registered public accounting firm. If our stockholders fail to ratify the selection, the Audit and Finance Committee will reconsider whether to retain ~~Plante & Moran, PLLC,~~GBQ, and may retain any firm without re-submitting the matter to our stockholders. Even if the selection is ratified, the Audit and Finance Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

~~THE BOARD OF DIRECTORS RECOMMENDS A VOTE~~ ~~FOR~~ ~~THE RATIFICATION OF THE APPOINTMENT OF PLANTE & MORAN, PLLC AS OUR INDEPENDENT AUDITORS.~~

~~SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT~~

The following table sets forth certain information with respect to beneficial ownership of Common Stock as of April 24, 2017, as to (i) each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each of the Company’s current directors and Named Executive Officers listed below, and (iii) all current executive officers and directors of the Company listed below as a group. Unless otherwise specified, the address for each officer and director is: 32000 Aurora Road, Suite B, Solon, Ohio 44139. Except as otherwise indicated and subject to community property laws where applicable, each person or entity included in the table below has sole voting and investment power with respect to the shares beneficially owned by that person or entity.

Shares Beneficially Owned

Percent of
Outstanding
Common
Stock (1)

Name and Address
5% Stockholders
Gina Huang 1,017,390
(2) 8.6 %
P.O. Box 3444, Road Town
Tortola, British Virgin Islands
Bright Horizon Partners 639,130
(3) 5.4 %
1300 Avenue of the Americas, 36th Floor
New York, NY 10019

Current Directors and Named Executive Officers
Ronald D. Black 13,984
(4) *
William Cohen 730,179
(5) 6.2 %
Glenda M. Dorchak 13,984
(6) *
Marc J. Eisenberg 13,984
(7) *
Eric W. Hilliard 63,165
(8) 0.5 %
Jiangang Luo 536,051
(9) 4.6 %
Marcia J. Miller 38,377
(10) 0.3 %
Michael H. Port 6,131
(11) *
Michael R. Ramelot 29,484
(12) *
Theodore L. Tewksbury III —

*
James Tu 433,111
(13) 3.7 %

All Current Directors and Executive Officers as a Group 1,343,797
(14) 11.4 %

*Less than one percent

~~(1)~~

Based on 11,778,823 shares of Common Stock outstanding as of April 24, 2017. In addition, shares of Common Stock issuable pursuant to options that are currently exercisable, or may become exercisable within 60 days of April 24, 2017, or pursuant to RSUs scheduled to vest within 60 days of April 24, 2017, are included in the reported beneficial holdings of the individual owning such options or RSUs. These shares of Common Stock have been treated as outstanding in calculating the percentage ownership of the individual possessing such interest, but not for any other individual.


~~(2)~~	Based upon a Schedule 13G/A filed with the SEC by Gina Huang, Brilliant Start Enterprise, Inc., and Jag International Ltd. on October 7, 2015. Ms. Huang holds sole voting and dispositive power over 417,390 shares of Common Stock held by Brilliant Start Enterprise, Inc., and 600,000 shares of Common Stock held by Jag International Ltd.


~~(3)~~	~~Based on a Schedule 13G/A filed with the SEC by Bright Horizon Partners, Inc. on October 7, 2015.~~


~~(4)~~	~~Includes 11,484 RSUs.~~


~~(5)~~	Includes 11,484 RSUs and 10,000 options. Includes 600,000 shares of Common Stock held by Costar Partners II, LLC. Mr. Cohen and Costar Partners II, LLC have shared voting and dispositive power of the shares of Common Stock held by Costar Partners II, LLC.


~~(6)~~	~~Includes 11,484 RSUs.~~


~~(7)~~	~~Includes 11,484 RSUs.~~


~~(8)~~	~~Represents the number of shares owned and options exercisable as of May 5, 2016, which was Mr. Hilliard’s separation date.~~


~~(9)~~	Includes 11,484 RSUs. Based on a Schedule 13D/A filed with the SEC by Cleantech Global Limited, formerly Prime Science & Technology, Inc., on October 7, 2015. Mr. Luo and Cleantech Global Limited reported sole voting and dispositive power over the shares of Common Stock. Mr. Luo is Managing Partner of Cleantech Global Limited.


~~(10)~~	~~Represents the number of shares owned and options exercisable as of August 15, 2016, which was Ms. Miller’s separation date.~~


~~(11)~~	~~Includes 3,194 options.~~


~~(12)~~	~~Includes 11,484 RSUs and 15,000 options.~~

~~(13)~~

Includes 133,111 vested options that are exercisable for 90 days from Mr. Tu’s separation date. If they are not exercised, these options will expire on May 22, 2017. Includes 300,000 shares of Common Stock held by 5 Elements Global Fund L.P. Mr. Tu has sole voting and dispositive power over the shares of Common Stock held by 5 Elements Global Fund L.P. See “Certain Relationships and Related Transactions” below for additional information regarding Mr. Tu’s relationship with Communal International Ltd. and its interests in 5 Elements Energy Efficiency Limited, another stockholder of the Company.


~~(14)~~	Includes 28,194 shares of Common Stock issuable pursuant to options that are currently exercisable, or may become exercisable within 60 days of April 24, 2017 and 68,904 shares of Common Stock issuable pursuant to RSUs scheduled to vest within 60 days of April 24, 2017. Does not include shares beneficially owned by Mr. Hilliard, Ms. Miller, or Mr. Tu.

~~EXECUTIVE COMPENSATION AND OTHER INFORMATION~~

~~Summary Compensation Table~~

The following table sets forth information about compensation of our former Chief Executive Officer, and two other most highly compensated executive officers (our “Named Executive Officers”) for the years indicated:

Name and Principal Position Year
Salary
($) (1)

Bonus
($)

Option Awards
($) (2)

Stock Awards
($) (2)

Non-Equity
Incentive Plan
Compensation (3)

All Other Compensation
($) (4)

Total
($)

James Tu 2016 383,077
—
297,694
291,946 0
480
973,197
Former Executive Chairman, Chief Executive Officer and President (5) 2015 303,992
0
325,344
327,600
1,024
957,960

Eric W. Hilliard 2016 89,269
—
127,658
125,202 0
205,372
547,501
Former President and Chief Operating Officer (6) 2015 243,226
0
162,672
262,080
1,191
669,169

Marcia J. Miller (7) 2016 137,546
—
80,003
78,463 0
109,923
405,935
Former Chief Financial Officer 2,015 166,039
8,377
172,559
94,017
666
441,658



~~(1)~~	~~Amounts paid in 2016 reflect adjustments to implement salary increases and the timing of payroll dates.~~
~~(2)~~	Under SEC rules, the values reported reflect the aggregate grant date fair values computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”), to each of the Named Executive Officers in the years shown. We calculate the grant date fair value of stock option grants using the Black-Scholes option pricing model. We calculate the fair value of RSU grants based on the closing stock price on the grant date. A discussion of the assumptions used in calculating the fair value is set forth in Note 9 to the Consolidated Financial Statements contained in Item 8 of the Annual Report on Form 10-K filed with the SEC on February 23, 2017. Each of the awards granted in 2016 and, in the case of Mr. Tu, earlier awards that remained unvested, were forfeited by the Named Executive Officer upon his or her departure from the Company.
~~(3)~~	~~The amounts set forth in this column are amounts paid under the Company’s cash incentive program, which is described below under “Cash incentive plan.”~~
~~(4)~~	The amounts set forth in this column include Company-paid contributions for life insurance policies and, with respect to Mr. Hilliard and Ms. Miller, the following amounts paid during 2016 under their respective separation agreements entered into with the Company of $205,192 and $109,692, respectively.
~~(5)~~	Mr. Tu served as the Executive Chairman and Chief Executive Officer during 2015 and until May 6, 2016, when he also assumed the role of President. On August 19, 2016, the Board of Directors separated the roles of Executive Chairman and Chief Executive Officer. Mr. Tu continued to serve as Chief Executive Officer and President until February 19, 2017.
~~(6)~~	~~Mr. Hilliard served as President and Chief Operating Officer during 2015 and until May 6, 2016.~~
~~(7)~~	Ms. Miller served as Interim Chief Financial Officer from February 6, 2015 until July 23, 2015, and as Chief Financial Officer from July 24, 2015 until August 15, 2016. The 2015 compensation information shown for Ms. Miller includes the entire 2015 calendar year. The bonus amount for Ms. Miller reflects a bonus payment with respect to Ms. Miller’s service as Interim Chief Financial Officer.

~~Narrative Disclosure to Summary Compensation Table~~

The Compensation Committee (the “Committee”) of our Board of Directors generally has the responsibility of administering our executive compensation program or making recommendations to the full Board with respect to such program. The Committee reviews and, as appropriate, makes recommendations to the full Board regarding the base salaries and annual cash bonuses for executive officers, and administers our stock incentive plans, including the grants of stock options.

~~Compensation philosophy and objectives~~

Our principal executive compensation policy, which has been endorsed by the Committee, is to provide a compensation program that will attract, motivate and retain persons of high quality and provide incentives that align the interests of our employees and directors with those of our stockholders. In administering the executive compensation program, the Committee is mindful of the following principles and guidelines, which are supported by the full Board:

~~Base salaries for executive officers should be competitive.~~

~~A sufficient portion of annual compensation should be at risk in order to align the interests of executives with those of our stockholders.~~

~~The variable part of annual compensation should reflect both individual and corporate performance.~~

As a person’s level of responsibility increases, a greater portion of total compensation should be at risk and include more stock-based compensation to provide executives long-term incentives, and help to align further the interests of executives and stockholders in the enhancement of stockholder value.

Executive officer compensation has three primary components: base salary, bonuses granted under a bonus or cash incentive plan, and stock-based awards granted pursuant to our 2014 Plan. In addition, executive officers receive certain benefits that are generally available to all salaried employees. We do not have any defined benefit pension plans, non-qualified deferred compensation arrangements, or supplemental retirement plans for our executive officers.

During 2016, the Compensation Committee engaged Compensia, Inc. to assist with the review of the Company’s executive and Board compensation by providing data on market trends and, more specifically, with respect to a group of peer companies having similar size and other characteristics to the Company based on the Company’s 2015 performance and how the Company’s compensation levels compared with such peers.

For each Named Executive Officer’s compensation for 2016, the Committee reviewed the proposed level for each compensation component based on various factors, including the median level for the peer group and other competitive market factors, internal equity and consistency, and an emphasis on pay for performance. The then Executive Chairman and Chief Executive Officer provided the Committee with recommendations for executive officers other than himself. The Committee made recommendations to the Board of Directors, which then approved the final compensation amounts for each executive officer. We have not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

~~Management Changes and Related Compensation Arrangements~~

Significant changes in the Company’s management team occurred during 2016 and early 2017. As a result, the Named Executive Officers are no longer executive officers of the Company and the amounts paid to Mr. Hilliard and Ms. Miller for 2016 reflect their severance benefits received under their separation agreements entered into with the Company on May 5, 2016 and June 15, 2016, respectively, as well as the compensation paid during their terms of employment. Mr. Tu also entered into a separation agreement with the Company dated February 18, 2017. The terms of these separation agreements were as follows:

The separation agreement with Mr. Hilliard provides for the continued payment of his salary at the rate in effect as of May 5, 2016, continued medical and related benefits and non-competition and non-solicitation obligations for a period of one year and full vesting of unvested stock options granted prior to 2016.

The separation agreement with Ms. Miller provides for the continued payment of her salary at the rate in effect as of June 17, 2016 for a period of eleven months following her separation date, the payment of up to $10,000 for executive outplacement and coaching service expenses, and full vesting of unvested stock options granted prior to 2016.

The separation agreement with Mr. Tu provides for the continued payment of his salary at the rate in effect as of February 18, 2017 for a period of twelve months following his separation date, twelve months of continued benefits and the payment of up to $10,000 for legal and executive outplacement and coaching service expenses.

~~The following executive officers succeeded the Named Executive Officers in their respective positions:~~

Dr. Theodore L. Tewksbury III was appointed as Executive Chairman effective December 12, 2016 and became the Company’s Chairman of the Board, Chief Executive Officer and President on February 19, 2017;

~~Bradley B. White was appointed as Chief Financial Officer effective December 12, 2016 and served in that role until departing from the Company on March 13, 2017; and~~

Michael H. Port was appointed as Chief Financial Officer on March 13, 2017, and had served as the Company’s Interim Chief Financial Officer following Ms. Miller’s departure, from August 16, 2016 until December 11, 2016.

Dr. Tewksbury’s compensation as Executive Chairman and now as Chairman of the Board, Chief Executive Officer and President, and Mr. White’s and Mr. Port’s compensation as Chief Financial Officer, were each established taking into account similar factors as the Named Executive Officer’s compensation, and a comparative peer group that had been adjusted to reflect the lower sales levels experienced in 2016 compared to 2015. The Committee also considered the need to recruit and

~~retain top level talent during a challenging time for the Company, and the responsibilities being managed by a smaller executive team, and their resulting compensation arrangements were as follows:~~

Dr. Tewksbury’s salary was set at $200,000 for his Executive Chairman role based on an expected 50% required effort as compared to the Chief Executive Officer and President. In addition, Dr. Tewksbury was granted RSUs with a grant date fair value of $100,000 on January 3, 2017. Upon his appointment as Chairman, Chief Executive Officer and President of the Company, Dr. Tewksbury’s salary was increased to $450,000. Dr. Tewksbury is eligible to receive an annual bonus with a target payout of 100% of his base salary, based on the Company’s financial performance and his individual performance and continued employment and, on February 27, 2017, he received stock options and RSUs having a total grant date fair value of approximately $450,000, with 50% of the awards in RSUs and stock options equal to 1.5 times the number of RSUs.

Mr. White’s salary as Chief Financial Officer was set at $315,000. Mr. White was also eligible to receive an annual bonus with a target payout of 65% of his base salary, based on the Company’s financial performance and his individual performance. Mr. White’s 2017 bonus was guaranteed to be a minimum of $150,000, provided that he remained employed with the Company through the date the bonus is paid. In addition, on January 3, 2017, Mr. White was granted stock options and RSUs having a total grant date fair value of approximately $315,000, with 50% of the awards in RSUs and stock options equal to 1.5 times the number of RSUs. Mr. White resigned from the Company on March 17, 2017 and his eligibility for any bonus and his equity awards terminated.

On March 16, 2017, the Board of Directors appointed Michael H. Port, the Company’s Corporate Controller, as Chief Financial Officer and Secretary. Mr. Port’s salary was set at $250,000 and he is eligible to receive an annual bonus with a target payout of 50% of his base salary, based on the Company’s financial performance and his individual performance. In addition, Mr. Port was granted RSUs with a grant date fair value of $65,000 and stock options equal to 1.5 times the number of RSUs. Mr. Port also served as Interim Chief Financial Officer from August 16, 2016 until Mr. White’s appointment on December 12, 2016. With respect to his service as Interim Chief Financial Officer in 2016, Mr. Port received additional compensation totaling $15,323 ($4,000 per month pro-rated to Mr. White’s start date).

~~Base salary~~

The Committee seeks to establish executive officer base salary levels that are competitive with the median amounts paid to executives performing similar functions within the Company’s peer group. The Committee also takes into account a number of largely subjective factors, including changes in the individual’s duties and responsibilities, the personal performance of such executive officer, the performance of the Company, cost-of-living increases, and such other factors as the Committee deems appropriate, including the individual’s overall mix between fixed and variable compensation and between cash and stock-based compensation.

The Executive Chairman and Chief Executive Officer annually assesses the performance of all other executive officers and recommends salary increases to the Committee based on performance evaluations, comparative data and other relevant factors. The Committee then reviews the Executive Chairman and Chief Executive Officer’s recommendations, considers the factors described above, and recommends salary amounts to the Board of Directors for approval.

