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0001104659-08-076313.txt : 20081215
0001104659-08-076313.hdr.sgml : 20081215
20081212203029
ACCESSION NUMBER: 0001104659-08-076313
CONFORMED SUBMISSION TYPE: 8-K/A
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20081211
ITEM INFORMATION: Entry into a Material Definitive Agreement
ITEM INFORMATION: Termination of a Material Definitive Agreement
ITEM INFORMATION: Completion of Acquisition or Disposition of Assets
ITEM INFORMATION: Triggering Events That Accelerate or Increase a Direct Financial Obligation under an Off-Balance Sheet Arrangement
ITEM INFORMATION: Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing
ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
ITEM INFORMATION: Regulation FD Disclosure
ITEM INFORMATION: Other Events
ITEM INFORMATION: Financial Statements and Exhibits
FILED AS OF DATE: 20081215
DATE AS OF CHANGE: 20081212
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COMMERCE ENERGY GROUP, INC.
CENTRAL INDEX KEY: 0001274150
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911]
IRS NUMBER: 200501090
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0731
FILING VALUES:
FORM TYPE: 8-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-32239
FILM NUMBER: 081248052
BUSINESS ADDRESS:
STREET 1: 600 ANTON BOULEVARD, STE. 2000
CITY: COSTA MESA
STATE: CA
ZIP: 92626
BUSINESS PHONE: (714) 259-2500
MAIL ADDRESS:
STREET 1: 600 ANTON BOULDVARD, STE. 2000
CITY: COSTA MESA
STATE: CA
ZIP: 92626
FORMER COMPANY:
FORMER CONFORMED NAME: COMMERCE ENERGY GROUP INC
DATE OF NAME CHANGE: 20040223
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN ENERGY GROUP INC
DATE OF NAME CHANGE: 20031222
8-K/A
1
a08-30253_18ka.htm
8-K/A
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): December 11, 2008
COMMERCE
ENERGY GROUP, INC.
(Exact Name of registrant
as specified in its charter)
Delaware
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001-32239
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20-0501090
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(State or other
jurisdiction of incorporation)
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(Commission File
Number)
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(IRS Employer
Identification No.)
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600
Anton Blvd., Suite 2000
Costa Mesa, California
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92626
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(Address of principal
executive offices)
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(Zip Code)
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Registrants telephone
number, including area code: (714) 259-2500
Not
Applicable
(Former name or former
address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
o Written communications pursuant to Rule 425
under the Securities Act (17 CFR 230.425)
x
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))
o Pre-commencement communications pursuant
to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Explanatory Note
This Form 8-K/A (Amendment No. 1) amends and restates
the Form 8-K previously filed by Commerce Energy Group, Inc. with the
Securities and Exchange Commission on December 12, 2008 (the Original Form
8-K) by repositioning the pro forma financial information referenced in Item
9.01(b) hereof to the end of this Form 8-K/A (Amendment No. 1) as pages F-1 through
F-3. This same information had been
inadvertently placed behind the press release that was filed as Exhibit 99.7 to
the Original Form 8-K. No other changes are
being made to the Original Form 8-K.
2
Item 1.01. Entry into a Material
Definitive Agreement
As
Commerce Energy Group, Inc. (the Company) has previously disclosed in
its filings with the Securities and Exchange Commission (SEC): (i) the
Company entered into a Note and Warrant Purchase Agreement dated as of August 21,
2008 (as amended, the Purchase Agreement) with AP Finance, LLC, a Delaware
limited liability company (AP Finance), whereby AP Finance agreed to purchase
one or more secured promissory notes from the Company and Commerce Energy, Inc.,
a California corporation and wholly owned subsidiary of the Company (Commerce);
(ii) pursuant to the terms and conditions of the Purchase Agreement, on August 21,
2008 and August 22, 2008, the Company and Commerce issued to AP Finance
two Senior Secured Convertible Promissory Notes in the principal amounts of
$20,931,579 and $2,225,410.98, respectively (the Notes); (iii) pursuant
to the terms of the Security Agreement dated August 21, 2008 among the
Company, Commerce and AP Finance (the Security Agreement), the Companys and
Commerces obligations under the Purchase Agreement and the Notes are secured
by substantially all of the assets of the Company and Commerce, including, but
not limited to, all of the Companys shares of stock in Commerce; (iv) AP
Finances security interest in substantially all of the assets of the Company
and Commerce is subordinated to the senior security interest the Company and
Commerce granted in favor of Wachovia Capital Finance Corporation (Western) (Wachovia)
pursuant to the Loan and Security Agreement dated as of June 8, 2006 among
the Company, Commerce and Wachovia (as amended, the Credit Facility); (v) on
October 27, 2008, the Company and Commerce issued to AP Finance a
Discretionary Line of Credit Demand Note (the Demand Note) in the principal
amount of $6.0 million pursuant to the Purchase Agreement; and (vi) the
Notes, the Credit Facility and the Demand Note all mature on December 22,
2008 (if, in the case of the Demand Note, not demanded sooner).
On December 11,
2008, AP Finance and Commerce Gas and Electric Corp., a Delaware corporation
and wholly owned subsidiary of Universal Energy Group Ltd. (CG&E),
notified the Company in writing that: (i) AP Finance had sold its interest
in the Notes to CG&E; (ii) Wachovia had assigned all of its and the
other lenders interests under the Credit Facility to AP Finance and CG&E;
and (iii) AP Finance and CG&E made a demand under the Demand Note and
notified us that a default exists under the Purchase Agreement and the Security
Agreement, for which as a result an event of default exists under the Purchase
Agreement, the Notes, the Demand Note and the Credit Facility, making all of
the Companys and Commerces obligations under the Purchase Agreement, the
Notes, the Demand Note, the Security Agreement and the Credit Facility (the Secured
Debt) immediately due and payable.
On December 11,
2008, AP Finance and CG&E proposed, under Section 9-620 of the Uniform
Commercial Code (the UCC) as in effect in the State of New York, to accept
all shares of common stock in Commerce and certain other securities held by the
Company in satisfaction of the Companys liabilities and obligations with
respect to the Secured Debt pursuant to the terms and conditions of the Acceptance
Agreement, as defined below (the Consensual Foreclosure).
The
Company had the right not to consent to, and thereby delay, the Consensual
Foreclosure. The Company recognized,
however, that this delay would likely not prevent a foreclosure. To induce the Company to accept the
Consensual Foreclosure, AP Finance and CG&E agreed to allow Commerce to pay
a dividend to the Company in the aggregate amount of $3.1 million and to
confirm it would satisfy certain liabilities.
The Companys board of directors determined that, as a result of the
proposed Consensual Foreclosure and the dividend to be paid to the Company by
Commerce, the Company would be able to assure that trade creditors would be
paid by Commerce in the ordinary course of business and the Company would be
able to make a cash distribution to its shareholders in the aggregate amount of
$2,614,780, after providing for all known or reasonably foreseeable obligations
of the Company. This distribution was comprised
of a dividend on shares of the Companys common stock in the amount of $0.084
per share and a redemption of all of the outstanding rights under the Companys
Shareholders Rights Agreement dated July 1, 2004 at a price of $0.001 per
right. The record date for the dividend
was set at December 11, 2008.
After
careful consideration, the Companys board of directors determined that the
Consensual Foreclosure is fair and in the best interests of the Company and its
shareholders. In reaching its
determination, the Companys board of directors considered, among other
factors: (i) the Companys inability, in light of the global credit crisis
and the losses that the Company has faced during the fiscal year ended July 31,
2008, to secure replacement financing to repay or refinance the Secured Debt in
a manner that the Company and its business could sustain or to enter into
another strategic transaction that would have allowed the Company and Commerce
to continue operations; (iii) the inability of the Company to obtain
debtor-in-possession financing necessary for a
3
bankruptcy
and the likelihood that such a bankruptcy would not result in value for the
stockholders; (iv) the likelihood that an involuntary foreclosure or a
voluntary or involuntary liquidation would not result in money being returned
to the Companys shareholders; (vi) the ability of the Company to make a
distribution to its stockholders of $2,614,780 as a result of the Consensual
Foreclosure; (vii) the ability of Commerce to continue in business as a
subsidiary of CG&E, which would benefit its suppliers, customers and
employees; and (viii) the board of directors receipt of an opinion of The
Mentor Group, financial advisor to the Company, that the Consensual Foreclosure
is fair, from a financial point of view, to the Company and its
shareholders. Therefore, on December 11,
2008, the Company consented to the Consensual Foreclosure pursuant to the terns
and conditions of an acceptance agreement dated as of December 11, 2008
among the Company, AP Finance and CG&E (the Acceptance Agreement).
Pursuant
to the terms and conditions of the Acceptance Agreement, AP Finance and
CG&E have: (i) consented to Commerce having paid the Company a $3.1
million dividend immediately prior to the delivery of the Acceptance Agreement;
(ii) consented to Commerces assumption of certain liabilities and
obligations of the Company identified in an assumption letter dated December 11,
2008 between the Company and Commerce (the Assumption Letter), including, but
not limited to, all liabilities and obligations of the Company under the
employment agreements between the Company and its executive officers (including
any severance obligations thereunder); (iii) agreed to indemnify the
Company and its officers, directors, employees, agents and representatives from
liabilities arising from any breach by Commerce of its obligations under the
Assumption Letter; (iv) released the Company from any and all liabilities
and obligations with respect to the Secured Debt; and (v) cancelled all
warrants to acquire shares of common stock of the Company held by AP Finance.
As a
result of the consummation of the Consensual Foreclosure, the Company ceased
all operations and Commerce now operates as a subsidiary of CG&E. The Company intends to call and hold a
special meeting of its shareholders, at which the Companys shareholders will
be asked to consider and approve the dissolution of the Company.
There
are no material relationships, other than with respect to the Purchase
Agreement, the Notes, the Demand Note, the Credit Facility and the Amendments
to the Employment Agreements between the Company and Messrs. Craig,
Fallquist, Mitchell, Bomgardner and Yi which have been assumed by Commerce and
are discussed in Item 5.02(e) herein, between the Company and its
directors, officers (or any associate of any such director or officer) or
affiliates, on the one side, and AP Finance or CG&E and their respective
directors, officers (or any associate of any such directors or officers) or
affiliates, on the other side. The
information set forth under Item 5.02(e) of this Current Report on Form 8-K
is hereby incorporated into this Item 1.01.
