EXHIBIT 10.24
COMMONWEALTH ENERGY CORPORATION
VOTING AND CONVERSION AGREEMENT
This Voting and Conversion Agreement (this "Agreement") is made as of
__________, 2004, by and among Commonwealth Energy Corporation, a California
corporation ("Commonwealth"), and the holders of Commonwealth's Series A
Convertible Preferred Stock who have executed the signature page hereto (the
"Series A Shareholders").
RECITALS
A. Commonwealth sold and issued shares of its Series A Convertible
Preferred Stock (the "Series A Preferred") to the Series A Shareholders.
B. Each of the Series A Shareholders holds the number of shares of
Commonwealth's Series A Preferred set forth on the signature page hereto.
C. Commonwealth has proposed a transaction to enable Commonwealth to
reincorporate in Delaware by merging a newly-formed California subsidiary
("Merger Sub") of Commonwealth's wholly-owned Delaware subsidiary, American
Energy Group, Inc. ("AEG") into Commonwealth. Under this transaction (the
"Merger"), (i) Merger Sub would be formed as a wholly-owned subsidiary of AEG;
(ii) Merger Sub would be merged with and into Commonwealth; (iii) Commonwealth
would be the surviving corporation in the merger and would retain all of its
assets and liabilities; (iv) Commonwealth would become a wholly-owned subsidiary
of AEG, with AEG becoming a public holding company; (v) the holders of
Commonwealth's Common Stock would receive shares of AEG Common Stock in the
merger.
D. It is a condition to the Merger that all outstanding shares of Series
A Preferred be converted into Commonwealth Common Stock prior to the effective
time of the merger.
E. Under the Certificate of Determination regarding the Series A
Preferred, each share of Series A Preferred can be automatically converted into
one share of Common Stock of Commonwealth immediately upon "the approval of
holders of 66-2/3 % of the outstanding shares of Series A Preferred Stock."
Accordingly, if the holders of two-thirds of the outstanding Series A Preferred
approve of the conversion of the Series A Preferred, all outstanding shares of
Series A Preferred will be converted into Common Stock.
F. In order to facilitate the Merger, the Series A Shareholders are
willing to agree to vote their shares of Series A Preferred in favor of the
conversion of all outstanding shares of Series A Preferred into Commonwealth
Common Stock immediately prior to the effective time of the Merger on the terms
and conditions set forth in this Agreement.
G. The Series A Shareholders believe that the terms of this Agreement,
and the transactions contemplated by the Agreement, are in the best interests of
both Commonwealth and
all of its shareholders, and Commonwealth and Series A Shareholders will benefit
substantially from the performance of the transactions and obligations
hereunder;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and other good and valuable consideration the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Conversion of Series A Convertible Preferred Stock; Issuance of
Common Stock. Subject to the terms of this Agreement, each Series A Shareholder
agrees that, prior to the effective time of the Merger, he, she or it shall vote
or cause to be voted (or give a written consent with respect to) all of his,
her, or its shares of Series A Preferred currently held, or shares hereafter
acquired, in favor of the conversion of Commonwealth's outstanding shares of
Series A Preferred into shares of Commonwealth's Common Stock. At the effective
time of the Merger, such shares shall be converted into shares of Common Stock
of AEG in accordance with the terms of the Merger.
2. Conditions to Conversion. The respective obligations of each Series A
Shareholder to vote in favor of the conversion of the Series A Preferred into
Commonwealth Common Stock are subject to the fulfillment prior to the effective
time of the Merger on the following conditions:
2.1 Payment of Dividends. Commonwealth shall have paid all accrued
and unpaid dividends with respect to all outstanding shares of Series A
Preferred.
2.2 Shareholder Approval. The Merger shall have been approved by the
requisite vote of the shareholders of Commonwealth, AEG and Merger Sub.
2.3 Conversion Agreements; Series A Conversion. Holders of at least
66-2/3 % of the outstanding shares of Series A Preferred shall have become a
party to this Agreement.
2.4 No Restraints. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
enforced by any United States court or United States governmental authority
which prohibits, restrains, enjoins or restricts the consummation of the Merger.
