RESTRICTED STOCK AGREEMENT
Exhibit 99.3
This Restricted Stock Agreement (this “Agreement”), is entered into effective as of the Grant
Date (as defined in paragraph 1), by and between COMMERCE ENERGY GROUP, INC., a Delaware
corporation (the “Company”), and XXXXXXXX XXXXXXX, XX. (“Recipient”).
Recitals
A. Recipient has entered into an Employment Agreement (the “Employment Agreement”) dated as of
December 1, 2005 with the Company;
B. The Employment Agreement provides that for past services rendered to the Company, Recipient
shall receive a stock bonus award in the form of restricted shares of the Company’s common stock,
$0.001 par value per share;
C. The Company maintains the 1999 Equity Incentive Plan, as amended (the “Plan”), which is
incorporated into and forms a part of this Agreement;
D. The Compensation Committee of the Company’s Board of Directors (the “Committee”)
administers the Plan;
E. Recipient has been selected by the Committee to receive a stock bonus award in the form of
restricted shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”),
under the Plan; and
F. The grant of restricted stock is made pursuant to the terms of Section 4(d) of the
Employment Agreement.
Agreement
1. Award and Consideration. On the terms and conditions set forth in this Agreement,
the Company, hereby issues to Recipient on December 1, 2005 (the “Grant Date”), for past services
rendered to the Company Forty-Five Thousand (45,000) shares (the “Restricted Shares”) of Common
Stock. All of the Restricted Shares issued hereunder shall be deemed issued to Recipient as fully
paid and nonassessable shares, and Recipient shall have all rights of a stockholder with respect
thereto, including the right to vote, receive dividends (including stock dividends), participate in
stock splits or other recapitalizations, and exchange such shares in a merger, consolidation or
other reorganization. The Company shall pay any applicable stock transfer taxes.
2. Escrow and Repurchase Right.
(a) Escrow. For purposes of facilitating the enforcement of the provisions of this
Section 2, Recipient agrees, immediately upon receipt of the certificate(s) for all the Restricted
Shares, to deliver such certificate(s), together with a “Stock Assignment Separate from
Certificate” in the form attached hereto as Exhibit A, executed in blank by Recipient (and
Recipient’s spouse if required for transfer) with respect to each such stock certificate issued
hereunder, to the Secretary or Assistant Secretary of the Company or their designee (the
“Escrow
Holder”) to hold in escrow for so long as such Restricted Shares remains subject to any
Repurchase Right (as defined below), and granting the Company the authority to take all actions
necessary to effectuate all transfers and/or releases (including releasing such shares of Common
Stock with respect to which the restrictions have lapsed) as may be necessary or appropriate to
accomplish the objectives of this Agreement in accordance with the terms hereof. Recipient hereby
acknowledges that such appointment of the Escrow Holder with such stated authorities is a material
inducement to the Company to enter into this Agreement, and such appointment is accordingly
irrevocable. Recipient agrees that neither the Company nor such Escrow Holder shall be liable to
the Recipient or any Permitted Transferee for any actions or omissions unless such Escrow Holder is
grossly negligent or engages in willful misconduct relative thereto. The Recipient agrees that the
Escrow Holder may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may resign at any time.
(b) Scope of Repurchase Right.
(i) If Recipient’s employment by the Company is terminated before the Restricted Shares and
Additional Securities (as defined below) are released from the Company’s Repurchase Right (as
defined below), the Company shall, upon the date of such termination, have the right to repurchase
all or any portion of the Restricted Shares and Additional Securities for $0.001 per share (the
“Repurchase Right”). The Company may exercise the Repurchase Right by delivering written notice to
Recipient within ninety (90) days after the date of termination.
(ii) If the requisite period (in the case of Restricted Shares vesting over time) (“Vesting
Period”) or the Performance Goal (as defined below) for any Performance Period (as defined below)
are not met, the Company shall have the right to repurchase the Restricted Shares and any
Additional Securities allocated to the Vesting Period or that Performance Period, for $0.001 per
share (the “Repurchase Right”). The Company may exercise the Repurchase Right by delivering
written notice to Recipient within ninety (90) days after the first anniversary of the Commencement
Date, in the case of Restricted Shares vesting over time, or within ninety (90) days after the date
that the Company files its Annual Report on Form 10-K with the Securities and Exchange Commission
with respect to Restricted Shares vesting during any applicable Performance Period.
(iii) Upon delivery of a repurchase notice pursuant to this Section 2(b), the Company shall
become the legal and beneficial owner of the Restricted Shares being repurchased and all rights and
interests therein or relating thereto, and the Company shall have the right to retain and transfer
to its own name the number of Restricted Shares being repurchased by the Company. Recipient shall
forfeit the right to all cash or other property from time to time received, receivable, or
otherwise distributed in respect of or in exchange for all or any part of the Restricted Shares and
Additional Securities that are repurchased by the Company pursuant hereto.