The
foregoing description of the Acceptance Agreement and the Assumption Letter are
qualified in their entirety by the full texts of the Acceptance Agreement and
the Assumption Letter, copies of which are filed as Exhibits 99.1 and 99.2,
respectively, to this Current Report on Form 8-K.
Item 1.02 Termination of a
Material Definitive Agreement
The
Information set forth under Item 1.01 of this Current Report on Form 8-K
is hereby incorporated by reference into this Item 1.02.
Under
the terms of the Acceptance Agreement, all of the Companys obligations under
the Purchase Agreement, the Notes, the Demand Note, the Security Agreement, the
Credit Facility, and the warrants previously issued to AP Finance terminated on
December 11, 2008.
Additionally,
on December 11, 2008, Jesup & Lamont Incorporated (Jesup), Bill
Corbett (Corbett) and the Lee E. Mikles Revocable Trust (Mikles) agreed to
the cancellation of warrants exercisable for an aggregate of 875,000 shares of
the Companys common stock issued by the Company to Jesup, Corbett and Mikles
for services rendered in connection with the sale of the Notes.
Effective
December 11, 2008, the Board of Directors of the Company authorized the
redemption of all of the outstanding Rights under the Companys Shareholders
Rights Agreement dated July 1, 2004 (the Rights Plan) at a redemption
price of $0.001 per right. The result of this redemption is to effectively
terminate the Rights Plan. In connection
with the contemplated dissolution of the Company, the Companys board of
directors also terminated the Amended and Restated 2005 Employee Stock Purchase
Plan, effective upon the consummation of the Consensual Foreclosure, and the
Commonwealth Energy Corporation 1999 Equity Incentive Plan, as amended, and the
Amended and Restated Commerce Energy Group, Inc. 2006 Stock Incentive Plan,
effective upon the dissolution of the Company.
4
There
are no material relationships, other than with respect to the cancelled
warrants, between the Company and its directors, officers (or any associate of
any such director or officer) or affiliates, on the one side, and Jesup,
Corbett and Mikles and their respective affiliates, on the other side.
Item 2.01. Completion of Acquisition or Disposition of
Assets
The
Information set forth under Item 1.01 of this Current Report on Form 8-K
is hereby incorporated by reference into this Item 2.01.
On December 11,
2008, in connection with the completion of the Consensual Foreclosure described
in Item 1.01 of this Current Report on Form 8-K and pursuant to the terms
and conditions of the Acceptance Agreement, the Company accepted the
foreclosure of all its interest in the common stock in Commerce, and certain
other securities, and agreed to the agreements of AP Finance and CG&E
contained in the Acceptance Agreement, including the satisfaction of the Companys
liabilities and obligations with respect to the Secured Debt under Section 9-620
of the UCC as in effect in the State of New York.
As a
result of the consummation of the Consensual Foreclosure, the Company has
ceased all operations and the Company intends to call and hold a special
meeting of its shareholders at which the Companys shareholders will be asked
to consider and approve the dissolution of the Company.
There
are no material relationships, other than with respect to the Acceptance
Agreement, the Secured Debt and the cancelled warrants, between the Company and
its directors, officers (or any associate of any such director or officer) or
affiliates, on the one side, and AP Finance or CG&E and their respective
directors, officers (or any associate of any such directors or officers) or
affiliates, on the other side.
The
foregoing description of the Acceptance Agreement is qualified in its entirety
by the full text of the Acceptance Agreement, a copy of which is filed as Exhibit 99.1
to this Current Report on Form 8-K.
Item 2.04 Triggering Events That
Accelerate or Increase a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement
(a) The
Information set forth under Item 1.01 of this Current Report on Form 8-K
is hereby incorporated by reference into this Item 2.04.
On December 11,
2008, AP Finance and CG&E made a demand under the Demand Note and notified
us that a default exists under the Purchase Agreement and the Security
Agreement, for which as a result an event of default exists under the Purchase
Agreement, the Notes, the Demand Note and the Credit Facility, making all of
the Companys and Commerces obligations under the Purchase Agreement, the
Notes, the Demand Note, the Security Agreement and the Credit Facility (the Secured
Debt) immediately due and payable in the aggregate amount of $28,743,144.
On December 11,
2008, AP Finance and CG&E proposed, under Section 9-620 of the UCC as
in effect in the State of New York, to accept all shares of stock in Commerce
and certain other securities held by the Company in satisfaction of the Companys
liabilities and obligations with respect to the Secured Debt pursuant to the
terms and conditions of the Acceptance Agreement (the Consensual Foreclosure).
The
Company had the right not to consent to, and thereby delay, the Consensual
Foreclosure. The Company recognized,
however, that this delay would likely not prevent a foreclosure. To induce the Company to accept the
Consensual Foreclosure, AP Finance and CG&E agreed to allow Commerce to pay
a dividend to the Company in the aggregate amount of $3.1 million. The Companys board of directors determined
that, as a result of the proposed Consensual Foreclosure and the dividend to be
paid to the Company by Commerce, the Company would be able to make a
distribution to its shareholders in the amount of $2,614,780, after providing
for all known or reasonably foreseeable obligations of the Company.
5
Item 3.01 Notice of Delisting or
Failure to Satisfy a Continued Listing Rule or Standard; Transfer of
Listing
(d) In
connection with the Consensual Foreclosure, the Companys board of directors
determined to initiate the withdrawal of the Companys shares from the NYSE
Alternext US, previously known as the American Stock Exchange (the Exchange). The Company is in the process of submitting a
letter to the Exchange requesting the withdrawal of its shares of common stock
from the Exchange. The Company also intends to file a Form 25 with the
Securities and Exchange Commission regarding its withdrawal from the Exchange. The Company has ceased all operations and
intends to call and hold a special meeting to seek stockholder approval to
dissolve the Company. The Company also
will not be in compliance with Section 1003 (a)(i) and Section 1003
(c)(i) of the Exchanges continued listing standards.
Item 5.02 Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers
(b) On
December 11, 2008, Gregory L. Craig resigned as Chief Executive Officer
and as a director of the Company and a director of Commerce. Mr. Craigs resignation as a director of
the Company and as a director of Commerce was effective upon the consummation
of the Consensual Foreclosure. Mr. Craigs
resignation as Chief Executive Officer of the Company shall become effective
immediately following the filing of the Companys Quarterly Report on Form 10-Q
for the quarterly period ended October 31, 2008 with the SEC.
Also
on December 11, 2008: Michael J. Fallquist resigned as Chief Operating
Officer of the Company and as a director of Commerce; John H. Bomgardner, II
resigned as Senior Vice President and General Counsel of the Company; and David
Yi resigned as Chief Risk Officer of the Company. The resignations of Messrs. Fallquist,
Bomgardner and Yi were effective upon the consummation of the Consensual
Foreclosure. Following the effectiveness
of Mr. Craigs resignation, Mr. Mitchell, as Chief Financial Officer and
Secretary of the Company, will be the sole remaining officer of the
Company. So long as Mr. Mitchell is
employed by Commerce, Mr. Mitchell shall not receive separate compensation
for his services as Chief Financial Officer and Secretary of the Company. If Mr. Mitchell
is no longer employed by Commerce, however, Mr. Mitchell shall receive
from the Company cash compensation equal to $275 per hour for hours actually
worked in connection with his role as the Companys Chief Financial Officer and
Secretary.
In
addition, on December 11, 2008, Charles E. Bayless, Gary J. Hessenauer,
Mark S. Juergensen, Dennis R. Leibel and Robert C. Perkins resigned as
directors of the Company, effective upon the consummation of the Consensual
Foreclosure. Mr. Juergensen also
resigned as a director of Commerce effective upon the consummation of the
Consensual Foreclosure. Rohn E.
Crabtree, an independent Class I director of the Company remains the sole
director of the Company, the sole member of the Audit Committee and was named
Chairman of the Board. It is the
intention of Mr. Crabtree to serve through the winding up stage of the
Company. The Companys board of
directors determined that Mr. Crabtree shall receive a cash retainer of
$8,000 per quarter for his continued service as a director, a member of the
Audit Committee and Chairman of the Board, which cash retainer shall be in lieu
of any and all other compensation (cash or otherwise) to which Mr. Crabtree
would have been entitled under the Companys compensation policies applicable
to non-employee directors.
(e) On
December 11, 2008, the Company entered into amendments (collectively, the Employment
Agreement Amendments) to the following employment agreements between the
Company and its executive officers after being approved by the Compensation
Committee of the Companys Board of Directors (collectively, the Employment
Agreements): the employment agreement dated as of February 20, 2008
between the Company and Gregory L. Craig; the employment agreement dated as of March 10,
2008 between the Company and Michael J. Fallquist; the employment letter
agreement dated as of July 10, 2008 between the Company and C. Douglas
6
Mitchell;
and the employment letter agreement dated as of July 18, 2008 between the
Company and John H. Bomgardner, II.
Among
other things, the Employment Agreement Amendments, which became effective
immediately prior to the consummation of the Consensual Foreclosure described
in Item 1.01 of this Current Report on Form 8-K: (i) assign the
Employment Agreements and all liabilities and obligations of the Company
thereunder, including but not limited to liabilities relating to severance, to
Commerce; (ii) fix the term of employment with Commerce for the respective
executives at one month following the consummation of the Consensual
Foreclosure; (iii) provide for severance in an amount equal to eight
months of salary continuation and eight months reimbursement of insurance
premiums relating to continued health coverage; and (iv) except in the
case of Mr. Mitchell, whose 66,667 remaining shares of unvested restricted
stock vested in full upon the consummation of the Consensual Foreclosure, terminate
any further vesting of stock options or shares of restricted stock previously
granted to the respective executives.
The Employment Agreement Amendments deleted the existing termination
provisions in the Employment Agreements including the Change in Control
provisions and replaced them with the provisions noted above.
Copies
of the Employment Agreement Amendments for Messrs. Craig, Fallquist,
Bomgardner and Mitchell are attached hereto as Exhibits 99.3, 99.4, 99.5 and
99.6, respectively.
Additionally,
effective December 11, 2008, the Compensation Committee of the Companys
Board of Directors approved a retention agreement between the Company and David
Yi, an officer, but not a named executive officer, of the Company (the Retention
Agreement) dated as of December 8, 2008.
The Retention Agreement, which became effective immediately prior to the
consummation of the Consensual Foreclosure, provides that Mr. Yi shall be
entitled to a bonus of $50,000 if he remains employed by Commerce and satisfies
certain conditions during the 120 days immediately following the Consensual
Foreclosure.
