EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of July 1, 2004, is
among COMMONWEALTH ENERGY CORPORATION, a California corporation
("Commonwealth"), COMMERCE ENERGY GROUP, INC., a Delaware corporation and a
direct wholly-owned subsidiary of Commonwealth ("Commerce Energy"), and CEGI
ACQUISITION CORP., a California corporation and a direct wholly-owned subsidiary
of Commerce Energy ("Merger Sub").
WITNESSETH:
WHEREAS, Commonwealth is a publicly held California corporation with
shares of common stock registered under Section 12(g) under the Securities
Exchange Act of 1934, as amended;
WHEREAS, pursuant to Commonwealth's Articles of Incorporation,
Commonwealth may issue up to fifty million (50,000,000) shares of common stock,
no par value per share ("Commonwealth Common Stock"), and ten million
(10,000,000) shares of preferred stock ("Commonwealth Preferred Stock");
WHEREAS, Commonwealth and Commerce Energy have caused Merger Sub to be
organized for the sole purpose of effectuating the transactions contemplated
hereby;
WHEREAS, the Boards of Directors of Commonwealth, Commerce Energy and
Merger Sub each have approved the Merger (as defined in Section 1.1 below) in
accordance with this Agreement and the California Corporations Code (the
"Corporations Code");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution of this Agreement, to induce
Commerce Energy to enter into this Agreement, the holders of Commonwealth's
Series A Convertible Preferred Stock, no par value per share (the "Series A
Preferred Stock"), are entering into the Conversion Agreement (the "Conversion
Agreement"), pursuant to which holders of more than 66 2/3% of the outstanding
shares of Series A Preferred Stock shall approve the conversion of the
outstanding shares of Series A Preferred Stock into Commonwealth Common Stock
immediately prior to the Merger;
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, and intending to be legally bound hereby, Commonwealth, Commerce
Energy and Merger Sub hereby agree as follows:
ARTICLE 1.
THE MERGER
SECTION 1.1 The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the
Corporations Code, Merger Sub shall be merged with and into Commonwealth (the
"Merger"). Following the Merger, Commonwealth shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
of Merger Sub shall cease.
SECTION 1.2 Effective Time. Subject to the terms and conditions set forth
in this Agreement, certificates of two officers of Commonwealth and Merger Sub
satisfying the applicable requirements of the Corporations Code (the
"Certificates of Approval") shall be duly executed and thereafter delivered,
together with this Agreement, to the Secretary of State of the State of
California for filing pursuant to the Corporations Code on or as soon as
practicable following the Closing Date. The Merger shall become effective at
such time as this Agreement, together with the Certificates of Approval, are
duly filed with the Secretary of State of the State of California in accordance
with the Corporations Code (the "Effective Time").
SECTION 1.3 Closing. The closing of the Merger (the "Closing") will take
place at a time and on a date to be specified by the parties as soon as
practicable after satisfaction or waiver of the conditions set forth in Article
2 (the "Closing Date"), at the offices of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP,
000 Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxxx, Xxxxx Xxxx, XX 00000 or at such other
place agreed to by the parties.
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in this Agreement and the Corporations Code.
SECTION 1.5 Charter and Bylaws. The Articles of Incorporation of
Commonwealth in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law. The Bylaws of Commonwealth in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 1.6 Directors and Officers.
(a) Directors and Officers of Commerce Energy. The directors and officers
of Commerce Energy immediately prior to the Effective Time shall be the officers
and directors of Commerce Energy as of the Effective Time until they are removed
or resign in accordance with the provisions of the Certificate of Incorporation
and Bylaws of Commerce Energy.
(b) Directors and Officers of Surviving Corporation. The directors of
Commonwealth immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation as of the Effective Time and until their
respective successors are elected and qualified or until they are removed or
resign in accordance with the provisions of the Articles of Incorporation and
Bylaws of the Surviving Corporation.
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SECTION 1.7 Conversion of Shares.