~~Mr. Tu’s, Mr. Hilliard’s, and Ms. Miller’s salaries were increased by 33.3%, 14.6%, and 15% in 2016 to $400,000, $275,000, and $230,000, respectively, as a result of the factors discussed above.~~

~~Cash incentive plan~~

For 2016, a cash incentive plan was established for executive management under which the executive officers were each eligible for an incentive payment of up to the following percentages of his or her 2016 salary, to be determined by the Board of Directors based upon the financial results of 2016 with respect to the metrics and percentages described below:

Incentive Payment as a % of Base Salary (1)
Minimum Target Maximum
James Tu 50% 100% 200%
Eric Hilliard 32.5% 65% 130%
Marcia Miller 25% 50% 100%



~~(1)~~	~~Based on the annual salary rate for the year.~~

~~The incentive payment levels listed above were payable based on the achievement of the following financial performance metrics:~~



	~~Threshold - 50%~~	~~Target - 100%~~	~~110% of Target Payment~~	~~150% of Target Payment~~	~~Maximum - 200%~~
~~Total Revenue (Sales) (1)~~	~~$71.513M~~	~~$85.15M - $95.349M~~	~~$95.350M~~	~~$109.653M~~	~~$119.118M~~



~~(1)~~	~~For Mr. Tu, this metric represented 70% of the total potential incentive payment. For Mr. Hilliard and Ms. Miller, this metric represented 50% of the total potential incentive payment.~~

Gross Margin % (1) Funding %
<35%
0 %
Threshold 35 % 50 %
36 % 60 %
37 % 70 %
38 % 80 %
39 % 90 %
Target 40 % 100 %
41 % 110 %
42 % 120 %
43 % 130 %
44 % 140 %
45 % 150 %
46 % 170 %
47 % 190 %
Maximum 47.5 % 200 %



~~(1)~~	~~This metric represented 30% of the total potential incentive payment for each of Mr. Tu, Mr. Hilliard, and Ms. Miller.~~

In addition, 20% of Mr. Hilliard’s and Ms. Miller’s potential incentive payment was based on the achievement of individual key performance indicators to be established and evaluated by the Company’s Executive Chairman and Chief Executive Officer. Based on the Company’s 2016 financial results, total revenue was $31.0 million and gross margin was 24.8%, which did not meet the minimum thresholds for payment. Mr. Hilliard and Ms. Miller were not eligible to receive any payments under the plan as they were no longer employed by the Company at the end of the fiscal year. Mr. Tu did not receive a payment, as his incentive amount was solely based on the achievement of at least the minimum total revenue and gross margin metrics.

~~Discretionary bonuses~~

The Committee may from time to time award a discretionary annual cash bonus to executive officers, in the amounts and based on the factors determined by the Committee. The bonus awards may be based on an executive officer’s individual performance or on the overall success of the Company, or both.

~~No discretionary bonuses were awarded to the Named Executive Officers in 2016. Mr. Port received a discretionary bonus of $35,000 with respect to his service as Interim Chief Financial Officer.~~

~~Stock awards and other stock-based awards~~

The Committee believes that employee equity ownership provides significant motivation to executive officers to maximize value for the Company’s stockholders and, therefore; periodically grants time-based stock options and RSUs under the 2014 Plan at the then current market price.

The Committee grants, or recommends to the Board to grant, options and/or RSUs to executive officers after consideration of recommendations from the Executive Chairman and Chief Executive Officer. Recommendations for equity awards are based upon the relative position, responsibilities, and previous and expected contributions of each officer, previous equity award grants to such officers and customary levels of equity award grants for the respective position in other comparable companies. The exercise price for stock options is equal to the fair market value of our Common Stock on the grant date. Stock options generally vest over a three-year period with 33% vesting one year from the date of grant and the remaining 67% vesting equally on a monthly basis over the remaining 24 months. Options expire 10 years from the date of

grant. RSUs generally vest over a three-year period with 33% vesting one year from the grant date, 33% vesting two years from the grant date, and the remaining 34% vesting three years from the grant date.

Under the 2014 Plan, upon a Change of Control (as defined in such plan) all outstanding unvested stock options become fully vested and exercisable if not assumed, or substituted with a new award, by the successor to the Company and, if such awards are assumed or substituted by the successor to the Company, they become fully exercisable and vested if the option holder’s employment is terminated (other than a termination for cause) within two years following a Change of Control. If an option holder’s employment is terminated within two years after a Change of Control for any reason other than death, retirement, disability or termination for cause, each outstanding stock option that is vested following such termination will remain exercisable until the earlier of the third anniversary of termination or the expiration of the term of the stock option. In addition, executive officers who are designated for participation under the Change in Control Benefit Plan described below, are eligible for vesting of all outstanding equity awards upon a qualifying termination following a Change in Control.

In addition to the annual grants, in August 2016, Mr. Port received a grant of 5,000 RSUs with a grant date fair value of $22,750 in connection with his appointment as the Interim Chief Financial Officer from August 16, 2016 until December 11, 2016.

~~Change in Control Benefit Plan~~

On February 19, 2017, we established a Change in Control Benefit Plan to provide for the payment of certain benefits to selected eligible employees and directors of the Company. A Change in Control is defined in the same manner as under the 2014 Plan and includes any one or more of the following events summarized below:

any “person” becomes the beneficial owner, 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;

~~individuals who, as of the beginning of any 24 month period, constitute the Board cease for any reason during such 24 month period to constitute at least a majority of the Board; or~~

consummation of (A) a merger, consolidation or reorganization of the Company, in each case, 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.

The Company entered into Change in Control participation agreements with Dr. Tewksbury and Mr. White on February 19, 2017 (which terminated upon Mr. White’s departure) and with Mr. Port on March 21, 2017. The Change in Control participation agreement provides for a lump sum payment equal to one times annual base salary and target bonus, accelerated vesting of stock awards, and continuation of group health plan benefits for 12 months if the participant’s employment is involuntarily terminated within 24 months of a Change in Control.

~~Section 162(m)~~

Section 162(m) of the Internal Revenue Code (“IRC Sec. 162(m)”) generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid to a company’s Chief Executive Officer, or to any of the company’s other three most highly compensated executive officers (other than the Chief Financial Officer), for any fiscal year. IRC Sec. 162(m) generally exempts qualifying performance-based compensation from the deduction limit if certain conditions are met. In determining base salary, benefits, perquisites and other compensation, the Committee considers tax deductibility. However, a more important goal of the Committee is to offer compensation that is competitive within our peer group.

~~Employment Agreements with Named Executive Officers~~

~~We did not have employment agreements with any of our Named Executive Officers and do not have employment agreements with our current executive officers.~~

~~Outstanding Equity Awards at Fiscal Year-End~~

~~The following table sets forth information with respect to equity awards outstanding for our Named Executive Officers as of December 31, 2016:~~

Name Award Grant Date Number of Securities Underlying Unvested Restricted Stock Units (#)
Number of
Securities Underlying
Unexercised Options
Exercisable
(#)

Number of
Securities Underlying Unexercised Options
Un-exercisable
(#)

Option Exercise Price
($)
Option Expiration Date

James Tu 4/29/2013 40,000
0
2.30
4/29/2023
1/28/2014 80,000
0
4.10
1/28/2024
3/16/2015 46,667
33,333
(2) 5.47
3/16/2025
3/14/2016 37,915
(1 ) —
51,350
(3) 7.70
3/14/2026

Eric W. Hilliard (4)

Marcia J. Miller (4)



~~(1)~~	One third vests on the first anniversary of the grant date. One third vests on the second anniversary of the grant date. The final one third vests on the third anniversary of the grant date. These RSUs were cancelled upon Mr. Tu’s departure from the Company on February 19, 2017.
~~(2)~~	One third vests on the first anniversary of the grant date, and the remainder vests monthly in equal installments over the following 24-month period. Upon Mr. Tu’s departure from the Company on February 19, 2017, all options that had not yet vested were cancelled. Mr. Tu has 90 days from his departure date to exercise the options that were vested as of such date.
~~(3)~~	One third vests on the first anniversary of the grant date, and the remainder vests monthly in equal installments over the following 24-month period. Upon Mr. Tu’s departure from the Company on February 19, 2017, these options were cancelled.
~~(4)~~	~~Eric Hilliard and Marcia Miller had no outstanding equity awards at December 31, 2016.~~

~~DIRECTOR COMPENSATION~~

We use a combination of cash and stock-based awards to attract and retain qualified candidates to serve on our Board. In setting director compensation, the Board considers the significant amount of time that directors expend in fulfilling their duties, the skill level required, and the compensation of Board members at comparable companies.

~~The following table sets forth the annual cash and stock-based compensation for non-employee directors for 2016:~~

January 1, 2016 to November 17, 2016 Beginning November 18, 2016

Annual Cash Retainer $ 32,500
$ 32,500

Restricted Stock Unit Grant $ 65,000
$ 45,000
(1)
Additional Annual Cash Retainers:
Lead Director $ 17,500
$ 20,000

Compensation Committee Chairman $ 12,000
$ 14,000

Compensation Committee Member $ 5,000
$ 5,000

Audit and Finance Committee Chairman $ 17,500
$ 19,000

Audit and Finance Committee Member $ 7,000
$ 7,000

Nominating and Corporate Governance Committee Chairman $ 9,000
(2)
Nominating and Corporate Governance Committee Member $ 4,000
(2)



~~(1)~~	Restricted stock unit grant on the date of the Company’s annual meeting of stockholders having a value as stated above based on the fair market value of the Common Stock on such date, and vesting on the earlier of (i) the one year anniversary of the grant date or (ii) the date of the Company’s annual meeting of stockholders next following the grant date. On June 15, 2016, each of the non-employee directors received a restricted stock unit grant of 11,484 shares, which will vest on June 15, 2017. In February 2017, the Board adopted a Change in Control Benefit Plan, which provides for full vesting of RSUs held by non-employee directors upon a Change in Control (as defined in such plan).
~~(2)~~	~~Compensation for the Nominating and Corporate Governance Committee took effect as of the date the committee was formed on August 9, 2016.~~

~~The Board, at its discretion, may grant options or other equity awards to newly elected directors and additional grants to other directors.~~

~~The following table summarizes the total compensation paid to non-employee directors for the year ended December 31, 2016:~~

Name
Fees Earned or Paid in
Cash ($)
Stock Awards ($)(1)
Option Awards
($) (2)
Total ($)

Ronald D. Black 57,011
65,000
—
122,011
William Cohen 37,229
65,000
—
102,229
Glenda M. Dorchak 42,559
65,000
—
107,559
Marc J. Eisenberg 37,701
65,000
—
102,701
Jiangang Luo 33,095
65,000
—
98,095
Michael R. Ramelot 46,610
65,000
—
111,610



~~(1)~~	Represents RSUs, which vest on June 15, 2017 and will be settled in Common Stock. The grant date fair value is calculated based on the closing price of the stock on the grant date. Each of Dr. Black, Messrs. Cohen, Eisenberg, Luo and Ramelot and Ms. Dorchak held 11,484 unvested RSUs as of December 31, 2016.
~~(2)~~	~~The number of outstanding options held by each non-employee director as of December 31, 2016 was as follows: Mr. Cohen – 10,000 and Mr. Ramelot – 15,000.~~

~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

The Audit and Finance Committee of the Board of Directors has appointed the firm of Plante & Moran, PLLC, independent public accountants, to audit the financial statements of the Company for the fiscal year ending December 31, 2017. Representatives of Plante & Moran, PLLC are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and will be able to respond to appropriate questions from stockholders.

Accountant Fees and Services

Plante & Moran, PLLC provided audit services to the Company for the fiscal years ending December 31, ~~2016~~2018 and ~~2015.~~2017. The following table presents fees for professional services rendered by Plante & Moran, PLLC for those years:


	Year Ended December 31,				Year Ended December 31,
	2016		2015		2018		2017
Audit Fees	$	339,875	$	381,575	$	327,500	$	304,100
Audit-Related Fees	-		-		0		0
Tax Fees	-		-		0		0
All Other Fees	-		-		0		0
Total Fees	$	339,875	$	381,575	$	327,500	$	304,100

Audit Fees. “Audit Fees” include the aggregate fees billed for professional services rendered by Plante & Moran, PLLC, including audit services related to quarterly reviews and audits of consolidated financial statements, reviews in connection with SEC filings and related consents, comfort letters related to the public stock offering, and other consultations. ~~For~~Because we are a smaller reporting company, for both ~~2016~~2018 and ~~2015,~~2017, we were not required to obtain ~~independent public accounting firm certification of~~an attestation report with respect to our internal control ~~infrastructure as defined by the Sarbanes-Oxley Act.~~over financial reporting from our independent registered public accounting firm. Therefore, no fees related to ~~the audit of Sarbanes-Oxley compliance~~that attestation report were incurred.

Pre-Approval Policies and Procedures

It is the Company’s policy that all audit and non-audit services to be performed by the Company’s principal auditors be approved in advance by the Audit and Finance Committee. The Audit and Finance Committee pre-approved all services provided by Plante & Moran, PLLC during ~~2016.~~ 2018.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM RATIFICATION PROPOSAL.

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table sets forth certain information with respect to beneficial ownership of Common Stock as of the Record Date assuming both (A) no Stockholder Approval and no conversion of the Notes into Series A Preferred Stock and (B) Stockholder Approval and conversion of the Notes into Series A Preferred Stock. This beneficial ownership information is provided with respect to (i) each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each of the Company’s current directors and the Named Executive Officers listed below, and (iii) all current executive officers and directors of the Company as a group. Unless otherwise specified, the address for each officer and director is: 32000 Aurora Road, Suite B, Solon, Ohio 44139. Except as otherwise indicated and subject to community property laws where applicable, each person or entity included in the table below has sole voting and investment power with respect to the shares beneficially owned by that person or entity.



	Assuming No Stockholder Approval and No Conversion of Notes				Assuming Stockholder Approval and Conversion of Notes into Series A Preferred Stock
	Amount and Nature of Beneficial Ownership		Percent of Outstanding Common Stock (1)		Amount and Nature of Beneficial Ownership		Percent of Outstanding Common Stock (1)

Name and Address
5% Stockholders
Schedule 13D Parties	2,126,848	(2)	17.2	%	3,834,620	(2)	27.2	%
1 Bridge Plaza North, #275
Fort Lee, NJ 07024
William F. Cohen	663,622	(3)	5.4	%	663,622	(3)	5.4	%
53 East 34th Street
Pine Brook, NJ 07514

Current Directors
Jennifer Cheng	8,290		*		8,290		*
Geraldine McManus	8,290		*		8,290		*
Stephen Socolof	5,032		*		5,032		*
Philip Politziner	0		*		0		*
Michael R. Ramelot	62,927	(4)	*		62,927	(4)	*
James Tu	300,000	(8)	2.4	%	1,217,137	(8)	9.2	%

Named Executive Officers
Theodore L. Tewksbury III	231,550	(6)	1.9	%	231,550	(6)	1.9	%
Jerry Turin	18,064	(9)	*		18,064	(9)	*
Michael H. Port	39,565	(7)	*		39,565	(7)	*

All Current Directors and Executive Officers as a Group (7 persons)	384,539	(5)	3.1	%	1,301,676	(5)	9.8	%

*Less than one percent

(1)

Based on 12,370,030 shares of Common Stock outstanding as of October 25, 2019. In accordance with the rules of the SEC, shares of Common Stock issuable pursuant to options that are currently exercisable, or may become exercisable within 60 days of October 25, 2019, or pursuant to restricted stock units (“RSUs”) scheduled to vest within 60 days of October 25, 2019, are included in the reported beneficial holdings of the individual owning such options or RSUs. Pursuant to the rules of the SEC, these shares of Common Stock have been treated as outstanding in calculating the percentage ownership of the individual possessing such interest, but not for any other individual.

(2)

Except for information provided with respect to James Tu, our Chief Executive Officer, the information in the table and this footnote is based solely on information contained in the Schedule 13D initially filed with the SEC on November 30, 2018 (as amended to date, the “Amended Schedule 13D”) by Gina Huang, Brilliant Start Enterprise, Inc., Jag International Ltd., Jiangang Luo, Cleantech Global Ltd., James Tu, 5 Elements Global Fund L.P., Yeh-Mei Hui Cheng, Communal International Ltd., and 5 Elements Energy Efficiency Limited (collectively, the “Schedule 13D Parties”). According to Amended Schedule 13D, the Schedule 13D Parties may be deemed to be a “group” under Section 13(d)(3) of the Exchange Act and Rule 13d-5 promulgated thereunder. Of the Schedule 13D Parties, only Ms. Huang has beneficial ownership of 5% or more of our Common Stock. Ms. Huang has shared voting and dispositive power over 1,017,390 shares of Common Stock (or beneficial ownership 8.2% of the outstanding Common Stock), consisting of 417,390 shares held by Brilliant Start Enterprise, Inc., and 600,000 shares held by Jag International Ltd., each of which is controlled by Ms. Huang.

