EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of April 30,
1998, is entered into by and among Onsite Energy Corporation, a Delaware
corporation ("Onsite"), Lighting Technology Services, Inc., a California
corporation ("LTS") (together, Onsite and LTS shall be referred to herein
as the "Company"), and Russell William Royal ("Employee"), in consideration
of the mutual promises and covenants made herein.
ARTICLE 1
EMPLOYMENT AND TERM OF EMPLOYMENT
1.1 EMPLOYMENT AND TERM. The Company hereby employs Employee to
render full-time services to the Company on an exclusive basis, upon the
terms and conditions set forth below, from the effective date of this
Agreement until the employment relationship is terminated in accordance
with the provisions of this Agreement. This Agreement shall terminate on
March 31, 2000, unless terminated earlier as provided for herein (the
"Employment Term").
1.2 ACCEPTANCE. Employee hereby accepts employment with the Company
and agrees to devote his full-time attention and best efforts exclusively
to rendering the services described below. Subject to Section 4.4 of the
Agreement of Purchase and Sale of Stock dated as of April 1, 1998 among
Onsite, Employee and Keith Aldrich (the "Stock Purchase Agreement"), the
Employee shall accept and follow the direction and authority of the Board
of Directors of LTS (the "Board") in the performance of his duties, and
shall comply with all existing and future regulations applicable to
employees of the Company and to the Company's business.
ARTICLE 2
DUTIES OF EMPLOYEE
2.1 GENERAL DUTIES. Employee shall serve as President and Chief
Operating Officer of LTS. In his capacity as President and Chief
Operating Officer of LTS, Employee shall do and perform all services, acts,
or other things necessary or advisable to manage and conduct the business
of LTS, including but not limited to the supervision, direction and control
of the business and other employees of LTS, subject to the policies and
direction of the Board and Section 4.4 of the Agreement of Purchase and
Sale of Stock. Employee shall have all powers, duties, and
responsibilities necessary to carry out his duties, and such other powers
and duties as the Board may prescribe consistent with LTS's Certificate and
Bylaws, including those set forth on Schedule A to this Agreement.
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2.2 EXCLUSIVE SERVICES. It is understood and agreed that Employee
may not engage in any other business activity during the term of his
employment hereunder, whether or not for profit or other remuneration,
without the prior written consent of the Board, except as set forth in
Schedule B to this Agreement. Further, Employee shall not directly or
indirectly acquire any stock or interest in any corporation, partnership,
or other business entity that competes, directly or indirectly, with the
business of the Company.
2.3 REPORTING OBLIGATIONS. In connection with the performance of his
duties hereunder, unless otherwise instructed by the Board, the Employee
shall report directly to the Board.
ARTICLE 3
COMPENSATION AND BENEFITS OF EMPLOYEE
3.1 ANNUAL BASE SALARY. The Company shall pay the Employee salary
for the services to be rendered by him during the term of this Agreement at
the rate of $125,000 annually (prorated for any portion of a year), subject
to increases, if any, as the Board may determine in its sole discretion
after periodic review of the Employee's performance of his duties
hereunder, LTS's net income contribution to Onsite's consolidated financial
statements and the compensation of Onsite executives.
3.2 STOCK OPTIONS. Beginning in January 1999, Employee shall be
eligible to participate in the Company's Stock Option Plan, subject to (a)
the grant of options by the Compensation Committee of Onsite's Board of
Directors, at its sole discretion, and (b) the Employee's execution of all
documents customarily required by the Company to effect the grant of
options.
3.3 PARTICIPATION IN BONUS POOL. Beginning in January 1999, Employee
shall be eligible to participate in the Company's Bonus Pool, consistent
with other Onsite executives, subject to the review and approval of the
Compensation Committee of Onsite's Board of Directors, at its sole
discretion.
