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EXHIBIT - 2.3
SALES AGENCY AGREEMENT
AGREEMENT, dated as of February 9, 2005, by and between
Commonwealth
Energy Corporation, a California
corporation ("Buyer"), and American
Communications Network, Inc., a Michigan
corporation ("ACN"), and, as to Section
8 only, Commerce Energy Group, Inc., a
Delaware corporation ("CEG").
W I T N E S S E T H
WHEREAS, Buyer, ACN and ACN Utility Services Inc., ACN Energy Inc.
and
ACN Power, Inc. (the "ACN Parties") have
entered into that certain Asset
Purchase Agreement, dated as of February 9,
2005 (the "Purchase Agreement"),
pursuant to which the ACN Parties are
selling substantially all of the assets,
properties, rights and businesses of the
Retail Energy Business to Buyer;
WHEREAS, as a condition to entering into the Purchase Agreement,
ACN
has agreed that its network of independent
sales representatives (the
"Representatives") shall act as a limited
agent for Buyer to sell electric
commodity and natural gas products and
related services of the Retail Energy
Business (the "Energy Products") to retail
residential and commercial consumers
from and after the Closing Date, subject to
the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained
herein and for other good and valuable
consideration set forth herein, the
sufficiency of which is hereby
acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
1. Defined Terms. 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:
"Accepted Customer" shall mean those customers of ACN which are
accepted by Buyer pursuant to standards to
be determined from time-to-time by
Buyer in its sole discretion and applied by
Buyer in a consistent manner as
gauged on a same UDC market, same energy
product or commodity, and same customer
class basis.
"ACN Call-Center-sourced Customers" shall mean those customers of
ACN
which have initiated contact with ACN, via
an inbound call, to ACN's call
center, and requested to become a customer
of ACN and have ultimately purchased
one or more Energy Products from ACN, which
customers (a) are Accepted Customers
and (b) have been or will be billed by
Buyer during or as of the relevant
measurement period.
"ACN Commission Reports" shall have the meaning ascribed to such
term
in Schedule A attached hereto.
"ACN Indemnified Person" shall have the meaning ascribed to such
term
in Section 10(c).
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"ACN-Sourced Customers" shall mean those customers presented by ACN
or
the Representatives under this Agreement to
Buyer which customers (a) are
Accepted Customers and (b) have been or
will be billed by Buyer during or as of
the relevant measurement period.
"Agency Customers" shall have the meaning ascribed to such term
in
Section 7(a).
"Agency Period" shall have the meaning ascribed to such term in
Section
3(a).
"Average Closing Price" shall mean, for any date of determination,
the
average closing sale price per share of the
Stock for the five (5) trading days
immediately preceding the date of
determination on the American Stock Exchange
or, if not listed on such exchange, on such
other national exchange or quotation
system upon which the Stock is then listed
or quoted.
"Benchmark" shall have the meaning ascribed to such term in
Section
7(a).
"Billing Report" shall have the meaning ascribed to such term
in
Section 6(a)(ii).
"Billing Report Date" shall have the meaning ascribed to such term
in
Section 8(b).
"Buyer Indemnified Person" shall have the meaning ascribed to such
term
in Section 10(a).
"Buyer RSG Liaison" shall have the meaning ascribed to such term
in
Section 4(g).
"CAB's" shall have the meaning ascribed to such term in Schedule
A
attached hereto.
"CEG" shall have the meaning ascribed to such term in the
preamble.
"CEG Common Stock" shall mean the common stock, $0.001 par value,
of
CEG.
"Commencement Date" shall have the meaning ascribed to such term
in
Section 7(a).
"Commission Notice" shall have the meaning ascribed to such term
in
Schedule A.
"Commissions" shall have the meaning ascribed to such term in
Section
6(a)(ii).
"Confidential Information" shall have the meaning ascribed to such
term
in Section 9(a).
"Customer Acquisition Fee" shall have the meaning ascribed to such
term
in Section 7(b).
"Earned Level" shall have the meaning ascribed to such term in
Schedule
A attached hereto.
