EXHIBIT 2.6
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE (this "AGREEMENT") is entered into as of
April 1, 2004 by and among Commonwealth Energy Corporation, a California
Corporation ("COMMONWEALTH"), Commerce Energy Group, Inc., a Delaware
corporation and wholly owned subsidiary of Commonwealth ("COMMERCE"), and Xx.
Xxxxx Xxxxxxx, an individual ("EXECUTIVE"), and is made with reference to that
certain Agreement and Plan of Merger dated as of March 29, 2004 ("MERGER
AGREEMENT") by and among Commonwealth, Skipping Stone Acquisition Corporation, a
Delaware corporation and wholly owned subsidiary of Commonwealth ("MERGER SUB"),
Skipping Stone Inc., a Delaware corporation ("SKIPPING STONE") and the holders
of Skipping Stone's common stock, par value $0.0001 per share ("SKIPPING STONE
COMMON STOCK").
Unless otherwise defined in this Agreement, capitalized terms used
herein have the meaning given such terms in the Merger Agreement.
Background
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A. Executive is President of Commonwealth and the record holder and
beneficial owner of 992,479 shares of Skipping Stone Common Stock
representing 67.6% of the outstanding Skipping Stone Common Stock.
B. In addition to being President of Commonwealth, Executive also is
President of Commerce.
C. At the Effective Time, Merger Sub will merge with and into Skipping Stone
and the Surviving Corporation will be a wholly owned subsidiary of
Commonwealth.
D. At the Effective Time, each share of Skipping Stone Common Stock owned by
Executive will automatically convert into such number of shares of
Commonwealth's common stock as Executive is entitled to receive pursuant
to the Merger Agreement.
E. The parties hereto agree that it would be detrimental to Commonwealth,
Commerce and their respective Affiliates if Executive, directly or
indirectly, were to engage in the business conducted by Commonwealth,
Commerce or any of their respective Affiliates following termination of
Executive's employment by Commonwealth, Commerce or any of their
respective Affiliates.
Terms and Conditions
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1. Non-Competition.
(a) Other than in his capacity as an employee of Commonwealth, Commerce
or any of their respective Affiliates, from the date hereof until twelve (12)
months after Executive is no longer employed by Commonwealth, Commerce or any of
their respective Affiliates (the "NON-COMPETE TERM"), Executive will not within
the Territory, either directly or indirectly, and will not permit any Covered
Entity to, either directly or indirectly, engage or participate in any business
or enterprise which has a physical presence in the Territory (by means of an
office, personnel or otherwise) and which is in the business of retail commodity
marketing or marketing energy efficient products or back office services
("PROHIBITED ACTIVITIES").
(b) A "COVERED ENTITY" means every Affiliate of Executive and every
business, association, trust, entity, corporation, partnership or proprietorship
in which Executive or any Affiliate of Executive has an ownership interest or
profit sharing percentage of five percent (5%) or more, or a firm from which
Executive or any Affiliate of Executive receives or is entitled to receive
income or compensation, or in which Executive or any Affiliate of Executive has
an interest as a lender. The agreements of Executive contained herein also apply
to each entity which is a Covered Entity at the time it is in violation of this
Agreement.
(c) Executive and any Covered Entity will be deemed to be engaging or
participating in competition prohibited by this Agreement if Executive or a
Covered Entity contracts with, consults with, advises or assists (financially or
otherwise) any other party to engage in activities which may not, consistent
with this Agreement, be undertaken directly by Executive or a Covered Entity,
whether or not such contract, consultation, advice or assistance is for
explicitly stated compensation.
(d) "AFFILIATE" means, with respect to any party, any corporation,
company, partnership, joint venture and/or firm which controls, is controlled by
or is under common control with such party. "CONTROL" means (i) in the case of
corporate entities, direct or indirect ownership of at least twenty-five percent
(25%) of the stock or participating shares entitled to vote for the election of
directors; and (ii) in the case of non-corporate entities (such as limited
liability companies, partnerships or limited partnerships), either (A) direct or
indirect ownership of at least twenty-five percent (25%) of the equity interest,
or (B) the power to direct the management and policies of the noncorporate
entity.
(e) "TERRITORY" means the United States of America.
