EXHIBIT 2.4
EXECUTION COPY
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of February 9, 2005, by and among
Commonwealth Energy Corporation, a California corporation ("Buyer"), Commerce
Energy Group, Inc., a Delaware corporation ("CEG"), American Communications
Network, Inc., a Michigan corporation ("ACN"), ACN Utility Services, Inc., a
Michigan corporation, ACN Energy, Inc., a Michigan corporation and ACN Power,
Inc., a Michigan corporation (ACN, ACN Utility Services, Inc., ACN Energy, Inc.,
and ACN Power, Inc. are collectively referred to as "Sellers") and Computershare
Trust Company, Inc., as escrow agent ("Escrow Agent").
W I T N E S S E T H:
WHEREAS, Buyer, Sellers, ACN and CEG have entered into that certain
Asset Purchase Agreement, dated as of February 9, 2005 (the "Asset Purchase
Agreement"), pursuant to which Sellers are selling substantially all of the
assets, properties, rights and business of the Retail Energy Business (as
defined in the Asset Purchase Agreement) to Buyer;
WHEREAS, as consideration for the purchase of the Retail Energy
Business, Section 3.1(b) of the Asset Purchase Agreement provides for the
delivery of 930,233shares (the "APA Shares") of common stock, par value $0.001
per share (the "CEG Common Stock") of CEG to the Escrow Agent on the Closing
Date, such APA Shares to be delivered to and maintained by the Escrow Agent in
accordance with the terms of this Agreement;
WHEREAS, Buyer, CEG and ACN have entered into that certain Sales
Agency Agreement, dated as of February 9, 2005 (the "Sales Agency Agreement"),
pursuant to which ACN agreed that its network of independent sales
representatives shall act as limited agents for Buyer to sell electric commodity
and natural gas products and related services of the Retail Energy Business; and
WHEREAS, Section 8(a) of the Sales Agency Agreement provides for the
delivery, from time to time, of certain shares of common stock (the "SAA Shares"
and, collectively with the APA Shares, the "Shares") of CEG, such SAA Shares to
be delivered to and maintained by the Escrow Agent in accordance with the terms
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
SECTION 1. Definitions. Terms used herein but not defined herein
shall have the meaning ascribed to them in the Purchase Agreement. In addition,
the following terms shall have the following meanings:
(a) "CEG Common Stock" shall have the meaning set forth in the
recitals.
(b) "Proceeds" shall mean, as to any given APA Share or SAA Share,
any stock or liquidating dividends, other distributions in property, return of
capital or other distributions made on or in respect of such APA Share or the
SAA Share (other than dividends payable out of the earnings of CEG), whether
resulting from a subdivision, combination or reclassification of the outstanding
capital stock of CEG or received in exchange for such Share or as a result of
any merger, consolidation, acquisition or other exchange of assets to which CEG
may be a party or otherwise.
(c) "Shares" shall mean the APA Shares and the SAA Shares.
SECTION 2. Deposit of Shares.
(a) APA Shares. Upon receipt, the Escrow Agent shall acknowledge
that it has received and deposited in a separate account maintained by the
Escrow Agent hereunder (the "APA Escrow Account") the APA Shares delivered by
CEG. Such APA Shares shall be held and dealt with by Escrow Agent subject to the
terms and conditions of this Agreement.
(b) SAA Shares. From time to time and as required by the Sales
Agency Agreement, CEG may deliver to the Escrow Agent the SAA Shares which shall
be acknowledged as received by the Escrow Agent to each party and deposited in a
separate account maintained by the Escrow Agent hereunder (the "SAA Escrow
Account"). Such SAA Shares shall be held and dealt with by Escrow Agent subject
to the terms and conditions of this Agreement.
SECTION 3. Use of Shares and Proceeds. The Shares and any Proceeds
shall be held in escrow hereunder by Escrow Agent as herein provided. Escrow
Agent shall not dispose of or distribute any of the Shares or Proceeds other
than as provided in this Agreement. Unless the context otherwise requires,
references in this Agreement to the Shares also shall be deemed to refer to any
Proceeds. Each of CEG and ACN agree to cause all Proceeds received by it, prior
to distribution of the Shares to which said distribution of Proceeds relates, to
be deposited in the Escrow Account.
SECTION 4. Dividends and Proxies with Respect to Shares. So long as
any Shares are held by Escrow Agent hereunder:
(a) CEG shall be entitled to exercise any and all voting and
consensual rights and powers accruing to an owner of the APA Shares and the SAA
Shares or any part thereof for any purposes not inconsistent with the terms of
this Agreement, the Asset Purchase Agreement or the Sales Agency Agreement;
provided, however, that Buyer shall give Escrow Agent and Seller at least five
(5) business days' prior written notice of the manner in which he intends to
exercise any such right or power.
