1
EXHIBIT 10.13
XXXXXXX XXXXXXX EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
November 1, 2000 between Commonwealth Energy Corporation, a California
corporation (the "Company") and Xxxxxxx X. Xxxxxxx ("Employee"), with reference
to the following:
A. Employee has heretofore acted as a Consultant to the
Company, and in that capacity has rendered valuable services to the Company.
B. The Company and Employee desire that Employee continue to
provide services to the Company as an employee of the Company on the terms
provided herein.
NOW, THEREFORE, in consideration of the various covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Term of Employment. The Company hereby employs Employee and Employee accepts
such employment for a term of fifty-two (52) months, commencing on November 1,
2000 and terminating on December 31, 2004 (the "Initial Term"); notwithstanding
the foregoing, however, the term of this Agreement is subject to earlier
termination as provided in Section 7 below.
2. Title and Responsibilities. During the term of this Agreement, Employee shall
serve as Chief Operating Officer of the Company and President of the Company's
subsidiary Utilihost. In the performance of such duties Employee shall report
directly to (and only to) the Chief Executive Officer of the Company (the "CEO")
and shall, subject to the reasonable supervision and control of the CEO, have
the duties, responsibilities and authority commensurate with such positions in
companies comparable to the Company and Utilihost. Employee's office location
shall at all times be in offices of the Company located in Orange County,
California. Employee may be required to travel from time to time to the extent
reasonably necessary to the performance of his duties hereunder.
Employee shall in good faith and consistent with his ability, experience
and talent perform the duties set forth in this Section 2, and shall devote
substantially all of his productive time and efforts to the performance of such
duties; provided, however, that Employee may participate in civic, charitable,
and other not-for-profit activities and manage personal and family investments
to the extent that the same does not materially conflict with the discharge of
his duties hereunder.
3. Compensation and Benefits. The Company shall pay and/or provide the following
compensation and benefits to Employee during the term hereof, and Employee shall
accept the same as payment in full for all services rendered by Employee to or
for the benefit of the Company:
3.1 Base Salary. The Company shall pay Employee a salary of $275,000 per
annum for the first twelve months of the term of this Agreement, $325,000 per
annum for the second twelve months of the term, $375,000 per annum for the third
twelve months of the term, and $425,000 per annum thereafter (the "Base
Salary"). Notwithstanding the foregoing, the Base Salary shall be subject to
review from time to time (not less frequently than at the end of each fiscal
year of the Company) and, as a result thereof, may be increased (but not
decreased) at the discretion of the CEO and the Compensation Committee of the
Company's Board of Directors. In determining such increases in the Base Salary,
if any, the CEO and the Compensation Committee of the Company's Board of
Directors shall take into account, among other things, the Company's achievement
of the objectives set forth in its business plan and the Company's results of
1
2
operations. The Base Salary shall be payable in accordance with the payroll
practices of the Company in effect from time to time.
3.2 Bonus Based Upon Meters Under Contract. Employee shall be paid a cash
bonus with respect to the calendar year ending December 31, 2001 provided that,
as of the last day of that calendar year, the number of meters under contract
for billing purposes under the TRIUMPH system is not less than 1,000,000.
Employee shall be paid a cash bonus with respect to each calendar year
thereafter in the amount indicated opposite that calendar year in the table
below, provided that, as of the last day of that calendar year, the Company has
increased the number of meters under contract for billing purposes under the
TRIUMPH system from the last day of the immediately preceding calendar year, on
a net basis, by a number of meters which is not less than the number of meters
indicated opposite that fiscal year:
Year Ending Minimum No. of Meters Bonus
----------- --------------------- -----
December 31, 2002 1,500,000 $ 75,000
December 31, 2003 2,000,000 $100,000
December 31, 2004 2,500,000 $100,000
Each year thereafter 1,000,000 more than the $100,000
immediately preceding year
The bonus with respect to each calendar year shall be due and
payable no later than thirty (30) days following the last day of that year. In
addition, the Company has to show net income from operations for the year in
which the bonus was earned, except in the case of an expansion year, in which
case the bonus will be at the discretion of the Company's Board of Directors.
