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EXHIBIT 10.11
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is entered into effective as
of June 1, 2000 among Commonwealth Energy Corporation, a California corporation
("CEC"), electricAMERICA, Inc., a Delaware corporation ("EA"), and Frederick M.
Bloom ("Bloom"), with reference to the following facts:
A. EA and Bloom are parties to an Employment Agreement dated as
of January 1, 2000 (the "Employment Agreement"), a copy of which is
attached as Exhibit A hereto, and CEC has guaranteed performance of EA's
obligations under the Employment Agreement.
B. EA and CEC have asked Bloom to terminate the Employment
Agreement.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing facts and the
mutual promises set forth below, the parties agree as follows:
1. Termination. The Employment Agreement and CEC's obligations to
guarantee performance thereunder are hereby terminated effective as of June 1,
2000.
2. Severance Payments. CEC and EA, jointly and severally, shall afford
Bloom all rights and benefits he previously enjoyed under the Employment
Agreement, including the following:
2.1 Settlement. Bloom hereby acknowledges receipt of the sum of $23,742
in settlement of all bonus claims.
2.2 Base Salary. Bloom shall continue to receive a Base Salary in
accordance with Section 3.1 of the Employment Agreement, which is hereby
incorporated herein.
2.3 Insurance. Bloom shall continue to receive the medical, dental and
life insurance currently provided by EA.
2.4 Automobile. Bloom shall continue to receive $1,300 per month as
reimbursement of certain automobile expenses.
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2.5 Insurance. EA and CEC shall continue to provide Bloom with insurance
benefits provided by Section 6.2 of the Employment Agreement, which is hereby
incorporated herein, except that they may purchase "tail" coverage for Bloom for
the period ending June 1, 2000.
2.6 Indemnification. EA and CEC shall defend, indemnify and hold Bloom
harmless from all liability, cost and expense, including reasonable attorneys'
fees, arising out of or related to Bloom's activities as an officer or director
of CEC or EA to the extent but only to the extent of benefits received by EA or
CEC under existing or future officers and directors, liability or other type of
insurance policies. In addition, to the extent CEC or EA cannot obtain full
releases of Bloom for his obligations as a guarantor of the corporate
obligations of EA and CEC, EA and CEC shall, jointly and severally, indemnify
Bloom from all liabilities, costs and expenses arising under such guaranty
obligations.
2.7 Withholding. All compensation payable to Bloom shall be subject to
such deductions as EA or CEC are from time to time required to make pursuant to
law, governmental regulation or order.
2.8 No Offset. Neither EA nor CEC shall have any rights of offset as
provided by Section 7.6 of the Employment Agreement, which is hereby
incorporated herein.
2.9 Term. The benefits afforded by this Section 2 shall continue through
January 31, 2005.
3. Investor Rights Agreement. Concurrently with the execution of this
Agreement, the parties shall execute and deliver an Investor Rights Agreement
in substantially the form attached as Exhibit B.
4. SEC Filings. EA and CEC shall advise Bloom in accordance with the
provisions of Section 7.7 of the Employment Agreement, which is hereby
incorporated herein.
5. Miscellaneous. Sections 10.1 through 10.12 of the Employment Agreement
are hereby incorporated herein.
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IN WITNESS WHEREOF, the undersigned have executed this Severance Agreement
effective as of the date first set forth above.
electricAMERICA, INC.
By: ____________________________________
COMMONWEALTH ENERGY
CORPORATION
By: ____________________________________
/s/ FREDERICK M. BLOOM
________________________________________
Frederick M. Bloom
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EXHIBIT A
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
January 1, 2000 between electricAMERICA, Inc. a Delaware Corporation (the
"Company" sometimes referred to as "electricAMERICA"), and Frederick M. Bloom
("Employee"), with reference to the following:
A. Employee is the founder and from its inception has been a principal
stockholder, director, officer and employee of Commonwealth Energy Corporation,
("Commonwealth" and sometimes referred to as "parent company") the parent
company of the Company and has rendered valuable services to Commonwealth and
has commenced to develop the business of, and will be rendering valuable
services to the Company.