See “Certain Relationships and Related Transactions” below for additional information. In addition, on March 29, 2019 certain of the Schedule 13D Parties or their affiliates, including Fusion Park LLC (of which Mr. Tu is the sole

member) and Brilliant Start (which is controlled by Ms. Huang), among others, Purchased an aggregate of $1.08 million in Notes. The Notes will automatically convert into shares of Series A Preferred Stock based on a conversion price of $0.67 upon Stockholder Approval, and the Series A Preferred Stock, once issued, is convertible into Common Stock on a one-for-one basis. Once Stockholder Approval is obtained, Ms. Huang and Mr. Tu will beneficially own 790,635 and 917,137 additional shares of Common Stock, respectively.


(3)	Based upon a Schedule 13D filed with the SEC by William Cohen and Costar Partners II, LLC on December 19, 2017 and the Company’s records. Mr. Cohen holds sole voting and dispositive power over 663,622 shares of Common Stock.


(4)	Includes 15,000 options exercisable within 60 days of the Record Date.


(5)	Includes 15,000 shares of Common Stock issuable pursuant to options that are currently exercisable, or may become exercisable within 60 days of October 25, 2019. Does not include shares beneficially owned by Mr. Port, Dr. Tewksbury, or Mr. Turin.


(6)	Effective following the April 1, 2019 10-K Filing, Mr. Tewksbury resigned from his positions as Chairman of the Board, Chief Executive and President of the Company. Includes 51,503 options currently exercisable until April 1, 2020.


(7)	Mr. Port’s employment with the Company terminated on August 15, 2018 and the information presented is as of such date.


(8)	Mr. Tu beneficially owns 300,000 shares of Common Stock through his voting and dispositive power over the Common Stock held by 5 Elements Global Fund L.P.


(9)	Effective following the April 1, 2019 10-K Filing, Mr. Turin resigned from his positions as Chief Financial Officer and Secretary of the Company.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary Compensation Table

The following table sets forth information about compensation of our former Chief Executive Officer, our former Chief Financial Officer and one additional executive officer who would have been among the most highly compensated but departed prior to December 31, 2018 (our “Named Executive Officers”) for the years indicated:



Name and Principal Position	Year	Salary ($) (1)	Bonus ($)	Option Awards ($) (2)	Stock Awards ($) (2)	Non-Equity Incentive Plan Compensation (3)	All Other Compensation ($) (4)	Total ($)

Theodore L. Tewksbury, III	2018	459,249	—	-	409,944	—	2,652	871,845
Former Chairman, Chief Executive Officer and President (5)	2017	407,692	—	191,160	262,178	—	569	861,599

Jerry Turin	2018	172,686	75,000	98,424	91,358	—	2,549	440,017
Former Chief Financial Officer and Secretary (6)

Michael H. Port	2018	164,227	—	—	121,934	—	112,493	398,654
Former Chief Financial Officer and Secretary (7)	2017	230,577	—	68,095	87,943	—	205	386,820



(1)	Amounts paid in 2017 and 2018 reflect adjustments to implement salary increases and the timing of payroll dates.
(2)	Under SEC rules, the values reported reflect the aggregate grant date fair values computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”), to each of the Named Executive Officers in the years shown. We calculate the grant date fair value of stock option grants using the Black-Scholes option pricing model. We calculate the fair value of RSU grants based on the closing stock price on the grant date. A discussion of the assumptions used in calculating the fair value is set forth in Note 11 to the Consolidated Financial Statements contained in Item 8 of the April 1, 2019 10-K Filing.
(3)	The amounts set forth in this column are amounts paid under the Company’s cash incentive program, which is described below under “Cash incentive plan.”
(4)	The amounts set forth in this column include Company-paid contributions for life insurance and supplemental disability policies and, with respect to Mr. Port for 2018, $111,158 paid under his separation agreement entered into with the Company.
(5)	Dr. Tewksbury served as the Chairman, Chief Executive Officer and President until the April 1, 2019 10-K Filing.
(6)	Mr. Turin was appointed as Chief Financial Officer and Secretary on May 29, 2018 and served until the April 1, 2019 10-K Filing.
(7)	Mr. Port served as Chief Financial Officer and Secretary from March 16, 2017 until May 29, 2018. The 2017 compensation information shown for Mr. Port includes the entire calendar year.

Narrative Disclosure to Summary Compensation Table

The Compensation Committee of our Board of Directors generally has the responsibility of administering our executive compensation program or making recommendations to the full Board with respect to such program. The Compensation Committee reviews and, as appropriate, makes recommendations to the full Board regarding the base salaries and annual cash bonuses for executive officers, and administers our stock incentive plans, including the grants of stock options.

Compensation Philosophy and Objectives

Our principal executive compensation policy is to provide a compensation program that will attract, motivate and retain persons of high quality and provide incentives that align the interests of our employees and directors with those of our stockholders. In administering the executive compensation program, the Compensation Committee is mindful of the following principles and guidelines, which are supported by the full Board:

Base salaries for executive officers should be competitive.

A sufficient portion of annual compensation should be at risk in order to align the interests of executives with those of our stockholders.

The variable part of annual compensation should reflect both individual and corporate performance.

Executive officer compensation has three primary components: base salary, bonuses granted under a bonus or cash incentive plan, and stock-based awards granted pursuant to our 2014 Equity Incentive Plan, as amended (“2014 Plan”). In addition, executive officers receive certain benefits that are generally available to all salaried employees. We do not have any defined benefit pension plans, non-qualified deferred compensation arrangements, or supplemental retirement plans for our executive officers.

During 2017, the Compensation Committee engaged Compensia, Inc. to assist with the review of the Company’s executive and Board compensation by providing data on market trends and, more specifically, with respect to a group of peer companies having similar size and other characteristics to the Company based on the Company’s performance and how the Company’s compensation levels compared with such peers.

For each Named Executive Officer’s compensation for 2018, the Compensation Committee reviewed the proposed level for each compensation component based on various factors, including the median level for the peer group and other competitive market factors, internal equity and consistency, and an emphasis on pay for performance. The Compensation Committee made recommendations to the Board of Directors, based on input from the then Chief Executive Officer other than with respect to his own compensation, which then approved the final compensation amounts for each executive officer. We have not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

Management Changes and Related Compensation Arrangements

Significant changes in the Company’s management team have occurred over the course of the past several years. As a result, all of our Named Executive Officers are no longer with the Company. Mr. Port ceased serving as Chief Financial Officer on May 29, 2018 when Jerry Turin was appointed to such position. Effective following the April 1, 2019 10-K Filing, (i) Dr. Tewksbury resigned from his position as Chairman, Chief Executive Officer and President (ii) Mr. Turin resigned from his position as Chief Financial Officer and (iii) James Tu was appointed to serve as the Company’s Chairman, Chief Executive Officer and President and interim Chief Financial Officer. In addition, in July 2019, Tod Nestor joined the Company and took over the roles of President and Chief Financial Officer.

Dr. Tewksbury’s compensation as Chairman of the Board, Chief Executive Officer and President, and Mr. Turin’s and Mr. Port’s compensation as Chief Financial Officer, were each established taking into account the factors described above. The Compensation Committee has also considered the need to recruit and retain top level talent during a challenging time for the Company, and the responsibilities being managed by a smaller executive team, and their resulting compensation arrangements were as follows:

Dr. Tewksbury’s salary was increased to $459,000 for 2018, and he was eligible to receive an annual bonus with a target payout of 100% of his base salary, based on the Company’s financial performance and his individual performance and continued employment and, on February 26, 2018, he received 165,300 RSUs.

Mr. Port’s salary was increased to $255,000 for 2018 and he was eligible to receive an annual bonus with a target payout of 50% of his base salary, based on the Company’s financial performance and his individual performance and continued employment and, on February 26, 2018, he received 49,167 RSUs. Mr. Port departed from the Company in August 2018, and received twelve months of continued salary and benefits, twelve months of accelerated vesting of

unvested stock options and RSUs, additional vesting of a portion of his 2018 RSU grant and all stock options that had vested remained exercisable until August 15, 2019. The amounts paid to Mr. Port for 2018 include his severance benefits received under his separation agreement entered into with the Company on May 22, 2018.

On May 29, 2018, following Mr. Port’s departure, the Board of Directors appointed Jerry Turin to the position of Chief Financial Officer and Secretary. Mr. Turin’s salary as Chief Financial Officer was set at $300,000. Mr. Turin was also eligible to receive an annual bonus with a target payout of 50% of his base salary, based on the Company’s financial performance and his individual performance. Mr. Turin’s 2018 bonus was guaranteed to be a minimum of $75,000, provided that he remained employed with the Company through the date the bonus was paid. In addition, on July 2, 2018, Mr. Turin was granted stock options and RSUs having a total value of approximately $225,000, with 50% of the awards in RSUs (based on a 30-day average stock price) and stock options equal to 1.5 times the number of RSUs.

Base salary

The Compensation Committee seeks to establish executive officer base salary levels that are competitive with the median amounts paid to executives performing similar functions within the Company’s peer group. The Compensation Committee also takes into account a number of largely subjective factors, including changes in the individual’s duties and responsibilities, the personal performance of such executive officer, the performance of the Company, cost-of-living increases, and such other factors as the Compensation Committee deems appropriate, including the individual’s overall mix between fixed and variable compensation and between cash and stock-based compensation.

Cash incentive plan

Effective January 1, 2018, an Executive Bonus Plan (the “Plan”) was established, based on the Compensation Committee’s recommendation to the Board of Directors, for executive management under which the executive officers are each eligible for a cash incentive payment. The Board of Directors set the potential payments at up to the following percentages of such executive’s 2018 salary, with the final amounts payable to be determined by the Board of Directors based upon the 2018 financial results with respect to the metrics and percentages described below:



	Incentive Payment as a % of Base Salary (1)
	Minimum	Target	Maximum
Chief Executive Officer	50%	100%	150%
Chief Financial Officer	25%	50%	100%



(1)	Based on the annual salary rate for the year.

Subject to the terms of the Plan, distribution of the 2018 bonus was based 80% on Company Performance and 20% on Individual Performance. In the event that the Company did not reach the “Minimum” performance for any of the applicable Company Performance metrics, no bonuses would be payable with respect to the Individual Performance component, irrespective of the objectives achieved. In addition, the Board or the Compensation Committee could, in its sole discretion, adjust amounts payable to any participant downward or upward to reflect such considerations as it may in its sole discretion deem to be appropriate.

Company Performance was based on two components - Total Company Net Revenue (“Net Revenue”) with respect to 70% of the amount payable, and Total Adjusted EBITDA (Adjusted Earnings before Interest, Taxes, Depreciation and Amortization and adjusted to exclude non-cash items, such as stock-based compensation) (“Adjusted EBITDA”) with respect to 30% of the amount payable, as reported in or, in the case of Adjusted EBITDA, calculated from the April 1, 2019 10-K Filing.

The incentive payment levels listed above were payable based on the achievement of the following financial performance metrics for 2018: (a) Net Revenue - $26 million (Minimum), $30 million (Target) and $34 million (Maximum), and (b) Adjusted EBITDA - $(5.0) million (Minimum), $(4.0) million (Target) and $(2.5) million (Maximum).

The Company did not achieve the Minimum Net Revenue or the Minimum Adjusted EBITDA, therefore, no bonuses were paid for 2018, other than the guaranteed bonus amount for Mr. Turin of $75,000.

Discretionary bonuses

The Compensation Committee may from time to time award a discretionary annual cash bonus to executive officers, in the amounts and based on the factors determined by the Compensation Committee. The bonus awards may be based on an executive officer’s individual performance or on the overall success of the Company, or both.

No discretionary bonuses were awarded to the Named Executive Officers in 2018.

Stock Awards and Other Stock-Based Awards

The Compensation Committee believes that employee equity ownership provides significant motivation to executive officers to maximize value for the Company’s stockholders and, therefore; periodically grants time-based stock options and RSUs under the 2014 Plan at the then current market price.

The Compensation Committee grants, or recommends to the Board to grant, options and/or RSUs to executive officers, typically after consideration of recommendations from the Chief Executive Officer. Recommendations for equity awards are based upon the relative position, responsibilities, and previous and expected contributions of each officer, previous equity award grants to such officers and customary levels of equity award grants for the respective position in other comparable companies. The exercise price for stock options is equal to the fair market value of our Common Stock on the grant date. Stock options generally vest over a three-year period with 33% vesting one year from the date of grant and the remaining 67% vesting equally on a monthly basis over the remaining 24 months. Options expire 10 years from the date of grant. RSUs generally vest over a three-year period with 33% vesting one year from the grant date, 33% vesting two years from the grant date, and the remaining 34% vesting three years from the grant date.

Change in Control Benefit Plan

individuals who, as of the beginning of any 24 month period, constitute the Board cease for any reason during such 24 month period to constitute at least a majority of the Board; or

The Company entered into Change in Control participation agreements with Dr. Tewksbury on February 19, 2017, with Mr. Port on March 21, 2017 and with Mr. Turin on May 18, 2018 (which terminated upon their departure). The Change in Control participation agreement provides for a lump sum payment equal to one times annual base salary and target bonus, accelerated vesting of stock awards, and continuation of group health plan benefits for 12 months if the participant’s employment is involuntarily terminated within 24 months of a Change in Control.

Section 162(m)

Section 162(m) of the Internal Revenue Code (“IRC Sec. 162(m)”) generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid to a company’s Chief Executive Officer, or to any of the company’s other three most highly compensated executive officers (other than the Chief Financial Officer), for any fiscal year. Generally, for compensation prior to 2018, IRC Sec. 162(m) exempted qualifying performance-based compensation from the deduction limit if certain conditions were met. In determining base salary, benefits, perquisites and other compensation, the Compensation Committee considers tax deductibility. However, a more important goal of the Compensation Committee is to offer compensation that is competitive within our peer group.

Employment Agreements with Named Executive Officers

We did not have employment agreements with any of our Named Executive Officers, all of whom are no longer with the Company.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information with respect to equity awards outstanding for our Named Executive Officers as of December 31, 2018:



Name	Award Grant Date	Number of Securities Underlying Unvested Restricted Stock Units (#)		Number of Securities Underlying Unexercised Options Exercisable (#)	Number of Securities Underlying Unexercised Options Un-exercisable (#)		Option Exercise Price ($)	Option Expiration Date

Theodore L. Tewksbury, III (4)	2/27/2017	49,443	(1)	45,323	28,842	(2)	$3.43	2/27/2027
	2/26/2018	165,300	(1)

Jerry Turin (5)	7/2/2018	50,474	(1)		75,711	(2)	$1.81	7/2/2028

Michael H. Port (6)	9/17/2015			5,000		(3)	$15.08	8/15/2019
	4/3/2017			22,525		(3)	$3.17	8/15/2019



(1)	One third vests on the first anniversary of the grant date, another one third vests on the second anniversary of the grant date, and the final one third vests on the third anniversary of the grant date. Dr. Tewksbury’s RSUs vested in full on April 1, 2019 pursuant to his separation agreement. One third of Mr. Turin’s RSUs vested and the remainder of the award terminated on April 1, 2019 pursuant to his separation agreement.
(2)	One third was to vest on the first anniversary of the grant date, and the remainder vests monthly in equal installments over the following 24-month period. The unvested portion of these options terminated on April 1, 2019 and Dr. Tewksbury’s vested options will remain exercisable for one year from the separation date under the separation agreements with each of Dr. Tewksbury and Mr. Turin.
(3)	Under the terms of Mr. Port’s separation agreement, options that were vested on his separation date from the Company remain exercisable for one year from the separation date.
(4)	Dr. Tewksbury served as the Chairman, Chief Executive Officer and President until the April 1, 2019 10-K Filing.
(5)	Mr. Turin was appointed as Chief Financial Officer and Secretary on May 29, 2018 and served until the April 1, 2019 10-K Filing.
(6)	Mr. Port served as Chief Financial Officer and Secretary from March 16, 2017 until May 29, 2018.