(a) Conversion of Commonwealth Common Stock. At the Effective Time, each
share of Commonwealth Common Stock issued and outstanding immediately prior to
the Effective Time (individually a "Share" and collectively, the "Shares")
(other than Company Dissenting Shares), including any shares of Commonwealth
Common Stock issued prior to the Effective Time upon conversion of any
Commonwealth Preferred Stock or exercise of Commonwealth Stock Options (as
defined in Section 1.9 below), by virtue of the Merger and without any action on
the part of any Person, shall be converted into and become one fully paid and
nonassessable share of common stock, $.001 par value per share, of Commerce
Energy ("Commerce Energy Common Stock"), and any outstanding fractional shares
of Commonwealth Common Stock shall be converted into equal fractional shares of
Commerce Energy Common Stock. For purposes of this Section 1.7(a), shares of
Commonwealth Common Stock issuable upon conversion of the Commonwealth Preferred
Stock prior to the Effective Time shall be deemed to be issued and outstanding
immediately prior to the Effective Time. The term "Person" means any individual,
corporation, partnership, limited liability company, governmental entity or
other entity or organization.
(b) Non-Effect on Commonwealth Preferred Stock. At the Effective Time,
each share of Commonwealth Preferred Stock issued and outstanding immediately
prior to the Effective Time and not converted to Commonwealth Common Stock prior
to the Effective Time shall be unaffected by the Merger and shall remain
Commonwealth Preferred Stock of Commonwealth and retain all the rights and
preferences of such Commonwealth Preferred Stock as determined by Commonwealth's
Articles of Incorporation, Bylaws, or other applicable law, as the case may be.
Nothing herein shall be deemed to grant conversion rights to any shares of
Commonwealth Preferred Stock not otherwise granted pursuant to Commonwealth's
Articles of Incorporation or Bylaws, or other applicable law, as the case may
be.
(c) Conversion of Merger Sub Stock. At the Effective Time, the shares of
common stock, par value $.001, of Merger Sub issued and outstanding immediately
prior to the Effective Time, all of which are owned of record by Commerce
Energy, shall, by virtue of the Merger and without any action on the part of any
Person, be converted into an aggregate number of the shares of common stock, no
par value per share, of the Surviving Corporation equal to the number of shares
of Commerce Energy Common Stock into which shares of Commonwealth Common Stock
are convertible at the Effective Time pursuant to Section 1.7(a) above.
(d) Cancellation of Commerce Energy Shares. At the Effective Time, each
share of capital stock of Commerce Energy issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of any Person, be cancelled, retired and cease to exist and
no payment shall be made with respect thereto.
SECTION 1.8 Shares of Dissenting Holders. Notwithstanding anything to the
contrary contained in this Agreement, any holder of Shares with respect to which
dissenters' rights, are granted by reason of the Merger under the Corporations
Code and who does not vote in favor of the Merger and who otherwise complies
with Chapter 13 of the Corporations Code ("Company Dissenting Shares") shall not
be entitled to receive shares of Commerce Energy Common Stock pursuant to
Section 1.7(a), unless such holder fails to perfect, effectively withdraws or
loses the
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right to dissent from the Merger under the Corporations Code. Such holder shall
be entitled to receive only the payment provided for by Chapter 13 of the
Corporations Code. If any such holder so fails to perfect, effectively withdraws
or loses the dissenters' rights under the Corporations Code, such holder's
Company Dissenting Shares shall thereupon be deemed to have been converted, as
of the Effective Time, into the right to receive shares of Commerce Energy
Common Stock pursuant to Section 1.7(a).
SECTION 1.9 Stock Options.
