Item 5.02. Departure of Directors or Certain
Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangement of Certain Officers
(b) On February 20,
2008, Steven S. Boss resigned as Chief Executive Officer and as a director of
Commerce Energy Group, Inc. (the “Company”), and as an officer and
director of all the Company’s subsidiaries and affiliates.
On February 20,
2008, the Company entered into a Separation Agreement and General Release (the “Separation
Agreement”) with Mr. Boss, which will become effective on February 28,
2008 (the “Effective Date”), unless it is revoked by Mr. Boss before that
date. Pursuant to the Separation
Agreement, Mr. Boss will (i) receive a severance payment of $446,333,
equal to thirteen (13) months of Mr. Boss’ base salary as of the
resignation date, payable in a lump sum within one business day after the
Effective Date, less customary payroll deductions required by law and (ii) retain
his group health coverage under COBRA for thirteen months at the Company’s
expense (collectively, the “Severance Benefits”).
Under the Separation
Agreement, the Company is repurchasing 75,000 shares of unvested restricted
stock held by Mr. Boss, pursuant to the terms of the Company’s 1999 Equity
Incentive Plan for par value per share, with payment for the repurchase being
credited from the severance payment. In
addition, Mr. Boss agreed to sell to the Company 166,000 shares of the
Company’s common stock owned by him for a price of $1.26 per share, or $209,000
in the aggregate, payable to Mr. Boss one business day after the Effective
Date.
Pursuant to the
Separation Agreement, Mr. Boss has agreed not to solicit the Company’s
employees or contractors, and not to work in certain businesses, for a period
of thirteen (13) months after February 20, 2008. Mr. Boss also acknowledged under the
Separation Agreement that certain provisions of his Employment Agreement shall
extend beyond the resignation date, including provisions relating to
proprietary information obligations.
The Company and Mr. Boss
also entered into a Voting and Standstill Agreement (the “Standstill Agreement”)
dated February 20, 2008. The Standstill Agreement limits the activities of
Mr. Boss until April 1, 2009, with respect to exercising any voting
rights that he might have by virtue of his ownership of shares of the Company’s
common stock currently held or subsequently acquired by him, restricts his
ability to enter into or participate in certain types of transactions involving
or affecting the Company and limits his ability to resell Company common stock
owned, or to be owned, by him.
The Separation Agreement
contains a general release by Mr. Boss of all claims against the Company
and its affiliates and representatives.
The Separation Agreement also contains other customary provisions
including Mr. Boss’ statutory rights under the Older Workers Benefit
Protection Act which permits him to revoke portions of the Separation Agreement
within a seven day period after February 20, 2008. If Mr. Boss elected to revoke portions
of the Separation Agreement he would not be entitled to the Severance Benefits.
The foregoing description
of the Separation Agreement and the Standstill Agreement are only summaries,
are not complete and are each qualified in their entirety to the actual
agreement, which are attached hereto as Exhibits 99.1 and 99.2, respectively,
and are incorporated herein by reference.
(c) On February 20,
2008, the Board of Directors of the Company (the “Board”) (i) appointed
Gregory L. Craig, 43, as Chief Executive Officer of the Company; (ii) designated
Mr. Craig as “principal executive officer” of the Company for purposes of
all filings with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended; (iii) appointed
him as a Class III Director of the Corporation (after taking action to
expand the number of directors from 6 to 7); (iv) designated Mr. Craig
as Chairman of the Board, and (v) designated Mr. Craig as a director
of each of the subsidiaries of the Company.
In his role as Chairman, Mr. Craig succeeds Dennis R. Leibel who remains
a member of the Board and Chair of the Compensation Committee.
From November 2005
through March 2007, Mr. Craig served as Chief Executive Officer of
Macquaire Cook Energy (formerly Cook Inlet Energy Supply, LLC), a North
American energy supply services company that he founded. From 1992 through November 2005, Mr. Craig
served as Chief Executive Officer of
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Cook Inlet Energy Supply,
LLC until it was sold to Macquarie Bank of Sydney, Australia in November 2005. Mr. Craig received his Bachelor of Administration
degree from the University of Alaska and his Master of Business Administration
(MBA) from the University of California at Los Angeles.
Mr. Craig was not
selected as an officer or director of the Company pursuant to any understanding
between Mr. Craig and any other person.
There are no family relationships between Mr. Craig and the
directors and executive officers of the Company.
Pursuant to an employment
agreement with Mr. Craig dated February 20, 2008 (the “Employment
Agreement”), Mr. Craig will receive an annual base salary of $450,000 and
is eligible to participate in all bonus plans applicable to senior executive
officers established by the Board, including the existing Bonus Program. Pursuant to a Stock Option Award Agreement
dated February 20, 2008, Mr. Craig was granted an option to purchase 250,000
shares of the Company’s common stock on February 20, 2008 at an exercise
price equal to $1.26 per share, the closing sale price on the date of grant
(such price representing 100% of the fair market value of a share of the
Company’s common stock on the date of grant, as defined in the Company’s 2006
Incentive Stock Plan). The option vested
in full on the date of grant. Mr. Craig
also was granted 500,000 shares of restricted stock, pursuant to a Restricted
Share Award Agreement dated February 20, 2008, which vested immediately as to 300,000
shares on the date of the award and as to the remaining shares, 100,000 shares
each on the next two anniversary dates of the award. The Employment Agreement has no specific term
and is subject to termination by either the Company or Mr. Craig without
cause upon 60 days written notice.