DIRECTOR COMPENSATION

The following table sets forth the annual cash and stock-based compensation for non-employee directors for 2018:




Annual Cash Retainer	$	32,500
Restricted Stock Unit Grant	$	45,000	(1)
Additional Annual Cash Retainers:
Lead Director	$	20,000
Compensation Committee Chair	$	14,000
Compensation Committee Member	$	5,000
Audit and Finance Committee Chair	$	19,000
Audit and Finance Committee Member	$	7,000
Nominating and Corporate Governance Committee Chair	$	9,000
Nominating and Corporate Governance Committee Member	$	4,000



(1)	Restricted stock unit grant on the date of the Company’s annual meeting of stockholders having a value as stated above based on the fair market value of the Common Stock on such date, and vesting on the earlier of (i) the one year anniversary of the grant date or (ii) the date of the Company’s annual meeting of stockholders next following the grant date. On June 20, 2018, each of the non-employee directors received a restricted stock unit grant of 15,000 shares, which will vest on June 20, 2019. In February 2017, the Board adopted a Change in Control Benefit Plan, which provides for full vesting of RSUs held by non-employee directors upon a Change in Control (as defined in such plan).

The Board, at its discretion, may grant options or other equity awards to newly elected directors and additional grants to other directors.

The following table summarizes the total compensation paid to non-employee directors for the year ended December 31, 2018:



Name	Fees Earned or Paid in Cash ($)	Stock Awards ($) (1)	Option Awards ($) (2)	Total ($)

Ronald D. Black (3)	61,500	33,300	—	94,800
William F. Cohen (4)	26,202	0	—	26,202
Glenda M. Dorchak (3)	57,500	33,300	—	90,800
Marc J. Eisenberg (3)	47,891	33,300	—	81,191
Michael R. Ramelot	51,500	33,300	—	84,800
Satish Rishi (3)	18,122	41,191	—	59,313



(1)	Represents RSUs, which vested on June 15, 2019 and settled in Common Stock. The grant date fair value is calculated based on the closing price of the stock on the grant date. Each of Dr. Black, Messrs. Eisenberg, Ramelot, and Rishi and Ms. Dorchak held 15,000 unvested RSUs as of December 31, 2018.
(2)	The number of outstanding options held by each non-employee director as of December 31, 2018 was as follows: Mr. Cohen 10,000 and Mr. Ramelot 15,000. With respect to Mr. Cohen, the vested options are exercisable until June 20, 2019.
(3)	Dr. Black and Messrs. Eisenberg and Rishi resigned from the Board effective following the April 1, 2019 10-K Filing. Ms. Dorchak resigned from the Board as of February 21, 2019. Their unvested RSUs vested as of their respective resignation dates.
(4)	Mr. Cohen’s term as director ended on June 20, 2018, the date of the 2018 Annual Meeting, as he did not stand for re-election to another term.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

~~Mr.~~On November 30, 2018, each of Ms. Huang, Brilliant Start, Jag International Ltd., Jiangang Luo, Cleantech Global Ltd., James Tu, who served in the capacities of Executive Chairman, Chief Executive Officer, and President during 2016, is also the Founder, Chief Executive Officer and Chief Investment Officer of 5 Elements Global Advisors, an investment advisory and management company managing the holdings of 5 Elements Global Fund LP, which was a beneficial owner of more than 5% of our Common Stock prior to the August 2014 registered offering. As of April 24, 2017, 5 Elements Global Advisors holds approximately 2.5% of our Common Stock. 5 Elements Global Advisors focuses on investing in clean energy companies with breakthrough, commercialized technologies, and near-term profitability potential.

~~Mr. Tu is also Co-Founder and 50% owner, and until May 2013, was the Managing Partner of~~L.P., Yeh‑Mei Hui Cheng, Communal International, Ltd. ~~(“Communal”)~~, ~~a British Virgin Islands company dedicated to assisting clean energy, solutions-based companies by maximizing technology~~ and ~~product potential and gaining them access to global marketing, distribution licensing, manufacturing and financing resources. Communal has a 50% ownership interest in~~ 5 Elements Energy Efficiency Limited ~~which was~~(the “Schedule 13D Parties”) filed a Schedule 13D with the SEC, indicating that they may be deemed to be “group” under Section 13(d)(3) of the Exchange Act, and Rule 13d-5 promulgated thereunder, and report their beneficial ~~owner of more than 5%~~ownership of our Common Stock ~~prior to~~as a group. The Schedule 13D was amended on February 26, 2019 and April 3, 2019.

A description of the ~~September 2015 registered offering. As~~relationships between certain of ~~April 24, 2017, 5 Elements Energy Efficiency Limited holds approximately 2.4% of our Common Stock. Yeh Mei-Hui~~the Schedule 13D Parties is set forth below:


·	Gina Huang, who:


o	is the Chairperson of Brilliant Start and the sole owner of Jag International, Ltd. (“Jag”);


o	has voting and dispositive power over the Common Stock beneficially owned by Brilliant Start and Jag;


·	Jiangang Luo, who is the Managing Partner of Cleantech Global Ltd., and a former member of the Board;


·	James Tu, who is now the Company’s Chairman and Chief Executive Officer and member of the Board and previously served as Chairman, Chief Executive Officer and President of the Company and a member of the Company’s Board from December 18, 2012 until his resignation from such positions on February 19, 2017:


o	has voting and dispositive power over the Common Stock held by 5 Elements Global Fund L.P.;


o	is a Co-Founder and 50% owner of Communal International, Ltd. (“Communal”), which has 50% ownership interest in Energy Efficiency (defined below);


·	Yeh-Mei Hui Cheng, who:


o	is the general partner and controlling partner of Energy Efficiency (defined below);


o	owns 50% of Energy Efficiency;


o	is Co-Founder and 50% owner of Communal, which owns the other 50% of Energy Efficiency; and


o	is the mother of Jennifer Cheng, a current member of the Board;


·	Communal, which holds 50% ownership interest in Energy Efficiency; and


·	5 Elements Energy Efficiency Limited (“Energy Efficiency”), which is owned 50% by Ms. Cheng and 50% by Communal.

On March 29, 2019, the Company entered into a note purchase agreement with certain investors, including Fusion Park LLC (of which James Tu, is the ~~owner~~sole member) and Brilliant Start, for the purchase of ~~the other 50%~~an aggregate of ~~5 Elements Energy Efficiency Limited~~$1.7 million of Notes, of which Fusion Park and ~~the other Co-Founder of Communal. Ms. Cheng is the mother of Simon Cheng, a member of our Board of Directors until February 19, 2017~~Brilliant Start purchased $580,000 and ~~a current employee of the Company. Mr. Cheng’s compensation as an employee of the Company totaled $155,901~~$500,000, respectively. The Notes are described in ~~2016.~~

Proposal 2 (the NASDAQ Stockholder Approval Proposal) above.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the ~~Securities~~ Exchange Act ~~of 1934~~ requires our officers, directors, and persons ~~owing~~owning more than 10% of a registered class of our equity securities, who collectively we generally refer to as insiders, to file certain reports regarding ownership of, and transactions in, our securities with the ~~Securities and Exchange Commission (the “SEC”).~~SEC. Such ~~officers, directors, and 10% stockholders~~insiders are also required by SEC rules to furnish us with copies of all ~~those~~Section 16(a) reports ~~that~~ they file.

Based solely on our review of such reports filed with the SEC and written representations from the reporting persons, we believe ~~we were in compliance with~~that all ~~filing requirements applicable to our executive officers and directors for~~

~~2016, except that William Cohen, a Director, was late in filing a Form 4 reporting indirect beneficial ownership of 1,259 shares~~ of our ~~Common Stock purchased by his son and 1,240 restricted stock units acquired by his son, who was an employee of~~insiders filed the ~~Company. As of December 31, 2016, Mr. Cohen’s son was no longer employed by the Company.~~required reports on a timely basis under Section 16(a) for fiscal year 2018.

AUDIT COMMITTEE REPORT

The Audit and Finance Committee has reviewed and discussed with the Company’s management and Plante & Moran, PLLC the audited consolidated financial statements contained in our Annual Report on Form 10-K for the ~~2016~~2018 fiscal year. The Audit and Finance Committee has also discussed with Plante & Moran, PLLC the matters required to be discussed ~~under~~by the applicable ~~auditing standards, as adopted by~~requirements of the Public Company Accounting Oversight Board.

The Audit and Finance Committee has received and reviewed the written disclosures and the letter from Plante & Moran, PLLC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s ~~communication~~communications with the Audit and Finance Committee concerning independence, and has discussed with Plante & Moran, PLLC its independence from Energy Focus.

Based on the review and discussions referred to above, the Audit and Finance Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for its ~~2016~~2018 fiscal year for filing with the ~~Securities and Exchange Commission.~~

SEC.

Submitted by the Audit and Finance Committee

Michael R. Ramelot, ~~Chairman~~
~~William Cohen~~
~~Marc J. Eisenberg~~Chair

~~Jiangang Luo~~Stephen Socolof (joined the committee on May 20, 2019)

Philip Politziner (joined the committee on August 9, 2019)

The foregoing Audit Committee Report shall not be deemed to be “soliciting material,” deemed “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act. Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate by reference future filings, including this proxy statement, in whole or in part, the foregoing Audit Committee Report shall not be incorporated by reference into any such filings.

3340

STOCKHOLDER PROPOSALS FOR THE ~~2018~~2020 ANNUAL MEETING

A stockholder who wishes to have a proposal included in our Proxy Statement for the ~~2018~~2020 Annual Meeting of Stockholders must submit the proposal in writing to the Secretary of the Company at our principal executive offices at 32000 Aurora Road, Suite B, Solon, Ohio 44139, for receipt no later than ~~December 29, 2017,~~July14, 2020 pursuant to Rule 14a-8(e) under the ~~Securities~~ Exchange Act, ~~of 1934 (the “Exchange Act”),~~ assuming that the date of the ~~2018~~2020 Annual Meeting will occur within 30 days of the anniversary of the ~~2017~~2019 Annual Meeting.

A stockholder who wishes to present a proposal at the ~~2018~~2020 Annual Meeting without having it appear in the Proxy Statement must submit notice of the proposal in writing to our Secretary no earlier than ~~February 21, 2018~~August 19, 2020 and no later than ~~March 22, 2018,~~September 18, 2020, assuming that the ~~2017~~2019 Annual Meeting occurs on ~~June 21, 2017,~~December 17, 2019, and otherwise comply with all requirements of our Bylaws with respect thereto.

If the date of the ~~2018~~2020 Annual Meeting is more than 30 days before or after the anniversary of the ~~2017~~2019 Annual Meeting, then the foregoing deadlines will change and be determined in accordance with the Rule 14a-8 under the Exchange Act (for proposals to be included in the Company’s Proxy Statement) or the Company’s Bylaws (for all other proposals).

HOUSEHOLDING INFORMATION

Some banks, brokers and other nominees are participating in the practice of “householding” proxy statements and annual reports. This means that beneficial holders of our Common Stock who share the same address or household may not receive separate copies of this Proxy Statement and our ~~2016~~2018 Annual Report on Form 10-K (the ~~“2016~~“2018 Annual Report”). ~~You may revoke your consent~~If you and other stockholders of record with whom you share an address currently receive multiple sets of proxy statements and annual reports, and you would like to ~~householding at any time by sending~~receive only a single copy of each in the future, or if you and other stockholders of record with whom you share an address currently receive a single copy of proxy statements and annual reports, and you would like to receive a separate copy of each in the future, please send your name, the name of your brokerage firm, and your account number to Broadridge, c/o Householding Department, 51 Mercedes Way, Edgewood, NYNew York 11717 or call 800-542-1061. If you hold your shares in street name (that is, through a bank, brokerage account or other record holder), please contact your bank, broker or the other record holder to request information about householding.

OTHER MATTERS

The Board of Directors knows of no other matters to be submitted atduring the Annual Meeting. If any other matters properly come before the Annual Meeting, then the persons named in the enclosed proxy will vote the shares they represent in such manner as the Board may recommend.

ANNUAL REPORT ON FORM 10-K

The Company’s ~~2016~~2018 Annual Report on Form 10-K, as amended, may be obtained, without charge, by writing to the Company at 32000 Aurora Road, Suite B, Solon, Ohio 44139, Attention: Investor Relations or by accessing the report on our website at http://www.energyfocus.com.

3541

Appendix A

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

ENERGY FOCUS, INC.

~~2014 STOCK INCENTIVE PLAN~~

~~(as proposed~~Pursuant to ~~be amended; and as adjusted to reflect our one-for-ten reverse split effected on July 16, 2014)~~


1.	~~Purpose of the Plan.~~

~~The purpose of this Plan is to enhance stockholder value by linking the compensation of officers, directors and key employees~~Section 242 of the ~~Company to increases in~~

General Corporation Law of the ~~price~~State of Delaware

Energy Focus, Inc. ~~common stock~~ (hereinafter called the “Company”), a corporation organized and ~~the achievement of other performance objectives,~~existing under and ~~to encourage ownership in the Company~~ by key personnel whose long-term employment is considered essential to the Company’s continued progress and success. The Plan is also intended to assist the Company in the recruitment of new employees and to motivate, retain and encourage such employees and directors to act in the stockholders’ interest and share in the Company’s success.


2.	~~Definitions.~~

~~As used herein, the following definitions shall apply:~~

~~(a)“Administrator”~~ ~~means the Board, any Committee or such delegates as shall be administering the Plan in accordance with Section 4~~virtue of the ~~Plan.~~

~~(b)“Affiliate”~~ means any Subsidiary or other entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant ownership interest as determined by the Administrator. The Administrator shall, in its sole discretion, determine which entities are classified as Affiliates and designated as eligible to participate in this Plan.

~~(c)“Applicable Law”~~ means the requirements relating to the administration of stock option plans under U.S. federal and state laws, any stock exchange or quotation system on which the Company has listed or submitted for quotation the Common Shares to the extent provided under the termsGeneral Corporation Law of the ~~Company’s agreement with such exchange or quotation system and, with respect to Awards subject to the laws~~State of ~~any foreign jurisdiction where Awards are, or will be, granted under the Plan, the laws of such jurisdiction.~~Delaware, does hereby certify as follows:

~~(d)“Award”~~ means a Stock Award, Option, Stock Appreciation Right, or Other Stock-Based Award granted in accordance with the terms of the Plan, or any other property (including cash) granted pursuant to the provisions of the Plan.

~~(e)“Awardee”~~ ~~means an Employee, Director or Consultant who has been granted an Award under the Plan.~~

~~(f)“Award Agreement”~~ means a Stock Award Agreement, Option Agreement, Stock Appreciation Right Agreement, or Other Stock-Based Award Agreement, which may be in written or electronic format, in such form and with such terms as may be specifiedResolutions were duly adopted by the Administrator, evidencing the terms and conditions of an individual Award. Each Award Agreement is subject to the terms and conditions of the Plan. The effectiveness of an Award shall not be subject to the Award Agreement’s being signed by the Company and/or the Participant receiving the Award unless specifically so provided in the Award Agreement.

~~(g)“Board”~~ ~~means~~ the Board of Directors of the ~~Company.~~

~~(h)“Change of Control”~~ ~~shall mean, except as otherwise provided in an Award Agreement, one~~Company pursuant to Section 242 of the ~~following shall have taken place after the date of this Plan:~~


~~(i)~~	any “person” (as such term is used in Sections 13(d) or 14(d) of 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~~General Corporation Law of the ~~total voting power~~State of Delaware setting forth amendments to the ~~voting securities~~Certificate of Incorporation 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;

~~(ii)~~

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

~~(iii)~~

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.

~~(i)“Code”~~ ~~means the United States Internal Revenue Code of 1986,~~ as amended, and ~~any successor thereto, the Treasury Regulations thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference~~declaring said amendments to ~~any specific section~~be advisable. The stockholders of the ~~Code shall be deemed to include such regulations and guidance, as well as any successor provision of the Code.~~

~~(j)“Committee”~~ ~~means a committee of Directors appointed by the Board~~Company duly approved said proposed amendments in accordance with Section 4242 of the ~~Plan or, in the absence of any such special appointment, the Compensation Committee~~General Corporation Law of the ~~Board.~~State of Delaware. The resolutions setting forth the amendments are as follows:

RESOLVED, that paragraph (A) of Article IV of the Certificate of Incorporation of the Company, as amended, be and hereby is deleted in its entirety and the following paragraph is inserted in lieu thereof:

~~(k)~~“~~Common Shares”~~ ~~means~~(A) The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the ~~common~~Corporation is authorized to issue is Fifty-Five Million (55,000,000) shares, noeach with a par value of $0.0001 per share. Fifty Million (50,000,000) shares shall be Common Stock and Five Million (5,000,000) shares shall be Preferred Stock.”