3.4 EXPENSES. LTS shall pay or reimburse the Employee for all
reasonable, ordinary, and necessary business expenses actually incurred or
paid by Employee in the performance of Employee's services under this
Agreement in accordance with the expense reimbursement policies of the
Company in effect from time to time during the Employment Term, upon
presentation of proper expense statements or vouchers or such other written
supporting documents as the Company may reasonably require.
3.5 VACATION. Employee shall be entitled to three weeks paid
vacation for each calendar year (prorated for any portion of a year, as
applicable), such vacation to accrue at the rate of ten hours per month.
It is agreed that Employee has three weeks of accrued vacation on the date
of this Agreement. Notwithstanding anything to the contrary in this
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Agreement, vacation time shall cease to accrue beyond six weeks at any
given time during the Employment Term.
3.6 CAR ALLOWANCE. LTS shall pay Employee $600 per month for non-
accountable transportation costs, including insurance, repair and
maintenance and fuel expenses, to be incurred or paid by Employee in the
performance of Employee's services under this Agreement.
3.7 GENERAL EMPLOYMENT BENEFITS. Except where expressly provided for
herein, Employee shall be entitled to participate in, and to receive the
benefits under, any pension, health, life, accident, and disability
insurance plans or programs and any other employee benefit or fringe
benefit plans that LTS makes available generally to its employees, as the
same may be in effect from time to time during the Employment Term.
3.8 REPAYMENT OF LTS LOANS. In addition to his other compensation
hereunder, during the term of this Agreement and any extensions thereof,
and so long as Employee remains an employee of the Company outside this
Agreement, LTS, at the request of Employee, shall pay Employee a bonus in
an amount sufficient to discharge the shareholder loan payments due from
Employee to LTS in any year, set forth below, and payment of all unpaid
interest accrued thereon after December 31, 1997, grossed up for taxes. If
requested, the December 1998 bonus shall be accounted for on the books and
records of LTS and any impact will be considered when the Company's Board
reviews the performance of LTS for the earn-out under the Stock Purchase
Agreement and other business purposes.
These loans have been made pursuant to a Promissory Note, which shall
remain in effect, which accrues interest at 10% per annum. Following are
the certain loan repayments contemplated by this Section 3.08:
December 1998: $ 7,638.08
December 1999: 15,276.18
December 2000: 22,914.27
December 2001: 30,552.36
December 2002: 38,190.50
Total: $ 114,571.38
3.9 CONTINUATION OF BONUSES FOR LTS LOANS. Following and
notwithstanding the termination or expiration of this Agreement or of
Employee's employment by the Company outside of this Agreement, LTS shall
issue Employee an annual severance payment in an amount sufficient to
discharge certain shareholder loan payments due from Employee to LTS in any
year, set forth above, grossed up for taxes, if Employee's employment by
the Company is terminated or not extended, due to death, disability, change
of control, or otherwise (whether or not the employment is "at will") is
terminated by the Company without cause, as defined in Section 4.02.
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ARTICLE 4
TERMINATION OF EMPLOYMENT
4.1 TERMINATION. This Agreement may be terminated earlier as
provided for in this Article 4, or extended by further written agreement of
the parties.
4.2 TERMINATION FOR CAUSE. The Company reserves the right to
terminate this Agreement for cause upon: (a) Employee's willful and
continued failure to substantially perform his duties with the Company
(other than such failure resulting from his incapacity due to physical or
mental illness) after there is delivered to Employee by the Board, acting
reasonably and in good faith, a written demand for substantial performance
which sets forth in detail the specific respects in which the Board
believes Employee has not performed his duties, and giving Employee not
less than 60 days to correct the deficiencies specified in the written
notice; (b) Employee's willful engagement in gross misconduct as determined
by the Board which is materially and demonstrably injurious to the Company;
or (c) Employee's commission of a felony, or an act of fraud against the
Company or its affiliates. Upon termination for cause, Employee shall not
be entitled to any severance benefits.
4.3 TERMINATION WITHOUT CAUSE. Notwithstanding anything to the
contrary in this Agreement, the Company reserves the right to terminate
this Agreement at any time without cause, subject to the express terms and
provisions below.