(c) Termination of the Repurchase Right. With respect to each of the fiscal years
ending July 31, 2007 and July 31, 2008 (each a “Performance Period”), the Repurchase Right shall
terminate and cease to be exercisable with respect to 15,000 shares if the Company equals or
exceeds the performance targets established by the Board for purposes of this Agreement (each a
“Performance Goal”) for such Performance Period. Further, the Repurchase Right shall terminate and cease to be exercisable with respect to 15,000 shares on the first
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anniversary of the Commencement Date. Upon the Recipient’s termination of employment as a result
of termination by the Company without Cause or Resignation by the Recipient with Good Reason (as
each such term is defined in the Recipient’s employment agreement with the Company), the Repurchase
Right shall terminate and cease to be exercisable with respect to the number of shares that would
have vested during the twelve (12) month period after such termination if the Recipient remained
employed with the Company, as long as Recipient signs the severance agreement and general release
document attached to the Employment Agreement.
(d) Additional Securities. For purposes of this Section 2, Restricted Shares shall
include all securities received in replacement of the Restricted Shares, as a stock dividend or as
a result of any stock split, recapitalization, merger, reorganization, exchange or the like, and
all new or additional securities or other properties to which Recipient is entitled by reason of
Recipient’s ownership of the Restricted Shares (hereinafter called “Additional Securities”).
Recipient shall be entitled to direct the Company to exercise any warrant or option received as
Additional Securities upon supplying the funds necessary to do so, in which event the securities so
purchased shall constitute Additional Securities, but the Recipient may not direct the Company to
sell any such warrant or option. If Additional Securities consist of a convertible security,
Recipient may exercise any conversion right, and any securities so acquired shall be deemed
Additional Securities. All Restricted Shares, including Additional Securities, shall be subject to
the restrictions contained in this Agreement.
(e) Transfer Restrictions. Until the Right of Repurchase lapses, Recipient shall not
transfer, assign, encumber or otherwise dispose of or xxxxx x xxxx in or to any Restricted Shares
or Additional Securities, without the prior written consent of the Company. Prior to the Right of
Repurchase lapsing, Recipient may transfer Restricted Shares and Additional Securities (a) by
beneficiary designation, will or intestate succession, or (b) to Recipient’s spouse, children or
grandchildren or to a trust established by Recipient for the benefit of Recipient or Recipient’s
spouse, children or grandchildren (each, a “Permitted Transfer”). If Recipient makes such a
Permitted Transfer of any Restricted Shares or Additional Securities, then this Section 2 shall
apply to the transferee to the same extent as to Recipient. The Company shall not be required (i)
to transfer on its books any Restricted Shares or Additional Securities which have been sold or
transferred in violation of the provisions of this Agreement (and the Company may issue appropriate
“stop transfer” instructions to its transfer agent accordingly) or (ii) to treat as the owner of
the Restricted Shares or Additional Securities, or otherwise to accord voting, dividend or
liquidation rights to, any transferee to whom the Restricted Shares or Additional Securities have
been transferred in contravention of this Agreement. All certificates representing the Restricted
Shares or Additional Securities shall have endorsed thereon the following legend:
“The shares represented by this certificate are subject to potential
forfeiture and to restrictions upon transfer, including certain
options to purchase such shares, set forth in an agreement between
the issuer and the registered holder, a copy of which is on file at
the principal office of the issuer corporation and will be furnished
upon request to such registered holder.”
forfeiture and to restrictions upon transfer, including certain
options to purchase such shares, set forth in an agreement between
the issuer and the registered holder, a copy of which is on file at
the principal office of the issuer corporation and will be furnished
upon request to such registered holder.”
3. Representations and Warranties of The Recipient. Recipient represents and warrants
to the Company each of the following matters:
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(a) Authorization. Recipient has full power and authority to enter into this
Agreement and this Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms.
(b) Purchase Entirely for Own Account. This Agreement is made with Recipient in
reliance upon Recipient’s representation to the Company, which by Recipient’s execution of this
Agreement Recipient hereby confirms, that the Restricted Shares will be acquired for investment for
Recipient’s own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Recipient has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this Agreement, Recipient
further represents that he does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any third person, with
respect to any of the Restricted Shares.
(c) Investment Experience. Recipient acknowledges that he has such knowledge and
experience in financial or business matters that he is capable of evaluating the merits and risks
of the investment in the Restricted Shares.
4. Compliance With Securities Laws.
(a) In addition to the restrictions contained in this Agreement, the Company at its discretion
may impose restrictions upon the sale, pledge or other transfer of the Restricted Shares and
Additional Securities (including the placement of appropriate legends on stock certificates or the
imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are
necessary or desirable in order to achieve compliance with the Act, the securities laws of any
state or any other law.
(b) THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
(c) All certificates representing the Restricted Shares or Additional Securities and all
certificates issued in transfer thereof or substitution therefor shall, where applicable, have
endorsed thereon the following legends:
(i) “The securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended. These securities have been acquired for investment and not
with a view to distribution and may not be offered for sale, sold, pledged or otherwise transferred
in the absence of an effective registration statement for such securities under the Securities Act
of 1933 or an opinion of counsel reasonably satisfactory in form and content to the issuer that
such registration is not required under such Act.”