In the event of a Change
in Control (as defined in the Employment Agreement), Mr. Craig will be entitled
to receive a sale bonus in an amount equal to two percent (2%) of the amount by
which the Company’s market capitalization on the date of the Change in Control
exceeds $91,126,854.
The Employment Agreement
provides that if Mr. Craig is terminated without cause or if he resigns
for Good Reason, as defined in the Employment Agreement, Mr. Craig will be
entitled to severance equal to twelve 12 months of his then current base salary
payable over a 12-month period, plus continued vesting for an additional 12
months for outstanding unvested stock options and restricted stock. In the event of a Change in Control of the
Company, Mr. Craig may resign for Good Reason.
Under the Employment
Agreement, Mr. Craig agrees not to solicit the Company’s employees,
customers, clients or suppliers during the term of his employment and for defined
periods after termination of employment with the Company, and refrain from
being connected with certain restricted businesses during any severance period. Finally, in accordance with the Employment
Agreement, the Company entered into an Indemnification Agreement dated February
20, 2008 with Mr. Craig.
The foregoing description
of the Employment Agreement, the Stock Option Award Agreement, the Restricted Share
Award Agreement and the Indemnification Agreement are only summaries, are not
complete and are each qualified in their entirety to the actual agreement,
which are attached hereto as Exhibits 99.3, 99.4, 99.5, and 99.6, respectively,
and are incorporated herein by reference.
A copy of the Press Release that the Company filed related to Mr. Craig’s
appointment as Chairman of the Board and Chief Executive Officer and Mr. Boss’
resignation is attached hereto as Exhibit 99.7 and is incorporated herein
by reference.
(d) On February 21,
2008, the Board appointed Rohn Crabtree, 53, as a Class I Director of the
Corporation and appointed Mr. Crabtree to the Audit Committee of the
Board.
The Board also nominated Mr. Crabtree
to continue as a Class I director at the Company’s upcoming annual meeting
of stockholders to be held on March 27, 2008 (the “Annual Meeting”).
Mr. Crabtree has
been a partner of Nautilus Renewables LLC, a private equity fund investing in
the renewable energy sector, since November 2006. Mr. Crabtree is also the President and
Chief Executive Officer of Newport Energy Holdings, LLC, a company focused on
investments in electric generation assets, which he founded in March 2004. From April 1998 to March 2004, Mr. Crabtree
held various management positions with Calpine Corporation, a large independent
power producer and marketer. These
positions included President and Chief Executive Officer of Calpine Canada
Power Ltd., a subsidiary of Calpine Corporation; Manager of the Calpine Power
Income Fund; Senior Vice President, Finance and Senior Vice President, Business
Development. Mr. Crabtree received
his Bachelor of Science degree from Weber State University and his Master of
Business Administration (MBA) from the Wharton School of the University of
Pennsylvania.
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The Board has adopted a compensation policy for
non-employee directors pursuant to which directors receive cash compensation
and equity awards.
Cash Compensation.
Mr. Crabtree
will be paid a quarterly retainer of $8,000, a fee of $1,000 for each Board
meeting which he attends in person and a fee of $750 for each Board meeting
which he attends telephonically. For service on Board committees (other than
the chairman of such committee), Mr. Crabtree will be paid $750 for each
committee meeting he attends in person and a fee of $500 for each committee
meeting he attends telephonically. Should Mr. Crabtree at some point be
appointed chair of a committee, he would be paid $1,000 for each committee
meeting he attends, whether in person or telephonically. On days on which there is a Board meeting and
committee meeting that he attends, Mr. Crabtree shall be paid for both the
Board meeting and the committee meeting.
On days on which there is more than one committee meeting that Mr. Crabtree
attends, he shall be paid for only one meeting. In addition, Mr. Crabtree
shall be entitled to receive reimbursement for reasonable travel expenses for
each Board or Board committee meeting that he attends in person if he resides
25 miles or more from the site of the meeting.
Equity-Based Awards.
The Company’s
non-employee director compensation policy provides for equity awards as
follows:
Initial
Grant of Restricted Stock.
On the date of the
initial appointment or election of each non-employee director to the Board, he
receives 20,000 restricted shares of Common Stock. The shares vest in full on
the first day of the month in which the one year anniversary of the date of
issuance occurs, with the shares being forfeited to the Company if the Board
member’s service is terminated prior to the vesting date.
Annual
Grant of Restricted Stock.
In addition, on the
date of each annual meeting of stockholders at which directors are elected,
each non-employee director who is either re-elected as a non-employee director
or who continues in office as an incumbent non-employee director, will be
issued 20,000 shares of restricted Common Stock. Such shares vest in full
on January 1 of the next succeeding calendar year after the date of
issuance, with the shares being forfeited to the Company if the Board member’s
service is terminated prior to the vesting date.
In connection with his initial appointment as a Class I
director to the Board and in light of the Board’s nomination to be a nominee as
a Class I Director at the Annual Meeting, Mr. Crabtree waived receipt of the
above-referenced Initial Grant of 20,000 shares of Restricted Stock which he
was entitled to under the Company’s non-employee director compensation policy.
In connection with his
appointment as a Class I director, the Company entered into an Indemnification
Agreement dated February 21, 2008 with him.
A copy of the Indemnification Agreement is attached hereto as Exhibit
99.8 and is incorporated herein by reference.
Mr. Crabtree was not
selected as an officer or director of the Company pursuant to any understanding
between Mr. Crabtree and any other person.
There are no family relationships between Mr. Crabtree and the
directors and executive officers of the Company.
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