B. The Company and Employee desire to enter into this Agreement to
assure the Company of the continued services of Employee on the terms provided
herein. It is understood by both parties that the Employee is not an employee
of Commonwealth, but instead is to be an employee of the electricAMERICA,
currently a dba of Commonwealth and is or soon will be a separate operating
subsidiary of Commonwealth. In any event, the Company and its parent agree to
perform or to cause the performance of the obligations of the Company under the
terms of this Agreement.
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 61 months, commencing on January 1, 2000
and terminating on January 31, 2005, unless sooner terminated as hereinafter
provided.
2. Titles and Responsibilities. Employee shall serve as President of
electricAMERICA which duties include supervision of the marketing efforts of
electricAMERICA, and in the performance of such duties shall report directly to
the Chairman of the Board of the Company who, at this time is also the Chairman
of the Board of Commonwealth. Employee's office location shall at all times be
in the Orange County Area, California provided that Employee may be required to
travel outside such area from time to time to the extent reasonably necessary
to the performance of his duties hereunder. During the term hereof, the Company
shall not employ or otherwise retain any other person in this capacity.
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 all of this productive time and efforts to the performance of such
duties; provided, however, that Employee may devote time to personal and family
investments to the extent that such investments do not materially conflict with
the discharge of his duties hereunder. The Company represents that for a period
of two years from the commencement of this contract term, Employee shall not be
requested to, and shall not manage or otherwise participate in the business
operations of Commonwealth in California.
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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. Employee's base salary for the term of this
Agreement shall be Two Hundred Seventy Five Thousand Dollars ($275,000.00) per
annum (the "Base Salary"), provided however that said Base Salary shall be
reduced during the second year of the term hereof to Two Hundred Twenty Five
Thousand Dollars ($225,000.00) if the increase in the total aggregate number of
customers (the increase in the customer count) as of the end of the first year,
when compared to the total aggregate number of customers as of January 3, 2000
does not equal or exceed fifty thousand (50,000). The term "Customer" or
"Customer Count shall mean each meter of a customers of Commonwealth or the
Company, or any affiliated company in any state. The parties acknowledge that as
of January 3, 2000 the aggregate Customer Count is the sum of (1) 84,286
customers who are being billed and (2) 4,749 "customers" who have committed to
switch to Commonwealth or electricAMERICA but are in the DASR process (direct
access service request) for a total of 89,935 customers, or Customer Count. If
the Customer Count at the end of the first year equals or exceeds fifty thousand
(50,000), then the Base Salary shall not be reduced. 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, except as set forth herein) at the discretion of the Board. In
determining increases if any in the Base Salary, the Board shall take into
account, among other things, the Company's Business Plan, including budgets and
projections, and the results of operations of the Company, and its affiliated
companies. The referenced Business Plans are the Business Plans presented to the
Board of Directors of Commonwealth and electricAMERICA by management of said
respective companies. The CEO of Commonwealth will prepare or cause to be
prepared such Business Plans for presentation to the Board of Commonwealth, and
are incorporated herein by this reference. The Base Salary shall be payable in
accordance with the payroll practices of the Company in effect from time to
time, provided however that upon the signing of this Agreement the Employee
shall receive a payment in the sum of fifty thousand dollars ($50,000.00) which
is an advance on the first annual salary obligation. The balance of the annual
salary will be paid in equal periodic payments per the policy of the Company.
3.2 Bonus. In the event that the aggregate total number of customers
of the Company and its parent and any affiliated companies, as of the end of the
first year of this Agreement, when compared to the aggregate total of the number
of customers of the Company and its parent as of January 3, 2000 equals or
exceeds fifty thousand (50,000), then Employee shall receive a bonus of fifty
thousand dollars ($50,000) and to the extent the increase in the Customer Count
exceeds fifty thousand. Employee shall also receive one dollar ($1.00) for each
customer in excess of fifty thousand (50,000). Employee shall be entitled to
such a annual cash bonuses each year of this Agreement based on the increase in
the aggregate total number of customers equaling or exceeding fifty thousand
each prior year. (As an example, if the Customer Count at the end of a year
shows an increase of 75,000 customers, Employee will receive $50,000, plus an
additional $25,000 which is $1.00 times 25,000). This bonus shall be due and
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payable no later than thirty (30) days following the close of each year.