RESOLVED FURTHER, that the ~~Company, or any security~~Section 1 of the ~~Company issued in substitution, exchange or lieu thereof.~~

~~(l)“Company”~~ ~~means~~Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc., ~~a Delaware corporation, or, except~~ as ~~utilized in the definition of Change of Control, its successor.~~

~~(m)“Consultant”~~ ~~means an individual providing services to the Company or any of its Affiliates as an independent contractor,~~amended, be and includes prospective consultants who have accepted offers of consultancy for the Company or any of its Affiliates, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction, (ii) does not directly or indirectly promote or maintain a market for the Company’s securities, and (iii) otherwise qualifies as a consultant under the applicable rules of the SEC for registration of shares of stock on a Form S-8 registration statement

~~(n)~~“~~Conversion Award” has the meaning set forth in Section 4(b)(xii) of the Plan.~~

~~(o)“Director”~~ ~~means a member of the Board. Any Director who does not serve as an employee of the Company~~hereby is

~~referred to herein as a “Non-employee Director~~.”

~~(p)“Disability”~~ means (i) “Disability” as defined in any employment, consulting or similar agreement to which the Participant is a party, or (ii) if there is no such agreement or it does not define “Disability,” (A) permanent and total disability as determined under the Company’s long-term disability plan applicable to the Participant, or (B) if there is no such plan applicable to the Participant or the Committee determines otherwise in an applicable Award Agreement, “Disability” shall mean the Participant’s continuous illness, injury or incapacity for a period of six consecutive months, as determined by the Administrator deleted in its ~~discretion. Notwithstanding~~entirety and the ~~above, with respect to an Incentive Stock Option, Disability shall mean permanent and total disability as defined~~following paragraph is inserted in Section 22(e)(3) of the Code and, with respect to any Award that constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the foregoing definition shall apply for purposes of vesting of such Award, provided that such Award shall not be settled until the earliest of: (x) the Participant’s “disability” within the meaning of Section 409A of the Code, (y) the Participant’s “separation from service” within the meaning of Section 409A of the Code and (z) the date such Award would otherwise be settled pursuant to the terms of the Award Agreement.lieu thereof:

~~(q)~~“~~Disaffiliation”~~ ~~means a Subsidiary’s or Affiliate’s ceasing to~~1. Designation. There shall be a ~~Subsidiary or Affiliate for any reason (including, without limitation, as a result~~series of ~~a public offering, or a spin-off or sale by the Company, of the stock of the Subsidiary or Affiliate) or a sale of a division of the Company and its Affiliates.~~

~~(r)“Employee”~~ means a regular, active employee of the Company or any Affiliate, including an Officer or Director who is also a regular, active employee of the Company or any Affiliate. The Administrator shall determine whether the Chairman of the Board qualifies as an “Employee.” For any and all purposes under the Plan, the term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant or a person otherwise designated by the Administrator, the Company or an Affiliate at the time of hire as not eligible to participate in or receive benefits under the Plan or not on the payroll, even if such ineligible person is subsequently determined to be a common law employee of the Company or an Affiliate or otherwise an employee by any governmental or judicial authority. Unless otherwise determined by the Administrator in its sole discretion, for purposes of the Plan, an EmployeePreferred Stock that shall be ~~considered to have terminated employment~~designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”) and ~~to have ceased to be an Employee if his or her employer ceases to be an Affiliate, even if he or she continues to be employed by such employer.~~

~~(s)“Exchange Act”~~ ~~means the United States Securities Exchange Act of 1934, as amended, and any successor thereto.~~

~~(t)“Fair Market Value”~~ ~~with respect to a Share shall mean the market price of such Share, determined by the Committee as follows:~~

~~(i)~~

If the Shares are listed on any established stock exchange or a national market system, the per Share Fair Market Value shall be the closing sales price for each share of such stock (or the closing bid, if no sales were reported) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable;

~~(ii)~~

If the Shares are regularly quoted on an automated quotation system (including the OTC Bulletin Board and the quotations published by the OTC Markets Group Inc.) or by a recognized securities dealer, the closing sales price for each share of such stock or, if closing sales prices are not reported, the per Share Fair Market Value shall be the mean between the high bid and low asked prices for a Share on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable; or


~~(iii)~~	In the absence of an established market for the Shares of the type described in (a) and (b), above, the per Share Fair Market Value thereof shall be determined by the Committee in good faith and in accordance with the applicable provisions of Section 409A of the Code and the regulations and rulings thereunder.

~~In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.~~

~~(u)“Grant Date”~~ means, with respect to each Award, the date upon which the Award is granted to an Awardee pursuant to this Plan, which may be a designated future date as of which such Award will be effective, as determined by the Committee.

~~(v)“Incentive Stock Option”~~ means an Option that is identified in the Option Agreement as intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder, and that actually does so qualify.

~~(w)“Nonqualified Stock Option”~~ ~~means an Option that is not an Incentive Stock Option.~~

~~(x)~~ ~~“Officer”~~ ~~means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.~~

~~(y)“Option”~~ means a right granted under Section 8 of the Plan to purchase a number of Shares at such exercise price, at such times, and on such other terms and conditions as are specified in the agreement or other documents evidencing the Award (the “Option Agreement”). Both Incentive Stock Options and Nonqualified Stock Options may be granted under the Plan

~~(z)“Other Stock-Based Award”~~ means an Award granted pursuant to Section 12 of the Plan on such terms and conditions as are specified in the agreement or other documents evidencing the Award (the “Other Stock-Based Award Agreement”).

~~(aa)“Participant”~~ ~~means the Awardee or any person (including any estate) to whom an Award has been assigned or transferred as permitted hereunder.~~

~~(ab)“Plan”~~ ~~means this 2014 Stock Incentive Plan, as set forth herein and as hereafter amended from time to time.~~

~~(ac)“Qualifying Performance Criteria”~~ ~~shall have the meaning set forth in Section 13(b) of the Plan.~~

~~(ad)“Retirement”~~ means, unless the Administrator determines otherwise, Termination of Employment, voluntary or involuntary, by a Participant from the Company and its Affiliates, other than a Termination for Cause, after attaining age fifty-five (55) and having at least ten (10) years of service as an Employee with the Company and its Affiliates, excluding service with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company. For Plan purposes, a “voluntary” Termination of Employment is a Termination of Employment where the Participant does not qualify for severance benefits, whether under a severance agreement or the Company’s or any of its Affiliate’s severance policy, plan or other arrangement.

~~(ae)“Securities Act”~~ ~~means the United States Securities Act of 1933, as amended.~~

~~(af)“Share”~~ ~~means a Common Share, as adjusted in accordance with Section 15 of the Plan.~~

~~(ag)“Stock Appreciation Right”~~ means a right granted under Section 10 of the Plan on such terms and conditions as are specified in the agreement or other documents evidencing the Award (the “Stock Appreciation Right Agreement”).

~~(ah)“Stock Award”~~ means an award or issuance of Shares or Stock Units made under Section 11 of the Plan, the grant, issuance, retention, vesting and/or transferability of which is subject during specified periods of time to such conditions (including, without limitation, continued employment or performance conditions) and terms as are expressed in the agreement or other documents evidencing the Award (the “Stock Award Agreement”).

~~(ai)“Stock Unit”~~ means a bookkeeping entry representing an amount equivalent to the Fair Market Value of one Share, payable in cash, property or Shares. Stock Units represent an unfunded and unsecured obligation of the Company, except as otherwise provided for by the Administrator.

~~(aj)“Subsidiary”~~ means any company (other than the Company) in an unbroken chain of companies beginning with the Company, provided each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain.

~~(ak)“Ten Percent Stockholder”~~ means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.

~~(al)”Termination for Cause”~~ means, unless otherwise provided in an Award Agreement, Termination of Employment on account of any act of fraud or intentional misrepresentation or embezzlement, misappropriation or conversion of assets of the Company or any Affiliate, or the intentional and repeated violation of the written policies or procedures of the Company, provided that, for an Employee who is party to an individual severance or employment agreement defining Cause, “Cause” shall have the meaning set forth in such agreement except as may be otherwise provided in such agreement. For purposes of this Plan, a Participant’s Termination of Employment shall be deemed to be a Termination for Cause if, after the Participant’s employment has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Committee, a Termination for Cause.

~~(am)“Termination of Employment”~~ means for purposes of this Plan, unless otherwise determined by the Administrator, ceasing to be an Employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company or one of its Subsidiaries or Affiliates. Unless otherwise determined by the Committee in the terms of an Award Agreement or otherwise, if a Participant’s employment with the Company and its Affiliates terminates but such Participant continues to provide services to the Company and its Affiliates in a Non-employee Director capacity, such change in status shall be deemed a Termination of Employment. A Participant employed by, or performing services for, a Subsidiary or an Affiliate or a division of the Company and its Affiliates shall be deemed to incur a Termination of Employment if, as a result of a Disaffiliation, such Subsidiary, Affiliate, or division ceases to be a Subsidiary, Affiliate or division, as the case may be, and the Participant does not immediately thereafter become an Employee of (or service provider for), or member of the board of directors of, the Company or another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries and Affiliates shall not be considered Terminations of Employment. In addition, Termination of Employment shall mean a “separation from service” as defined in regulations issued under Code Section 409A whenever necessary to ensure compliance therewith for any payment or settlement of a benefit conferred under this Plan that is subject to such Code section, and, for such purposes, shall be determined based upon a reduction in the bona fide level of services performed to a level equal to twenty percent (20%) or less of the average level of services performed by the Employee during the immediately preceding 36-month period.


3.	~~Stock Subject to the Plan.~~

~~(a)Aggregate Limit.~~ Subject to the provisions of Section 15(a) of the Plan, the maximum aggregate number of Shares which may be subject to Awards granted under the Plan is 2,500,000 Shares. The Shares issued under the Plan may be either Shares reacquired by the Company, including Shares purchased in the open market, or authorized but unissued Shares. As of the date the Plan is approved by the Company’s stockholders, no further awards will be made under the 2008 Stock Incentive Plan, as amended, (the “Prior Plan”).

~~(b)Code Section 162(m) and 422 Limits; Other Share Limitations.~~ Subject to the provisions of Section 15(a) of the Plan, no Employee may be granted under this Plan (i) Options or Stock Appreciation Rights during any calendar year with respect to more than 150,000 Shares, and (ii) Stock Awards and Other Stock-Based Awards that are intended to comply with the performance-based exception under Code Section 162(m) and are denominated in Shares under which more than 80,000 Shares may be earned for each calendar year (or other 12 month period) in the vesting or performance period. During any calendar year, no Participant may be granted an Award that is intended to comply with the performance-based exception under Code Section 162(m) and is denominated in cash under which more than seven hundred fifty thousand dollars ($750,000) may be earned for each calendar year (or other 12 month period) in the performance period. The foregoing limitations in this section shall be calculated for 2014 to include all awards issued under a Prior Plan since December 31, 2013. In addition, the foregoing limitations in this section shall be multiplied by two with respect to Awards granted to a Participant during the first calendar year in which the Participant commences employment with the Company and its Affiliates. Subject to the provisions of Section 15(a) of the Plan, the aggregate number of Shares that may be subject to all Incentive Stock Options granted under the Plan shall not exceed 100,000 Shares. Notwithstanding anything to the contrary in the Plan, the limitations set forth in this Section 3(b) shall be subject to adjustment under Section 15(a) of the Plan only to the extent that such adjustment will not affect the status of any Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

~~(c)Share Counting Rules~~.


~~(i)~~	For purposes of this Section 3 of the Plan, Shares subject to Awards that have been canceled, expired, settled in cash, or forfeited for any reason (in whole or in part) shall not reduce the aggregate number of Shares which may be subject to Awards granted under this Plan and shall be available for future Awards granted under this

Plan. If Shares subject to an award under any Prior Plan are canceled, expired, settled in cash, or forfeited for any reason (in whole or in part), the Shares subject to an award under the Prior Plan, to the extent of such cancellation, expiration, settlement in cash, or forfeiture, shall not be available for grant under this Plan. Notwithstanding the foregoing, Shares added back under the provisions of this subsection (c) shall not be counted when determining the limit on Shares that may be granted as Incentive Stock Options under subsection (b), above.

~~(ii)~~

Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under paragraph (i) of this Section: (a) Shares tendered by the Participant or withheld by the Company in payment of the purchase price of an Option, (b) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to Options or Stock Appreciation Rights, (c) Shares subject to a Stock Appreciation Right that are not issued in connection with its stock settlement on exercise thereof, and (d) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options. Shares subject to Awards that have been retained by the Company in payment or satisfaction of the tax withholding obligation of an Awardee, other than for an Option or Stock Appreciation Right as described above, and Shares that have been delivered (either actually or constructively by attestation) to the Company in payment or satisfaction of the tax withholding obligation of an Awardee, other than for an Option or Stock Appreciation Right as described above, shall again be available for grant under the Plan.


~~(iii)~~	Conversion Awards shall not reduce the Shares authorized for grant under the Plan or the limitations on Awards to a Participant under subsection (b), above, and Shares subject to a Conversion Award shall not again be available for an Award under the Plan as provided in subsection (c)(i) above.


4.	~~Administration of the Plan.~~

~~(a)Procedure~~.


~~(i)~~	~~Multiple Administrative Bodies.~~ ~~The Plan shall be administered by the Board, a Committee designated by the Board to so administer this Plan and/or their respective delegates.~~

~~(ii)~~

~~Section 162(m)~~. To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Code Section 162(m), Awards to “covered employees” (within the meaning of Code Section 162(m)) or to Employees that the Committee determines may be “covered employees” in the future shall be made by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code. References herein to the Administrator in connection with Awards intended to qualify as “performance-based compensation” shall mean a Committee meeting the “outside director” requirements of Code Section 162(m). Notwithstanding any other provision of the Plan, the Administrator shall not have any discretion or authority to make changes to any Award that is intended to qualify as “performance-based compensation” to the extent that the existence of such discretion or authority would cause such Award not to so qualify.


~~(iii)~~	~~Rule 16b-3~~. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3 promulgated under the Exchange Act (“Rule 16b-3”), Awards to Officers and Directors shall be made by the entire Board or a Committee of two or more “non-employee directors” within the meaning of Rule 16b-3.

~~(iv)~~

~~Other Administration.~~ To the extent required by the rules of the principal U.S. national securities exchange on which the Shares are traded, the members of the Committee shall also qualify as “independent directors” as set forth in such rules. Except to the extent prohibited by Applicable Law, the Board or a Committee may delegate to a Committee of one or more Directors or to authorized officers of the Company the power to approve Awards to persons eligible to receive Awards under the Plan who are not (A) subject to Section 16 of the Exchange Act or (B) at the time of such approval, “covered employees” under Section 162(m) of the Code.

~~(v)~~

~~Awards to Directors~~. The Board shall have the power and authority to grant Awards to Non-employee Directors, including the authority to determine the number and type of awards to be granted; determine the terms and conditions, not inconsistent with the terms of this Plan, of any award; and to take any other actions the Board considers appropriate in connection with the administration of the Plan.


~~(vi)~~	~~Delegation of Authority for the Day-to-Day Administration of the Plan.~~ Except to the extent prohibited by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time.