(b) Until such time as a joint written instruction from CEG and the
Buyer, on the one hand, and ACN, on the other hand, is given with respect to any
of the APA Shares and the SAA Shares, CEG shall be entitled to receive and
retain any and all nonliquidating cash dividends payable in respect of the APA
Shares and the SAA Shares. All Proceeds in respect of
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the Shares held by Escrow Agent shall be retained by Escrow Agent and shall not
be distributed except in accordance with the terms of this Agreement.
(c) The APA Shares and the SAA Shares and any proceeds thereof shall
not be commingled. Upon final disbursement of the APA Shares or the SAA Shares,
the escrow relating thereto shall be terminated.
(d) Escrow Agent, ACN and the Sellers shall execute and deliver to
CEG, or cause to be executed and delivered to CEG, all such proxies, powers of
attorney, dividend orders and other instruments for the purpose of enabling them
to exercise the voting and consensual rights and powers which they are entitled
to exercise pursuant to Section 4(a) and to receive the dividends which they are
authorized to retain pursuant to Section 4(b).
SECTION 5. Release from Escrow.
(a) Upon joint written instruction from CEG and the Buyer, on the
one hand, and ACN, on the other hand, the Escrow Agent shall release such amount
of APA Shares or SAA Shares in accordance with such joint written instruction.
In the absence of such joint written notice, the Escrow Agent shall release the
Shares upon receipt of an order of a court of competent jurisdiction.
(b) Each of the parties agree to join, at the request of the other
party, in joint written notice authorizing the Escrow Agent to release the APA
Shares or the SAA Shares when such shares are allowed to be released under the
applicable agreement.
(c) Any APA Shares remaining in escrow 14 months from the date
hereof shall be released to CEG.
(d) Any SAA Shares remaining in escrow following termination of the
Sales Agency Agreement, as certified to Escrow Agent by CEG or ACN, shall be
released to CEG.
SECTION 6. Liability of Escrow Agent. The duties and obligations of
Escrow Agent hereunder shall be determined solely by the express provisions of
this Agreement, and Escrow Agent shall be under no obligation to refer to any
other documents between or among the parties related in any way to this
Agreement, it being specifically understood that the following provisions are
accepted by all of the parties hereto:
(a) Escrow Agent shall not be liable to anyone whomsoever by reason
of any error of judgment or for any act done or step taken or omitted by it, or
for any mistake of fact or law or anything which it may do or refrain from doing
in connection herewith unless caused by or arising out of its own gross
negligence or willful misconduct. CEG, the Buyer, ACN and Sellers shall jointly
and severally indemnify and hold Escrow Agent harmless from and against any and
all liability and expense which may arise out of any action taken or omitted by
Escrow Agent in accordance with this Agreement, except such liability and
expense as may result from the gross negligence or willful misconduct of Escrow
Agent.
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(b) Escrow Agent shall be entitled to rely on, and shall be
protected in acting in reliance upon, any instructions or directions furnished
to it in writing signed by CEG, the Buyer, ACN and Sellers pursuant to any
provision of this Agreement and shall be entitled to treat as genuine, and as
the document it purports to be, any letter, paper or other document furnished to
it by CEG, the Buyer, ACN or Sellers, and believed by Escrow Agent to be genuine
and to have been signed and presented by the proper party or parties.
SECTION 7. Expenses. Any stock transfer taxes incurred in connection
with the release and delivery of the Shares by Escrow Agent hereunder shall be
borne by the Sellers.. Any fees or expenses charged by the Escrow Agent in
connection with this agreement, including but not limited to the fees described
on Exhibit A attached hereto, shall be borne 50% by Sellers and 50% by Buyer.
SECTION 8. Settlement of Disputes. Any dispute which may arise under
this Agreement with respect to the delivery and/or ownership or right of
possession of the APA Shares and the SAA Shares, or the duties of the Escrow
Agent hereunder, shall be settled either (i) by mutual agreement of CEG, the
Buyer and ACN (evidenced by appropriate instructions in writing to the Escrow
Agent, signed by such parties) or (ii) by binding arbitration of the issue in
accordance with the following procedures:
(a) Any party may request arbitration by giving the other involved
party written notice, which notice shall describe, in reasonable detail, the
nature of the dispute, controversy or claim. The arbitration shall be governed
by the rules of the American Arbitration Association ("AAA") and held in New
York, New York or other mutually agreed upon location.
(b) If both parties agree an arbitrator within 30 days after a
request for arbitration is made hereunder, that arbitrator shall be selected to
hear the dispute in accordance with AAA rules. If the parties are not able to
agree upon an arbitrator within such 30 day period, then that party who
requested arbitration may request that the AAA select an arbitrator who has
business experience in the energy industry similar to the Business and the
selected arbitrator shall hear the dispute in accordance with AAA rules.