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(ii) Any legend required to be placed thereon by any applicable state securities law.
5. Section 83(b) Election. Recipient hereby represents that he understands (a) the
contents and requirements of a timely election made pursuant to Section 83(b) of the Internal
Revenue Code or similar provision of state law (collectively, an “83(b) Election”), (b) the
application of Section 83(b) to the grant of the Restricted Shares by Recipient pursuant to this
Agreement, (c) the nature of the election to be made by Recipient under Section 83(b), and (d) the
effect and requirements of the 83(b) Election under relevant state and local tax laws. Recipient
further represents that he intends to file an election pursuant to Section 83(b), the form of which
election is attached hereto as Exhibit B, with the Internal Revenue Service within thirty (30) days
following the grant of the Restricted Shares hereunder, and a copy of such election with his
federal tax return for the calendar year in which the date of this Agreement falls. Recipient
covenants to inform the Company of any change in Recipient’s state of residency. Recipient shall
provide the Company with a copy of any timely 83(b) Election. If Recipient makes a timely 83(b)
Election, Recipient shall immediately pay to the Company the amount necessary to satisfy any
applicable federal, state, and local income and employment tax withholding requirements. If
Recipient does not make a timely 83(b) Election, Recipient shall, either at the time that the
restrictions lapse under this Agreement or at the time withholding is otherwise required by any
applicable law, pay the Company the amount necessary to satisfy any applicable federal, state, and
local income and employment tax withholding requirements. The Company may require Recipient to
remit to the Company an amount sufficient to satisfy federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for the Restricted Shares.
Recipient hereby represents that he has had an opportunity to consult a tax advisor.
6. Distributions. The Company shall disburse to Recipient all dividends, interest and
other distributions paid or made in cash or property (other than Additional Securities) with
respect to the Restricted Shares and Additional Securities, less any applicable federal or state
withholding taxes.
7. Not An Employment Contract. The grant of Restricted Shares will not confer on
Recipient any right with respect to continuance of employment or other service with the Company or
any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would
otherwise have to terminate or modify the terms of the Recipient’s employment or other service at
any time.
8. Amendment. Except as otherwise provided herein, any provision of this Agreement
may be amended or waived only with the prior written consent of Recipient and the Board of
Directors of the Company.
9. Assignment; Successors. The Recipient shall not transfer, assign or encumber any
of his rights, privileges, duties or obligations under this Agreement without the prior written
consent of the Company, and any attempt to so transfer, assign or encumber shall be void. The
Company may transfer, assign or encumber its rights, privileges, duties or obligations under this
Agreement (including, without limitation, the right to maintain the escrow for the Restricted
Shares or Additional Securities and the Repurchase Right), to any of its subsidiaries or
affiliates. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors, administrators, successors and
assigns.
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10. Entire Agreement. The Agreement, together with the Employment Agreement and the
Plan, constitutes the entire agreement of the parties and supercedes any and all agreements, either
oral or in writing, between the parties with respect to the subject matter hereof. If there is any
conflict in terms between this Agreement and the Employment Agreement, the terms of this Agreement
shall prevail. The terms of this Agreement shall be subject to the terms of the Plan, a copy of
which may be obtained by Recipient from the office of the Secretary of the Company; and this
Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the
Board from time to time pursuant to the Plan.
11. Choice of Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California as such laws are applied to contracts entered into and
performed in such State.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of December 1, 2005 to reflect
the grant which was authorized on the Grant Date as first above written.
| “COMPANY” | ||||
| COMMERCE ENERGY GROUP, INC. | ||||
| By: | /S/ XXXXXX X. BOSS | |||
| Xxxxxx X. Boss | ||||
| Chief Executive Officer | ||||
| “RECIPIENT” | ||||
| By: | /S/ XXXXXXXX XXXXXXX, XX. | |||
| Xxxxxxxx Xxxxxxx, Xx. | ||||
| Address: | ||
| Xx. Xxxxxxxx Xxxxxxx, Xx. | ||
| Commerce Energy Group, Inc. | ||
| 000 Xxxxx Xxxxxxxxx | ||
| Xxxxx 0000 | ||
| Xxxxx Xxxx, Xxxxxxxxxx 00000 |
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EXHIBIT A
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Agreement between the undersigned
and Commerce Energy Group, Inc., a Delaware corporation (the “Company”), dated as of December 1,
2005 (the “Agreement”), the undersigned hereby sells, assigns and transfers unto the Company
(___) shares of the Common Stock of the Company, standing in his
name on the books of the Company, represented by Certificate No. ___herewith, and does hereby
irrevocably constitute and appoint attorney to transfer the said stock in the
books of the Company with full power of substitution.
DATED:
,
By:
Print name:
Instruction: Please do not fill in any blanks other than the signature line. The purpose of this
assignment is to enable the Company to exercise its repurchase option set forth in the Agreement
without requiring additional signatures.
