UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): November 11, 2008
COMMERCE
ENERGY GROUP, INC.
(Exact
Name of registrant as specified in its charter)
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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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Registrant’s
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)
ý
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))
I
tem
1.01. Entry
into a Material Definitive Agreement.
On
November 11, 2008, Commerce Energy Group, Inc. (the “Company”) and Universal
Energy Group Ltd. (“UEG”) entered into a letter agreement (the “Letter
Agreement”) pursuant to which the Company agreed to a period of exclusive
negotiations extending through November 26, 2008 (the “Exclusivity Period”) in
order to conduct due diligence and reach a definitive agreement relating to a
potential transaction between the Company and UEG (the “Proposed
Transaction”).
The
Proposed Transaction would involve a purchase by UEG of: (i) certain of the
Company’s assets (the “Purchased Assets”), including, but not limited to, all
customer contracts relating to the natural gas retailing business currently
being conducted by the Company and its subsidiaries in Ohio, all customer
contracts relating to the electricity retailing business currently being
conducted by the Company and its subsidiaries in Pennsylvania, New Jersey,
Maryland and Michigan, and all licenses related thereto; (ii) newly issued
shares of the Company’s common stock (the “Shares”) amounting to 49% of the
issued and outstanding shares of the Company’s common stock, after giving effect
to the issuance of the Shares; and (iii) a warrant (the “Warrant”) to acquire up
to that number of additional newly issued shares of the Company’s common stock
(the “Warrant Shares”) that, when taken together with the Shares, would amount
to 66 2/3% of the issued and outstanding shares of the Company’s common stock as
of the closing date of the Proposed Transaction, after giving effect to the
issuance of the Shares and the Warrant Shares (assuming the Warrant is exercised
in full on the closing date of the Proposed Transaction). The Letter Agreement
contemplates that UEG would pay the Company an aggregate of $16 million in cash
for the Purchased Assets, the Shares and the Warrant.
In
addition, the Letter Agreement contemplates that, immediately following the
closing of the Proposed Transaction, the Board of Directors of the Company would
consist of seven members, three of whom shall be nominees of UEG. The
Letter Agreement also provides that, within ten days of signing a definitive
agreement relating to the Proposed Transaction, UEG would replace or arrange for
the replacement of the credit support currently provided to the Company by
Wachovia Capital Finance (Western) under the Company’s existing credit facility
for an initial fee of $250,000. The terms of the Proposed Transaction, as
described above and in the Letter Agreement, are non-binding and subject to
further negotiations and the execution of a definitive agreement.
Pursuant
to the Letter Agreement, the Company has agreed that, during the Exclusivity
Period, it will not, directly or indirectly:
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·
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submit,
solicit, initiate, encourage or discuss any proposal , offer or inquiry
from any other person relating to an Acquisition Proposal (as defined in
the Letter Agreement);
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enter
into any agreement or commitment related to any Acquisition Proposal;
or
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provide
any information with respect to any Acquisition Proposal to any third
party, except as permitted in the Letter
Agreement.
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Notwithstanding
the foregoing, under the Letter Agreement, the Company may enter into or
participate in discussions or negotiations with a third party, or take any other
action, in respect of an Unsolicited Acquisition Proposal (as defined in the
Letter Agreement) if, and to the extent, the directors of the Company determine
in good faith that the taking of such action is necessary in the discharge of
their fiduciary duties under applicable laws. If, during the Exclusivity Period,
the Company receives an Acquisition Proposal, the Company must notify
UEG and the Company may not accept, recommend or approve or enter into any
agreement to implement an Unsolicited Acquisition Proposal for a period of 72
hours, during which the Company shall negotiate in good faith with UEG to make
such adjustments to the Proposed Transaction as would enable UEG and the Company
to proceed with the Proposed Transaction rather than the Company accepting the
Unsolicited Acquisition Proposal. In addition, the Letter Agreement requires the
Company to provide certain information to UEG regarding any written Acquisition
Proposal.
In the
event that prior to the earlier of the termination of the Letter Agreement or
the entry by the Company and UEG into a definitive agreement: (i) the Company or
its Board of Directors recommends, approves or enters into or proposes to
publicly accept, recommend, approve or enter into any agreement with any person
to implement an Acquisition Proposal; (ii) an Acquisition Proposal is publicly
announced, proposed, offered or made to the
stockholders
of the Company and such Acquisition Proposal is completed within 12 months of
the termination of the Letter Agreement; or (iii) the Company and UEG fail to
enter into a definitive agreement on or prior to November 26, 2008 and such
failure is solely or primarily attributable to the Company failing to use
commercially reasonable efforts to negotiate and enter into a definitive
agreement, then the Company shall pay UEG a non-completion fee of $500,000. In
the event that prior to the earlier of the termination of the Letter Agreement
or the entry by the Company and UEG into a definitive agreement, the Company and
UEG fail to enter into a definitive agreement on or prior to November 26, 2008
and such failure is solely or primarily attributable to UEG failing to use
commercially reasonable efforts to negotiate and enter into a definitive
agreement, then UEG shall pay the Company a non-completion fee of
$500,000.
There are
no material relationships, other than with respect to the Letter Agreement,
between the Company and its directors, officers (or any associate of any such
director or officer) or affiliates, on the one side, and UEG and its directors,
officers (or any associate of any such director or officer) or affiliates, on
the other side.
The
foregoing description of the Letter Agreement is qualified in its entirety by
the text of the Letter Agreement, a copy of which is filed as Exhibit 99.1 to
this Current Report. There cannot be any assurance that the Proposed Transaction
will occur.
Item 7.01
Regulation FD
Disclosure.
On
November 12, 2008, the Company issued a press release announcing the execution
of the Letter Agreement. A copy of the press release is being furnished as
Exhibit 99.2 to this Current Report.
Item 9.01. Financial
Statements and Exhibits.
(c) Exhibits
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Exhibit No
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Description
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99.1
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Letter
Agreement, dated November 11, 2008, between Universal Energy Group Ltd.
and Commerce Energy Group, Inc.
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99.2
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Commerce
Energy Group, Inc. press release dated November 12,
2008
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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:
November 12, 2008
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By:
/s/ C. DOUGLAS
MITCHELL
C.
Douglas Mitchell
Chief Financial
Officer
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EXHIBIT
INDEX
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Exhibit No.
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Description
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99.1
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Letter
Agreement, dated November 11, 2008, between Universal Energy Group Ltd.
and Commerce Energy Group, Inc.
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99.2
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Commerce
Energy Group, Inc. press release dated November 12,
2008.
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