For purposes of this Section 3.2, "meters under contract for billing purposes
under the TRIUMPH h system" shall include all such meters of the Company's
customers, and all meters of any other company utilizing the TRIUMPH system.
3.3 Bonus Upon Change in Control of the Company. If during the term of
this Agreement there is a Change in Control (as defined below), then the Company
shall pay to Employee, concurrently with such Change in Control, a cash bonus in
an amount equal to the sum of (a) eight times the Employee's then current annual
Base Salary; and (b) the amount of taxes payable by Employee under Internal
Revenue Code Section 280G with respect to the bonus contemplated by this Section
3.3. The bonus contemplated by this Section 3.3 shall be paid to Employee
whether or not Employee elects to terminate this Agreement pursuant to any of
the terms of this Agreement. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities of the Company under an employee benefit plan of the Company, becomes
the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of (A) the outstanding shares of common stock of the Company, or (B) the
combined voting power of the Company's then-outstanding securities entitled to
vote generally in the election of directors; (ii) during any period of not more
than two consecutive years, not including any period prior to the date of this
Agreement, individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in
clause (iii) below) whose election by the Board or nomination by the Company's
shareholders was approved by a vote of at least a majority of the directors
still in office who either were in office at the beginning of such period or
whose election or nomination for election was previously so approved, ceases for
any reason to constitute a majority of the Board; or (iii) the Company is a
party to a merger or consolidation which results in the holders of voting
securities of the Company outstanding immediately prior thereto failing to
continue to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity) at least 50% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the Company sells
or disposes of all or substantially all of the Company's assets or any
transaction having similar effect is consummated; or the Company is subject to a
hostile takeover in the form of a proxy fight or any other means that allows the
company to be controlled by a material change in the Board of Directors. In the
event the company is taken
2
3
over, whether hostile or otherwise, all financial payments and options, earned
or otherwise, shall be considered due and owing and shall be considered earned
as shown in the following paragraphs 3.1, 3.2, 3.3, 3.4, and 3.5. All payments
shall be made to the Employee prior to the changeover date of the event that
would take over the company.
3.4 Stock Option Plan. Concurrently herewith, the Company shall grant to
Employee stock options entitling Employee to purchase 900,000 shares of the
Company's common stock, with an exercise price of $2.75 per share (the
"Options"). The right to exercise the Options shall be vested as to 225,000
shares covered thereby immediately upon the grant of the Options. The Options
shall vest as to an additional 225,000 shares on each of December 31, 2001,
December 31, 2002 and December 31, 2003; provided, however, that the Options
shall vest in full immediately prior to the consummation of any Change in
Control. The Options shall have a term of seven years (regardless of any
termination of Employee's employment, except as required by Section 422 of the
Internal Revenue Code with respect to those of the Options that are "incentive"
stock options within the meaning of that Section), and shall, to the maximum
extent permitted by law, be "incentive" stock options within the meaning of
Section 422 of the Internal Revenue Code. Employee shall be entitled to include
the shares purchased or purchasable upon exercise of the Options in any
registration statement hereafter filed by the Company under the Securities Act
of 1933, as amended, on a basis which is no less favorable to Employee than the
basis on which any other shareholder of the Company is entitled to include such
shareholder's shares in such registration statement.
3.5 Stock Repurchase Option: In the event the company is taken over
through any event that takes control of the company itself or by taking control
of the Board of Directors, or a sale of assets as defined herein. Whether such a
takeover is considered non-consensual or not; hostile or not: all financial
payments due to the Employee and all options due to the Employee, at the sole
discretion of the employee, shall be considered due and owing and shall be
considered earned as shown in the following paragraphs 3.1, 3.2, 3.3, and 3.4.
Employee shall have the absolute right, subject to applicable State and Federal
securities laws, to be exercised in his sole discretion and in addition to any
other compensation or benefits payable to Employee hereunder, to require the
Company to repurchase from Employee all capital stock and stock options of the
Company then earned or to be earned by Employee at an aggregate repurchase price
(see definition below) equal to two (2) times the then aggregate price value of
the Company's capital stock; not to exceed a total price of $10.00 per share.