Employee shall also be eligible for an additional discretionary bonus to be
determined by the Board of Commonwealth taking into account, among other things,
the results of operations of the Company and the affiliated companies for the
completed year.
(a) Bonus Upon Sale of Assets or Control of the Company. If
during the term of this Agreement all or substantially all of the assets of the
Company or its parent, or more than fifty percent (50%) of the issued and
outstanding voting shares of the Company or its parent are, in any transaction
or series of transactions, acquired by any person or entity not now affiliated
with the Company or its parent, then the Company shall pay to Employee a bonus
equal to eight (8) times the annual Base Salary, plus the amount of any 280 G
taxes payable by Employee. In addition all stock options due the Employee shall
be immediately earned and issued as non-restricted options. The bonus shall be
paid to Employee within sixty (60) days after the date of such Change of
Control, and the payment of the bonus shall be accompanied by a summary
statement or accounting of the computation thereof. The bonus shall be payable
to Employee whether or not Employee elects to terminate this Agreement pursuant
to Section 7.3 below.
(b) Participation in Public Offering. If during the term of
this Agreement the Company or its parent or any affiliated company makes a
public offering (as used herein, "public offering" means new shares are marketed
and sold to the public pursuant to a contract with an underwriter who commits to
create a market for the IPO shares) of shares of any such entity's voting common
stock, or any other class securities with substantially similar terms and
preferences, ("Common Stock"), Employee shall have the right to sell shares of
Common Stock that the Employee may own on the following terms and subject to the
following conditions:
(i) Employee shall be entitled to have three hundred
thousand (300,000) of any such shares of stock of either the parent or
successor, or, if applicable, the Company, or any affiliated entity of the
Company as Employee may own, placed into a non-restricted Common Stock status
immediately prior to the public offering.
(ii) If any holder of Common Stock of the Company
(hereinafter a "Selling Shareholder") is permitted by the Company or any
affiliated company its underwriters to have any of his Common Stock registered
and sold with the Common Stock issued by the Company in the public offering, the
Common Stock owned by Employee shall be included in the Common Stock registered
and sold by the Selling Shareholders, on the same basis as that afforded to the
other Selling Shareholders;
(iii) Except with respect to shares of Common Stock
registered and sold by Employee pursuant to Section (ii) above, (i) Employee
acknowledges that the shares of stock so purchased by him will be registered
under the Securities Act or any applicable state securities laws; (ii) Employee
represents and warrants to the Company that all such stock will be held by him
for his account for investment purposes only; (iii) Employee acknowledges and
agrees that no stock so acquired by him may be transferred unless and until (A)
counsel for the
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applicable company shall have determined, at the company's sole cost and
expense, that the intended transfer does not violate the Securities Act of 1933
(the "Securities Act") or the rules and regulations promulgated thereunder or
any applicable state securities laws, or (B) the shares have been validly
registered under the Securities Act and all applicable state securities law; and
(iv) Employee need not enter into any Shareholders
Agreement restricting his transfer of the shares of Common Stock so purchased by
him.
3.3 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 employee incentive and benefit
plans or arrangements made available in the future by the Company to 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, or of the parent corporation, and with full seniority credit for
Employee's prior employment by Commonwealth. The Company shall also provide to
Employee at the Company's expense reasonable health insurance coverage as given
to other senior management employees of the Company or any affiliated company
as approved by the respective Board, and in addition, the Company will pay the
cost of term life insurance on Employee up to five thousand dollars ($5,000.00)
per year.
3.4 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 and
for which the Company will be entitled to a tax deduction, 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.
3.5 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 20 business days
in any calendar year. Employee shall also be entitled to all paid holidays
given to the Company's senior executive officers. Employee shall also be
entitled to the sick day benefits and policies as set forth in the Company's
employee manual applicable to senior executive officers.
3.6 Automobile: Telephone: etc. During the term hereof the
Company shall continue to provide the Employee the sum of One Thousand Three
Hundred Dollars ($1,300.00) per month for the purposes of the Employee paying
for the use of an automobile of Employee's choosing, throughout the term of
this Agreement. At any time during the term, the Employee shall have the right
to have the title of the automobile placed in his name. At the end of the term
Employee shall have the right to purchase the title to the automobile by
assuming the obligation to pay for any outstanding balance due thereon. In
addition, the Company shall provide an automobile telephone, a home telecopy
machine and an answering service and shall reimburse Employee for all charges
incurred by him in connection with the use thereof related to the
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performance of his duties hereunder.