"Energy Products" shall have the meaning ascribed to such term in
the
Whereas clause.
"Initial Agency Period" shall have the meaning ascribed to such
term in
Section 3(a).
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"Month-End Period" shall have the meaning ascribed to such term
in
Section 7(a).
"Post-Closing Call Center Customers" shall mean those ACN
Call-Center-sourced Customers generated
after the Closing Date.
"Purchase Agreement" shall have the meaning ascribed to such term
in
the Whereas clause.
"Rep" shall have the meaning ascribed to such term in Schedule
A
attached hereto.
"Representatives" shall have the meaning ascribed to such term in
the
Whereas clause.
"Representative-Sold Customer" shall have the meaning ascribed to
such
term in Section 6(a)(i).
"Restrictive Period" shall have the meaning ascribed to such term
in
Section 9(c).
"RVP" shall have the meaning ascribed to such term in Schedule
A
attached hereto.
"Share Issuance Limitation" shall have the meaning ascribed to
such
term in Section 8(c).
"Standards" shall have the meaning ascribed to such term in
Section
2(a).
"Stock" shall have the meaning ascribed to such term in Section
8(a).
"SVP" shall have the meaning ascribed to such term in Schedule
A
attached hereto
"Territory" means North America.
2. Sales Agency.
(a) During the Agency Period, ACN shall provide, or cause to be
provided, to Buyer its network of
Representatives to act as the limited agent
for Buyer to sell Energy Products on behalf
and for the benefit of Buyer. ACN
shall use its commercially reasonable
efforts to cause the Representatives: (i)
to sell Energy Products and otherwise
promote the Retail Energy Business in a
manner consistent with the manner in which
such products were sold for the
Retail Energy Business prior to the Closing
Date, and (ii) to act as agent for
the sale of Energy Products exclusively for
or on behalf of Buyer. Buyer shall
have the right to cause ACN to direct the
Representatives with respect to sales
of Energy Products, customer service and
regulatory matters in accordance with
Buyer's Licenses or Certificates, the
statutes, rules, regulations, or policies
of the applicable jurisdictions in which
Buyer has authorized ACN and
Representatives to conduct customer
acquisition activities (the "Standards"),
but in no event shall it have the right to
cause ACN to take any actions (or
inaction) with respect to management and
oversight of, or the commissions or
other fees paid or payable to, the
Representatives.
(b) ACN shall be responsible for directing the Representatives
to
adhere to the Standards in selling the
Energy Products and otherwise in
connection with the performance of
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any obligations of ACN or the
Representatives under this Agreement. Neither ACN
nor the Representatives nor their
respective personnel shall have the power or
authority to act as attorney-in-fact of
Buyer or bind Buyer in any way without
the prior written consent of Buyer. All
customers acquired by the
Representatives shall be subject to
acceptance by Buyer to the extent permitted
by law.
(c) ACN's and Representatives' agency on behalf of Buyer shall
be
limited to the following acts: (i)
solicitation of customers, (ii) the offering
of Buyer's Energy Products as set forth in
Buyers marketing materials,
applications, and sales agreements, or
(iii) recommending Buyer's Energy
Products to retail customers.
(d) ACN's and the Representatives' limited agency shall not
include
(i) the negotiation of prices or rates,
terms or conditions of service for
Buyer's Energy Products, (ii) taking title
to Energy Products, (iii) arranging
for the purchase, transportation,
scheduling or delivery of Energy Products,
(iv) interaction or transactions with
pipelines, utilities, local distribution
companies, other suppliers or marketers, or
state or federal energy/utility
regulators, or (v) execution of contracts
or agreements on behalf of Buyer.
(e) Buyer shall have the right to cause ACN to take appropriate
actions with respect to the conduct of a
Representative in order to comply with
a notice or inquiry of any applicable
Governmental Authority by providing at
least 5 days' prior written notice (or such
lesser period of notice as may be
required by such Governmental Authority) to
ACN specifying the applicable
remedial or corrective actions required by
the Governmental Authority.