The employee, in the employee's sole and absolute discretion, may exercise such
right twenty-four (24) hours prior to the closing of such an event. Prior to the
closing, as defined herein, the Employee may elect to sell all or some of the
Employee's stocks and/or stock options and the Company shall agree to purchase
the same capital stock and stock options earned or to be earned by the Employee,
at the Employee's sole discretion. The Employee without any representation or
warranty by Employee may exercise this option; other than the Employee has good
title thereto free of all liens, encumbrances and adverse interests. By Employee
delivering to the Company a certificate or certificates representing such
capital stock and stock options, or this employment agreement, in each case duly
endorsed for transfer or accompanied by appropriate stock powers, and or notice
of the exercise of the right to have the Company repurchase the Employee's
options and or stock. In which case the Company shall be obligated to
immediately deliver to the Employee certified funds representing payment of the
purchase price in full for all of the stock, and with regard to the options an
amount equal to the difference between the exercise price owed by the Employee
for the options and the above referenced repurchase price payable by the Company
for the shares that would otherwise be issued in relation to the Employee's
options being repurchased by the Company. The term "aggregate price value" shall
mean the value of the optioned shares as set forth by the Company for the
purposes of calculating the withholding taxes for the applicable issuance period
of the options being repurchased. It is acknowledged that any options which vest
due to the Change of Control shall be deemed to have been issued on the date of
vesting and thus the latest stock price for such options shall be the price used
to determine the value for such accelerated vested options. This clause may be
invoked by the Employee in the case of any takeover or any Change of Control.
3.6 Other Fringe Benefits. Employee shall be entitled to participate in
all of the Company's incentive and benefit plans and arrangements, including,
without limitation, all bonus, compensation and other incentive and benefit
plans or arrangements made available now or in the future by the Company to
3
4
its senior executives, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements, but on a
basis no less favorable than that afforded to any other director, officer or
employee of the Company. The Company shall also provide to Employee at the
Company's expense all health, medical, hospitalization, life and disability
insurance provided to other senior executives of the Company.
3.7 Expenses. The Company shall promptly reimburse Employee for all
out-of-pocket expenses actually incurred by him in connection with the
performance of his duties hereunder, subject to Employee's furnishing the
Company with evidence in the form of receipts satisfactory to the Company
substantiating the claimed expenditures (such expenses being commensurate with
the office and executive position of Employee hereunder, and including first
class hotel and travel arrangements). Employee's right to be reimbursed for
expenses incurred prior to the termination of this Agreement shall survive
termination of this Agreement.
3.8 Vacation. Employee shall be entitled to the number of paid vacation
days in each calendar year determined by the Board from time to time for the
Company's senior executive officers, but not less than twenty (20) business days
in any calendar year. Employee shall also be entitled to all paid holidays given
to the Company's senior executive officers.
3.9 Automobile; Telephone; Etc. During the term hereof the Company shall
provide Employee $800 per month for the purposes of the Employee paying for an
automobile and related expenses. In addition, the Company shall provide a cell
phone and shall reimburse Employee for all charges incurred by him in connection
with the use thereof related to the performance of his duties hereunder.
3.10 Withholding and other Deductions. All compensation payable to
Employee hereunder shall be subject to such deductions as the Company is from
time to time required to make pursuant to law, governmental regulation or order.
4. Representations and Warranties. Employee represents and warrants to the
Company that (a) Employee is under no contractual or other restriction or
obligation which is inconsistent with the execution of this Agreement, the
performance of his duties hereunder, or the other rights of the Company
hereunder; and (b) Employee is under no physical or mental disability that would
hinder the performance of his duties under this Agreement. The Company
represents and warrants to Employee that (i) the execution and delivery of this
Agreement by the Company and the performance of its obligations hereunder have
been duly authorized by the Board and no further corporate action on the
Company's part is necessary to authorize this Agreement and the performance of
such obligations; and (ii) this Agreement constitutes the valid and binding
obligation of the Company, enforceable by Employee against the Company strictly
in accordance with its terms (subject to laws in effect with respect to
creditors' rights generally and applicable principles relating to equitable
remedies).