~~(b)Powers of the Administrator.~~ Subject to the provisions of the Plan and, in the case of a Committee or delegates acting as the Administrator, subject to the specific duties delegated to such Committee or delegates, the Administrator shall have the authority, in its discretion:


~~(i)~~	~~to select the Non-employee Directors, Consultants and Employees of the Company or its Affiliates to whom Awards are to be granted hereunder;~~


~~(ii)~~	~~to determine the number of Common Shares to be covered by each Award granted hereunder;~~


~~(iii)~~	~~to determine the type of Award to be granted to the selected Employees and Non-employee Directors;~~


~~(iv)~~	~~to approve forms of Award Agreements;~~

~~(v)~~

to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise and/or purchase price, the time or times when an Award may be exercised (which may or may not be based on performance criteria), the vesting schedule, any vesting and/or exercisability provisions, terms regarding acceleration of Awards or waiver of forfeiture restrictions, the acceptable forms of consideration for payment for an Award, the term, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine and may be established at the time an Award is granted or thereafter;


~~(vi)~~	~~to correct administrative errors;~~


~~(vii)~~	~~to construe and interpret the terms of the Plan (including sub-plans and Plan addenda) and Awards granted pursuant to the Plan;~~

~~(viii)~~

to adopt rules and procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized (A) to adopt rules and procedures regarding the conversion of local currency, the shift of tax liability from employer to employee (where legally permitted) and withholding procedures and handling of stock certificates which vary with local requirements, and (B) to adopt sub-plans and Plan addenda as the Administrator deems desirable, to accommodate foreign laws, regulations and practice;


~~(ix)~~	~~to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans and Plan addenda;~~

~~(x)~~

to modify or amend each Award, including, but not limited to, the acceleration of vesting and/or exercisability, provided, however, that any such modification or amendment (A) is subject to the plan amendment provisions set forth in Section 16 of the Plan, and (B) may not materially impair any outstanding Award unless agreed to in writing by the Participant, except that such agreement shall not be required if the Administrator determines in its sole discretion that such modification or amendment either (Y) is required or advisable in order for the Company, the Plan or the Award to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (Z) is not reasonably likely to significantly diminish the benefits provided under such Award, or that adequate compensation has been provided for any such diminishment, except following a Change of Control;

~~(xi)~~

to allow or require Participants to satisfy withholding tax amounts by electing to have the Company withhold from the Shares to be issued upon exercise of a Nonqualified Stock Option or vesting of a Stock Award that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined in such manner and on such date that the Administrator shall determine or, in the absence of provision otherwise, on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be

~~made in such form and under such conditions as the Administrator may provide;~~

~~(xii)~~

to authorize conversion or substitution under the Plan of any or all stock options, stock appreciation rights or other stock awards held by awardees of an entity acquired by the Company (the “Conversion Awards”). Any conversion or substitution shall be effective as of the close of the merger or acquisition. The Conversion Awards may be Nonqualified Stock Options or Incentive Stock Options, as determined by the Administrator, with respect to options granted by the acquired entity;


~~(xiii)~~	~~to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;~~

~~(xiv)~~

to impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resale by a Participant or of other subsequent transfers by the Participant of any Shares issued as a result of or under an Award or upon the exercise of an Award, including, without limitation, (A) restrictions under an insider trading policy, (B) restrictions as to the use of a specified brokerage firm for such resale or other transfers, and (C) institution of “blackout” periods on exercises of Awards;

~~(xv)~~

to provide, either at the time an Award is granted or by subsequent action, that an Award shall contain as a term thereof, a right, either in tandem with the other rights under the Award or as an alternative thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash or a combination thereof, the amount of which is determined by reference to the value of the Award; and


~~(xvi)~~	~~to make all other determinations deemed necessary or advisable for administering the Plan and any Award granted hereunder.~~

~~(c)Effect of Administrator’s Decision.~~ All questions arising under the Plan or under any Award shall be decided by the Administrator in its total and absolute discretion. All decisions, determinations and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and conditions of any Award granted hereunder, shall be final and binding on all Participants. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations, including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select.

~~(d)Indemnity~~. To the extent allowable under Applicable Law, each member of the Committee or of the Board and any person to whom the Board or Committee has delegated any of its authority under the Plan shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Articles of Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.


5.	~~Eligibility.~~

Awards may be granted only to Directors, Employees and Consultants of the Company or any of its Affiliates; provided, however, that Incentive Stock Options may be granted only to Employees of the Company and its Subsidiaries (within the meaning of Section 424(f) of the Code).


6.	~~Term of Plan.~~

The Plan shall become effective upon its approval by stockholders of the Company. It shall continue in effect for a term of ten (10) years from the date the Plan is approved by the stockholders of the Company (the “Effective Date”) unless terminated earlier under Section 16 of the Plan.


7.	~~Term of Award.~~

Subject to the provisions of the Plan, the term of each Award shall be determined by the Administrator and stated in the Award Agreement, and may extend beyond the termination of the Plan. In the case of an Option or a Stock Appreciation Right, the term shall be ten (10) years from the Grant Date or such shorter term as may be provided in the Award Agreement.


8.	~~Options~~.

The Administrator may grant an Option or provide for the grant of an Option, either from time to time in the discretion of the Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of performance goals.

~~(a)Option Agreement.~~ ~~Each Option Agreement shall contain provisions regarding (i)~~ the number of Shares ~~that may~~constituting such series shall be ~~issued upon exercise~~Three Million Three Hundred Thousand (3,300,000). The rights, preferences, powers, restrictions and limitations of the ~~Option, (ii)~~Series A Preferred Stock shall be as set forth herein.”

IN WITNESS WHEREOF, the ~~type~~Company has caused this Certificate of Option, (iii) the exercise price of the Option and the means of payment of such exercise price, (iv) the term of the Option, (v) such terms and conditions regarding the vesting and/or exercisability of an Option as may be determined from time to time by the Administrator, (vi) restrictions on the transfer of the Option and forfeiture provisions, and (vii) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator.

~~(b)Exercise Price. The per share exercise price for the Shares~~Amendment to be ~~issued upon exercise~~signed by its Chief Executive Officer this Day of an Option shall be determined by the Administrator, except that the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the Grant Date, except with respect to Conversion Awards. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock at the Grant Date, 20.

ENERGY FOCUS, INC.

By: _________________________

James Tu

Executive Chairman and ~~the Option is not exercisable after the expiration of five years from the Grant Date.~~

~~(c)No Option Repricings.~~ Subject to Section 15 of the Plan, the exercise price of an Option may not be reduced without stockholder approval, nor may outstanding Options be cancelled in exchange for cash, other Awards or Options with an exercise price that is less than the exercise price of the original Option without stockholder approval.

~~(d)No Reload Grants.~~ Options shall not be granted under the Plan in consideration for and shall not be conditioned upon the delivery of Shares to the Company in payment of the exercise price and/or tax withholding obligation under any other employee stock option.

~~(e)Vesting Period and Exercise Dates.~~ Options granted under this Plan shall vest and/or be exercisable at such time and in such installments during the period prior to the expiration of the Option’s term as determined by the Administrator and as specified in the Option Agreement. The Administrator shall have the right to make the timing of the ability to exercise any Option granted under this Plan subject to continued active employment, the passage of time and/or such performance requirements as deemed appropriate by the Administrator. At any time after the grant of an Option, the Administrator may reduce or eliminate any restrictions surrounding any Participant’s right to exercise all or part of the Option.

~~(f)Form of Consideration.~~ The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment, either through the terms of the Option Agreement or at the time of exercise of an Option. Acceptable forms of consideration may include:


~~(i)~~	~~cash;~~


~~(ii)~~	~~check or wire transfer (denominated in U.S. Dollars);~~

~~(iii)~~

subject to any conditions or limitations established by the Administrator, other Shares which were held for a period of more than six (6) months on the date of surrender and which have a Fair Market Value on the date of surrender equal to or greater than the aggregate exercise price of the Shares as to which said Option shall be exercised (it being agreed that the excess of the Fair Market Value over the aggregate exercise price, if any, shall be refunded to the Awardee in cash);


~~(iv)~~	~~subject to any conditions or limitations established by the Administrator, the Company withholding Shares otherwise issuable upon exercise of an Option;~~


~~(v)~~	~~consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Administrator and in compliance with Applicable Law;~~


~~(vi)~~	~~such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Law; or~~


~~(vii)~~	~~any combination of the foregoing methods of payment.~~

~~(g)Procedure for Exercise; Rights as a Stockholder~~.


~~(i)~~	Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the applicable Option Agreement.

~~(ii)~~

An Option shall be deemed exercised when (A) the Company receives (1) written or electronic notice of exercise (in accordance with the Option Agreement or procedures established by the Administrator) from the person entitled to exercise the Option and (2) full payment for the Shares with respect to which the related Option is exercised, and (B) with respect to Nonqualified Stock Options, provisions acceptable to the Administrator have been made for payment of all applicable withholding taxes.

~~(iii)~~

Unless provided otherwise by the Administrator or pursuant to this Plan, until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option.


~~(iv)~~	~~The Company shall issue (or cause to be issued) such Shares as soon as administratively practicable after the Option is exercised. An Option may not be exercised for a fraction of a Share.~~

~~(h)Termination of Employment or Board Membership.~~


~~(i)~~	The Administrator shall determine as of the Grant Date (subject to modification subsequent to the Grant Date) the effect a termination from membership on the Board by a Non-employee Director for any reason or a Termination of Employment due to (A) Disability, (B) Retirement, (C) death, or (D) otherwise (including Termination for Cause) shall have on any Option.


~~(ii)~~	~~Unless otherwise provided in the Award Agreement:~~

~~(A)~~Upon termination from membership on the Board by a Non-employee Director, any Option held by such Director that (1) has not vested and is not exercisable as of the effective date of such termination from membership on the Board shall be subject to immediate cancellation and forfeiture, or (2) is vested and exercisable as of the effective date of such termination shall remain exercisable for one year thereafter, or the remaining term of the Option, if less;

~~(B)~~Upon Termination of Employment or termination from membership on the Board by a Non-employee Director due to death or Disability, any Option held by such Employee or Non-employee Director that (1) is vested and exercisable as of the effective date of such Termination of Employment or termination from membership on the Board shall remain exercisable for one year after such termination or the remaining term of the Option, if less, and (2) is not yet vested shall vest in full as of the date of death or Disability, and any such vested Options shall remain exercisable for one year after such Termination of Employment or termination from membership on the Board by a Non-employee Director due to death or Disability or the remaining term of the Option, if less;

~~(C)~~Upon Termination of Employment due to Retirement, any Option held by an Awardee at Retirement, to the extent vested and exercisable as of the effective date of such Retirement, will remain outstanding for the lesser of one year or the remaining term of the Option; and

~~(D)~~Any other Termination of Employment shall result in immediate cancellation and forfeiture of all outstanding Options that have not vested as of the effective date of such Termination of Employment, and any vested and exercisable Options held at the time of such Termination of Employment shall remain exercisable for ninety (90) days thereafter, or the remaining term of the Option, if less. Notwithstanding the foregoing, all outstanding and unexercised Options shall be immediately cancelled in the event of a Termination for Cause.Chief Executive Officer


9.	~~Incentive Stock Option Limitations/Terms.~~

~~(a)Eligibility.~~ Only employees (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company or any of its Subsidiaries may be granted Incentive Stock Options.

~~(b)$100,000 Limitation.~~ Notwithstanding the designation “Incentive Stock Option” in an Option Agreement, if and to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Awardee during any calendar year (under all plans of the Company and any of its Subsidiaries) exceeds U.S. $100,000, such Options shall be treated as Nonqualified Stock Options. For purposes of this Section 9(b) of the Plan, Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the Grant Date.

~~(c)Transferability.~~ The Option Agreement must provide that an Incentive Stock Option is not transferable by the Awardee otherwise than by will or the laws of descent and distribution, and, during the lifetime of such Awardee, must not be exercisable by any other person. If the terms of an Incentive Stock Option are amended to permit transferability, the Option will be treated for tax purposes as a Nonqualified Stock Option.

~~(d)Exercise Price.~~ ~~The per Share exercise price of an Incentive Stock Option shall in no event be inconsistent with the requirements for qualification of the Incentive Stock Option under Section 422 of the Code.~~

~~(e)Other Terms.~~ Option Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be necessary to qualify, to the extent determined desirable by the Administrator, with the applicable provisions of Section 422 of the Code. If any such terms and conditions, as of the Grant Date or any later date, do not so comply, the Option will be treated thereafter for tax purposes as a Nonqualified Stock Option.


~~10.~~	~~Stock Appreciation Rights.~~

A “Stock Appreciation Right” is a right that entitles the Awardee to receive, in cash or Shares (as determined by the Administrator), value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the aggregate exercise price of the right, as established by the Administrator on the Grant Date. Stock Appreciation Rights may be granted to Awardees either alone (“freestanding”) or in addition to or in tandem with other Awards granted under the Plan and may, but need not, relate to a specific Option granted under Section 8 of the Plan. Any Stock Appreciation Right granted in tandem with an Option may be granted at the same time such Option is granted or at any time thereafter before exercise or expiration of such Option, and shall be based on the Fair Market Value of one Share on the Grant Date or, if applicable, on the Grant Date of the Option with respect to a Stock Appreciation Right granted in exchange for or in tandem with, but subsequent to, the Option (subject to the requirements of Section 409A of the Code). All Stock Appreciation Rights under the Plan, other than Conversion Awards, shall be granted subject to the same terms and conditions applicable to Options as set forth in Section 8 of the Plan. Subject to the provisions of Section 8 of the Plan, the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate.


~~11.~~	~~Stock Awards.~~

~~(a)Stock Award Agreement.~~ Each Stock Award Agreement shall contain provisions regarding (i) the number of Shares subject to such Stock Award or a formula for determining such number, (ii) the purchase price of the Shares, if any, and the means of payment for the Shares, (iii) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares granted, issued, retainable and/or vested, (iv) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares as may be determined from time to time by the Administrator, (v) restrictions on the transferability of the Stock Award, and (vi) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator. The Committee may, in its sole discretion, waive the vesting restrictions and any other conditions set forth in any Award Agreement under such terms and conditions as the Committee shall deem appropriate, subject to the limitations imposed under Code Section 162(m) and the regulations thereunder in the case of an Award intended to comply with the performance-based exception under Code Section 162(m), unless determined otherwise under the circumstances by the Committee.

~~(b)Restrictions and Performance Criteria.~~ The grant, issuance, retention and/or vesting of Stock Awards issued to Employees may be subject to such performance criteria and level of achievement versus these criteria as the Administrator shall determine, which criteria may be based on financial performance, personal performance evaluations and/or completion

of service by the Awardee. Notwithstanding anything to the contrary herein, the performance criteria for any Stock Award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code (a “Performance Stock Award”) shall be established by the Administrator based on one or more Qualifying Performance Criteria selected by the Administrator and specified in writing not later than ninety (90) days after the commencement of the period of service (or, if earlier, the elapse of 25% of such period) to which the performance goals relate or otherwise within the time period required by the Code or the applicable Treasury Regulations, provided that the outcome is substantially uncertain at that time. Stock Awards for which vesting is not based on the attainment of performance criteria are referred to as “Restricted Stock Awards.”

~~(c)Termination of Employment or Board Membership.~~


~~(i)~~	The Administrator shall determine as of the Grant Date (subject to modification subsequent to the Grant Date) the effect a termination from membership on the Board by a Non-employee Director for any reason or a Termination of Employment due to (A) Disability, (B) Retirement (C) death, or (D) otherwise (including Termination for Cause) shall have on any Stock Award.


~~(ii)~~	~~Unless otherwise provided in the Award Agreement:~~

~~(A)~~Termination of Employment or termination from membership on the Board by a Non-employee Director due to Disability or death shall result in immediate full vesting of any as yet unvested Stock Award, and in the case of a Stock Award that vests upon the achievement of performance goals, the vested amount shall be based upon the target award amount;

~~(B)~~Any other Termination of Employment or termination from membership on the Board by a Non-employee Director shall result in immediate cancellation and forfeiture of all outstanding, unvested Stock Awards.

In the event that the Administrator shall provide for vesting as to a ratable portion of a performance period in an Award Agreement for a Stock Award under which vesting is based on the attainment of performance criteria over such performance period, the ratable vesting percentage determined by the portion of the performance period during which the Awardee was an Employee of the Company or an Affiliate shall be applied to determine the portion of the Stock Award that is vested based upon actual performance results after the completion of the performance period.

~~(d)Rights as a Stockholder.~~ Unless otherwise provided for by the Administrator, the Participant shall have the rights equivalent to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) to the Participant.