(f) ACN shall provide Buyer with true and complete copies of
all
independent representative form agreements
and updates thereto from time to
time.
(g) In providing the Representatives hereunder, ACN agrees
(i)(A)
not to take any actions that it knows or,
in the exercise of reasonable care,
should know would be harmful in any
material respect to the business and
operations of the Buyer, (B) to use its
commercially reasonable efforts to
promote the Retail Energy Business and the
interests of Buyer in the same manner
as it promotes its own business, and (C) to
comply with all applicable energy
federal, state and local laws, the
Standards, and Buyer's policies and
procedures established in accordance with
Section 5(a) hereof as in effect from
time to time, and (ii) to use its
commercially reasonable efforts to cause the
Representatives to do (or not to do, as
applicable) the same.
3. Agency Period; Termination.
(a) The
Agreement shall become effective as of the date hereof and
continue for a period of one year (the
"Initial Agency Period") or until earlier
terminated as provided herein. Upon the
expiration of such one-year period, this
Agreement shall be automatically renewed on
a year-to-year basis unless
terminated by either Buyer or ACN by the
giving of written notice of termination
to the other party hereto at least 90 days'
prior to the expiration of the
initial term or any successive term. The
Initial Agency Period and any
successive term being collectively referred
to herein as the "Agency Period."
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(b) This Agreement may be terminated at any time prior to the
expiration of the Agency Period by any of
the following:
(i) by mutual written agreement of the parties;
(ii) by either party upon the occurrence of a material breach
by the other party that remains uncured for
a period of thirty (30) days after
such breaching party receives written
notice describing the breach in reasonable
detail from the non-breaching party.
(c) In the case of termination other than as provided in
Section
3(b)(ii), notwithstanding any other
provision of this Agreement, any such
termination shall be without liability to
either party. Any termination as
provided in Section 3(b)(ii) shall be
without prejudice to the non-breaching
party's rights to seek damages for such
breach.
4. Duties of ACN. ACN will use its best efforts to cause the
Representatives to sell standard offer
contracts of the Retail Energy Business
as approved by Buyer to pre-approved
customer classes in electric and gas
markets as designated by Buyer in which
ACN-Sourced Customers are located; and
will perform the following functions:
(a) process, reconcile, and make payments to Representatives of
commissions received from Buyer on each
Representative-Sold Customer;
(b) provide Buyer with information similar in all material
respects
to that set forth in Schedule A attached
hereto for the purpose of identifying
the amount of Commissions to be paid by
Buyer to ACN in accordance with Section
6 hereof for ACN payment to
Representatives;
(c) at Buyer's option, ACN will perform all
Representative-service
functions;
(d) ACN will use its best efforts to give Buyer access to ACN's
Representative conventions and regional
training and orientation sessions and
regional and local level conferences,
training sessions, meetings and gatherings
at which ACN's other training and
product/service familiarization is scheduled
to occur so that Buyer may train the
Representatives on products, processes, and
procedures to sell Energy Products;
(e) ACN and Buyer will agree from time to time to provide
Representatives material to be provided by
Buyer for presentation through ACN's
website area(s) serving Representatives,
including potential links to Buyer's
website area(s) intended to inform the
Representatives of Energy Products
available for Representatives to sell;
(f) ACN will use its commercially reasonable efforts to promote
the
agency relationship created hereunder to
the Representatives;
(g) ACN will permit a representative of Buyer (a "Buyer RSG
Liaison") to work in ACN's offices housing
its RSG (and provide an amount of
enclosed office space with a locking door
customary for a senior executive) for
the purpose of assisting RSG management
in
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understanding energy products, answering
energy sales questions and generally
assisting with the interface between the
two organizations (ACN and Buyer) with
respect to activities under this Agreement;
and
(h) ACN will obtain and maintain any licenses or certificates
required to perform its obligations under
this Agreement.