(a) Conversion of Company Stock Options. At the Effective Time, each
outstanding option to purchase shares of Commonwealth Common Stock (a "Company
Stock Option" or collectively, "Company Stock Options") that was (1) issued
pursuant to the Plan, or (2) issued by Commonwealth's Board of Directors outside
of the Plan, whether vested or unvested, shall be assumed by Commerce Energy in
such a manner that it is converted into an option granted by Commerce Energy
(each, a "Commerce Energy Option") to acquire, on substantially the same terms
and subject to substantially the same conditions as were applicable under such
Company Stock Option, the same number of shares of Commerce Energy Common Stock
as the holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time, at a price per share equal to (i) the aggregate
exercise price for the shares of Commonwealth Common Stock otherwise purchasable
pursuant to such Company Stock Option, divided by (ii) the number of shares of
Commerce Energy Common Stock deemed purchasable pursuant to such Company Stock
Option.
(b) Registration Statement. Commerce Energy shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of
Commerce Energy Common Stock for delivery upon exercise of Commerce Energy
Options in accordance with this Section 1.9. As soon as practicable after the
Effective Time, Commerce Energy shall file post-effective amendments to
Commonwealth's registration statements on Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Commerce
Energy Common Stock subject to the Commerce Energy Options and shall use its
best efforts to maintain the effectiveness of such registration statement(s)
(and maintain the current status of the prospectus(es) contained therein) for so
long as the Commerce Energy Options remain outstanding.
SECTION 1.10 Stock Certificates. From and after the Effective Time,
subject to Section 1.7, all of the outstanding certificates that represented
shares of Commonwealth Common Stock immediately prior to the Effective Time
shall be deemed for all purposes to evidence ownership of, and to represent,
shares of Commerce Energy Common Stock into which the shares of Commonwealth
Common Stock formerly represented by such certificates have been converted as
provided in this Agreement. The registered owner on the books and records of
Commerce Energy or its transfer agent of any outstanding stock certificate
shall, until such certificate shall have been surrendered for transfer or
otherwise accounted for to Commerce Energy or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to, and to receive
any dividends and other distributions upon, the shares of Commerce Energy Common
Stock evidenced by such outstanding certificates which prior to the Merger
represented shares of Commonwealth Common Stock.
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ARTICLE 2.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 2.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party hereto to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions, or the waiver of such condition by such party:
(a) No Restraints. No court or governmental entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law or order (whether temporary, preliminary or permanent) that in effect,
enjoins or otherwise prohibits consummation of the Merger contemplated by this
Agreement and no judicial or administrative proceeding that seeks any such
result shall continue to be pending.
(b) Form S-4 Registration Statement. The registration statement on Form
S-4 to be filed with the U.S. Securities and Exchange Commission by Commerce
Energy in connection with the issuance of shares of Commerce Energy Common Stock
in the Merger shall have become effective under the Securities Act of 1933 and
shall not be the subject of any stop order or proceedings seeking a stop order.
(c) Required Approvals. All required approvals, licenses and
certifications from, and notifications and filings to, governmental entities and
non-governmental third parties shall have been obtained or made, as applicable.
ARTICLE 3.
TERMINATION
SECTION 3.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Commonwealth, by the affirmative vote of a majority of the
directors of each of Commonwealth and Commerce Energy. This Agreement shall also
be terminated prior to the Effective Time unless (i) the conversion of 100% of
the outstanding shares of Series A Preferred Stock into Commonwealth Common
Stock shall have been consummated prior to the Closing Date, (ii) this Agreement
shall have been approved by the requisite vote of the shareholders of
Commonwealth, Commerce Energy and Merger Sub and (iii) the opinion of Paul,
Hastings, Xxxxxxxx & Xxxxxx LLP, counsel to Commonwealth, addressed to
Commonwealth and its shareholders to the effect that the Merger will be treated
for Federal income tax purposes as a reorganization under Section 368 of the
Code shall have been delivered and such opinion shall not have been withdrawn or
modified in any material respect.
SECTION 3.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 3.1, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or shareholders.
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ARTICLE 4.
MISCELLANEOUS
SECTION 4.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Commerce Energy or Merger Sub: Commerce Energy Group, Inc.