3.7 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.
3.8 Marketing and Advertising Support. Company agrees that the
number and the aggregate salaries for support staff for Employee, and the
budgeted amount available to Employee for advertising and marketing shall be no
less than said budgets and support staff made available to or for Employee
during the last 12 months of his employment with Commonwealth.
3.9 Right to Reinstatement to Nomination on Board of Commonwealth
Energy Corporation After Two Years. After the expiration of two years as
referenced in a separate agreement between Commonwealth and the California
Public Utility Commission, Commonwealth agrees that any management slate of
nominees for directors of its Board shall include Employee.
3.10 Registration Rights as to Shares. After the initial public
offering, should the Company or any of its affiliates elect to file a
registration statement with the Securities Exchange Commission regarding the
issuance of shares which involve or relate to the shares presently owned by
Employee, or as above defined as Common Stock, Employee shall have the right to
"piggy back" all or a portion of his shares in such registration subject to the
approval of any underwriter contracted for such registration.
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 (a) 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 (b) 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. Employee acknowledges that "Confidential Information" includes all
customer lists, quotations, requests for quotations, purchase orders, pricing
information, bills of materials, files, data processing reports and other
documents relating to the Company's business, whether furnished to Employee by
the Company or generated by Employee, alone or in combination with others, and
all such Confidential
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Information is considered trade secrets and are valuable assets of the Company.
Employee agrees upon termination of employment by either party to immediately
return all such materials to the Company and not to make or retain copies
thereof. Employee acknowledges that Confidential Information includes, but is
not limited to, names and addresses of customers and other employees of the
Company, the nature and volume (both dollar and usage or product amount) of
business transacted by the Company with any of its customers or accounts or
suppliers, and customer usage or purchasing histories. Employee further
acknowledges that such information is necessary to the conduct of the Company's
business, is not generally known, and give the Company a competitive advantage
in the markets it serves.
Employee agrees that upon termination of employment, unless Employee is
hereafter being retained by the Company in some other capacity, with or without
cause, Employee will not, for a period of two (2) years after such termination:
A. Use or assist others in using Confidential Information for any
purpose competitive with the business of the Company; or
B. Solicit or induce or attempt to solicit or induce other employees of
the Company to terminate their employment with the Company.
Employee further agrees that during his employment hereunder and for two (2)
years thereafter, he will communicate the contents of this Paragraph 5 and its
subparagraphs to any person or other entity with, from, or by whom Employee
seeks employment, if such person or other entity is engaged in a business which
is competitive with the business of the Company.
The parties agree and declare that, because of the irreparable nature of the
injury to the Company which would result if Employee violates or breaches this
paragraph 5 and/or its subparagraphs, the award of monetary damages would not
adequately compensate the Company for such violation or breach. Therefore, in
the event that the Company institutes any action or proceeding to enforce the
provisions of this paragraph 5 and/or its subparagraphs, employee hereby waives
any claim or defense that the Company has an adequate remedy at law and Employee
agrees that any violation by him of this paragraph 5 and/or its subparagraphs
shall be the proper subject, without limitation, for immediate, ex parte
injunctive relief by the Company.
If it shall be judicially determined that Employee has violated any of his
obligations under this paragraph 5 and/or its subparagraphs, then the period
applicable to the obligation which Employee shall have been determined to have
violated or breached shall automatically be extended for a period of time equal
in length to the period during which said violation(s) or breach(s) occurred
and/or continued.
Employee agrees to adhere to and observe the guidelines and requirements
concerning non-disclosure of information including financial information and
other insider information as may be required per the Securities Exchange
Commission rules and regulations.
The covenants by Employee contained in this paragraph 5 and/or its subparagraphs
are of the essence of this agreement; they shall be construed as independent of
any other provision of this Agreement; and the existence of any claim or cause
of action of Employee against the Company,
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whether predicated on this Agreement of otherwise, shall not constitute a
defense to the enforcement by the Company of these covenants made by Employee.