5. Duties of Buyer. Buyer shall provide Energy Products for the
Representatives to sell in accordance with
the following terms:
(a) Buyer shall set all pricing and terms of service, as well
as
establish the policies and procedures for
the Representatives to sell Energy
Products for the Retail Energy
Business;
(b) Buyer shall undertake all business functions relating to
customers generated by the Representatives
pursuant to this Agreement,
including, but not limited to, order entry,
provisioning, billing, collections,
energy supply and scheduling, utility
interfaces, and customer tracking;
(c) Buyer shall provide ACN with reports and/or electronic data
reasonably satisfactory to ACN, at such
times as are reasonably acceptable to
ACN, in order for ACN to properly
administer its incentive compensation and
other programs for the Representatives and
so that ACN may reconcile its records
with those of Buyer;
(d) Buyer shall be entitled to provide training for
Representatives
at such times as may be reasonably
acceptable to ACN at ACN's Representative
conventions, and regional training and
orientation sessions and regional and
local level conferences, training sessions,
meetings and gatherings at which
ACN's other training and product/service
familiarization is scheduled to occur
and Buyer shall provide all product
literature, contractual forms, and any other
materials needed for the Representatives
(including web-based information) to be
able to sell Buyer energy products and
services;
(e) Buyer may provide a Buyer RSG Liaison, which liaison shall
be
reasonably acceptable to ACN, to be
co-located in the offices of ACN housing its
RSG during the normal business hours of the
RSG management; and
(f) Buyer will comply with all applicable energy federal, state
and
local laws necessary to satisfy the
purposes of this Agreement.
6. Commission Payment.
(a) Buyer shall pay ACN commission payments for all sales
generated
by the Representatives in the following
manner:
(i) For each (A) Transferred Customer and (B) ACN-sourced
Customer and ACN Call-Center-sourced
Customer (i.e., excluding Post-Closing Call
Center
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Customers) which (1) is an Accepted
Customer and (2) has been billed by Buyer
(each such customer hereinafter referred to
as a "Representative-Sold
Customer"), Buyer shall pay ACN amounts
equivalent to the actual commissions
(without taking into account any deduction
by ACN from such commissions of ACN's
customary out-of-pocket costs) and which
ACN, using its policies and procedures
as in effect on the date hereof (taking
into account the deduction by Buyer of
the 10% of commission deduction by ACN for
presumed bad-debt), will in turn pay
to the Representative(s) as such amounts
are further defined and limited as
specified in Section 6(a)(ii) hereof.
Except with the prior written consent of
Buyer, ACN shall direct the Representatives
not to sell, and Buyer shall have no
obligation to pay ACN any commissions with
respect to, any Energy Products other
than "standard offers".
(ii) Within ten (10) days after the end of each month, Buyer
shall provide ACN with a report (the
"Billing Report") setting forth the billed
revenue from the sale of Energy Products
with respect to all Representative-Sold
Customers during the prior month, and
within ten (10) days after receiving the
Billing Report, ACN shall send Buyer the
Commission Notice. Buyer shall pay any
undisputed commissions directly to ACN
within sixty (60) days after the end of
the month to which the Commission Notice
applies, with any disputed commission
paid, if necessary, promptly after
resolution thereof by the parties. Each party
shall be entitled to conduct audits of the
other's books and records as it deems
necessary or advisable in order to verify
the information set forth in the
Billing Report or the Commission Notice, as
applicable.
(b) All commission payments shall be made by Buyer directly to
ACN.
ACN shall be solely liable for the payment
of any and all compensation of
whatever kind to the Representatives, other
out of pocket expenses incidental to
the paying of the Representatives or the
Representatives' sale of Energy
Products and benefits received by such
independent contractors (including the
Representatives). To the extent required,
ACN (and not Buyer under any
circumstance) shall issue an IRS Form 1099
to each of the Representatives with
respect to any commissions or fees that any
of the Representatives earns for the
Energy Products provided hereunder.