~~12.~~	~~Other Stock-Based Awards.~~

~~(a)Other Stock-Based Awards~~. An “Other Stock-Based Award” means any other type of equity-based or equity-related Award not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares), as well as any cash based bonus based on the attainment of Qualifying Performance Criteria as described in Section 13(b), in such amount and subject to such terms and conditions as the Administrator shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares or pursuant to attainment of a performance goal. Each Other Stock-Based Award will be evidenced by an Award Agreement containing such terms and conditions as may be determined by the Administrator.

~~(b)Value of Other Stock-Based Awards~~. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares or a target amount of cash, as determined by the Administrator. The Administrator may establish performance goals in its discretion. If the Administrator exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met. Notwithstanding anything to the contrary herein, the performance criteria for any Other Stock-Based Award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall be established by the Administrator based on one or more Qualifying Performance Criteria selected by the Administrator and specified in writing not later than ninety (90) days after the commencement of the period of service (or, if earlier, the elapse of 25% of such period) to which the performance goals relate and otherwise within the time period required by the Code and the applicable Treasury Regulations, provided that the outcome is substantially uncertain at that

~~time.~~

~~(c)Payment of Other Stock-Based Awards. Payment, if any, with respect to Other Stock-Based Awards shall be made in accordance with the terms of the Award, in cash or Shares or a combination thereof, as the Administrator determines.~~

~~(d)Termination of Employment or Board Membership.~~


~~(i)~~	The Administrator shall determine as of the Grant Date (subject to modification subsequent to the Grant Date) the effect a termination from membership on the Board by a Non-employee Director for any reason or a Termination of Employment due to (A) Disability, (B) Retirement, (C) death, or (D) otherwise (including Termination for Cause) shall have on any Other Stock-Based Award.


~~(ii)~~	~~Unless otherwise provided in the Award Agreement:~~

~~(A)~~Termination of Employment or termination from membership on the Board by a Non-employee Director due to Disability or death shall result in immediate full vesting of any as yet unvested Other Stock-Based Award, and in the case of an Other Stock-Based Award which vests on the basis of attainment of a performance goal, the vested amount shall be based upon the target award amount;

In the event that the Administrator shall provide for vesting as to a ratable portion of a performance period in an Award Agreement for an Other Stock-Based Award under which vesting is based on the attainment of performance criteria over such performance period, the ratable vesting percentage determined by the portion of the performance period during which the Awardee was an Employee of the Company or an Affiliate shall be applied to determine the portion of the Other Stock-Based Award that is vested based upon actual performance results after the completion of the performance period.


~~13.~~	~~Other Provisions Applicable to Awards.~~

~~(a)Non-Transferability of Awards.~~ Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by beneficiary designation, will or by the laws of descent or distribution, including but not limited to any attempted assignment or transfer in connection with the settlement of marital property or other rights incident to a divorce or dissolution, and any such attempted sale, assignment or transfer shall be of no effect prior to the date an Award is vested and settled. The Administrator may only make an Award transferable to an Awardee’s family member or any other person or entity provided the Awardee does not receive consideration for such transfer. If the Administrator makes an Award transferable, either as of the Grant Date or thereafter, such Award shall contain such additional terms and conditions as the Administrator deems appropriate, and any transferee shall be deemed to be bound by such terms upon acceptance of such transfer.

~~(b)Qualifying Performance Criteria.~~ For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, on a basis consistent with U.S. Generally Accepted Accounting Principles (“GAAP”) or on a non-GAAP or adjusted GAAP basis, applied to either the Company as a whole or to a Subsidiary, business unit, Affiliate or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the Award or by duly adopted resolution: (i) sales or cash return on sales; (ii) cash flow or free cash flow or net cash from operating activity; (iii) earnings (including gross margin, earnings before or after interest and taxes, earnings before taxes, and net earnings); (iv) basic or diluted earnings per share; (v) growth in earnings or earnings per share; (vi) stock price; (vii) return on equity or average shareholders’ equity; (viii) total shareholder return; (ix) return on capital; (x) return on assets or net assets; (xi) return on investments; (xii) revenue or gross profits; (xiii) income before or after interest, taxes, depreciation and amortization, or net income; (xiv) pretax income before allocation of corporate overhead and bonus; (xv) operating income or net operating income; (xvi) operating profit or net operating profit (whether before or after taxes); (xvii) operating margin; (xviii) return on operating revenue; (xix) working capital or net working capital; (xx) market share; (xxi) asset velocity index; (xxii) contract awards or backlog; (xxiii) overhead or other expense or cost reduction; (xxiv) growth in shareholder value relative to the moving average of the S&P 500 Index or a peer group

index; (xxv) credit rating; (xxvi) strategic plan development and implementation; (xxvii) improvement in workforce diversity; (xxviii) customer satisfaction; (xxvix) employee satisfaction; (xxx) management succession plan development and implementation; and (xxxi) employee or customer retention. With respect to any Award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, the performance criteria must be Qualifying Performance Criteria, and the Administrator will (within the first quarter of the performance period, but in no event more than ninety (90) days into that period) establish the specific performance targets (including thresholds and whether to exclude certain extraordinary, non-recurring, or similar items) and Award amounts (subject to the right of the Administrator to exercise discretion to reduce payment amounts following the conclusion of the performance period). Extraordinary, non-recurring items that may be the basis of adjustment include acquisitions or divestitures, restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, an event either not directly related to the operations of the Company, Subsidiary, division, business segment or business unit or not within the reasonable control of management, the cumulative effects of tax or accounting changes in accordance with U.S. GAAP, and foreign exchange gains or losses.

~~(c)Certification.~~ Prior to the payment of any compensation under an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Administrator shall certify in writing the extent to which any Qualifying Performance Criteria and any other material terms under such Award have been satisfied (other than in cases where such criteria relate solely to the increase in the value of the Common Shares).

~~(d)Discretionary Adjustments Pursuant to Section 162(m).~~ Notwithstanding satisfaction or completion of any Qualifying Performance Criteria, to the extent specified as of the Grant Date, the number of Shares, Options or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Qualifying Performance Criteria may be reduced (but not increased) by the Administrator on the basis of such further considerations as the Administrator in its sole discretion shall determine.


~~14.~~	~~Dividends and Dividend Equivalents.~~

Awards other than Options and Stock Appreciation Rights may provide the Awardee with the right to receive dividend payments or dividend equivalent payments on the Shares subject to the Award, whether or not such Award is vested. Notwithstanding the foregoing, dividends or dividend equivalents shall not be paid with respect to Stock Awards or Other Stock-Based Awards that, in either case, vest based on the achievement of performance goals prior to the date the performance goals are satisfied and the Award is earned, and then shall be payable only with respect to the number of Shares or Stock Units actually earned under the Award. Such payments may be made in cash, Shares or Stock Units or may be credited as cash or Stock Units to an Awardee’s account and later settled in cash or Shares or a combination thereof, as determined by the Administrator. Such payments and credits may be subject to such conditions and contingencies as the Administrator may establish.


~~15.~~	~~Adjustments upon Changes in Capitalization, Organic Change or Change of Control.~~

~~(a)Adjustment Clause.~~ In the event of (i) a stock dividend, extraordinary cash dividend, stock split, reverse stock split, share combination, or recapitalization or similar event affecting the capital structure of the Company (each, a “Share Change”), or (ii) a merger, consolidation, acquisition of property or shares, separation, spin-off, reorganization, liquidation, Disaffiliation, or similar event affecting the Company or any of its Subsidiaries (each, an “Organic Change”), the Administrator or the Board may in its discretion make such substitutions or adjustments as it deems appropriate and equitable to (i) the Share limitations set forth in Section 3 of the Plan, (ii) the number and kind of Shares covered by each outstanding Award, and (iii) the price per Share subject to each such outstanding Award. In the case of Organic Changes, such adjustments may include, without limitation, (x) the cancellation of outstanding Awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Administrator or the Board in its sole discretion (it being understood that in the case of an Organic Change with respect to which stockholders receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such determination by the Administrator that the value of an Option or Stock Appreciation Right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each Share pursuant to such Organic Change over the exercise price of such Option or Stock Appreciation Right shall conclusively be deemed valid); (y) the substitution of other property (including, without limitation, cash or other securities of the Company and securities of entities other than the Company) for the Shares subject to outstanding Awards; and (z) in connection with any Disaffiliation, arranging for the assumption of Awards, or replacement of Awards with new awards based on other property or other securities (including, without limitation, other securities of the Company and securities of entities other than the Company),

by the affected Subsidiary, Affiliate, or division or by the entity that controls such Subsidiary, Affiliate, or division following such Disaffiliation (as well as any corresponding adjustments to Awards that remain based upon Company securities). The Committee may adjust in its sole discretion the Qualifying Performance Criteria applicable to any Awards to reflect any Share Change and any Organic Change and any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by GAAP or as identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or the Company’s other SEC filings, provided that in the case of Qualifying Performance Criteria applicable to any performance-based Awards intended to qualify under Code Section 162(m), such adjustment does not violate Section 162(m) of the Code. Any adjustment under this Section 15(a) need not be the same for all Participants.

~~(b)Change of Control.~~ In the event of a Change of Control, unless otherwise determined by the Administrator as of the Grant Date of a particular Award (or subsequent to the Grant Date), the following acceleration, exercisability and valuation provisions shall apply:

~~(i)~~

On the date that such Change of Control occurs, any or all Options and Stock Appreciation Rights awarded under this Plan not previously exercisable and vested shall, if not assumed, or substituted with a new award, by the successor to the Company, become fully exercisable and vested, and if the successor to the Company assumes such Options or Stock Appreciation Rights or substitutes other awards for such Awards, such Awards (or their substitutes) shall become fully exercisable and vested if the Participant’s employment is terminated (other than a Termination for Cause) within two years following the Change of Control.

~~(ii)~~

Except as may be provided in an individual severance or employment agreement (or severance plan) to which an Awardee is a party, in the event of an Awardee’s Termination of Employment within two years after a Change of Control for any reason other than because of the Awardee’s death, Retirement, Disability or Termination for Cause, each Option and Stock Appreciation Right held by the Awardee (or a transferee) that is vested following such Termination of Employment shall remain exercisable until the earlier of the third anniversary of such Termination of Employment (or any later date until which it would remain exercisable under such circumstances by its terms) or the expiration of its original term. In the event of an Awardee’s Termination of Employment more than two years after a Change of Control, or within two years after a Change of Control because of the Awardee’s death, Retirement, Disability or Termination for Cause, the provisions of Sections 8(i) and 10 of the Plan shall govern (as applicable).

~~(iii)~~

On the date that such Change of Control occurs, the restrictions and conditions applicable to any or all Stock Awards, Stock Unit Awards and Other Stock-Based Awards that are not assumed, or substituted with a new award, by the successor to the Company shall lapse and such Awards shall be fully vested. Unless otherwise provided in an Award Agreement at the Grant Date, upon the occurrence of a Change of Control without assumption or substitution of the Awards by the successor, any performance based Award shall be deemed fully earned at the target amount as of the date on which the Change of Control occurs. All Stock Awards, Stock Unit Awards and Other Stock-Based Awards shall be settled or paid within thirty (30) days of vesting hereunder. Notwithstanding the foregoing, if the Change of Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, the Awardee shall be entitled to receive the Award from the Company on the date that would have applied absent this provision. If the successor to the Company does assume (or substitute with a new award) any Stock Awards, Stock Unit Awards and Other Stock-Based Awards, all such Awards shall become fully vested if the Participant’s employment is terminated (other than a Termination for Cause) within two years following the Change of Control, and any performance based Award shall be deemed fully earned at the target amount effective as of such Termination of Employment.

~~(iv)~~

The Committee, in its discretion, may determine that, upon the occurrence of a Change of Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and/or that each Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per Share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine, and if there is no excess value, the Committee may, in its discretion, cancel such Awards.

~~(v)~~

An Option, Stock Appreciation Right, Stock Award, Stock Unit Award or Other Stock-Based Award shall be considered assumed or substituted for if following the Change of Control the Award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Stock Award, Stock Unit Award or Other Stock-Based Award immediately prior to the Change of Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change of Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the transaction constituting a Change of Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Stock Award, Stock Unit Award or Other Stock-Based Award, for each Share subject thereto, will be solely common stock of the successor company with a fair market value substantially equal to the per Share consideration received by holders of Shares in the transaction constituting a Change of Control. The determination of whether fair market value is substantially equal shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding.

~~(c)Section 409A~~. Notwithstanding the foregoing: (i) any adjustments made pursuant to Section 15(a) of the Plan to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (ii) any adjustments made pursuant to Section 15(a) of the Plan to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment, the Awards either continue not to be subject to Section 409A of the Code or comply with the requirements of Section 409A of the Code; (iii) the Administrator shall not have the authority to make any adjustments pursuant to Section 15(a) of the Plan to the extent that the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code to be subject thereto; and (iv) if any Award is subject to Section 409A of the Code, Section 15(b) of the Plan shall be applicable only to the extent specifically provided in the Award Agreement and permitted pursuant to Section 24 of the Plan in order to ensure that such Award complies with Code Section 409A.


~~16.~~	~~Amendment and Termination of the Plan.~~

~~(a)Amendment and Termination.~~ The Administrator may amend, alter or discontinue the Plan or any Award Agreement, but any such amendment shall be subject to approval of the stockholders of the Company in the manner and to the extent required by Applicable Law. In addition, without limiting the foregoing, unless approved by the stockholders of the Company and subject to Section 16(b), no such amendment shall be made that would:


~~(i)~~	~~increase the maximum aggregate number of Shares which may be subject to Awards granted under the Plan;~~


~~(ii)~~	~~reduce the minimum exercise price for Options or Stock Appreciation Rights granted under the Plan; or~~


~~(iii)~~	~~reduce the exercise price of outstanding Options or Stock Appreciation Rights, as prohibited by Section 8(c) without stockholder approval.~~

~~(b)Effect of Amendment or Termination.~~ No amendment, suspension or termination of the Plan shall materially impair the rights of any Participant with respect to an outstanding Award, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company, except that no such agreement shall be required if the Administrator determines in its sole discretion that such amendment either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated, except that this exception shall not apply following a Change of Control. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

~~(c)Effect of the Plan on Other Arrangements.~~ Neither the adoption of the Plan by the Board or a Committee nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or any Committee to adopt such other incentive arrangements as it or they may deem desirable, including without limitation, the granting of restricted shares or restricted share units or stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.


~~17.~~	~~Designation of Beneficiary.~~

~~(a)~~An Awardee may file a written designation of a beneficiary who is to receive the Awardee’s rights pursuant to Awardee’s Award or the Awardee may include his or her Awards in an omnibus beneficiary designation for all benefits under the Plan. To the extent that Awardee has completed a designation of beneficiary while employed with the Company, such beneficiary designation shall remain in effect with respect to any Award hereunder until changed by the Awardee to the extent enforceable under Applicable Law.

~~(b)~~Such designation of beneficiary may be changed by the Awardee at any time by written notice. In the event of the death of an Awardee and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Awardee’s death, the Company shall allow the legal representative of the Awardee’s estate to exercise the Award.


~~18.~~	~~No Right to Awards or to Employment.~~

No person shall have any claim or right to be granted an Award and the grant of any Award shall not be construed as giving an Awardee the right to continue in the employ of the Company or its Affiliates. Further, the Company and its Affiliates expressly reserve the right, at any time, to dismiss any Employee or Awardee at any time without liability or any claim under the Plan, except as provided herein or in any Award Agreement entered into hereunder.


~~19.~~	~~Legal Compliance.~~

Shares shall not be issued pursuant to an Option, Stock Appreciation Right, Stock Award or Other Stock-Based Award unless such Option, Stock Appreciation Right, Stock Award or Other Stock-Based Award and the issuance and delivery of such Shares shall comply with Applicable Law and shall be further subject to the approval of counsel for the Company with respect to such compliance. Unless the Awards and Shares covered by this Plan have been registered under the Securities Act or the Company has determined that such registration is unnecessary, each person receiving an Award and/or Shares pursuant to any Award may be required by the Company to give a representation in writing that such person is acquiring such Shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.


~~20.~~	~~Inability to Obtain Authority.~~

To the extent the Company is unable to or the Administrator deems it unfeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be advisable or necessary to the lawful issuance and sale of any Shares hereunder, the Company shall be relieved of any liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.