The within covenant shall be applicable during the term of this Agreement and
also in the event of termination hereof. irrespective of whether termination
shall be by the Company or by Employee. with or without cause.
6. Insurance and Indemnification.
6.1 "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. Furthermore, so long as it does not adversely affect Employee's
ability to obtain life insurance in the general market at prevailing rates, the
Company may take out additional "key-man" life insurance with respect to
Employee at the Company's cost and for its benefit. 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.
6.2 Insurance Covering Employee. The Company shall, at its cost,
provide insurance coverage to Employee to the same extent as other senior
executives and directors of the Company, with respect to (i) director's and
officer's liability, (ii) errors and omissions and (iii) general liability. At
no time will the director's and officer's liability and errors and omissions
insurance fall below $10,000,000. As the company grows appropriate levels of
coverage will be to full force and effect.
6.3 Indemnification. The Company shall indemnify Employee and
hold him harmless from and against any and all costs. expense, losses, claims,
damages. obligations or liabilities (including actual attorneys fees and
expenses) arising out of or relating to any acts. or omissions to act, made by
Employee on behalf of or in the course of performing services for the Company to
the full extent permitted by the Bylaws of the Company as in effect on the date
of this Agreement, or, if greater, as permitted by applicable law, provided that
the indemnity afforded by the Company's Bylaws shall never be greater than that
permitted by applicable law. To the extent a change in applicable law permits
greater indemnification than is now afforded by the Bylaws and a corresponding
amendment shall not be made in said Bylaws, it is the intent of the parties
hereto that Employee shall enjoy the greater benefits so afforded by such
change. If any claim, action, suit or proceeding is brought. or claim relating
thereto is made, against Employee with respect to which indemnity may be sought
against the Company pursuant to this section, Employee shall notify the Company
in writing thereof, and the Company shall have the right to participate in, and
to the extent that it shall wish, in its discretion, assume and control the
defense thereof, with counsel satisfactory to Employee.
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6.4 Rights Not Exclusive. The foregoing rights conferred upon
Employee shall not be exclusive of any other right which Employee may have or
hereafter acquire under any statute, provision of the Articles of Incorporation
or Bylaws, agreement, vote of shareholders or disinterested directors or
otherwise, and such provisions shall survive the termination or expiration of
this Agreement for any reason whatsoever.
7. Termination.
7.1 Death or Total Disability of Employee. If Employee dies,
Employee's employment hereunder shall automatically terminate. If Employee
becomes totally disabled during the term of this Agreement, this Agreement may
be terminated at the option of the Company. For these purposes Employee shall be
deemed totally disabled if Employee becomes physically or mentally incapacitated
or disabled or otherwise unable to discharge Employee's duties within the terms
of the Company's disability insurance, or as otherwise defined by the Social
Security Administration. Prior to termination of this Agreement as a result of
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. Furthermore, in the
event that this Agreement automatically terminates as a result of the death of
Employee, or in the event that this Agreement is terminated by the Company as a
result of the total disability of Employee, the Company shall continue to pay,
Employee (or, in the event of Employee's death, Employee's estate, heirs or
personal representative), when otherwise due, for a period of one year
thereafter or until expiration of the term hereof, whichever occurs first. the
Base Salary, and should such disability continue beyond a year, then for the
additional period up to one additional year, one-half of the Base Salary less
any proceeds actually received by Employee from any disability insurance
provided to Employee at the expense of the Company.
7.2 Termination by the Company for Cause. Except as set forth in
Section 7 1, the Company may terminate this ?agreement only for cause, which
shall be limited to any one of the following:
Employee's conviction by, or entry of a plea of guilty or nolo
contendre in, a court of competent and final jurisdiction for any felony which
would materially and adversely interfere with Employee's ability to perform his
services under this Agreement
Upon termination of this Agreement by the Company for cause.
Employee shall be entitled to receive all compensation and other benefits
payable to him pursuant to Section 3 hereof accrued through the effective date
of termination.
7.3 Termination by Employee for Cause. Employee may terminate
this Agreement only for cause, which shall be limited to any one of the
following:
(a) The sale of all or substantially all of the Company's
assets to a person unaffiliated with the Company or the occurrence of a Change
of Control, in either case
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without Employee's prior written consent. which consent may be given or withheld
by Employee in his sole and arbitrary discretion.