(c) Prior to an ACN customer becoming a Transferred Customer,
Buyer
shall provide ACN the information necessary
to calculate Representatives'
commissions substantially as set forth on
Schedule A attached hereto and
thereafter ACN shall provide reports
substantially as set forth on Schedule A
attached hereto so that Buyer may remit to
ACN amounts in accordance with this
Section 6 which are commission amounts for
ACN to pay to the Representatives.
(d) Subsequent to an ACN customer becoming a Transferred
Customer,
and for all Representative-Sold Customers,
Buyer shall provide ACN the
information necessary to calculate
Representatives' commissions substantially as
set forth on Schedule A attached hereto and
thereafter ACN shall provide reports
substantially as set forth on Schedule A
attached hereto so that Buyer may remit
to ACN amounts in accordance with this
Section 6 which are commission amounts
for ACN to pay to the Representatives.
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7. Customer Acquisition Payment Structure.
(a)
During the Initial Agency Period, Buyer shall calculate, not
less frequently than by each month-end and
shall report such calculation to ACN
within twenty (20) days after the end of
each month, the sum of Transferred
Customers, ACN-Sourced Customers and
Post-Closing Call Center Customers which it
has sent a bill to during the billing cycle
ending as of the last day of the
immediately preceding month (hereafter
referred to as "Agency Customers"). Buyer
shall have an obligation to pay ACN a
Customer Acquisition Fee upon the earlier
to occur of (i) the expiration of the
Initial Agency Period, or (ii) the day
immediately after the last day of the month
during the Initial Agency Period on
which Buyer has at least [CONFIDENTIAL
TREATMENT REQUESTED] Agency Customers
(the "Commencement Date"). The number of
Agency Customers of Buyer on the
Commencement Date and on any month-end
anniversary of the Commencement Date
which is greater than the highest prior
Benchmark shall be referred to herein as
a "Benchmark" for the succeeding calendar
month-end period (any such period, a
"Month-End Period"). A Customer Acquisition
Fee, to the extent payable, shall be
paid by Buyer to ACN within 30 days of the
expiration of the prior Month-End
Period, for each Agency Customer enrolled
as of the end of the prior Month-End
Period in excess of the applicable
Benchmark. Each party shall be entitled to
conduct audits of all reports, calculations
and determinations made by the other
party with respect to the Customer
Acquisition Fee.
(b) The "Customer Acquisition Fee" shall equal an amount
calculated
by multiplying (i) the number of Agency
Customers at the end of the Month-End
Period in excess of the applicable
Benchmark by (ii) [CONFIDENTIAL TREATMENT
REQUESTED].
8. Payment of
Customer Acquisition Fee(s) Post-Initial Period.
(a) Subject to the Share Issuance Limitation, upon the
Commencement
Date, CEG shall place into escrow, pursuant
to the Escrow Agreement, a number of
shares of CEG Common Stock, rounded down to
the nearest whole number, determined
by dividing $1,250,000 by the Average
Closing Price on the day immediately prior
to the Commencement Date.
(b) Within twenty (20) business days after the date of receipt
of
the Billing Report (such date of receipt
being referred to as a "Billing Report
Date") most closely following the
conclusion of a Month-End Period, a number of
shares of CEG Common Stock shall be
released from the escrow to ACN equal to (i)
the Customer Acquisition Fee payable by
Buyer to ACN with respect to the
immediately prior Month-End Period divided
by (ii) the Average Closing Price as
of the Billing Report Date. If there is no
CEG Common Stock remaining on deposit
in the escrow at the time a release is
required in accordance with the prior
sentence, subject to the Share Issuance
Limitation, CEG shall promptly deposit
in escrow not less than a number of
additional shares of CEG Common Stock equal
to (1) $1,250,000 divided by (2) the
Average Closing Price as of the Billing
Report Date; provided, however, CEG shall
have no obligation to deposit
additional shares of CEG Common Stock into
escrow unless such shares have been
duly approved for listing on the American
Stock Exchange (or such other national
exchange or quotation system upon which the
CEG Common Stock is then listed or
quoted), provided that Buyer and CEG have
used commercially reasonable efforts
to do so.
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(c) Notwithstanding any provision of