2.5 Form S-4 Registration Statement. The registration statement on
Form S-4 filed with the U.S. Securities and Exchange Commission by AEG in
connection with the issuance of shares of AEG Common Stock in the Merger shall
have become effective under the Securities Act of 1933, as amended, and shall
not be the subject of any stop order or proceedings seeking a stop order and AEG
shall have received all state securities laws or "blue sky" permits and
authorizations necessary, or exemptions from such permits and authorizations, to
issue shares of AEG Common Stock in the Merger.
2.6 Listing. The shares of AEG Common Stock issuable to
Commonwealth's shareholders pursuant to the Merger and such other shares
required to be reserved for issuance in
-2-
connection with the Merger shall have been authorized for listing on the
American Stock Exchange upon official notice of issuance.
3. Grant of Proxy. Each Series A Shareholder hereby revokes any and all
previous proxies with respect to his, her or its Series A Preferred Stock.
Effective on the date hereof, each Series A Shareholder appoints Xxxxx Xxxxxx
and Xxxxxx X. Xxxxxxx, or either of them, proxies, each with full power of
substitution, (a) to vote his, her or its Series A Preferred at any meeting of
the Series A Shareholders of Commonwealth and at any and all adjournment or
adjournments thereof, and (b) to give a written consent with respect to his, her
or its Series A Preferred in connection with any solicitation of written
consents by Commonwealth or by any shareholder of Commonwealth, in each case in
favor of the conversion of Commonwealth's outstanding shares of Series A
Preferred into shares of Commonwealth's Common Stock effective immediately prior
to the effective time of the Merger; provided, however, that the proxy or his
substitute shall not be entitled to vote in favor of such conversion unless the
conditions set forth in Section 2 of this Agreement have been satisfied. Each
Series A Shareholder agrees not to grant any subsequent proxies with respect to
the conversion of Commonwealth's outstanding shares of Series A Preferred into
shares of Commonwealth's Common Stock until after the effective time of the
Merger. In accordance with Sections 705(e)(5) and 706 of the California
Corporation Code, this proxy shall be irrevocable.
4. Termination of Agreement. If the conditions set forth in Section 2 of
this Agreement are not satisfied on or before November 1, 2004, this Agreement
shall terminate and be of no further force and effect.
5. Miscellaneous.
5.1 Representations. Each Series A Shareholder hereby represents and
warrants that (a) he, she or it has the requisite power and authority to enter
into and perform this Agreement, (b) the performance of this Agreement by the
Series A Shareholder will not require him, her or it to obtain the consent,
waiver or approval of any person and will not violate, result in a breach of or
constitute a default under any statute, regulation, agreement, judgment,
consent, decree or restriction by which he, she or it is bound, (c) he, she or
it is the legal and/or beneficial owner of that number of shares of Commonwealth
Series A Preferred set forth on the signature page hereto.
5.2 Surrender of Stock Certificates. Promptly following the
conversion of the Series A Preferred in accordance with the terms of this
Agreement, each Series A Shareholder shall, upon the request of the Company,
surrender the stock certificate(s) representing such Series A Shareholder's
shares of Series A Preferred to the Company for cancellation.
5.3 Restrictions on Transfer. No Series A Shareholder shall sell,
assign, transfer, hypothecate or encumber ("Transfer") any shares of Series A
Preferred unless (a) the transferee has been advised of this Agreement and the
terms and provisions hereof, and (b) the transferee agrees in writing to be
bound by the terms and provisions of this Agreement. Any purported transfer,
sale, assignment, hypothecation, or encumbrance of any of such Shares not in
accordance with the terms of this Agreement shall be null and void and shall
transfer no right, title, or interest in or to such Shares. To assure compliance
with the terms of this Agreement, the
-3-
Company shall direct its stock transfer agent to stop transfer of any shares of
Series A Preferred not Transferred in accordance with this Agreement.
5.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Upon the execution and delivery of this
Agreement by any Series A Shareholder, this Agreement shall, subject to the
terms and conditions of this Agreement, become a binding obligation of the
Series A Shareholder with respect to the shares of Series A Preferred held by
such Series A Shareholder.
5.5 Equitable Relief. Each Series A Shareholder agrees that if he,
she, or it fails to perform his, her or its obligations under this Agreement for
any reason, then Commonwealth shall be entitled to specific performance and
injunctive or other equitable relief, and the Series A Shareholder hereby
further agrees to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any injunctive or other equitable relief.