The
Employment Agreements, as amended by the Employment Agreement Amendments, and
the Retention Agreement were assigned to, and assumed by, Commerce in
connection with the Consensual Foreclosure.
Item 7.01 Regulation FD Disclosure
On December 11,
2008, the Company issued a press release announcing that the Consensual
Foreclosure was completed, describing the other transactions related thereto,
disclosing the declaration of a cash dividend and the redemption of the rights
issued pursuant to the Rights Agreement and also disclosing other actions
disclosed in this Current Report on Form 8-K. A copy of the press release dated December 11,
2008 is being furnished as Exhibit 99.7 to this Current Report on Form 8-K.
Item 8.01. Other Events
On December 11, 2008, the Companys board of directors
declared a dividend of $0.084 per share on shares of the Companys common stock
payable to holders of record as of the close of business on December 11,
2008. Additionally, on December 11,
2008, the Company took action to redeem all outstanding rights under the Rights
Agreement dated as of July 1, 2004 between the Company and Computershare
Trust Company, as rights agent. The
Company has delivered the aggregate amount of the distribution to its payment
agent with irrevocable instructions to make distributions to the Companys
shareholders as soon as practical. The
distribution is expected to be made to shareholders during the week of December
15, 2008.
Item 9.01. Financial Statements and Exhibits
(b) Pro
Forma Financial Information
The pro forma financial information related to the
disposition described in Item 2.01 above is included for the fiscal year ended July 31,
2008, and furnished with this Current Report on Form 8-K on pages F-1
through F-3 herein. The information
being furnished pursuant to this Item 9.01(b) and set forth on pages F-1
through F-3 shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as expressly set forth by specific
reference in such filing.
7
(d) Exhibits
Exhibit No.
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Description
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99.1
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Acceptance Agreement dated as of December 11,
2008 among Commerce Energy Group, Inc., AP Finance, LLC and Commerce Gas
and Electric Corp.
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99.2
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Assumption Letter dated as of December 11, 2008
between Commerce Energy Group, Inc. and Commerce Energy, Inc.
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99.3
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Amendment to Employment Agreement dated
December 11, 2008 between Commerce Energy Group, Inc. and Gregory
L. Craig.
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99.4
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Amendment to Employment Agreement dated
December 11, 2008 between Commerce Energy Group, Inc. and Michael
J. Fallquist.
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99.5
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Amendment to Employment Letter Agreement dated
December 11, 2008 between Commerce Energy, Inc. and C. Douglas
Mitchell.
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99.6
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Amendment to Employment Letter Agreement dated
December 11, 2008 between Commerce Energy, Inc. and John H.
Bomgardner.
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99.7
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Press Release of Commerce Energy Group, Inc.
dated December 11, 2008
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8
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, Commerce Energy Group, Inc. has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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COMMERCE ENERGY GROUP,
INC.
a Delaware corporation
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Date: December 12,
2008
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By:
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/s/
C. DOUGLAS MITCHELL
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C.
Douglas Mitchell
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Chief
Financial Officer
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9
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
As is described further in this Current Report on Form 8-K, on December 11,
2008, Commerce Energy Group, Inc. (the Company) consented to a consensual
foreclosure under Section 9-620 of the Uniform Commercial Code as in effect in
the State of New York, pursuant to which the holders of the Companys secured
debt agreed to accept all shares of stock in Commerce Energy, Inc. (Commerce)
and certain other securities held by the Company in satisfaction of the
Companys liabilities and obligations with respect to its secured debt (the
Consensual Foreclosure).
In connection with the Consensual Foreclosure, Commerce paid a
dividend to the Company in the aggregate amount of $3.1 million and agreed to
assume certain liabilities and obligations of the Company. Also in connection with the Consensual
Foreclosure, the Company approved a distribution to its shareholders in the
aggregate amount of $2,614,780. The
distribution was comprised of a dividend on shares of the Companys common
stock in the amount of $0.084 per share and a redemption of all of the outstanding
rights under the Companys Shareholders Rights Agreement dated July 1, 2004 at
a price of $0.001 per right.
As a result of the Consensual Foreclosure, the Company ceased all
operations and the Company intends to call and hold a special meeting of the
Companys shareholders, at which the Companys shareholders will be asked to
consider and approve the dissolution of the Company.
The following unaudited pro forma condensed consolidated balance
sheet for the year ended July 31, 2008 is presented as if the Consensual
Foreclosure had been consummated on August 1, 2007, the first day of the
fiscal year ended July 31, 2008. No
statement of operations is presented because the Company ceased all operations
in connection with the consummation of the Consensual Foreclosure. The adjustments set forth in the Pro Forma
Adjustments column are described in the Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements.
The unaudited pro forma condensed consolidated balance sheet for
the year ended July 31, 2008 is provided for illustrative purposes only
and is not necessarily indicative of what the financial position of the Company
would actually have been had the Consensual Foreclosure occurred on the
respective date indicated, nor do they represent a forecast of the financial
position as of any future date.
All information contained herein is derived from and should be
read in conjunction with the historical consolidated financial statements of the
Company as of and for the year ended July 31, 2008, included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission (SEC) on November 13, 2008.
Index to Unaudited Pro Forma Condensed Consolidated
Financial Statements
|
Page
|
Unaudited
Pro Forma Condensed Consolidated Balance Sheet as of July 31, 2008
|
F-2
|
|
|
Unaudited Notes
to Pro Forma Condensed Consolidated Financial Statements
|
F-3
|
F-1
COMMERCE
ENERGY GROUP, INC.
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
|
|
As reported
July 31, 2008
|
|
Pro Forma
Adjustments
|
|
Footnote
|
|
Pro Forma
July 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,042
|
|
$
|
(1,942
|
)
|
1
|
|
$
|
3,100
|
|
Accounts receivable, net
|
|
82,416
|
|
(82,416
|
)
|
|
|
0
|
|
Natural gas
inventory
|
|
7,717
|
|
(7,717
|
)
|
|
|
0
|
|
Prepaid expenses
and other current assets
|
|
13,269
|
|
(13,269
|
)
|
|
|
0
|
|
Total current assets
|
|
$
|
108,444
|
|
$
|
(105,344
|
)
|
|
|
$
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
1,600
|
|
(1,600
|
)
|
2
|
|
0
|
|
Property and equipment, net
|
|
8,009
|
|
(8,009
|
)
|
2
|
|
0
|
|
Goodwill
|
|
0
|
|
0
|
|
2
|
|
0
|
|
Other intangible assets
|
|
3,976
|
|
(3,976
|
)
|
2
|
|
0
|
|
Total assets
|
|
$
|
122,029
|
|
$
|
(118,929
|
)
|
|
|
$
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Energy and accounts payable
|
|
$
|
58,500
|
|
$
|
(58,500
|
)
|
2
|
|
$
|
0
|
|
Dividend and
redemption payable
|
|
2,615
|
|
3
|
|
|
|
2,615
|
|
Short term borrowings and accrued liabilities
|
|
23,657
|
|
(23,172
|
)
|
2
|
|
485
|
|
Total current liabilities
|
|
$
|
82,157
|
|
$
|
(79,057
|
)
|
|
|
$
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Common stock
$0.001 par value, 150,000 authorized, 30,875 shares issued and outstanding at
April 30, 2008
|
|
61,919
|
|
(61,919
|
)
|
2
|
|
0
|
|
Other comprehensive loss
|
|
(996
|
)
|
996
|
|
2
|
|
0
|
|
Retained earnings (accumulated
deficit)
|
|
(21,051
|
)
|
21,051
|
|
2
|
|
0
|
|
Total stockholders' equity
|
|
39,872
|
|
(39,872
|
)
|
|
|
0
|
|
Total
liabilities and stockholders equity
|
|
$
|
122,029
|
|
$
|
(118,929
|
)
|
|
|
$
|
3,100
|
|
F-2
1. Basis of Pro Forma Presentation
The unaudited pro forma condensed consolidated balance sheet as of
year ended July 31, 2008 is based on the historical financial statements
of the Company, after giving effect to the Consensual Foreclosure.
The unaudited pro forma condensed consolidated balance sheet as of
July 31, 2008 presents the financial position of the Company assuming the
Consensual Foreclosure had been completed on August 1, 2007.
The unaudited pro forma condensed consolidated statement of
operations is not included because the Company ceased all operations in connection
with the Consummation of the Consensual Foreclosure and no further operations
are contemplated. The pro forma
adjustments and assumptions are based on estimates, evaluations and other data
currently available and, in the Company's opinion, provide a reasonable basis
for the fair presentation of the estimated effects directly attributable to the
Consensual Foreclosure and the other transaction related thereto.
The unaudited pro forma condensed consolidated balance sheet as of
July 31, 2008 is provided for illustrative purposes only and is not
necessarily indicative of what the financial position of the Company would
actually have been had the Consensual Foreclosure occurred on the respective
date indicated, nor do they represent a forecast of the financial position as
of any future date.
All information contained herein should be read in conjunction the
following historical consolidated financial statements of the Company the year
ended July 31, 2008, included in the Company's Annual Report on Form 10-K filed
with the SEC on November 13, 2008.
2. Pro
Forma Adjustments
The following pro forma adjustments are included in the unaudited
pro forma condensed balance sheet as of July 31, 2008.
(1) To
reflect the $3.1 million dividend paid by Commerce to the Company in connection
with the Consensual Foreclosure.
(2) To
reflect the Consensual Foreclosure.
(3) To
reflect the declaration of the dividend on shares of the Companys common stock
and the redemption of the rights in connection with the Consensual Foreclosure.
F-3
EXHIBIT
INDEX
Exhibit No.
|
|
Description
|
|
|
|
99.1
|
|
Acceptance Agreement dated as of December 11,
2008 among Commerce Energy Group, Inc., AP Finance, LLC and Commerce Gas
and Electric Corp.
|
|
|
|
99.2
|
|
Assumption Letter dated as of December 11, 2008
between Commerce Energy Group, Inc. and Commerce Energy, Inc.
|
|
|
|
99.3
|
|
Amendment to Employment Agreement dated
December 11, 2008 between Commerce Energy Group, Inc. and Gregory
L. Craig.
|
|
|
|
99.4
|
|
Amendment to Employment Agreement dated
December 11, 2008 between Commerce Energy Group, Inc. and Michael
J. Fallquist.
|
|
|
|
99.5
|
|
Amendment to Employment Letter Agreement dated
December 11, 2008 between Commerce Energy, Inc. and C. Douglas
Mitchell.
|
|
|
|
99.6
|
|
Amendment to Employment Letter Agreement dated
December 11, 2008 between Commerce Energy, Inc. and John H.