2. Non-Solicitation of Employees. During the Non-Compete Term,
Executive will not, either directly or indirectly, and will not permit any
Covered Entity
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to, either directly or indirectly, hire, solicit, take away, or attempt to hire,
solicit or take away (either on behalf of Executive or on behalf of any other
person or entity) any person (a) who is then an employee of Commonwealth,
Commerce or any of their respective Affiliates, or (b) who has terminated his or
her employment by Commonwealth, Commerce or by any of their respective
Affiliates without the consent of such employer, within one hundred eighty (180)
days of such termination.
3. Non-Solicitation of Customers and Suppliers. During the Non-Compete
Term, Executive will not, directly or indirectly, and will not permit any
Covered Entity to, either directly or indirectly, with respect to each and every
individual, corporation, partnership, company or other association that during
Executive's term of employment by Commonwealth, Commerce or any of their
respective Affiliates (a) has obtained or contracted to obtain goods or services
from Commonwealth, Commerce or their respective Affiliates (a "CUSTOMER") and
with which Executive had contact during his term of employment by Commonwealth,
Commerce or any of their respective Affiliates, or (b) became known to Executive
as a Customer or potential Customer of Commonwealth, Commerce or any of their
respective Affiliates in any manner and whose name and/or address would
constitute proprietary or confidential information or (c) has a contractual
relationship with Commonwealth, Commerce or any of their respective Affiliates
to provide intellectual property, technology, goods or services to be utilized
in the business of Commonwealth, Commerce or any of their respective Affiliates
(a "SUPPLIER"), solicit, call upon, divert or take away such Customer or
potential Customer or Supplier as a client, customer or supplier on his behalf
or on behalf of any other individual, corporation, company, partnership or other
association conducting a business substantially similar to the Prohibited
Activities or cause or attempt to cause such Customer or potential Customer or
Supplier to redirect, terminate, limit, modify or fail to enter into any actual
or potential relationship with Commonwealth, Commerce or any of their respective
Affiliates involving the business of Commonwealth, Commerce or any of their
respective Affiliates, notwithstanding that any such Customer, potential
Customer or Supplier may have been induced to give his or its patronage to
Commonwealth, Commerce or any of their respective Affiliates by the solicitation
by Executive or by someone on Executive's behalf.
4. Enforcement. Executive acknowledges that a breach of this Agreement
by Executive or any Covered Entity will cause serious and potentially
irreparable harm to Commonwealth, Commerce and each of their respective
Affiliates. Executive therefore acknowledges that a breach of this Agreement by
him or any Covered Entity cannot be adequately compensated in an action for
damages at law, and equitable relief would be necessary to protect Commonwealth,
Commerce and each of their respective Affiliates from a violation of this
Agreement and from the harm which this Agreement is intended to prevent. By
reason thereof, Executive acknowledges on behalf of himself and each Covered
Entity that Commonwealth, Commerce and each of their respective Affiliates are
entitled, in addition to any other remedies they may have under this Agreement
or otherwise, to seek preliminary and permanent injunctive and other equitable
relief to
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prevent or curtail any breach of this Agreement. Executive acknowledges,
however, that no specification in this Agreement of a specific legal or
equitable remedy may be construed as a waiver of or prohibition against pursuing
other legal or equitable remedies in the event of a breach of this Agreement by
Executive or any Covered Entity.
5. Survival. All recitals, covenants, commitments and agreements of any
of the parties made in this Agreement shall survive the execution and delivery
of this Agreement and the closing of the transactions contemplated in the Merger
Agreement.
6. Binding Effect; Successors and Assigns. This Agreement may be
assigned by Commonwealth or Commerce if such assignment is accompanied by the
sale of the stock of such assigning party or of the Surviving Corporation, or of
substantially all of the assets of the assigning party or of the Surviving
Corporation. The terms and provisions set forth in this Agreement inure to the
benefit of and are enforceable by Commonwealth, Commerce and their respective
successors, assigns, and successors-in-interest, including without limitation
any corporation with which Commonwealth or Commerce, as the case may be, may be
merged or by which either may be acquired, or which may be the acquiring
corporation in an asset sale transaction or other form of corporate
reorganization with respect to Commonwealth or Commerce, provided, however, any
provision of the foregoing to the contrary notwithstanding, that the terms of
this Agreement shall be of no further force or effect upon the occurrence of a
Change in Control as defined in Executive's employment agreement, dated as of
March [29], 2004 with Commonwealth and Commerce. This Agreement may not be
assigned by Executive.