This provision is without prejudice to any other rights that Commonwealth may
have against any Series A Shareholder for any failure to perform his, her or its
obligations under this Agreement.
5.6 Further Assurances. Each Series A Shareholder shall at any time
and from time to time promptly execute and deliver to Commonwealth such further
instruments, consents, proxies and other documents and take such further action
as Commonwealth may reasonably require in order to carry out the full intent and
purpose of this Agreement.
5.7 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns.
5.8 Modification; Waiver. No modification or waiver of any provision
of this Agreement shall be effective unless in writing and approved by
Commonwealth and the holders of a majority of the total number of shares of
Series A Preferred held by Series A Shareholders that have signed this
Agreement.
5.9 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements with respect to the
matters addressed herein except as specifically set forth herein.
[Signature Page Follows]
-4-
[SIGNATURE PAGE TO CONVERSION AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Conversion Agreement
as of the date first written above.
COMMONWEALTH: COMMONWEALTH ENERGY CORPORATION
By:
----------------------------------------
(signature)
Name:
--------------------------------------
(please type or print name)
Title:
-------------------------------------
(please type or print title)
SERIES A SHAREHOLDER:
-------------------------------------------
(please print or type name of entity,
if applicable)
By:
----------------------------------------
(signature)
Name:
--------------------------------------
(please type or print name)
Title:
-------------------------------------
(please type or print title,
if applicable)
-------------------------------------------
(number of Series A Preferred Shares held)
-5-
SCHEDULE TO EXHIBIT 10.24
Twenty-six Commonwealth Energy Corporation Voting and Conversion Agreement
were executed, each substantially identical to Exhibit 10.24 except that the
Series A Shareholders, and the number of shares of Series A Preferred were as
follows:
SHAREHOLDER NAME NO. OF SERIES A SHARES
---------------- ----------------------
Xxxxx X. Gaggs & Xxxxxx X. Xxxxx Trustees Airey Spouses Trust UA
DTD 10/24/85 75,000
Xxxxxx Xxxx Xxxxx 50,000
Xxxxxxx X. Xxxxxxxx in Trust for Xxxxxx and Xxxxxx Xxxxxxxx 20,000
Xxxxxxx X. Xxxxxxx or Xxxxxx X. Xxxxxxx 15,000
Xxxxxx & XX Xxxxxx 2003 Trust UA DTD Jul 9, 2003 12,500
Xxxxxxx Xxxxxx Platte 12,500
Xxxx Xxxxxxxx 12,500
X. X. Xxxxxx 12,500
Xxxx X. Xxxxx & Xxxx Xxxxx Xxxxx Family Trust 12,500
Xxxxxx X. Xxxxxx & U. Xxxx Xxxxxx Co-Trustees Xxxxxx C & U Xxxx
Xxxxxx Trust 10,000
Xxxxxx X. X'Xxxxxxx or Xxxxx X. X'Xxxxxxx 10,000
Xxxxx Xxxxxx 10,000
Xxxxxxxxx X. Xxxxxxxxx 10,000
Xxxxxx X. Xxxxxxxxx Xx. and Xxxxx X. Xxxxxxxxx JTWROS 10,000
Xxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx Co-Trustee - Xxxxxxx
Family Trust Dated 7/30/91 10,000
Xxxxxx X. Xxxxxx & Xxxxxx X. Xxxxxx, Co-Trustees of the Xxxxxx
Family Trust Dated 7/17/2000 10,000
Xxxxxx Xxxxxx Trustee Xxxxx X. Xxxxxx Credit Shelter Trust 7,500
Xxxxxxx X. Xxxxx 5,000
Xxx X. Xxxxxxx or Xxxxxxxx X. Xxxxxxx 5,000
Xxxxx Xxxxxx 5,000
Bank of America NT&SA Trustee U/A/D 8/12/83 FBO the Lola May
Xxxxxx Xxxxx Trust 25,000
Xxxxxx X. Xxxxx or Xxxxx X. Xxxxx 25,000
Xxxxxxx Family Trust 25,000
Xxxxx Xxxxxx 10,000
Xxxxxxx Xxxxx, XXX: Xxxxx Xxxxxxx 6,000
Xxxxxxx X. Xxxxxxx 5,000
-6-