~~21.~~	~~Reservation of Shares.~~

~~The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.~~


~~22.~~	~~Notice.~~

Any written notice to the Company required by any provisions of this Plan shall be addressed to the Secretary of the Company and shall be effective when received. Any notice to a Participant hereunder shall be addressed to the last address of record with the Company and shall be effective when sent via first class mail, courier service, or electronic mail to such last address of record.


~~23.~~	~~Governing Law; Interpretation of Plan and Awards.~~


~~(a)~~	This Plan and all determinations made and actions taken pursuant hereto shall be governed by the substantive laws, but not the choice of law rules, of the state of Delaware, except as to matters governed by U.S. federal law.


~~(b)~~	~~In the event that any provision of the Plan or any Award granted under the Plan is declared to be illegal, invalid or~~

otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of the terms of the Plan and/or Award shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision.


~~(c)~~	The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of the Plan, nor shall they affect its meaning, construction or effect.


~~(d)~~	~~The terms of the Plan and any Award shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns.~~


~~24.~~	~~Section 409A.~~

It is the intention of the Company that no Award shall be “deferred compensation” subject to Section 409A of the Code, unless and to the extent that the Administrator specifically determines otherwise, and the Plan and the terms and conditions of all Awards shall be interpreted accordingly. The terms and conditions governing any Awards that the Administrator determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery of cash or Shares pursuant thereto and any rules regarding treatment of such Awards in the event of a Change of Control, shall be set forth in the applicable Award Agreement, deferral election forms and procedures, and rules established by the Administrator, and shall comply in all respects with Section 409A of the Code. The following rules will apply to Awards intended to be subject to Section 409A of the Code (“409A Awards”):

~~(a)If a Participant is permitted to elect to defer an Award or any payment under an Award, such election will be permitted only at times in compliance with Code Section 409A.~~

~~(b)The Company shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under Section 409A.~~

~~(c)~~Any distribution of a 409A Award following a Termination of Employment that would be subject to Code Section 409A(a)(2)(A)(i) as a distribution following a separation from service of a “specified employee” as defined under Code Section 409A(a)(2)(B)(i), shall occur no earlier than the expiration of the six-month period following such Termination of Employment.

~~(d)~~In the case of any distribution of a 409A Award, if the timing of such distribution is not otherwise specified in the Plan or an Award Agreement or other governing document, the distribution shall be made not later than the end of the calendar year during which the settlement of the 409A Award is specified to occur.

~~(e)~~In the case of an Award providing for distribution or settlement upon vesting or the lapse of a risk of forfeiture, if the time of such distribution or settlement is not otherwise specified in the Plan or an Award Agreement or other governing document, the distribution or settlement shall be made not later than March 15 of the year following the year in which the Award vested or the risk of forfeiture lapsed.

~~(f)~~Notwithstanding anything herein to the contrary, in no event shall the Company or the Administrator be liable for the payment of, or any gross up payment in connection with, any taxes or penalties owed by the Participant pursuant to Code Section 409A


~~25.~~	~~Limitation on Liability.~~

~~The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant, an Employee, an Awardee or any other persons as to:~~

~~(a)The Non-Issuance of Shares.~~ The non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and

~~(b)Tax or Exchange Control Consequences.~~ ~~Any tax consequence or any exchange control obligation owed, by any Participant, Employee, Awardee or other person due to the receipt, exercise or settlement of any Option or other Award~~

~~granted hereunder.~~


~~26.~~	~~Unfunded Plan.~~

Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Awardees who are granted Stock Awards or Other Stock-Based Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation. Neither the Company nor the Administrator shall be deemed to be a trustee of stock or cash to be awarded under the Plan. Any liability of the Company to any Participant with respect to an Award shall be based solely upon any contractual obligations which may be created by the Plan; no such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Administrator shall be required to give any security or bond for the performance of any obligation which may be created by this Plan.

~~27. Foreign Employees.~~

Awards may be granted hereunder to Employees and Consultants who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the Company to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Administrator may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.

~~28. Tax Withholding.~~

Each Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to any Award under the Plan no later than the date as of which any amount under such Award first becomes includible in the gross income of the Participant for any tax purposes with respect to which the Company has a tax withholding obligation. Unless otherwise determined by the Company, withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement; provided, however, that not more than the legally required minimum withholding may be settled with Shares that are part of the Award. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any vested Shares or any other payment due to the participant at that time or at any future time. The Administrator may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Shares.

~~29. Cancellation of Award; Forfeiture of Gain~~.

Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that the Award will be cancelled and the Participant will forfeit the Shares or cash received or payable on the vesting or exercise of the Award, and that the amount of any proceeds of the sale or gain realized on the vesting or exercise of the Award must be repaid to the Company, under such conditions as may be required by Applicable Law or established by the Committee in its sole discretion.

~~30. Data Privacy and Transfer~~

As a condition of acceptance of an Award, the Participant explicitly thereby consents to the collection, use and transfer, in electronic or other form, of personal data by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that the Company and its Affiliates hold certain personal information about the Participant, including the Participant’s name, home address and telephone number, date of birth, social security or other identification number, salary, nationality, job title, Shares held in the Company or any Subsidiary, details of all Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the purpose of implementing, managing and administering the Plan (the “Data”). The Participant further understands that the Company and its Affiliates may transfer the Data among themselves as necessary for the purpose of implementation, management and administration of the Plan, and that

the Company and its Affiliates may each further transfer the Data to any third parties assisting the Company in the implementation, management, and administration of the Plan. The Participant understands that these recipients may be located in the Participant’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Participant’s country. The Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant, through participation in the Plan and acceptance of an Award under the Plan, authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Participant may elect to deposit any Shares. In addition, by accepting an Award under the Plan, each Participant agrees and acknowledges (i) that the Data will be held only as long as is necessary to implement, manage, and administer the Plan; (ii) that the Participant may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data, or refuse or withdraw consent to the use and transfer of the Data, without cost, by delivering such revocation or withdrawal of consent in writing to a designated human resources representative; and (iii) that refusal or withdrawal of consent may affect the Participant’s ability to participate in the Plan thereafter.

A-1

Appendix B

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

ENERGY FOCUS, INC.

Pursuant to Section 242 of the

General Corporation Law of the State of Delaware

Energy Focus, Inc. (hereinafter called the “Company”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:

Resolutions were duly adopted by the Board of Directors of the Company pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth the amendment to the Certificate of Incorporation of the Company, as amended, and declaring said amendment to be advisable. The stockholders of the Company duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware. The resolutions setting forth the amendments are as follows:

Upon this Certificate of Amendment becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), the shares of Common Stock issued and outstanding or held in treasury immediately prior to the Effective Time (the “Old Common Stock”) shall be reclassified into a different number of shares of Common Stock (the “New Common Stock”) such that each two to twenty shares of Old Common Stock shall, at the Effective Time, be automatically reclassified into one share of New Common Stock, the exact ratio within the foregoing range to be determined by the Board of Directors of the Corporation prior to the Effective Time and publicly announced by the Corporation. From and after the Effective Time, certificates representing the Old Common Stock shall represent the number of whole shares of New Common Stock into which such Old Common Stock shall have been reclassified pursuant to the immediately preceding sentence. No fractional shares of Common Stock shall be issued as a result of such reclassification. In lieu of any fractional shares to which the stockholders would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then fair value of the Common Stock as determined in good faith by the Board of Directors of the Corporation.

B-1

IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to be signed by its Chief Executive Officer this Day of , 20.

ENERGY FOCUS, INC.

By: _________________________

James Tu

Executive Chairman and Chief Executive Officer

57B-2



			The Board of Directors believes that Dr. Black’s qualifications to serve as a Board member include his leadership positions in various high-growth technology companies, both domestic and foreign. Dr. Black has served as the Company’s Lead Director since March 2016. He has been a member of the Compensation Committee since July 2015 (serving as Chair from July 2015 to October 2016), and a member of the Nominating and Corporate Governance Committee since August 2016.

William Cohen	63	2014	Mr. Cohen has served as the Chief Executive Officer of Dillon Yarn Corporation since February 2011, and as President from October 1996 to February 2011. Dillon Yarn Corporation manufactures and globally distributes filament yarns, fabrics, flake, chip, staple fiber and non-woven fabric to many segments of the textile industry, including medical, technical, industrial, automotive, home furnishing and apparel. Mr. Cohen is also Chairman and Chief Executive Officer of Atlas Oral Health Care LLC, Chairman and Chief Executive Officer of GAWI, LLC d/b/a Arctic Ease, a Partner in Fabricated Metals, and President of Morristown Helicopter Services Inc. He is a member of the Tel Aviv University Board of Governors and Chairman Emeritus of American Friends of Tel Aviv University. Mr. Cohen attended C.W. Post of Long Island University.

			The Board of Directors believes that Mr. Cohen’s qualifications to serve as a Board member include his leadership experience of a global manufacturing and distribution business, as well as his network and experience in sales, marketing and manufacturing, both domestic and foreign. Mr. Cohen has served as a member of the Compensation Committee since July 2014 and as a member of the Audit and Finance Committee since June 2016.

Glenda M. Dorchak	63	2015	Ms. Dorchak has been a member of the Board of Directors of Mellanox Technologies, a leading global supplier of end-to-end InfiniBand and Ethernet interconnect silicon, software and systems, since 2009 and currently serves as the chair of the nominating and governance committee. Ms. Dorchak also currently serves on the board of Mirametrix Inc., a private software company that provides gaze-tracking software and she is an Operating Advisor to OMERS Private Equity and BDC Venture group for Industrial, Clean-tech and Energy. Ms. Dorchak was Executive Vice President and General Manager of Global Business for Spansion, Inc., a Sunnyvale, California based flash memory provider from April 2012 to June 2013. From January 2009 until September 2010, when it was acquired by Red Bend Software, Ms. Dorchak was the Chief Executive Officer and Vice Chairman of VirtualLogix, Inc., a Sunnyvale, California based provider of virtualization software for wireless and embedded devices. Prior to VirtualLogix, Inc., she served as Chairman and Chief Executive Officer of Intrinsyc Software International, Inc. from August 2006 to November 2008 where she had also served as an independent director from September 2003 to December 2004. Ms. Dorchak was an executive with Intel Corporation from 2001 to 2006, including serving as Vice President and Chief Operating Officer of Intel Corporation’s Communications Group; Vice President and General Manager of Intel’s Consumer Electronics Group; and Vice President and General Manager of the Broadband Products Group. Prior to her tenure at Intel Corporation, she served as Chairman and Chief Executive Officer of Value America, Inc., an online retailer, from September 1999 to November 2000.



			The Board of Directors believes that Ms. Dorchak’s qualifications to serve as a Board member include her executive and board member experience in the software and technology industries, as well as her expertise, experience and understanding of global markets. Ms. Dorchak has been a member of the Compensation Committee since July 2015, serving as the Chair since November 2016, and has been a member and Chair of the Nominating and Corporate Governance Committee since August 2016. Ms. Dorchak also served on the Audit and Finance Committee from July 2015 until August 2016.

Marc J. Eisenberg	50	2015	Mr. Eisenberg is Chief Executive Officer and a Director of ORBCOMM Inc., positions he has held since March 2008. ORBCOMM is a global provider of machine-to-machine solutions, including network connectivity, devices and web reporting applications. He previously served as its Chief Operating Officer from February 2007 to March 2008, Chief Marketing Officer from June 2006 to February 2007 and Executive Vice President, Sales and Marketing from March 2002 to June 2006. Mr. Eisenberg holds a Bachelor’s of Science degree in Marketing and Management from New York University.

			The Board of Directors believes that Mr. Eisenberg’s qualifications to serve as a Board member include his leadership position in a technology company, as well as his expertise and experience in global operations. Mr. Eisenberg has served as a member of the Audit and Finance Committee since July 2015 and as a member of the Nominating and Corporate Governance Committee since August 2016.

Michael R. Ramelot	71	2013	Mr. Ramelot has been a consultant since 2002 on many projects, including serving as project leader on BlackLine system implementations to enhance the financial close process of several multi-million dollar companies; serving as project leader on due diligence, accounting valuations and appraisals related to acquisitions; researching and preparing position papers for companies on complex accounting issues; preparing various SEC filings; and assessing and implementing compliance with Section 404 of Sarbanes-Oxley at several companies. Prior to becoming a consultant, Mr. Ramelot served as the President and Chief Financial Officer of Compro Packaging LLC. Mr. Ramelot received a Master’s degree in Business Administration from the University of Santa Clara and a Bachelor of Science degree in accounting from St. Mary’s College. He is a Certified Public Accountant.

			The Board of Directors believes that Mr. Ramelot’s qualifications to serve as a Board member include his significant experience with financial and accounting matters and SEC compliance matters. Mr. Ramelot has been a member and Chair of the Audit and Finance Committee since September 2013.



Theodore L. Tewksbury III, Ph.D.	60	2016	Dr. Tewksbury is the 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 has been a director of Jariet Technologies, a private company specializing in digital microwave integrated circuits for wireless infrastructure, backhaul and military applications, since its spinoff from Semtech in 2015. From 2008 to 2013, Dr. Tewksbury served as President and Chief Executive Officer and a director of Integrated Device Corporation, a public semiconductor company. Dr. Tewksbury received a B.S. degree in Architecture, as well as M.S. and Ph.D. degrees in Electrical Engineering from MIT.

			The Board of Directors believes that Dr. Tewksbury’s qualifications to serve as a Board member include his role as the Company’s Chief Executive Officer and President since February 2017, his executive leadership experience with public and private technology companies, and his distinguished track record of transforming and building visionary businesses.



	Equity Compensation Plan Information
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders	780,849	$	7.48	(2)	990,079	(1)



	Shares Beneficially Owned
			Percent of Outstanding Common Stock (1)

Name and Address
5% Stockholders
Gina Huang	1,017,390	(2)	8.6	%
P.O. Box 3444, Road Town
Tortola, British Virgin Islands
Bright Horizon Partners	639,130	(3)	5.4	%
1300 Avenue of the Americas, 36th Floor
New York, NY 10019

Current Directors and Named Executive Officers
Ronald D. Black	13,984	(4)	*
William Cohen	730,179	(5)	6.2	%
Glenda M. Dorchak	13,984	(6)	*
Marc J. Eisenberg	13,984	(7)	*
Eric W. Hilliard	63,165	(8)	0.5	%
Jiangang Luo	536,051	(9)	4.6	%
Marcia J. Miller	38,377	(10)	0.3	%
Michael H. Port	6,131	(11)	*
Michael R. Ramelot	29,484	(12)	*
Theodore L. Tewksbury III	—		*
James Tu	433,111	(13)	3.7	%

All Current Directors and Executive Officers as a Group	1,343,797	(14)	11.4	%



	Gross Margin % (1)		Funding %
	<35%		0	%
Threshold	35	%	50	%
	36	%	60	%
	37	%	70	%
	38	%	80	%
	39	%	90	%
Target	40	%	100	%
	41	%	110	%
	42	%	120	%
	43	%	130	%
	44	%	140	%
	45	%	150	%
	46	%	170	%
	47	%	190	%
Maximum	47.5	%	200	%



	January 1, 2016 to November 17, 2016		Beginning November 18, 2016


Annual Cash Retainer	$	32,500	$	32,500
Restricted Stock Unit Grant	$	65,000	$	45,000	(1)
Additional Annual Cash Retainers:
Lead Director	$	17,500	$	20,000
Compensation Committee Chairman	$	12,000	$	14,000
Compensation Committee Member	$	5,000	$	5,000
Audit and Finance Committee Chairman	$	17,500	$	19,000
Audit and Finance Committee Member	$	7,000	$	7,000
Nominating and Corporate Governance Committee Chairman			$	9,000	(2)
Nominating and Corporate Governance Committee Member			$	4,000	(2)



Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)(1)	Option Awards ($) (2)	Total ($)

Ronald D. Black	57,011	65,000	—	122,011
William Cohen	37,229	65,000	—	102,229
Glenda M. Dorchak	42,559	65,000	—	107,559
Marc J. Eisenberg	37,701	65,000	—	102,701
Jiangang Luo	33,095	65,000	—	98,095
Michael R. Ramelot	46,610	65,000	—	111,610