If Employee is terminated without cause, Employee shall be paid a
severance amount equal to the Employee's then monthly base salary
multiplied by the number of months remaining in the Employment Term on the
date of termination ("Termination Date") and pursuant to Section 3.09.
4.4 VOLUNTARY TERMINATION BY EMPLOYEE. Notwithstanding anything to
the contrary in this Agreement, Employee may terminate this Agreement at
any time upon 90 days written notice to the Company. If Employee
voluntarily terminates employment, Employee shall not be entitled to any
severance benefits.
4.5 CHANGE IN CONTROL. If there is a "change in control" in the
Company during the Employment Term, then this Agreement may be terminated
by either party, effective as of the date the change in control, as if
there was a termination without cause in accordance with Section 4.03. For
the purposes of this Section 4.05, a "change in control" shall mean an
event involving one transaction or a related series of transactions, in
which: (1) (i) the Company issues securities equal to 50% or more of the
issued and outstanding capital stock of the Company, calculated on a fully-
diluted basis, to any individual, firm, partnership or other entity,
including a "group" within the meaning of Section 13 (d)(3) of the
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Securities Exchange Act of 1934 ("the Exchange Act"); (ii) the Company is
acquired in a merger or other business combination in which the Company is
not the surviving corporation, or (iii) 50% or more of the Company's
consolidated assets or earning power are sold or transferred AND (2)
Employee is no longer President and Chief Operating Officer of LTS
fulfilling the duties set forth in Section 2.01.
4.6 DISABILITY. If Employee becomes permanently and totally
disabled, this Agreement shall be terminated. If the Company has an
insurance policy in force with respect to Employee's permanent or total
disability, the definition and determination of permanent or total
disability thereunder shall govern. If no such policy is in force, the
following definition and determination shall apply: Inability of Employee,
because of injury or sickness, to engage in Employee's regular duties
hereunder which has lasted or can be expected to last for a continuous
period of not less than three months. This determination shall be
made as follows.
The Company shall, at its own expense, have a physician of its
choosing (the "First Physician") examine Employee. If Employee disagrees
with the opinion of the First Physician, he may engage at his own expense
another physician (the "Second Physician"). The Second Physician shall
confer with the First Physician and, if they together agree in writing that
Employee is or is not permanently or totally disabled, their written
opinion shall conclusive as to such disability. If the First and Second
Physician do not agree, they shall choose a third consulting physician (the
expense of which shall be borne by the Company), and the written opinion of
a majority of these 3 physicians shall be conclusive as to such disability.
The date of any written opinion that is conclusive as to such disability is
the date on which such disability, if that is the conclusion, will be
deemed to have occurred.
In signing this Agreement, Employee consents to such examination, to
furnish any medical information requested by any examining physician, and
to waive any applicable physician-patient privilege that may arise because
of such examination. All physicians must be board-certified in the
specialty most closely related to the nature of the disability alleged to
exist.
For purposes of this Agreement, the term disability does not include
any disability for which the Company can make reasonable accommodation, as
the term "reasonable accommodation" is defined by the Americans with
Disabilities Act and the cases construing that Act.
4.7 DEATH. If Employee dies during the term of this Agreement, this
Agreement shall be terminated thirty days after his death.
4.8 EFFECT OF TERMINATION. Except as expressly provided for in this
Agreement, the termination of employment shall not excuse any obligation
that accrued prior to termination, nor shall termination excuse the
performance of any obligation which is required to be performed after
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termination. Any such obligation shall survive the termination of
employment and this Agreement.
ARTICLE 5
COVENANTS AND REPRESENTATIONS OF EMPLOYEE
5.1 NON-COMPETITION. Employee acknowledges that he will have access
at the highest level to, and the opportunity to acquire knowledge of, the
Company's customer lists, customer needs, business plans, trade secrets,
and other confidential and proprietary information from which the Company
may derive economic or competitive advantage, and that he is entering into
the covenants and representations in this Article 5 in order to preserve
the goodwill and going concern value of the Company, and to induce the
Company to enter into this Agreement. During the Employment Term,
Employee will not work for or assist directly or indirectly any competitor
of the Company.