7. Severability. In the event that any provision or term of this
Agreement, or any word, phrase, clause, sentence or other portion thereof
(including, without limitation, the geographic and temporal restrictions and
provisions contained in this Agreement) is held to be unenforceable or invalid
for any reason, such provision or portion thereof will be modified or deleted in
such a manner as to make this Agreement, as modified, legal and enforceable to
the fullest extent permitted under applicable laws.
8. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California without regard to the
conflicts of law principles thereof.
9. Venue. The parties hereby irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the courts of the State of California,
Orange County, and/or the United States District Court for the Southern District
of California for any actions, suits, controversies or proceedings arising out
of or relating to this Agreement and the transactions contemplated hereby (and
the parties agree not to commence any action, suit or proceeding relating
thereto except in such courts), and further agree that service of any process,
summons, notice or document by U.S. registered mail to the respective addresses
set forth above shall be effective service of
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process for any action, suit or proceeding brought against the parties in any
such court. The parties hereby irrevocably and unconditionally waive any
objection to the laying of venue of any action, suit, controversies or
proceeding arising out of this agreement or the transactions contemplated
hereby, in the courts of the State of California, Orange County and/or the
United States District Court for the Southern District of California, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient or improper forum.
10. Notices. All notices, claims, requests, demands, and other
communications hereunder ("notices") shall be in writing and shall be deemed to
have been given if personally delivered or if sent by telecopy or facsimile or
mailed by overnight, commercial air courier service or by first class,
registered or certified mail, postage prepaid, and properly addressed as
follows:
if to Commonwealth or Commerce:
Xx. Xxx X. Xxxxxx
Chairman of the Board and Chief Executive Officer
Commonwealth Energy Corporation and Commerce Energy Group
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to (which copy shall not constitute notice):
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Attn: Xxxx X. Xxxxx Xxxxxx, Esq.
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
if to Executive:
Xx. Xxxxx Xxxxxxx
President
Commonwealth Energy Corporation and Commerce Energy Group
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
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with a copy to (which shall not constitute notice):
Stroock & Stroock & Xxxxx LLP
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Any party may change its address for the purpose of this Article by giving the
other parties written notice of the new address in the manner set forth above.
Notice will conclusively be deemed to have been given when personally delivered,
or if given by mail, on the second day after being sent by an overnight,
commercial air courier service or on the fifth day after being sent by first
class, registered or certified mail, or if given by telecopy or facsimile
machine, when confirmation of transmission is indicated by the sender's telecopy
or facsimile machine.
11. Miscellaneous Terms.
(a) The headings contained in this Agreement are for reference purposes
only, are not necessarily descriptive of the paragraphs to which they relate and
shall not affect the meaning or interpretation of this Agreement.
(b) No change, modification, addition or amendment to this Agreement
will be valid unless in writing and signed by the party against which
enforcement of such change, modification, addition or amendment is sought.
(c) The parties agree to cooperate in good faith to accomplish the
objectives of this Agreement and, to that end, agree to execute and/or deliver
from time to time such other and further instructions and documents and to take
such other actions as may be reasonably necessary or convenient to fulfillment
of these purposes.
(d) No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, will be deemed to
be, or may be construed as, a further or continuing waiver of any such term,
provision or condition.
(e) In the event of any dispute concerning the interpretation of this
Agreement or its enforcement, or any proceeding arising out of or in connection
with an alleged or actual breach of this Agreement, the prevailing party will be
entitled to recover, in addition to any other relief obtained or awarded, any
reasonable attorneys' fees and expenses incurred in relation to such dispute,
enforcement or proceeding.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers as of the date first written
above.
COMMONWEALTH ENERGY CORPORATION
By: /s/ XXX X. XXXXXX
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Name: Xxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
COMMERCE ENERGY GROUP, INC.
By: /s/ XXX X. XXXXXX
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Name: Xxx X. Xxxxxx
Title: Chief Executive Officer, President
and Treasurer
EXECUTIVE
By: /s/ XXXXX XXXXXXX
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Xx. Xxxxx Xxxxxxx
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