Bomgardner.
|
|
|
|
99.7
|
|
Press Release of Commerce Energy Group, Inc.
dated December 11, 2008
|
EX-99.1
2
a08-30253_1ex99d1.htm
EX-99.1
Exhibit 99.1
Commerce
Energy Group, Inc.
600 Anton
Boulevard
Suite 2000
Costa
Mesa, CA 92626
AP Finance, LLC
152 West 57th Street,
54th Floor
New York, New York
Commerce Gas and Electric
Corp.
25 Sheppard Avenue West
Suite 1605
Toronto, ON M2N 6S6
Universal Energy Group
Ltd.
25 Sheppard Avenue West
Suite 1605
Toronto, ON M2N 6S6
Re: Acceptance Agreement
We have received the notice of default from and
proposal from AP Finance, LLC (APF) and Commerce Gas and Electric Corp. (CGE
and, together with APF, collectively, the Holders) to accept collateral in
full satisfaction of the obligations it secures dated December 10, 2008,
given pursuant to Section 9-620 of the Uniform Commercial Code as in
effect in the State of New York (the Section 9-620 Proposal) pursuant to
the Note and Warrant Purchase Agreement dated August 21, 2008 (the NPA)
and the Security Agreement of the same date (together with all agreements and
documents executed by us in favor of APF in connection with the NPA, other than
the Warrant (as defined therein), collectively, the Note Purchase Documents). You have confirmed to us that, immediately
prior to the effectiveness of this Agreement, APF will have sold and assigned
to CGE, and CGE will have accepted and assumed, all of APFs remaining right,
title and interest in and to, and obligations under, the Note Purchase
Documents. You have also confirmed to us
that Wachovia Capital Finance Corporation (Western) (Wachovia) has assigned
to APF and CGE all of its rights, title and interest in the Loan and Security
Agreement dated as of June 8, 2006, by and among Commerce Energy, Inc.,
Commerce Energy Group, Inc., Wachovia, as agent, Wachovia and Wells Fargo
Foothill, LLC (together with the other Financing Agreements, as defined therein,
collectively, the Wachovia Agreements).
We acknowledge (on our own behalf and on behalf of Commerce Energy, Inc.)
that (a) events of default have occurred and are continuing under the
terms of the Note Purchase Documents, (b) as a result thereof, the Holders
are entitled to exercise all of their rights, options and remedies available
under the Note Purchase Documents, and otherwise available at law or in equity,
and (c) prior to giving effect to the transactions contemplated by the Section 9-620
Proposal, all of the indebtedness and other obligations under the Note Purchase
Documents are
unconditionally owing by
us and Commerce Energy, Inc., on a joint and several basis, without
offset, defense or counterclaim of any kind, nature and description whatsoever. Pursuant to Section 9-620 of the Uniform
Commercial Code as in effect in New York we hereby consent to CGEs acceptance
of the following collateral in full satisfaction of the obligations under the
Note Purchase Documents: (1) 100%
of the shares of stock in Commerce Energy, Inc., and (2) all shares
of stock of Power Efficiency Corporation owned by us (collectively, the Subject
Collateral), provided that CGE and/or APF, as applicable, confirm by executing
this Acceptance Agreement that, upon the effectiveness of this Agreement:
· CGE
consents to Commerce Energy, Inc. having paid us a $3.1 million dividend
prior to the delivery of this Acceptance Agreement and CGE agrees to indemnify
the directors and officers of Commerce Energy, Inc. and their agents and
representatives who assist in paying the dividend against any losses, claims,
causes of action, liability, damage or expense arising in connection with such
dividends.
· CGE
consents to the assumption by Commerce Energy, Inc. of certain of our
agreements and its agreement to pay certain other liabilities or obligations,
as identified in a letter dated today (the Assumption Letter). CGE agrees to (i) cause Commerce Energy, Inc.
to perform all of its obligations thereunder; and (ii) indemnify us, our
officers, directors, employees, agents and representatives from any loss,
claim, cause of action, liability, damage or expense arising from any breach by
Commerce Energy, Inc. of the terms of the Assumption Letter.
· CGE
releases Commerce Energy Group, Inc. from any and all liabilities or
obligations under the Note Purchase Documents effective upon the delivery and
acceptance of this Acceptance Agreement and the vesting in CGE of all our
rights to the Subject Collateral and agree to look solely to Commerce Energy, Inc.,
for such amounts.
· Each
of CGE and APF releases Commerce Energy Group, Inc. from any and all
liabilities or obligations under the Wachovia Agreements effective upon the
delivery and acceptance of this Acceptance Agreement and the vesting in CGE of
all our rights to the Subject Collateral and agree to look solely to Commerce
Energy, Inc., for such amounts.
· The
Warrant to acquire our common stock held by APF is cancelled.
In addition, when this
Acceptance Agreement becomes effective, in addition to our acknowledgement
above that such effectiveness vests in CGE all our rights to the Subject
Collateral, we hereby confirm to CGE and APF that:
1. General Release. Commerce Energy Group, Inc. hereby fully,
completely, absolutely and unconditionally releases, discharges and holds
harmless each of APF, CGE, Universal Energy Group Ltd. and Commerce Energy, Inc.
and any successor to them, and each of their past and present managers,
members, officers, directors, shareholders, employees, agents, attorneys,
affiliates and assigns, whether acting in their representative or individual
capacities, from any and all claims, causes of action, rights and actions of
any kind or nature whatsoever, either at law or in equity, including without
limitation all
2
claims in any way
arising out of or relating to the Note Purchase Documents, the Subject
Collateral or this foreclosure except for obligations arising from this Acceptance
or the Assumption Letter.
2. Unknown Claims. It is Commerce Energy Group, Inc.s
intention to fully, finally and forever settle, release and resolve all claims
against you or your affiliates, regardless of whether known or unknown,
foreseen or unforeseen, suspected or unsuspected, vested or contingent, accrued
or unaccrued except for obligations arising from this Acceptance or the
Assumption Letter. The releases given
herein shall be and remain in effect to their full extent, notwithstanding the
discovery or existence of any additional or different facts. We knowingly and voluntarily waive the
provisions of California Civil Code section 1542, which provides: A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially affected
his settlement with the debtor.
3. Representation and Warranty. We represent and warrant to APF and CGE that
there are no secured parties or lienholders that are entitled to receive a copy
of the Section 9-620 Proposal pursuant to Section 9-621(a)(2) or
(3) of the Uniform Commercial Code.
4. Further Deliveries. We will immediately deliver to CGE, the
following:
(a) evidence
acceptable to CGE that the board of directors of Commerce Energy Group, Inc.,
by allocating a portion of the dividend it is paying to its stockholders for
such purpose and giving appropriate notice, has redeemed in full all
outstanding Rights, as defined in and pursuant to the terms of the rights
agreement dated as of July 1, 2004, as amended, between Commerce Energy
Group, Inc. and Computershare Trust Company, as agent; and
(b) certificates
of the Chief Executive Officer of Commerce Energy Group, Inc. as to
certain factual matters.
In
addition, we confirm that we have received evidence of agreements to cancel
warrants held by Jesup & Lamont, Incorporated, Bill Corbett and the
Lee E. Mikles Revocable Trust Dated March 26, 1996.
5. Severability. If any provision of this Acceptance Agreement
is invalid or unenforceable for any reason, then such provision shall be deemed
automatically adjusted to the minimum extent necessary to conform to the
requirements for validity and, as so adjusted, shall be deemed a provision of this
Acceptance Agreement as though originally included herein. In the event that the provision invalidated
is of such a nature that it cannot be so adjusted, the provision shall be
deemed deleted from this Acceptance Agreement as though the provision had never
been included herein. In either case,
the remaining provisions of this Acceptance Agreement shall remain in effect.
6. Counterparts. This Acceptance Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute this
Acceptance Agreement by signing any such counterpart. Delivery by facsimile or electronic
transmission shall bind the parties.
3
7. Entire Agreement. This Acceptance Agreement constitutes the
entire agreement between the parties hereto, and supersedes and replaces all
prior and contemporaneous negotiations, representations and understandings,
whether written or oral. No party has
relied upon any promise or agreement not expressly set forth herein. No modification or waiver of any of the terms
hereof shall be effective unless in writing, signed by the party to be charged
with such modification or waiver.
8. Effectiveness. This Acceptance Agreement shall be effective
upon the execution and delivery thereof by all signatories listed below. The transactions contemplated by the Section 9-620
Proposal shall be deemed to have been consummated upon the Effectiveness of
this Acceptance Agreement.
9. APF. Except for the obligation to cancel the
Warrant as set forth above, APF shall have no obligations under this Acceptance
Agreement.
10. Wachovia Agreements. Notwithstanding any provision of the
Assignment, Acceptance, Resignation and Consent Agreement, dated as of the date
hereof, among APF, CGE, Wachovia Capital Finance Corporation (Western), Wells
Fargo Foothill, LLC, Commerce Energy, Inc. and Commerce Energy Group, Inc.,
no obligations under this Acceptance Agreement or the Assumption Letter are
released by the Wachovia Assignment. For
sake of clarity, the parties acknowledge that the transactions contemplated by
the Section 9-620 Proposal shall not affect the indebtedness or other
obligations of Commerce Energy, Inc. under the Wachovia Agreements, which
indebtedness and other obligations are unconditionally owing by Commerce Energy, Inc.
without offset, defense or counterclaim of any kind, nature and description
whatsoever.
