8-KLeadership Changes

FIRST SOLAR, INC. 8-K Report, Executive Changes (Jan 9, 2009)

Filed January 9, 2009For Securities:FSLR

Summary

First Solar, Inc. (FSLR) filed an 8-K on January 9, 2009, primarily to report amendments to the employment and change in control agreements for Executive Vice President John T. Gaffney and Chief Financial Officer Jens Meyerhoff. These amendments, executed in late December 2008, were mainly to ensure compliance with Section 409A of the Internal Revenue Code, which governs nonqualified deferred compensation plans. An important update for investors is the change in the acceleration of equity awards upon certain termination events. Previously, outstanding equity awards would continue to vest for one year in the event of termination without cause. The amended agreements now provide for one year of acceleration of all outstanding equity awards in the event of death, disability, or termination without cause. An exception exists for Mr. Gaffney's initial hiring equity awards, which will fully vest upon termination without cause. This change potentially impacts the value of executive compensation in specific termination scenarios.

Key Highlights

  • 1Amendments to employment and change in control agreements for EVP John T. Gaffney and CFO Jens Meyerhoff.
  • 2Amendments were primarily to comply with Section 409A of the Internal Revenue Code.
  • 3Equity award vesting terms have been modified for termination events.
  • 4New provisions offer one year of acceleration for outstanding equity awards upon death, disability, or termination without cause for both executives.
  • 5An exception applies to Mr. Gaffney's initial hiring equity awards, which will fully vest upon termination without cause.
  • 6Prior to amendments, equity awards only continued to vest for one year upon termination without cause.

Frequently Asked Questions

The primary reason for amending the employment agreements and change in control agreements for John T. Gaffney and Jens Meyerhoff was to ensure compliance with Section 409A of the Internal Revenue Code, which deals with the taxation of nonqualified deferred compensation.

The amendments now provide for a full year of acceleration of outstanding equity awards in the event of death, disability, or termination of employment without cause. This means that a larger portion, or potentially all, of these awards could vest sooner than originally expected under specific circumstances, which could impact the total compensation realized by the executives.

Yes, while both executives benefit from the new one-year acceleration clause for most equity awards upon death, disability, or termination without cause, Mr. Gaffney's initial hiring equity awards are treated differently. These specific awards will fully vest upon his termination without cause, regardless of the general acceleration terms.

Before these amendments, outstanding equity awards would continue to vest for only one year in the event of a termination of employment without cause. The new agreements provide for acceleration of these awards, rather than just continued vesting.