5.2 CONFIDENTIAL INFORMATION. During the Employment Term and for
five years thereafter, the Employee agrees to keep secret and to retain in
the strictest confidence all confidential matters which relate to the
Company or its "affiliates" (as that term is defined in the Exchange Act),
including, but not limited to, customer lists, client lists, trade secrets,
pricing lists, business plans, financial projections and reports, business
strategies, internal operating procedures, and other confidential business
information from which the Company derives an economic or competitive
advantage, or from which the Company might derive such advantage in its
business, whether or not labeled "secret" or "confidential." This
paragraph will not apply to disclosure of such information required by
court order or applicable laws or to information which through no fault of
Employee has become generally known or available to the public, which has
been furnished to the Employee by a third party without violating any duty
to the Company, or which has been developed independently by Employee
without the use of any such confidential information of the Company.
5.3 NON-SOLICITATION OF CUSTOMERS. During the Employment Term, the
Employee will have access to confidential records and data pertaining to
the Company's customers, their needs, and the relationship between the
Company and its customers. Such information is considered secret and is
disclosed during the Employment Term in confidence. Accordingly, during
the Employment Term and for one year thereafter, the Employee and any
entity controlled by him or with which he is associated (as the terms
"control" and "associate" are defined in the Exchange Act) shall not,
directly or indirectly, solicit for a competitive purpose, interfere with,
induce or entice away any person or entity that is or was a client,
customer or agent of the Company or its affiliate (as the term "affiliate"
is defined in the Exchange Act).
5.4 NON-SOLICITATION OF EMPLOYEES. The Employee and any entity
controlled by him or with which he is associated (as the terms "control"
and "associate" are defined in the Exchange Act) shall not, during the
Employment Term and for one year thereafter, directly or indirectly,
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solicit, interfere with, hire, offer to hire or induce any person who is or
was an officer or employee of the Company or any affiliate (as the term
"affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his relationship with the Company, or affiliate
of the Company, in order to accept employment by, or enter into a business
relationship with, any other entity or person. (These acts are hereinafter
referred to as the "prohibited acts of solicitation.") The foregoing
restriction and Section 5.03, however, shall not apply to any business with
which Employee may become associated after the Employment Term so long as
the prohibited acts of solicitation taken by such business are not as a
result of the active participation or involvement, direct or indirect, by
the Employee.
5.5 RETURN OF PROPERTY. Upon termination of employment, and at the
request of the Company otherwise, the Employee agrees to promptly deliver
to the Company all Company or affiliate memoranda, notes, records, reports,
manuals, drawings, designs, computer files in any media, and other
documents (including extracts and copies thereof) relating to the Company
or its affiliate, and all other property of the Company, provided that he
may retain copies solely for and as reasonably required for his compliance
with applicable laws.
5.6 INVENTIONS. Subject to Sections 2870 through 2872 of the
California Labor Code, all processes, inventions, patents, copyrights,
trademarks, and other intangible rights that may be conceived or developed
by the Employee, either alone or with others, during the Employment Term,
whether or not conceived or developed during Employee's working hours, and
which are related to the Company's business, shall be the sole property of
the Company. Employee shall execute all documents, including patent
applications and assignments, required by the Company to establish the
Company's rights under this provision.
5.7 REPRESENTATIONS. The Employee represents and warrants to the
Company that he has full power to enter into this Agreement and perform his
duties hereunder, and that his execution and delivery of this Agreement and
the performance of his duties shall not result in a breach of, or
constitute a default under, any agreement or understanding, whether oral or
written, including, without limitation, any restrictive covenant or
confidentiality agreement, to which he is a party or by which he may be
bound.