[Signature page follows]
4
|
COMMERCE ENERGY GROUP, INC.
|
|
|
|
By:
|
/s/ GREGORY
L. CRAIG
|
|
|
Gregory L. Craig
|
|
|
Chairman and Chief
Executive Officer
|
|
|
|
Confirmed, agreed and
accepted this 11th day of December, 2008.
|
|
|
|
UNIVERSAL ENERGY GROUP LTD.
|
|
|
|
|
|
By:
|
/s/ Michael Silver
|
/s/ Shawn Dym
|
|
Name:
|
Michael Silver
|
Shawn Dym
|
|
Title:
|
General Counsel
|
Senior V.P.
|
|
|
and Corp. Secy
|
|
|
|
COMMERCE GAS AND ELECTRIC
CORP.
|
|
|
|
|
|
By:
|
/s/ Michael Silver
|
/s/ Shawn Dym
|
|
Name:
|
Michael Silver
|
Shawn Dym
|
|
Title:
|
General Counsel
|
Senior V.P.
|
|
|
and Corp. Secy
|
|
|
|
|
|
|
AP FINANCE, LLC
|
|
|
|
|
|
By:
|
/s/ David Levy
|
|
Name:
|
David Levy
|
|
Title:
|
|
|
|
|
|
|
5
|
COMMERCE ENERGY, INC.
|
|
|
|
|
|
By:
|
/s/ C. Douglas Mitchell
|
|
Name:
|
C. Douglas Mitchell
|
|
Title:
|
CFO
|
6
EX-99.2
3
a08-30253_1ex99d2.htm
EX-99.2
Exhibit 99.2
COMMERCE ENERGY, INC.
600 Anton Boulevard
Suite 2000
Costa Mesa, CA 92626
Commerce Energy Group, Inc.
600 Anton Boulevard
Suite 200
Costa
Mesa, CA 92626
Ladies and Gentlemen:
You and our secured
lenders (being AP Finance, LLC and Commerce Gas and Electric Corp.) have
notified us that a default exists under the Note and Warrant Purchase Agreement
dated August 21, 2008 and the Security Agreement of the same date between
us and AP Finance, LLC (as amended and assigned, the Secured Debt). You have confirmed to us that, immediately
prior to the effectiveness of this Agreement, AP Finance, LLC will have sold
and assigned to Commerce Gas and Electric Corp., and Commerce Gas and Electric
Corp. will have accepted and assumed, all of AP Finance, LLCs remaining right,
title and interest in and to, and obligations under, the Secured Debt. We understand that the secured lenders have
proposed to accept: (1) 100% of the shares of stock in us, and (2) all
shares of stock of Power Efficiency Corporation owned by you, which are pledged
as collateral for the Secured Debt, in satisfaction of that debt (the Debt Satisfaction Transaction). We would benefit significantly from the
satisfaction of the Secured Debt, and to induce you to accept the proposal from
our secured lenders we agree with you as follows:
1. We
will pay to you today a dividend of $3,100,000 which you agree to hold in trust
until you accept the proposal and promptly return if you do not confirm your
written acceptance of the proposal to AP Finance, LLC and Commerce Gas and
Electric Corp. on or prior to 5:00 p.m. PST, December 12, 2008.
2. We
confirm that, with respect to all contracts on which you and we are jointly
liable, or with respect to which you have guaranteed our obligations, including
all those which are set out as items 7 through 13 on Schedule A, we will fully
perform. We will pay and perform all of
our accounts, trade payables or other matters arising from the operation of the
business of Commerce Energy, Inc. (regardless of by whom such claim is
payable), all contracts of Commerce Energy Group, Inc. listed on Schedule
A to this letter, and contracts of Commerce Energy Group, Inc. related to
the business and operations of Commerce Energy, Inc. not listed involving
aggregate payments or other consideration payable or receivable by or to
Commerce Energy Group, Inc. thereunder over the term of each such contract
of less than $100,000 per contract. We
will indemnify you and your directors, officers, employees, representatives and
agents against any loss, claim, cause of action, liability, damage or expense
based on or arising from our failure to perform any of such obligations or
agreements or from claims made against you because you were our
shareholder,
excluding claims based on or arising from federal or state securities laws,
environmental laws, or income tax laws.
3. We
will make available to your accountants all records and reasonable assistance
needed to file federal and state income tax returns for your fiscal year ended July 31,
2008 and for the period ending on the date your stockholders approve
dissolution or dissolution otherwise occurs, provided such dissolution occurs
in 2009. You agree that we may review
and comment upon such returns before they are filed. We agree that any liability on such returns
attributable to our operations is our responsibility, but you and we confirm
that our tax advisors have determined no state or federal income tax is
currently due or anticipated to be due.
4. We
hereby assume responsibility for the sponsorship and administration of your
employee benefit plans which cover our employees, except for the Commonwealth
Energy Corporation 1999 Equity Incentive Plan, the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, and the Commerce Energy Group, Inc. Amended and
Restated 2005 Employee Stock Purchase Plan, which
you will terminate. You and we will
cooperate to obtain any required consents of third parties as soon as
practicable. To the extent that the
consent of a third party is required in respect of an employee benefit plan,
such assumption hereunder will not be effective until such consent is obtained,
but we will nonetheless pay any amounts for which you would be responsible for
such plan. We will pay all costs to
document such transfer of responsibility (including costs in respect of
appropriate plan amendments to remove you as sponsor or fiduciary). It is acknowledged that it is our mutual
intent that such assumptions hereunder take place effective as of today, to the
extent permitted by the applicable plans and the providers thereof.
5. We
hereby assume all liability for that certain Lease dated as of July, 2006
between SP IV Millennium Center, L.P. and Commerce Energy Group, Inc. for Suite 950-East,
at Urban Towers-East, 222 West Las Colinas Boulevard, Irving, Texas as amended
by Amendment No. 1 dated as of September 12, 2007, and you hereby
assign to us all rights and benefits thereunder (including, without limitation,
all rights to any refund or return of deposits or like amounts thereunder), and
we will indemnify you and your directors, officers, employees, representatives
and agents for any loss, claim, cause of action, liability, damage or expense
based on or arising from such lease.
6. We
hereby assume all responsibility for the defense of the proceedings identified
on Schedule B to this Agreement and all related claims and will indemnify you
and hold you and your directors, officers, employees, representatives and
agents harmless from and against any loss, claim, cause of action, liability,
damage or expense arising in connection with such matter. You will provide us with all requested
cooperation and assistance in connection with our conduct of the defense of
such proceedings as we may from time to time require.
7. We
will assume the amended employment agreements with the individuals referred to
on Schedule C to this letter on such terms as are mutually acceptable to us and
such individuals as described in items 1, 2, 4 and 5 of Schedule A.
2
8. We
will pay $218,000 of the premiums for a six year extension of policies No. 610-61-40
(D&O), ELU105497-08 (D&O Excess), HS-0303-2136-070608 (Side A) and
00-667-19-79 (EPLI) issued by American Insurance Group or one of its subsidiaries
(it being acknowledged that you will pay the balance of the premiums owing in
respect of such policies).
9. We
will store your corporate records and make them available to your officers,
representatives or agents for the purpose of winding up your corporate affairs
provided that we shall have no duty except to exercise reasonable care. After December 31, 2012 we shall have
the right to destroy these records unless you or your representatives have
requested delivery of the records to them at their expense.
10. We
will permit Mr. Douglas Mitchell as part, but not all, of his employment
by us while it continues pursuant to his amended employment agreement, to
administer the orderly winding up of your business and will provide him
reasonable administrative and office support (irrespective of the length of
time his employment with us continues) for a period of three (3) months
following the Debt Satisfaction Transaction.
11. We
agree to execute and deliver such assignment and assumption agreements or other
instruments, and take such other actions, as you may reasonably request to
further document, confirm or carry out the provisions of this Agreement.
[SIGNATURE PAGE
FOLLOWS]
3
|
COMMERCE ENERGY, INC.,
|
|
a California
corporation
|
|
|
|
By:
|
/s/ C. Douglas Mitchell
|
|
Name:
|
C. Douglas Mitchell
|
|
Title:
|
CFO
|
Accepted, agreed and
confirmed this 11th day of December, 2008.
|
COMMERCE ENERGY GROUP,
INC.,
|
|
a Delaware corporation
|
|
|
|
|
|
By:
|
/s/ C. Douglas Mitchell
|
|
Name:
|
C. Douglas Mitchell
|
|
Title:
|
CFO
|
EX-99.3
4
a08-30253_1ex99d3.htm
EX-99.3
Exhibit
99.3
AMENDMENT
TO EMPLOYMENT AGREEMENT
This Amendment (this Amendment)
to the Employment Agreement (the Agreement) dated as of February 20,
2008 by and between Gregory L. Craig (the Executive) and Commerce Energy
Group, Inc. (CEGI), on behalf of itself and any and all of its
subsidiaries, is made and entered into by the Executive, CEGI and Commerce
Energy, Inc. (CEI) and shall become effective, if at all, as of
immediately prior to the consummation of the Consensual Foreclosure (as defined
below). Capitalized terms not defined in
this Amendment shall have the meaning set forth in the Agreement.
RECITALS
WHEREAS, the
parties hereto wish to amend certain provisions of the Agreement effective as
of immediately prior to the Consensual Foreclosure, if at all.
NOW, THEREFORE,
for $100 to be paid by CEI to Executive and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Effectiveness
This Amendment shall
become effective, if at all, immediately prior to the consummation of the
consensual foreclosure under Section 9-620 of the Uniform Commercial Code
as in effect in New York, pursuant to which CEGI consents to the acceptance by
AP Finance, LLC and Commerce Gas and Electric Corp., a Delaware corporation and
a subsidiary of Universal Energy Group Ltd., (collectively, the Lenders) of
certain collateral in satisfaction of certain indebtedness owed to the Lenders
(the Consensual Foreclosure). This
Amendment shall not take effect if the Consensual Foreclosure does not occur.
2. Assignment
Upon the effectiveness of
this Amendment, (A) the Agreement, as amended by this Amendment, and all
liabilities and obligations of CEGI and its subsidiaries (other than CEI)
thereunder, shall be assigned to CEI (the Assignment), (B) CEI accepts
the Assignment and agrees to assume and be bound by, and fulfill its
obligations under, the Agreement, as amended by this Amendment, (C) subject
to the terms and conditions of the Agreement, as amended by this Amendment,
Executive shall be employed by CEI, (D) all references to Commerce Energy
Group, Inc. in the Agreement shall be replaced with Commerce Energy, Inc.,
and (E) the Executive consents to the Assignment and hereby agrees that
upon its effectiveness CEGI shall have no liability associated with the
Agreement or this Amendment.
Neither the Consensual
Foreclosure nor the assignment of the Agreement to CEI, shall entitle the
Executive to payments except as identified in this Amendment.
Subject to the earlier
effectiveness of this Amendment, Executive hereby resigns as an officer and
employee of CEGI effective immediately following the filing of CEGIs quarterly
report on
Form 10-Q for the
quarterly period ended October 31, 2008 with the Securities and Exchange
Commission (the CEGI Resignation Time).