(b) The Company's material breach of any of the terms and
conditions of this Agreement. provided that termination pursuant to this
subsection (b) shall not constitute a valid termination for cause unless the
Board shall have first received written notice from Employee stating with
specificity, the nature of such material breach and affording the Company at
least thirty (30) days to cure the material breach alleged.
Upon any termination of this Agreement by Employee for cause,
Employee shall not be required to render or to provide any further services
pursuant to this Agreement and shall be entitled to receive in one lump sum
within fifteen (15) days following notice of such termination, a termination
payment equal, in the case of termination under (a) above, to eight (8) times
the annual Base Salary then being paid to Employee hereunder, plus an amount
equal to any 280 G taxes payable by Employee and in the case of termination
under (b) above, equal to the monetary value (not discounted to present value)
of all of the compensation and other benefits payable to Employee pursuant to
this Agreement for the remainder of the term hereof. Such compensation shall be
in addition to, and not in lieu of, any payment due under section 3.2 (a) or any
other damages to which Employee may otherwise be entitled.
7.4 Stock Repurchase Option. In the event that Employee's
employment hereunder ceases following a Change of Control Employee shall have
the absolute right, to be exercised in his sole and absolute discretion and in
addition to any other compensation or benefits payable to him hereunder, to
require the Company to repurchase from him 25% of his capital stock of the
Company or its parent then owned by him at an aggregate repurchase price equal
to 100% of the then fair market value, as a going concern, without minority or
nonliquidity discounts. and no less than the value that other shareholders, on
the average. are paid for their stock. Such right may be exercised by notice
from Employee to the Company or its parent, as may be applicable, and the
closing of the repurchase shall take place at a time and place to be agreed upon
by Employee and the Company or its parent, but not to be more than thirty (30)
days following the Company's receipt of the notice. At the closing Employee
shall sell and the Company or its parent, as is applicable shall purchase the
capital stock and stock options, without any representation or warranty by
Employee other than that he has good title thereto free of all liens,
encumbrances and adverse interests, by Employee's delivery to the Company of a
certificate or certificates representing such capital stock and stock options,
in each case duly endorsed for transfer or accompanied by appropriate stock
powers. and by the Company's delivery to Employee of a certified check
representing payment of the purchase price in full.
7.5 No Mitigation. Employee shall have no duty or obligation to
mitigate damages hereunder, and if Employee does choose to accept employment
elsewhere after any breach or improper termination of this Agreement by the
Company, then any income and other employment benefits received by Employee by
virtue of his employment by, or rendition of services for or on behalf of, any
person or entity other than the Company after such breach or improper
termination shall not reduce the Company's obligation to make payments and
afford
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benefits hereunder.
7.6 No Offset. The Company shall have no right to offset against
any payments or other benefits due to Employee under this Agreement the amount
of any claims it may have against Employee by reason of any breach or alleged
breach of this Agreement by Employee: provided, however, that the Company shall
have the right to offset any amounts due the Company from Employee pursuant to
any judgment (after exhaustion of all appeals) rendered by a court of competent
jurisdiction in connection with any breach or alleged breach of this Agreement
by Employee.
7.7 SEC Filings. The Company as well as its parent company and
counsel engaged to advise the Company or its parent company with respect to
filings with the SEC shall give timely notice and advice to Employee, to the
extent the Company or its parent has or is given information that should so
indicate to the Company or its counsel, of any requirement that Employee make
filings with the SEC or any other governmental agency having jurisdiction by
reason of Employee's position with the Company and/or Employee's transactions to
securities of the Company.
8. Relationship Following Expiration of the Term of Agreement. In the
event of the expiration of this employment relationship, Employee and Company
contemplate that each will negotiate to good faith to reach a mutually
acceptable agreement for Employee's continuing services to the Company on a
contractual basis or on a consulting basis. the terms and compensation to be
negotiated at or near the end of the term of this Agreement.
9. 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 covering unemployment
insurance, workers' compensation, industrial accident, labor and taxes.
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. Any Change
of Control shall be deemed to be an assignment subject to this section.
10.3 Survival. The covenants, agreements, representations and
warranties
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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.
