EXHIBIT 10.15
JOHN BARTHROP EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
of November 1, 2000 between Commonwealth Energy Corporation, a California
corporation (the "Company") and John A. Barthrop ("Employee"), with reference to
the following:
A. Employee has heretofore acted as the Chief Legal Officer to
the Company and Secretary to the Company and its affiliated companies, and in
that capacity has rendered valuable services to the Company.
B. The Company and Employee desire that Employee continue to
provide services to the Company as an employee of the Company on the terms
provided herein.
NOW, THEREFORE, in consideration of the various covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Term of Employment. The Company hereby employs Employee and Employee accepts
such employment for a term of fifty-two (52) months, commencing on November 1,
2000 and terminating on December 31, 2004 (the "Initial Term"); notwithstanding
the foregoing, however, the term of this Agreement is subject to earlier
termination as provided in Section 7 below.
2. Title and Responsibilities. During the term of this Agreement, Employee shall
serve as Chief Legal Counsel of the Company. In the performance of such duties
Employee shall report directly to (and only to) the Chief Executive Officer of
the Company (the "CEO") and shall, subject to the reasonable supervision and
control of the CEO, have the duties, responsibilities and authority commensurate
with such positions in companies comparable to the Company. Employee's office
location shall at all times be in offices of the Company located in Orange
County, California. Employee may be required to travel from time to time to the
extent reasonably necessary to the performance of his duties hereunder.
Employee shall in good faith and consistent with his ability,
experience and talent perform the duties set forth in this Section 2, and shall
devote substantially all of his productive time and efforts to the performance
of such duties; provided, however, that Employee may participate in civic,
charitable, and other not-for-profit activities and manage personal and family
investments to the extent that the same does not materially conflict with the
discharge of his duties hereunder.
3. Compensation and Benefits. The Company shall pay and/or provide the following
compensation and benefits to Employee during the term hereof, and Employee shall
accept the same as payment in full for all services rendered by Employee to or
for the benefit of the Company:
3.1 Base Salary. The Company shall pay Employee a salary of $160,000
per annum for the first twelve months of the term of this Agreement, $185,000
per annum for the second twelve months of the term, $210,000 per annum for the
third twelve months of the term, and $240,000 per annum thereafter (the "Base
Salary"). Notwithstanding the foregoing, the Base Salary shall be subject to
review from time to time (not less frequently than at the end of each fiscal
year of the Company) and, as a result thereof, may be increased (but not
decreased) at the discretion of the CEO and the Compensation Committee of the
Company's Board of Directors. In determining such increases in the Base Salary,
if any, the CEO and the Compensation Committee of the Company's Board of
Directors shall take into account, among other things, the Company's achievement
of the objectives set forth in its business plan and the Company's results of
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operations. The Base Salary shall be payable in accordance with the payroll
practices of the Company in effect from time to time.
3.2 Bonus. Employee shall be paid a cash bonus of thirty percent of the
Employee's annual salary at that time with respect to each calendar year ending
December 31, 2001 provided that the Company or the Company together with its
affiliated companies has met or exceeded the projections in its annual business
plan for pretax profit for the time period in question or the board of directors
determines that either external or internal factors significantly change the
business environment beyond the control of the Employee and said factors
adversely influence the achievement of the pretax profit objective of the
business plan. The bonus with respect to each calendar year shall be due and
payable no later than thirty (30) days following the last day of that year. In
addition, the Company has to show net income from operations for the year in
which the bonus was earned, except in the case of an expansion year, in which
case the bonus will be at the discretion of the Company's Board of Directors.