Additionally, Executive hereby resigns as a director of CEGI and as a
director of each of its subsidiaries, including, but not limited to, CEI,
effective upon the effectiveness of this Amendment. Executive hereby resigns as an officer of CEI
effective upon the conclusion of the Holdover Period (as defined below). Between the effectiveness of this Amendment
and the CEGI Resignation Time, Executive shall not be entitled to any
compensation or benefits from CEGI and shall only be entitled to the
compensation and benefits provided by CEI under the Agreement, as amended by
this Amendment.
3. Term
Executive shall be
employed by CEI for a period of thirty (30) days following the effectiveness of
this Amendment (the Holdover Period).
If CEI terminates the employment of Executive or does not require his
services during the Holdover Period, it shall nonetheless pay Executives
compensation and benefits for the full Holdover Period and shall pay the
amounts due under Section 6 of this Amendment.
4. Executives
Duties
During the Holdover
Period, the Executives authority, duties or responsibilities may be reduced or
eliminated. Such reductions or
eliminations shall not be a basis for the Executive to assert that CEI breached
the Agreement nor shall they be a basis for the Executive to resign.
5. Release
As of the date the
Executive signs this Amendment, the Executive, to the fullest extent permitted
by law, releases CEGI, and each of its related entities (other than CEI) and
their respective directors, officers, employees, representatives and agents
from any and all known and unknown claims and liabilities, other than those
arising under the Age Discrimination in Employment Act, except for claims
against CEGI for applicable rights of indemnification.
6. Severance
Payment
After the Holdover
Period, the Executive shall continue to receive his Base Salary, payable
monthly, for a period of eight (8) months, less necessary withholdings and
authorized deductions. CEI will also pay
the cost of Executives continued health care insurance coverage under COBRA,
payable monthly, for a period of eight (8) months, provided Executive
elects such continued coverage, or will pay Executive the cash equivalent of
such premiums. The Executive shall
receive no other compensation or benefits under the Agreement or this Amendment
following the end of the Holdover Period; provided, however, that, at the end of the
Holdover Period, Executive shall also be paid for (i) all earned but
unpaid compensation (including accrued but unpaid vacation) through the
effective date of termination, and (ii) reimbursement of expenses properly
incurred on behalf of CEI.
7. Stock
Options and Restricted Stock
No stock options or
shares of restricted stock granted to Executive shall vest after the
effectiveness of this Amendment.
8. Termination
Section 5 of the
Agreement is deleted in its entirety.
9. Proprietary
Information Obligations
Section 6 of the Agreement
continues in full force and effect with regard to CEGI, CEI, and any and all of
its affiliates.
10. Release
In order to receive any
severance benefits or payments provided for under Section 6 of this
Amendment, the Executive must execute and deliver to CEI a valid Waiver and
Release Agreement in a form substantially similar to the release attached as Exhibit C
to the Agreement (with appropriate modifications to reflect the provisions of
this Amendment and otherwise ensure compliance with the current state of the
law). No severance benefits or payments
shall be paid under Section 6 of this Amendment unless and until the
Executive has executed such Waiver and Release Agreement within the time period
specified by CEI in the Waiver and Release Agreement (which shall not be more
than 7 days after such agreement is tendered to the Executive unless otherwise
required by law), and the period within which the Executive may revoke his or
her Waiver and Release Agreement has expired without revocation. The Waiver and Release Agreement will release
all claims the Executive might have against CEGI or CEI under the Agreement or
this Amendment, except claims against CEI for amounts payable under Section 6
of this Amendment and claims against CEI or CEGI for applicable rights of
indemnification.
The Executive may revoke
his signed Waiver and Release Agreement within seven (7) days (or such
other period provided by law) after his signing the Waiver and Release
Agreement. Any such revocation must be made in writing and must be received by
CEI within such seven (7) day (or such other) period. If the Executive timely revokes his Waiver
and Release Agreement, he shall not be eligible to receive any severance
benefits or payments under Section 6 of this Amendment. Notwithstanding the foregoing, if the
expiration of the revocation period described above could occur in a calendar
year later than the calendar year in which the Waiver and Release Agreement is
tendered to the Executive for execution, then in no event will benefits or
payments under the Agreement or this Amendment that are conditioned upon the
effectiveness of the Waiver and Release Agreement be paid prior to the
beginning of such later calendar year.
11. Modifications
and Conflicts
Except as expressly
provided for herein, all the terms and conditions of the Agreement remain in
full force and effect; provided, however, that in the event of a
conflict between the provisions of the Agreement and the provisions of this
Amendment, the provisions of this Amendment shall control.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have duly executed
this Amendment on the date(s) indicated below.
|
EXECUTIVE
|
|
|
|
/s/ GREGORY L. CRAIG
|
|
Gregory L. Craig
|
|
|
|
|
|
COMMERCE ENERGY GROUP,
INC.
|
|
|
|
By:
|
/s/ C. Douglas Mitchell
|
|
Name: C. Douglas
Mitchell
|
|
Title: CFO
|
|
|
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COMMERCE ENERGY, INC.
|
|
|
|
By:
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/s/ C. Douglas Mitchell
|
|
Name: C. Douglas
Mitchell
|
|
Title CFO
|
EX-99.4
5
a08-30253_1ex99d4.htm
EX-99.4
Exhibit 99.4
AMENDMENT
TO EMPLOYMENT AGREEMENT
This Amendment (this Amendment)
to the Employment Agreement (the Agreement) dated as of March 10, 2008
by and between Michael J. Fallquist (the Executive) and Commerce Energy Group, Inc.
(CEGI), on behalf of itself and any and all of its subsidiaries, is made and
entered into by the Executive, CEGI and Commerce Energy, Inc. (CEI) and
shall become effective, if at all, as of immediately prior to the consummation
of the Consensual Foreclosure (as defined below). Capitalized terms not defined in this
Amendment shall have the meaning set forth in the Agreement.
RECITALS
WHEREAS, the
parties hereto wish to amend certain provisions of the Agreement effective as
of immediately prior to the Consensual Foreclosure, if at all.
NOW, THEREFORE,
for $100 to be paid by CEI to Executive and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Effectiveness
This Amendment shall
become effective, if at all, immediately prior to the consummation of the
consensual foreclosure under Section 9-620 of the Uniform Commercial Code
as in effect in New York, pursuant to which CEGI consents to the acceptance by
AP Finance, LLC and Commerce Gas and Electric Corp., a Delaware corporation and
a subsidiary of Universal Energy Group Ltd., (collectively, the Lenders) of
certain collateral in satisfaction of certain indebtedness owed to the Lenders
(the Consensual Foreclosure). This Amendment
shall not take effect if the Consensual Foreclosure does not occur.
2. Assignment
Upon the effectiveness of
this Amendment, (A) the Agreement, as amended by this Amendment, and all
liabilities and obligations of CEGI and its subsidiaries (other than CEI)
thereunder, shall be assigned to CEI (the Assignment), (B) CEI accepts
the Assignment and agrees to assume and be bound by, and fulfill its
obligations under, the Agreement, as amended by this Amendment, (C) subject
to the terms and conditions of the Agreement, as amended by this Amendment,
Executive shall be employed by CEI, (D) all references to Commerce Energy
Group, Inc. in the Agreement shall be replaced with Commerce Energy, Inc.,
and (E) the Executive consents to the Assignment and hereby agrees that
upon its effectiveness CEGI shall have no liability associated with the
Agreement or this Amendment.
Neither the Consensual
Foreclosure nor the assignment of the Agreement to CEI, shall entitle the
Executive to payments except as identified in this Amendment.
Executive hereby resigns
as an officer and employee of CEGI and as a director of all of its
subsidiaries, including, but not limited to, CEI, effective upon the
effectiveness of this
Amendment. Executive hereby resigns as an officer of CEI
effective upon the conclusion of the Holdover Period (as defined below).
3. Term
Executive shall be
employed by CEI for a period of thirty (30) days following the effectiveness of
this Amendment (the Holdover Period).
If CEI terminates the employment of Executive or does not require his
services during the Holdover Period, it shall nonetheless pay Executives
compensation and benefits for the full Holdover Period and shall pay the
amounts due under Section 6 of this Amendment.
4. Executives
Duties
During the Holdover
Period, the Executives authority, duties or responsibilities may be reduced or
eliminated. Such reductions or
eliminations shall not be a basis for the Executive to assert that CEI breached
the Agreement nor shall they be a basis for the Executive to resign.
5. Release
As of the date the
Executive signs this Amendment, the Executive, to the fullest extent permitted
by law, releases CEGI, and each of its related entities (other than CEI) and
their respective directors, officers, employees, representatives and agents
from any and all known and unknown claims and liabilities, other than those
arising under the Age Discrimination in Employment Act, except for claims
against CEGI for applicable rights of indemnification.
6. Severance
Payment
After the Holdover
Period, the Executive shall continue to receive his Base Salary, payable
monthly, for a period of eight (8) months, less necessary withholdings and
authorized deductions. CEI will also pay
the cost of Executives continued health care insurance coverage under COBRA,
payable monthly, for a period of eight (8) months, provided Executive
elects such continued coverage, or will pay Executive the cash equivalent of
such premiums. The Executive shall
receive no other compensation or benefits under the Agreement or this Amendment
following the end of the Holdover Period; provided, however, that, at the end of the
Holdover Period, Executive shall also be paid for (i) all earned but
unpaid compensation (including accrued but unpaid vacation) through the
effective date of termination, and (ii) reimbursement of expenses properly
incurred on behalf of CEI.
7. Stock
Options and Restricted Stock
No stock options or
shares of restricted stock granted to Executive shall vest after the effectiveness
of this Amendment.
8. Termination
Section 5 of the
Agreement is deleted in its entirety.
9. Proprietary
Information Obligations
Section 6 of the
Agreement continues in full force and effect with regard to CEGI, CEI, and any
and all of its affiliates.