5. Confidential Information. Employee acknowledges that the nature of Employee's
engagement by the Company is such that Employee will have access to Confidential
Information (as hereinafter defined) which has value to the Company. During the
term of this Agreement and at all times thereafter, Employee shall keep all of
the Confidential Information in confidence and shall not disclose any of the
same to any other person, except the Company's personnel entitled thereto and
other persons designated in writing by the Company or except as otherwise
required by law. Employee shall not use the Confidential Information for
Employee's personal gain or benefit outside the scope of Employee's engagement
by the Company. The term "Confidential Information," as used herein, means all
information or material not generally known by non-Company personnel which (a)
gives the Company some competitive business advantage or the opportunity of
obtaining such advantage or the disclosure of which could be materially
detrimental to the interests of the Company; (b) which is owned by the Company
or in which the Company has an interest; and (c) which is either (i) marked
"Confidential Information," "Proprietary Information" or other similar marking,
(ii) known by Employee to be considered confidential and proprietary by the
Company, or (iii) from all the relevant circumstances should reasonably be
assumed by Employee to be confidential and proprietary to the Company.
4
5
6. "Key Man" Insurance. The Company shall have the right to purchase "key-man"
life insurance covering Employee, in the name and for the benefit of the Company
and at the Company's expense in any amount not exceeding $2,000,000. Employee
shall cooperate in all reasonable respects with the Company's efforts to obtain
such insurance and shall submit to any required medical or other examination;
provided; however, that if such medical or other examination cannot be conducted
by Employee's personal physician, then Employee shall have the right to have his
personal physician attend the examination. Upon the termination of his
employment hereunder, Employee may acquire any such life insurance policy upon
paying the Company an amount equal to the insurance policy's cash surrender
value, if any, at the time of termination and reimbursing the Company for the
pro rata portion of any premium paid applicable to periods subsequent to the
termination.
7. Termination; Separation Compensation.
7.1 Termination. Notwithstanding Section 1 above, Employee's employment
with the Company shall terminate upon the earliest to occur of any of the
following:
the death of Employee;
the "total disability" of Employee (as hereinafter defined);
the expiration of ten (10) days after the receipt by Employee of written notice
of termination executed by the Company if Employee willfully breaches or
habitually neglects the duties which he is required to perform under the terms
of this Agreement (unless caused by Employee's disability), provided that such
termination is approved by not less than a majority of the then current members
of the Company's Board of Directors;
the expiration of ten (10) days after the receipt by Employee of written notice
of termination executed by the Company if Employee shall make any intentional
material misrepresentation to the Company's Board of Directors, commit fraud,
embezzlement, misappropriation or any felony or other criminal act with respect
to Company, and/or any affiliates thereof, whether or not a criminal or civil
charge is filed in connection therewith, provided that such termination is
approved by not less than a majority of the then current members of the
Company's Board of Directors;
the expiration of one hundred eighty (180) days after receipt by the Company
of written notice of termination executed by Employee;
the expiration of ten (10) days after receipt by the Company of written notice
of termination executed by Employee if, without Employee's written consent,
there shall have been any adverse change in Employee's status, title, position,
duties, responsibilities or authorities contemplated by this Agreement; or
the expiration of ten (10) days after receipt by the Company of written notice
of termination executed by Employee if there shall have been a material breach
by the Company of any of its obligations under this Agreement, which default is
not cured within such ten day period.
7.2 Definition of Total Disability. For purposes of this Agreement,
Employee shall be deemed to have suffered a "total disability" if he is unable
to perform substantially all of the duties theretofore performed by him under
this Agreement by reason of any medically determinable physical or mental
impairment which has lasted for not less than one hundred twenty (120)
consecutive calendar days or for one hundred fifty (150) calendar days (whether
or not consecutive) in any one hundred eighty (180) calendar days. Prior to
termination of this Agreement as a result of total disability, and
notwithstanding any failure or inability of Employee to render services
hereunder, the Company shall continue to pay and/or provide to Employee the
compensation and benefits specified in Section 3 hereof.