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx, Chief Executive
Officer
Facsimile: (000) 000-0000
if to Commonwealth to: Commonwealth Energy Corporation
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx, Chief Executive
Officer
Facsimile: (000) 000-0000
with a copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 4.2 Number and Gender. For purposes of this Agreement whenever the
context requires, the singular number shall include the plural, and vice versa,
and each gender shall include all genders.
SECTION 4.3 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
SECTION 4.4 Assignment. This Agreement shall not be assigned by operation
of law or otherwise; provided, however, that Merger Sub may assign any or all of
its rights and obligations under this Agreement to any other subsidiary of
Commerce Energy.
SECTION 4.5 Amendment. This Agreement may be amended by action taken by
Commonwealth, Commerce Energy and Merger Sub at any time before or after
approval of the Merger by the shareholders of Commonwealth (if required by
applicable law) but, after any such approval, no amendment shall be made which
requires the approval of such shareholders under
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applicable law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
SECTION 4.6 Waiver. At any time prior to the Effective Time, each party
hereto (for these purposes, Commerce Energy and Merger Sub shall together be
deemed one party and Commonwealth shall be deemed the other party) may waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of either party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
SECTION 4.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflicts of law thereof.
SECTION 4.8 Headings. The headings in this Agreement are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
SECTION 4.9 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 4.4, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 4.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 4.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
COMMONWEALTH ENERGY CORPORATION
By: /s/ Xxx X. Xxxxxx
-------------------------------------------
Name: Xxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
COMMERCE ENERGY GROUP, INC.
By: /s/ Xxx X. Xxxxxx
-------------------------------------------
Name: Xxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
CEGI ACQUISITION CORP.
By: /s/ Xxx X. Xxxxxx
-------------------------------------------
Name: Xxx X. Xxxxxx
Title: President
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
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CERTIFICATE OF APPROVAL
OF
AGREEMENT AND PLAN OF REORGANIZATION
Xxx X. Xxxxxx and Xxxx X. Xxxxxxxx certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Commonwealth Energy Corporation, a California corporation (the "Commonwealth").
2. There total number of outstanding shares of each class of capital stock
entitled to vote on the merger are as follows: 29,699,737 outstanding shares of
common stock of Commonwealth and 1,001,000 outstanding shares of preferred stock
of Commonwealth.
3. The principal terms of the Agreement and Plan of Reorganization in the
form attached were duly approved by the board of directors of Commonwealth and
by the vote of a number of shares of Commonwealth which equaled or exceeded the
vote required.
4. The percentage vote required was (a) more than 50% of the outstanding
shares of common stock of Commonwealth and (b) more than 50% of the voting power
of the outstanding shares of common stock and preferred stock of Commonwealth
voting together as a single class.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: July 6, 2004
/s/ Xxx X. Xxxxxx
----------------------------------------
Name: Xxx X. Xxxxxx
Title: Chief Executive Officer
/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
CERTIFICATE OF APPROVAL
OF
AGREEMENT AND PLAN OF REORGANIZATION
Xxx X. Xxxxxx and Xxxx X. Xxxxxxxx certify that:
1. They are the President and Secretary, respectively, of CEGI Acquisition
Corp., a California corporation ("CEGI Acquisition Corp.").
2. There total number of outstanding shares of each class of capital stock
entitled to vote on the merger are as follows: 1,000 outstanding shares of
common stock of CEGI Acquisition Corp.
3. The principal terms of the Agreement and Plan of Reorganization in the
form attached were duly approved by the board of directors of CEGI Acquisition
Corp. and by the vote of a number of shares of CEGI Acquisition Corp. which
equaled or exceeded the vote required.
4. The required vote of the sole stockholder of the parent of CEGI
Acquisition Corp. was obtained.
5. The percentage vote required was more than 50% of the outstanding
shares of common stock of CEGI Acquisition Corp.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: July 6, 2004
/s/ Xxx X. Xxxxxx
----------------------------------------
Name: Xxx X. Xxxxxx
Title: President
/s/ Xxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