ARTICLE 6
MISCELLANEOUS PROVISIONS
6.1 NOTICES. All notices or other communications required hereunder
shall be in writing and shall be sufficient in all respects and shall be
deemed delivered after 3 days if sent via registered or certified mail,
postage prepaid; the next day if sent by overnight courier service; or one
business day after transmission, if sent by facsimile to the following (or
at such other address for a party as shall be specified by like notice):
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To the Employee:
Russell William Royal
19729 Clancy Lane
Huntington Beach, CA 92646
To the Company:
Onsite Energy Corporation
701 Palomar Airport Road, Ste. 200
Carlsbad, CA 92009
Attn: Richard T. Sperberg
6.2 NO ASSIGNMENT. This Agreement, and the rights and obligations
of the parties, may not be assigned by either party without the prior
written consent of the other party.
6.3 APPLICABLE LAW. This Agreement and the relationships of the
parties in connection with the subject matter of this Agreement shall be
governed by, and construed under, the laws of the State of California.
6.4 ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements or understandings of the parties, either oral or written, with
respect to this employment of Employee by the Company, and contains the
complete and final agreement and understanding of the parties with respect
thereto. Employee acknowledges that no representation, inducements,
promises, or agreements, oral or otherwise, have been made by the Company
or any of its officers, directors, employees or agents, which are not
expressed herein, and that no other agreement shall be valid or binding on
the Company.
6.5 WITHHOLDING TAXES. All amounts payable under this Agreement,
whether such payment is to be made in cash or other property, including,
without limitation, stock of the Company, shall be subject to withholding
for Federal, state, and local income taxes, employment and payroll taxes,
and other legally required withholding taxes and contributions to the
extent legally required, and the Employee agrees to report all such amounts
properly on his personal income tax returns and for all other purposes, as
called for.
6.6 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remaining provisions and terms of this Agreement shall
not be affected by such judgment, and this Agreement shall be carried out
as nearly as possible according to its original terms and intent and, to
the full extent permitted by law, any provision or restrictions found to be
invalid shall be amended with such modifications as may be necessary to
cure such invalidity, and such restrictions shall apply as so modified, or
if such provisions cannot be amended, they shall be deemed severable from
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the remaining provisions and the remaining provisions shall be fully
enforceable in accordance with law.
6.7 EFFECT OF WAIVER. The failure of either party to insist on
strict compliance with any provision of this Agreement by the other party
shall not be deemed a waiver of such provision or a relinquishment of any
right thereunder, nor shall it affect the validity of this Agreement nor
prevent enforcement of such provision or any similar provision, at any
time.
6.8 BINDING ARBITRATION. Any claim, dispute, or controversy arising
out of this Agreement, or breach thereof, shall be resolved by submission
to binding arbitration.
(a) Arbitration Notice. The arbitration shall commence upon any
party sending to any other party to this Agreement a notice in writing (the
"Arbitration Notice") demanding arbitration and specifying the issue(s) to
be arbitrated and all relief sought (the "Arbitration Matter").
(b) Selection of Arbitrators.
(i) The parties, or their legal representatives, may agree
in writing upon a sole arbitrator.
(ii) In the event they cannot so agree each side shall,
within fifteen (15) days after the giving of the Arbitration Notice,
furnish a list of acceptable arbitrators consisting of attorneys at law.
From the combined lists of acceptable arbitrators, each side may reject all
but one arbitrator. The remaining acceptable arbitrators shall constitute
a new list and the process shall be repeated until three (3) acceptable
arbitrators are designated who shall constitute the "Arbitration Panel."
(iii) If three (3) acceptable arbitrators are not appointed
within thirty (30) days after giving the Arbitration Notice, the Superior
Court of the State of California for the County of San Diego shall, upon
the filing of a petition by any of the parties hereto pursuant to the
provisions of California Code of Civil Procedure Section 1281.6 (or any
successor section), and after a hearing at which all parties are afforded
an opportunity to be present and be heard, select a third neutral
arbitrator, from a list of five (5) persons obtained by the court from the
parties jointly or, if they cannot agree, from the San Diego County office
of the American Arbitration Association, to join each of the
party-appointed arbitrators resulting from Section 6.08(b)(ii) above to
constitute the Arbitration Panel.