(c) Each of the parties shall bear its own fees, costs and expenses
of the arbitration and its own legal expenses, attorneys' fees and costs of all
experts and witnesses; provided, however, that if the claim of either party is
upheld by the arbitrator in all material respects, the arbitrator may apportion
between the parties as the arbitrator may deem equitable the costs incurred by
the prevailing party. The fees and expenses of the arbitration procedures,
including the fees of the arbitrator, will be shared equally by the parties.
(d) Any award rendered pursuant to an arbitration proceeding shall
be final, conclusive, non-appealable and binding upon the parties, and any
judgment thereon may be entered and enforced in any court of competent
jurisdiction.
(e) The Escrow Agent shall continue to hold any disputed funds
hereunder until the Escrow Agent shall have received either of (i) or (ii)
above; immediately following its receipt of (i) or (ii) above, the Escrow Agent
shall distribute the amount in the Escrow Account, in accordance with such
written instruction or certified copy of any such award, order, decree or
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judgment. The Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings. Prior to the settlement of any such dispute, the
Escrow Agent is authorized and directed to retain in its possession, without
liability to anyone, the APA Shares and/or the SAA Shares which are the subject
of such dispute.
SECTION 9. Resignation and Removal of Escrow Agent. Escrow Agent may
resign from the performance of its duties hereunder at any time by giving thirty
(30) days' prior written notice to the parties or may be removed, with or
without cause, by the parties, acting jointly, by furnishing a Joint Written
Direction to Escrow Agent, at any time by the giving of ten (10) days' prior
written notice to Escrow Agent as provided herein below. Such resignation or
removal shall take effect upon the appointment of a successor Escrow Agent as
provided herein below. Upon any such notice of resignation or removal, the
parties, acting jointly, shall appoint a successor Escrow Agent hereunder. If
the parties shall fail to appoint a successor Escrow Agent within thirty (30)
days after such notice of resignation or removal, the Escrow Agent shall have
the right to deposit the Escrow Funds with a court of competent jurisdiction and
to petition such court for the appointment of a successor Escrow Agent.
SECTION 10. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:
If to the Buyer or CEG:
Commerce Energy Group, Inc.
Commonwealth Energy Corporation
000 Xxxxx Xxxx, Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telecopier: (000) 000-0000
with a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
If to ACN or Sellers:
American Communications Network, Inc.
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00000 Xxxxxxxx Xxxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Jaffe, Raitt, Heuer & Xxxxx, P.C.
00000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to Escrow Agent:
Computershare Trust Company, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Corporate Trust
Telecopy: (000) 000-0000
Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set forth
above.
SECTION 11. Governing Law. This Agreement shall be construed,
performed and enforced in accordance with, and governed by, the laws of the
State of New York, without giving effect to the principles of conflicts of laws
thereof.
SECTION 12. Successors and Assigns. The rights and obligations of
the parties under this Agreement shall not be assigned to any person or entity,
without the written consent of the other parties. This Agreement shall be
binding upon and shall inure to the benefit of the successors and assigns of the
parties hereto.
SECTION 13. Headings. Section headings contained herein have been
inserted for reference purposes only and shall not be construed as part of this
Agreement
SECTION 14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
COMMERCE ENERGY GROUP, INC.
By: /S/ XXXXX XXXXXXX
---------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
COMMONWEALTH ENERGY CORPORATION
By: /S/ XXXXX XXXXXXX
---------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
AMERICAN COMMUNICATIONS NETWORK, INC.
By: /S/ XXXXX X. XXXXXXX
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Secretary/Treasurer
ACN UTILITY SERVICES, INC.
By: /S/ XXXXX X. XXXXXXX
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Secretary/Treasurer
[Signature page to Escrow Agreement]
ACN ENERGY, INC.
By: /S/ XXXXX X. XXXXXXX
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Secretary/Treasurer
ACN POWER, INC.
By: /S/ XXXXX X. XXXXXXX
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Secretary/Treasurer
COMPUTERSHARE TRUST COMPANY, INC.
By: /s/ XXXX X. XXXX
---------------------------------------
Name: Xxxx X. Xxxx
Title: Corporate Trust Officer
By: /s/ XXXXXXX XXXXXX
---------------------------------------
Name: Xxxxxxx XxXxxx
Title: Operations Manager & Trust
Officer
[Signature page to Escrow Agreement]
EXHIBIT A
Computershare Trust Company, Inc.
Commonwealth Energy Group, Inc. / ACN Escrow
Escrow Agent Fee Schedule
Account Acceptance Fee $2,500
Annual Administrative Fee $2,500
Overnight Delivery Charges At cost
Out-of-Pocket Expenses At cost
The acceptance and first year's annual fee are payable at closing. Annual
administrative fees are due in advance of the period for which service is to be
rendered. Special or extraordinary events, such as amendments to the documents
or disputes are not included in the above fees, and we reserve the right to
charge an additional amount based on the time incurred in handling such events
should they occur. Late charges are 1 1/2% per month on outstanding balances
owing 45 days from date of invoice.