7.3 Separation Compensation. If Employee's employment terminates pursuant
to Section 7.1(a), (b), (c), (d) or (e) of this Agreement, Employee shall be
entitled to receive the Base Salary and other
5
6
compensation and benefits provided for under this Agreement through the date of
termination, but shall not be entitled to receive any severance pay or
non-vested employment benefits or options, or any other termination benefits,
except to the extent otherwise required to be paid under applicable California
law. If Employee's employment terminates for any reason other than pursuant to
the provisions of this Agreement referred to in the immediately preceding
sentence, then Employee shall be entitled to receive (i) the Base Salary and
other compensation and benefits provided for under this Agreement through the
date of termination, and (ii) an amount equal to one and one-half times
Employee's then current annual Base Salary. The amount specified in clause (ii)
above shall be payable in eighteen (18) equal monthly installments, commencing
immediately following the termination of Employee's employment. The Company and
Employee both agree that the amount of the severance payment specified by the
immediately preceding sentence is reasonable under the circumstances existing at
the time of the execution of this Agreement.
7.4 Mitigation. Employee shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, and the amount of any payment or benefit provided in this Section 7
shall not be reduced by any compensation earned by Employee as a result of
employment by another employer or by any other benefits.
8. General Relationship. Employee shall be considered an employee of the Company
within the meaning of all federal, state and local laws and regulations
including, but not limited to, laws and regulations governing unemployment
insurance, workers' compensation, industrial accident, labor and taxes.
9. Indemnification Agreement. As a material inducement to Employee to execute
and deliver this Agreement, concurrently with the execution and delivery of this
Agreement, the Company and Employee have executed and delivered an
Indemnification Agreement in the form attached to this Agreement as Exhibit A.
10. Miscellaneous.
10.1 Entire Agreement. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
10.2 No Assignment. This Agreement may not be assigned by the Company or
Employee without the prior written consent of the other (which consent may be
granted or withheld by such party in its sole and absolute discretion), and any
attempt to assign rights and duties without such written consent shall be null
and void and of no force and effect. Subject to the preceding sentence, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
10.3 Survival. The covenants, agreements, representations and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment, irrespective of any investigation made by or on
behalf of any party.
10.4 Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not
a party to this Agreement.
10.5 Waiver. The failure of either party hereto at any time to enforce
performance by the other party of any provision of this Agreement shall in no
way affect such party's rights thereafter to enforce the same, nor shall the
waiver by either party of any breach of any provision hereof be deemed to be a
waiver by such party of any other breach of the same or any other provision
hereof.
10.6 Section Headings. The headings of the several sections in this
Agreement are inserted solely for the convenience of the parties and are not a
part of and are not intended to govern, limit or aid in the construction of any
term or provision hereof.
6
7
10.7 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing, served personally on, telecopied, sent
by courier or other express private mail service, or mailed by certified,
registered or express United States mail postage prepaid, and shall be deemed
given upon receipt if delivered personally, telecopied, or sent by courier or
other express private mail service, or if mailed when actually received as shown
on the return receipt. Notices shall be addressed as follows:
(a) If to the Company, to:
Commonwealth Energy Corporation
00000 Xxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
If to Employee, to:
Xxxxxxx X. Xxxxxxx
00000 Xxxxxxxxxxxx Xxxxx
Xxx Xxxx Xxxxxxxxxx, XX 00000
Either party may change its address for purposes of this Section by
giving to the other, in the manner provided herein, a written notice of such
change.
10.8 Severability. All sections, clauses and covenants contained in this
Agreement are severable, and in the event any of them shall be held to be
invalid by any court, this Agreement shall be interpreted as if such invalid
sections, clauses or covenants were not contained herein.
10.9 Applicable Law. This Agreement is made with reference to the laws of
the State of California, shall be governed by and construed in accordance
therewith, and any court action brought under or arising out of this Agreement
shall be brought in any competent court within the State of California, County
of Orange.
10.10 Attorneys' Fees. If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of any
alleged dispute, breach, default or misrepresentation in connection with this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs it incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
10.11 Gender. Where the context so requires, the use of the masculine
gender shall include the feminine and/or neuter genders and the singular shall
include the plural, and vice versa, and the word "person" shall include any
corporation, firm, partnership or other form of association.
10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date hereinabove set forth.
COMMONWEALTH ENERGY CORP. EMPLOYEE
By: /s/ Xxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
------------------------------ ----------------------------
Xxx X. Xxxxxx, Chairman of the Xxxxxxx X. Xxxxxxx
Board and CEO
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx, Director
Compensation Committee
7
8
Exhibit A - Indemnification Agreement, attached hereto and made a part hereof
8