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:
electricAMERICA, Inc.
15901 Red Hill Avenue
Suite 100
Tustin, CA 92780
(b) If to Employee, to:
Frederick M. Bloom
41 Montgomery
Newport Beach, CA. 92660
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
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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.
THE COMPANY
electricAMERICA, Inc.
a California corporation
By: /s/ JOHN A. BARTHROP
-------------------------------
Secretary
EMPLOYEE
By: /s/ FREDERICK M. BLOOM
-------------------------------
Frederick M. Bloom
In the event of a breach in the performance of any obligation of the Company
stated in this Agreement, Commonwealth agrees, upon five days notice to
Commonwealth of such breach, to perform and/or pay the cost to perform or cure.
Commonwealth Energy Corporation
By: /s/ JOHN A. BARTHROP
-------------------------------
John A. Barthrop
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EXHIBIT B
18
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into
as of June 1, 2000 between Commonwealth Energy Corporation, a California
corporation ("CEC"), and Frederick M. Bloom ("Shareholder"), with reference to
the following facts:
A. Bloom currently owns 7,095,160 shares of CEC (the "Shares"),
1,200,000 shares of which Bloom has made available to CEC under the
terms of an Accommodation Agreement between Bloom and CEC dated as of
May ___, 2000.
B. in order to induce Bloom to resign as an officer, director and
employee of CEC, CEC desires to afford Bloom certain benefits equivalent
to those he enjoyed prior to such resignations.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing facts and the
mutual promises set forth herein, the parties agree as follows:
1. Participation in Public Offering. If during the term of this
Agreement CEC or any affiliated company makes a public offering (as used herein,
"public offering" means new shares are marketed and sold to the public pursuant
to a contract with an underwriter who commits to create a market for the new
shares) of shares of any such entity's voting common stock, or any other class
securities with substantially similar terms and preferences, Bloom shall have
the right to sell the Shares on the following terms and subject to the following
conditions:
1.1 Initial Shares. Bloom shall be entitled to have 300,000 of his
Shares placed into a nonrestricted common stock status immediately prior to the
public offering.
1.2 Participation. If any shareholder of CEC (hereinafter a "Selling
Shareholder") is permitted to have any of his shares of CEC registered and sold
with the shares issued by CEC in the public offering, all or a portion of the
Shares owned by Bloom shall be included in the shares registered and sold by the
selling shareholders, on the same basis as that afforded to the other selling
shareholders.
Exhibit B - Page 1
19
1.3 No Restrictions. Bloom need not enter into any Shareholders
Agreement, lock-up agreement or other arrangement restricting his transfer of
the Shares.
2. Registration Rights. After the initial public offering, should CEC or
any of its affiliates elect to file a registration statement with the Securities
and Exchange Commission ("SEC") regarding the issuance of shares of CEC, Bloom
shall have the right to "piggy back" all or a portion of his Shares in such
registration subject to the approval of any underwriter contracted for such
registration.
3. Miscellaneous.
3.1 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.
3.2 No Assignment. This Agreement may not be assigned by CEC or Bloom
without the prior written consent of the other (which consent may be granted or
withhold 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. Any change of control of CEC, however
effected, shall be deemed to be an assignment subject to this Section.
3.3 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 breath of the same or any other provision
hereof.
3.4 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.
3.5 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:
Exhibit B - Page 2
20
If to CEC: Commonwealth Energy Corporation
15901 Red Hill Avenue
Suite 100
Tustin, CA 92780
Fax: (714) 481-6589
If to Bloom: Frederick M. Bloom
41 Montgomery
Newport Beach, CA 92660
Fax: (949) 219-0885
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.
3.6 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, provided that the
economic benefits of the Agreement are substantially preserved.
3.7 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.
3.8 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 such action or
proceeding, in addition to any other relief to which it may be entitled.
3.9 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.
Exhibit B - Page 3
21
IN WITNESS WHEREOF, the parties have executed and delivered this
Investor Rights Agreement effective as of the date first set forth above.
COMMONWEALTH ENERGY
CORPORATION
By:
------------------------------------
/s/ FREDERICK M. BLOOM
---------------------------------------
Frederick M. Bloom
Exhibit B - Page 4