10. Release
In order to receive any
severance benefits or payments provided for under Section 6 of this
Amendment, the Executive must execute and deliver to CEI a valid Waiver and
Release Agreement in a form substantially similar to the release attached as Exhibit C
to the Agreement (with appropriate modifications to reflect the provisions of
this Amendment and otherwise ensure compliance with the current state of the
law). No severance benefits or payments
shall be paid under Section 6 of this Amendment unless and until the
Executive has executed such Waiver and Release Agreement within the time period
specified by CEI in the Waiver and Release Agreement (which shall not be more
than 7 days after such agreement is tendered to the Executive unless otherwise
required by law), and the period within which the Executive may revoke his
Waiver and Release Agreement has expired without revocation. The Waiver and Release Agreement will release
all claims the Executive might have against CEGI or CEI under the Agreement or
this Amendment, except claims against CEI for amounts payable under Section 6
of this Amendment and claims against CEI or CEGI for applicable rights of
indemnification.
The Executive may revoke
his signed Waiver and Release Agreement within seven (7) days (or such
other period provided by law) after his signing the Waiver and Release
Agreement. Any such revocation must be made in writing and must be received by
CEI within such seven (7) day (or such other) period. If the Executive timely revokes his Waiver
and Release Agreement, he shall not be eligible to receive any severance
benefits or payments under Section 6 of this Amendment. Notwithstanding the foregoing, if the
expiration of the revocation period described above could occur in a calendar
year later than the calendar year in which the Waiver and Release Agreement is
tendered to the Executive for execution, then in no event will benefits or
payments under the Agreement or this Amendment that are conditioned upon the
effectiveness of the Waiver and Release Agreement be paid prior to the
beginning of such later calendar year.
11. Modifications
and Conflicts
Except as expressly
provided for herein, all the terms and conditions of the Agreement remain in
full force and effect; provided, however, that in the event of a
conflict between the provisions of the Agreement and the provisions of this
Amendment, the provisions of this Amendment shall control.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have duly executed
this Amendment on the date(s) indicated below.
|
EXECUTIVE
|
|
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/s/ MICHAEL J.
FALLQUIST
|
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Michael J. Fallquist
|
|
|
|
|
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COMMERCE ENERGY GROUP,
INC.
|
|
|
|
By:
|
/s/ Gregory L. Craig
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Name: Gregory L. Craig
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|
Title: Chairman and CEO
|
|
|
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COMMERCE ENERGY, INC.
|
|
|
|
By:
|
/s/ Gregory L. Craig
|
|
Name: Gregory L. Craig
|
|
Title Chairman and CEO
|
EX-99.5
6
a08-30253_1ex99d5.htm
EX-99.5
Exhibit
99.5
AMENDMENT
TO EMPLOYMENT AGREEMENT
This Amendment (this Amendment)
to the employment letter agreement (the Agreement) dated as of July 10,
2008 by and between C. Douglas Mitchell (the Executive), and Commerce Energy
Group, Inc. (CEGI), on behalf of itself and any and all of its
subsidiaries, is made and entered into by the Executive, CEGI and Commerce
Energy, Inc. (CEI) and shall become effective, if at all, as of
immediately prior to the consummation of the Consensual Foreclosure (as defined
below). Capitalized terms not defined in
this Amendment shall have the meaning set forth in the Agreement.
RECITALS
WHEREAS, the parties hereto wish to amend
certain provisions of the Agreement effective as of immediately prior to the
Consensual Foreclosure, if at all.
NOW, THEREFORE, for $100 to be paid by CEI to Executive
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Effectiveness
This Amendment shall
become effective, if at all, immediately prior to the consummation of the
consensual foreclosure under Section 9-620 of the Uniform Commercial Code
as in effect in New York, pursuant to which CEGI consents to the acceptance by
AP Finance, LLC and Commerce Gas and Electric Corp., a Delaware corporation and
a subsidiary of Universal Energy Group Ltd., (collectively, the Lenders) of
certain collateral in satisfaction of certain indebtedness owed to the Lenders
(the Consensual Foreclosure). This
Amendment shall not take effect if the Consensual Foreclosure does not occur.
2. Assignment
Upon the effectiveness of
this Amendment, (A) the Agreement, as amended by this Amendment, and all
liabilities and obligations of CEGI and its subsidiaries (other than CEI)
thereunder, shall be assigned to CEI (the Assignment), (B) CEI accepts
the Assignment and agrees to assume and be bound by, and fulfill its
obligations under, the Agreement, as amended by this Amendment, (C) subject
to the terms and conditions of the Agreement, as amended by this Amendment,
Executive shall be employed by CEI, (D) all references to Commerce Energy
Group, Inc. in the Agreement shall be replaced with Commerce Energy, Inc.,
and (E) the Executive consents to the Assignment and hereby agrees that
upon its effectiveness CEGI shall have no liability associated with the
Agreement or this Amendment.
Neither the Consensual
Foreclosure nor the assignment of the Agreement to CEI, shall entitle the
Executive to payments except as identified in this Amendment.
Executive hereby resigns
as an officer of CEI effective upon the conclusion of the Holdover Period (as
defined below).
3. Term
Executive shall be
employed by CEI for a period of thirty (30) days following the effectiveness of
this Amendment (the Holdover Period).
If CEI terminates the employment of Executive or does not require his
services during the Holdover Period, it shall nonetheless pay Executives
compensation and benefits for the full Holdover Period and shall pay the
amounts due under Section 6 of this Amendment.
4. Executives Duties
During the Holdover
Period, the Executives authority, duties or responsibilities may be reduced or
eliminated. Such reductions or
eliminations shall not be a basis for the Executive to assert that CEI breached
the Agreement nor shall they be a basis for the Executive to resign.
5. Release
As of the date the
Executive signs this Amendment, the Executive, to the fullest extent permitted
by law, releases CEGI, and each of its related entities (other than CEI) and
their respective directors, officers, employees, representatives and agents
from any and all known and unknown claims and liabilities, other than those
arising under the Age Discrimination in Employment Act, except for claims
against CEGI for applicable rights of indemnification.
6. Severance Payment
After the Holdover
Period, the Executive shall continue to receive his Base Salary, payable
monthly, for a period of eight (8) months, less necessary withholdings and
authorized deductions. CEI will also pay
Executive $1,200 per month for the cost of Executives continued health care
insurance, payable monthly, for a period of eight (8) months. The Executive shall receive no other
compensation or benefits under the Agreement or this Amendment following the
end of the Holdover Period; provided, however, that, at the end of the
Holdover Period, Executive shall also be paid for (i) all earned but
unpaid compensation (including accrued but unpaid vacation) through the
effective date of termination, and (ii) reimbursement of expenses properly
incurred on behalf of CEI.
7. Stock Options and Restricted Stock
All unvested shares of
restricted stock granted to Executive shall vest in full upon the consummation
of the Consensual Foreclosure. No stock
options granted to Executive, if any, shall vest after the effectiveness of
this Amendment.
8. Termination
The Section of the
Agreement entitled Termination is hereby deleted in its entirety.
9. Release
In order to receive any
severance benefits or payments provided for under Section 6 of this
Amendment, the Executive must execute and deliver to CEI a valid Waiver and
Release Agreement, in a form substantially similar to the release attached as Exhibit A
to the Agreement (with appropriate modifications to reflect the provisions of
this Amendment). No severance benefits
or payments shall be paid under Section 6 of this Amendment unless and
until the Executive has executed such Waiver and Release Agreement within the
time period specified by CEI in the Waiver and Release Agreement (which shall
not be more than 7 days after such agreement is tendered to the Executive
unless otherwise required by law), and the period within which the Executive
may revoke his or her Waiver and Release Agreement has expired without
revocation. The Waiver and Release
Agreement will release all claims the Executive might have against CEGI or CEI
under the Agreement or this Amendment, except claims against CEI for amounts
payable under Section 6 of this Amendment and claims against CEI or CEGI
for applicable rights of indemnification.
The Executive may revoke
his signed Waiver and Release Agreement within seven (7) days (or such
other period provided by law) after his signing the Waiver and Release
Agreement. Any such revocation must be
made in writing and must be received by CEI within such seven (7) day (or
such other) period. If the Executive
timely revokes his Waiver and Release Agreement, he shall not be eligible to
receive any severance benefits or payments under Section 6 of this
Amendment. Notwithstanding the
foregoing, if the expiration of the revocation period described above could
occur in a calendar year later than the calendar year in which the Waiver and
Release Agreement is tendered to the Executive for execution, then in no event
will benefits or payments under the Agreement or this Amendment that are
conditioned upon the effectiveness of the Waiver and Release Agreement be paid
prior to the beginning of such later calendar year.
10. Modifications and Conflicts
Except as expressly
provided for herein, all the terms and conditions of the Agreement remain in
full force and effect; provided, however, that in the event of a
conflict between the provisions of the Agreement and the provisions of this
Amendment, the provisions of this Amendment shall control.
[Signature Page Follows]
IN WITNESS WHEREOF, the
undersigned have duly executed this Amendment on the date(s) indicated
below.
|
EXECUTIVE
|
|
|
|
/s/ C. DOUGLAS MITCHELL
|
|
C. Douglas Mitchell
|
|
|
|
COMMERCE ENERGY GROUP,
INC.
|
|
|
|
By:
|
/s/ Gregory L. Craig
|
|
Name: Gregory L. Craig
|
|
Title: Chairman and CEO
|
|
|
|
COMMERCE ENERGY, INC.
|
|
|
|
By:
|
/s/ Gregory L. Craig
|
|
Name: Gregory L. Craig
|
|
Title Chairman and CEO
|
EX-99.6
7
a08-30253_1ex99d6.htm
EX-99.6
Exhibit
99.6
AMENDMENT
TO EMPLOYMENT AGREEMENT
This Amendment (this Amendment)
to the employment letter agreement (the Agreement) dated as of July 18,
2008 by and between John H. Bomgardner, II (the Executive) and Commerce
Energy Group, Inc. (CEGI), on behalf of itself and any and all of its
subsidiaries, is made and entered into by the Executive, CEGI and Commerce
Energy, Inc. (CEI) and shall become effective, if at all, as of
immediately prior to the consummation of the Consensual Foreclosure (as defined
below). Capitalized terms not defined in
this Amendment shall have the meaning set forth in the Agreement.
RECITALS
WHEREAS, the parties hereto wish to amend
certain provisions of the Agreement effective as of immediately prior to the
Consensual Foreclosure, if at all.
NOW, THEREFORE, for $100 to be paid by CEI to Executive
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Effectiveness
This Amendment shall
become effective, if at all, immediately prior to the consummation of the
consensual foreclosure under Section 9-620 of the Uniform Commercial Code
as in effect in New York, pursuant to which CEGI consents to the acceptance by
AP Finance, LLC and Commerce Gas and Electric Corp., a Delaware corporation and
a subsidiary of Universal Energy Group Ltd., (collectively, the Lenders) of
certain collateral in satisfaction of certain indebtedness owed to the Lenders
(the Consensual Foreclosure). This
Amendment shall not take effect if the Consensual Foreclosure does not occur.