(c) Books and Records. The parties agree to make available to
the Arbitration Panel all books, records, schedules, and other information
requested by it. Such matters are to be made available to the Arbitration
Panel at such times as are deemed necessary by it to make its decision as
herein provided. The Arbitration panel shall have all those powers set
forth in Section 1282.6 of California Code of Civil Procedure including,
<PAGE10>
but not limited to, those powers relating to the production of books,
records, documents and other evidence.
(d) Discovery. The parties may conduct such discovery, and the
Arbitration Panel shall have such discovery powers, as are set forth in the
California Code of Civil Procedure Section 1283.05. The Arbitration Panel
shall be empowered to grant all provisional relief permitted by the
California Code of Civil Procedure. In addition to all other arbitration
rights hereby provided, the provisions of Sections 1282.2, 1282.4 and
1282.6 of the California Civil Code shall apply. In addition to any and
all arbitration rights hereby provided, the arbitration proceedings and
discovery shall be conducted pursuant to Sections 1282 et seq. of
California Code of Civil Procedure, including, without limitation, the
provisions of Sections 1282.2, 1282.4, 1283 and 1283.5.
(e) Enforcement. Enforcement of the Arbitration Panel's award
shall be effected pursuant to California Civil Code Sections 1281 et seq.
However, the provisions of California Code of Civil Procedure Section
1281.8 shall not apply and the Arbitration Panel shall be specifically
empowered to grant all provisional remedies permitted under the California
Code of Civil Procedure.
(f) Location. The arbitration shall take place in the County of
San Diego, State of California, at a time and place selected by the
Arbitration Panel. Notice in writing of such time and place shall be given
by the Arbitration Panel to each party at least thirty (30) days prior to
the date so fixed.
(g) Time Periods. The Arbitration Panel shall diligently,
expeditiously, and in good faith hear and decide the Arbitration Matter
under consideration, within the limits and subject to the standards set
forth in this Agreement. In any event, such decision shall be rendered not
later than thirty (30) days after the arbitration hearing is conducted.
(i) If there is only one (1) arbitrator, his/her decision shall be final
and binding. (ii) If there are three (3) arbitrators, the agreed decision
of any two (2) of them shall be final and binding. (iii) If a neutral
third arbitrator was appointed pursuant to Section 6.08(b)(iii) above, and
the two (2) party-appointed arbitrators are unable to agree upon a
decision, the decision of the neutral third arbitrator shall be final and
binding.
The Arbitration Panel shall prepare an award in writing which
reflects the final decision of the Arbitration Panel and a copy of same
shall be delivered to each party hereto. Judicial confirmation,
correction, or vacation of the decision of the Arbitration Panel shall be
sought only in the San Diego County Superior Court, which judgment may be
enforced and shall be accorded full faith and credit in any court of
competent jurisdiction, including any jurisdiction in which is located any
real property which is the subject matter of the dispute.
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(h) Binding Effect. The arbitration award shall be final,
conclusive and binding on all parties thereto and shall be non-appealable.
The costs of the arbitrators shall be borne by the losing party.
6.9 ATTORNEYS FEES. In the event of any action, suit, arbitration or
dispute arising out of this Agreement, or the parties' performance as
outlined herein, the prevailing party shall be entitled to an award of
costs, including an award of reasonable attorneys' fees.
6.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
THE COMPANY: ONSITE ENERGY CORPORATION
By: RICHARD T. SPERBERG
Richard T. Sperberg
Chief Executive Officer
LIGHTING TECHNOLOGY SERVICES, INC.
By: RICHARD T. SPERBERG
Richard T. Sperberg
Chief Executive Officer
EMPLOYEE: By: RUSSELL WILLIAM ROYAL
Russell William Royal