2. Assignment
Upon the effectiveness of
this Amendment, (A) the Agreement, as amended by this Amendment, and all
liabilities and obligations of CEGI and its subsidiaries (other than CEI)
thereunder, shall be assigned to CEI (the Assignment), (B) CEI accepts
the Assignment and agrees to assume and be bound by, and fulfill its
obligations under, the Agreement, as amended by this Amendment, (C) subject
to the terms and conditions of the Agreement, as amended by this Amendment,
Executive shall be employed by CEI, (D) all references to Commerce Energy
Group, Inc. in the Agreement shall be replaced with Commerce Energy, Inc.,
and (E) the Executive consents to the Assignment and hereby agrees that
upon its effectiveness CEGI shall have no liability associated with the
Agreement or this Amendment.
Neither the Consensual
Foreclosure nor the assignment of the Agreement to CEI, shall entitle the
Executive to payments except as identified in this Amendment.
Executive hereby resigns
as an officer and employee of CEGI, effective upon the effectiveness of this
Amendment. Executive hereby resigns as
an officer of CEI effective upon the conclusion of the Holdover Period (as
defined below).
3. Term
Executive shall be
employed by CEI for a period of thirty (30) days following the effectiveness of
this Amendment (the Holdover Period).
If CEI terminates the employment of Executive or does not require his
services during the Holdover Period, it shall nonetheless pay Executives
compensation and benefits for the full Holdover Period and shall pay the
amounts due under Section 6 of this Amendment.
4. Executives Duties
During the Holdover
Period, the Executives authority, duties or responsibilities may be reduced or
eliminated. Such reductions or
eliminations shall not be a basis for the Executive to assert that CEI breached
the Agreement nor shall they be a basis for the Executive to resign.
5. Release
As of the date the
Executive signs this Amendment, the Executive, to the fullest extent permitted
by law, releases CEGI, and each of its related entities (other than CEI) and
their respective directors, officers, employees, representatives and agents
from any and all known and unknown claims and liabilities, other than those
arising under the Age Discrimination in Employment Act, except for claims
against CEGI for applicable rights of indemnification.
6. Severance Payment
After the Holdover
Period, the Executive shall continue to receive his base salary, payable
monthly, for a period of eight (8) months, less necessary withholdings and
authorized deductions. CEI will also pay
the cost of Executives continued health care insurance coverage under COBRA,
payable monthly, for a period of eight (8) months, provided Executive
elects such continued coverage, or will pay Executive the cash equivalent of
such premiums. In addition, CEI will
forgive any repayment for relocation expenses that might otherwise be owed
under the terms of the Agreement. The
Executive shall receive no other compensation or benefits under the Agreement
or this Amendment following the end of the Holdover Period; provided, however,
that, at the end of the Holdover Period, Executive shall also be paid for (i) all
earned but unpaid compensation (including accrued but unpaid vacation) through
the effective date of termination, and (ii) reimbursement of expenses
properly incurred on behalf of CEI.
7. Stock Options and Restricted Stock
No stock options or
shares of restricted stock granted to Executive shall vest after the
effectiveness of this Amendment.
8. Termination
Attachment A and the next
to last bullet of the Agreement (which references Attachment A) are deleted in
their entirety.
9. Release
In order to receive any
severance benefits or payments provided for under Section 6 of this
Amendment, the Executive must execute and deliver to CEI a valid separation
agreement and general release (Waiver and Release Agreement) in a form
substantially similar to the release attached as Exhibit A to the
Agreement (with appropriate modifications to reflect the provisions of Section 6
of this Amendment and otherwise ensure compliance with the current state of the
law). No severance benefits or payments
shall be paid under Section 6 of this Amendment unless and until the
Executive has executed such Waiver and Release Agreement within the time period
specified by CEI in the Waiver and Release Agreement (which shall not be more
than 7 days after such agreement is tendered to the Executive unless otherwise
required by law), and the period within which the Executive may revoke his
Waiver and Release Agreement has expired without revocation. The Waiver and Release Agreement will release
all claims the Executive might have against CEGI or CEI under the Agreement or
this Amendment, except claims against CEI for amounts payable under Section 6
of this Amendment and claims against CEI or CEGI for applicable rights of
indemnification.
The Executive may revoke
his signed Waiver and Release Agreement within seven (7) days (or such
other period provided by law) after his signing the Waiver and Release
Agreement. Any such revocation must be made in writing and must be received by
CEI within such seven (7) day (or such other) period. If the Executive timely revokes his Waiver
and Release Agreement, he shall not be eligible to receive any severance
benefits or payments under Section 6 of this Amendment. Notwithstanding the foregoing, if the
expiration of the revocation period described above could occur in a calendar
year later than the calendar year in which the Waiver and Release Agreement is
tendered to the Executive for execution, then in no event will benefits or
payments under the Agreement or this Amendment that are conditioned upon the
effectiveness of the Waiver and Release Agreement be paid prior to the
beginning of such later calendar year.
10. Modifications and Conflicts
Except as expressly
provided for herein, all the terms and conditions of the Agreement remain in
full force and effect; provided, however, that in the event of a
conflict between the provisions of the Agreement and the provisions of this
Amendment, the provisions of this Amendment shall control.
[Signature Page Follows]
IN WITNESS WHEREOF, the
undersigned have duly executed this Amendment on the date(s) indicated
below.
|
EXECUTIVE
|
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/s/ JOHN H.
BOMGARDNER, II
|
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John H.
Bomgardner, II
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COMMERCE ENERGY GROUP,
INC.
|
|
|
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By:
|
/s/ Gregory L. Craig
|
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Name: Gregory L. Craig
|
|
Title: Chairman and CEO
|
|
|
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COMMERCE ENERGY, INC.
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|
|
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By:
|
/s/ Gregory L. Craig
|
|
Name: Gregory L. Craig
|
|
Title Chairman and CEO
|
EX-99.7
8
a08-30253_1ex99d7.htm
EX-99.7
Exhibit 99.7
Contacts:
|
|
Commerce
Energy Group, Inc.
|
|
|
C. Douglas Mitchell
Chief Financial Officer 714-259-2500
|
|
|
|
|
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PondelWilkinson
Inc.
|
|
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Robert Jaffe/Roger Pondel
310-279-5980
|
Commerce Energy Consents to Foreclosure
and Declares
Dividend
COSTA
MESA, CA December 11, 2008 Commerce Energy Group, Inc. (AMEX:EGR) announced today that the company accepted a foreclosure by
its secured lenders under a procedure under the Uniform Commercial Code on all
shares of Commerce Energy, Inc. (Commerce), our wholly-owned subsidiary,
and certain other securities held by the company, in satisfaction of the
companys liabilities and obligations with respect to the companys secured
debt. In connection therewith, the
company declared a cash dividend of $0.084 per share on shares of the companys
common stock to all stockholders of record on December 11, 2008. The company also announced today that the
company redeemed all of the rights outstanding under the companys shareholder
rights agreement at a price of $0.001 per right.
AP Finance, LLC (AP Finance) and Commerce Gas and
Electric Corp., a wholly-owned subsidiary of Universal Energy Group Ltd. (CG&E),
the holders of the companys secured debt, notified the company today that a
default existed under certain agreements relating to the companys secured debt. AP Finance and CG&E, also proposed today,
under Section 9-620 of the Uniform Commercial Code, as in effect in the
State of New York, to accept all of the companys stock in Commerce and certain
other securities held by the company in satisfaction of the companys
liabilities and obligations with respect its secured debt pursuant to the terms
and conditions of an acceptance agreement among the company, AP Finance and
CG&E (the Consensual Foreclosure).
The company had a right not to consent to, and
thereby delay, the Consensual Foreclosure.
However, the company recognized that a delay would likely not prevent a
foreclosure and instead chose to accept certain inducements offered by AP
Finance and CG&E by consenting to the Consensual Foreclosure and executing
and delivering an acceptance agreement today.
Pursuant to the terms of the acceptance agreement, AP Finance and
CG&E agreed to allow Commerce to pay a dividend to the company in the
aggregate amount of $3.1 million. As a
result of the Consensual Foreclosure and the dividend to be paid by Commerce to
the company, the companys board of directors determined that the company would
be able to make a distribution to its shareholders in the aggregate amount of
$2,614,780, comprised of a dividend in the amount of $0.084 per share on shares
of the companys common stock and a redemption of all of the rights outstanding
under the companys shareholder rights agreement at a price of $0.001 per
right. The dividend will be payable to
shareholders of record as of the close of business on December 11, 2008
and will be paid as soon as practical.
As a result of the Consensual Foreclosure, the
company ceased all operations but Commerce will continue to market gas and
electricity in its current markets as a subsidiary of CG&E, a wholly-owned
subsidiary of Toronto Stock Exchange listed Universal Energy Group Ltd. The company will commence proceedings to
wind-up and dissolve as soon as practicable.
Effective on December 11, 2008, in connection
with the Consensual Foreclosure, the company determined to initiate the
withdrawal of the companys shares from the NYSE Alternext US, previously known
as the American Stock Exchange (the Exchange). The company is in the process of submitting a
letter to the Exchange requesting the withdrawal of its shares of common stock
from the Exchange.
About
Commerce Energy Group
Commerce Energy Group was a
leading independent U.S. electricity and natural gas marketing company. Its formerly-owned, principal operating
subsidiary, Commerce Energy, Inc., is licensed by the Federal Energy
Regulatory Commission and by state regulatory agencies as an unregulated retail
marketer of natural gas and electricity and serves homeowners, commercial and
industrial consumers and institutional customers. For more information, visit www.CommerceEnergy.com.
Forward-Looking
Statements
This press release contains
forward-looking statements that are made pursuant to the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995, particularly those
statements regarding the effects of the proposed transaction and those preceded
by, followed by or that otherwise include the words believes, expects, anticipates,
intends, estimates, or similar expressions.
Forward-looking statements relating to expectations about future results
or events are based upon information available to Commerce as of todays date,
and Commerce does not assume any obligations to update any of these statements. The forward-looking statements are not
guarantees of the future performance of Commerce and actual results may vary
materially from the results and expectations discussed.
# # #
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