3.3 Bonus Upon Change in Control of the Company. If during the term of
this Agreement there is a Change in Control (as defined below), then the Company
shall pay to Employee, concurrently with such Change in Control, a cash bonus in
an amount equal to the sum of (a) four times the Employee's then current annual
Base Salary; and (b) the amount of taxes payable by Employee under Internal
Revenue Code Section 280G with respect to the bonus contemplated by this Section
3.3. The bonus contemplated by this Section 3.3 shall be paid to Employee
whether or not Employee elects to terminate this Agreement pursuant to any of
the terms of this Agreement. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities of the Company under an employee benefit plan of the Company, becomes
the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of (A) the outstanding shares of common stock of the Company, or (B) the
combined voting power of the Company's then-outstanding securities entitled to
vote generally in the election of directors; (ii) during any period of not more
than two consecutive years, not including any period prior to the date of this
Agreement, individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in
clause (iii) below) whose election by the Board or nomination by the Company's
shareholders was approved by a vote of at least a majority of the directors
still in office who either were in office at the beginning of such period or
whose election or nomination for election was previously so approved, ceases for
any reason to constitute a majority of the Board; or (iii) the Company is a
party to a merger or consolidation which results in the holders of voting
securities of the Company outstanding immediately prior thereto failing to
continue to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity) at least 50% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the Company sells
or disposes of all or substantially all of the Company's assets or any
transaction having similar effect is consummated; or the Company is subject to a
hostile takeover in the form of a proxy fight or any other means that allows the
company to be controlled by a material change in the Board of Directors. In the
event the company is taken over, whether hostile or otherwise, all financial
payments and options, earned or otherwise, shall be considered due and owing and
shall be considered earned as shown in the following paragraphs 3.1, 3.2, 3.3,
3.4, and 3.7. All payments shall be made to the Employee prior to the changeover
date of the event that would take over the company.
3.4 Stock Option Plan. Concurrently herewith, the Company shall grant
to Employee stock options entitling Employee to purchase 500,000 shares of the
Company's common stock, with an exercise price of $2.75 per share (the
"Options"). The right to exercise the Options shall be vested as to 125,000
shares covered thereby immediately upon the grant of the Options. The Options
shall vest as to an additional 125,000 shares on each of December 31, 2001,
December 31, 2002 and December 31, 2003. The Options shall have a term of seven
years (regardless of any termination of Employee's employment, except as
required by Section 422 of the Internal Revenue Code with respect to those of
the Options that are "incentive" stock options within the meaning of that
Section), and shall, to the maximum extent permitted by law, be "incentive"
stock options within the meaning of Section 422 of the Internal Revenue
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Code. Employee shall be entitled to include the shares purchased or purchasable
upon exercise of the Options in any registration statement hereafter filed by
the Company under the Securities Act of 1933, as amended, on a basis which is no
less favorable to Employee than the basis on which any other shareholder of the
Company is entitled to include such shareholder's shares in such registration
statement.
3.5 Stock Repurchase Option: In the event the company is taken over
through any event that takes control of the company itself or by taking control
of the Board of Directors, or a sale of assets as defined herein. Whether such a
takeover is considered non-consensual or not; hostile or not: all financial
payments due to the Employee and all options due to the Employee, at the sole
discretion of the employee, shall be considered due and owing and shall be
considered earned as shown in the following paragraphs 3.1, 3.2, 3.3, and 3.4.
Employee shall have the absolute right, subject to applicable State and Federal
securities laws, to be exercised in his sole discretion and in addition to any
other compensation or benefits payable to Employee hereunder, to require the
Company to repurchase from Employee all capital stock and stock options of the
Company then earned or to be earned by Employee at an aggregate repurchase price
(see definition below) equal to two (2) times the then aggregate price value of
the Company's capital stock; not to exceed a total price of $10.00 per share.
The employee, in the employee's sole and absolute discretion, may exercise such
right twenty-four (24) hours prior to the closing of such an event. Prior to the
closing, as defined herein, the Employee may elect to sell all or some of the
Employee's stocks and/or stock options and the Company shall agree to purchase
the same capital stock and stock options earned or to be earned by the Employee,
at the Employee's sole discretion. The Employee without any representation or
warranty by Employee may exercise this option; other than the Employee has good
title thereto free of all liens, encumbrances and adverse interests. By Employee
delivering to the Company a certificate or certificates representing such
capital stock and stock options, or this employment agreement, in each case duly
endorsed for transfer or accompanied by appropriate stock powers, and or notice
of the exercise of the right to have the Company repurchase the Employee's
options and or stock. In which case the Company shall be obligated to
immediately deliver to the Employee certified funds representing payment of the
purchase price in full for all of the stock, and with regard to the options an
amount equal to the difference between the exercise price owed by the Employee
for the options and the above referenced repurchase price payable by the Company
for the shares that would otherwise be issued in relation to the Employee's
options being repurchased by the Company. The term "aggregate price value" shall
mean the value of the optioned shares as set forth by the Company for the
purposes of calculating the withholding taxes for the applicable issuance period
of the options being repurchased. It is acknowledged that any options which vest
due to the Change of Control shall be deemed to have been issued on the date of
vesting and thus the latest stock price for such options shall be the price used
to determine the value for such accelerated vested options. This clause may be
invoked by the Employee in the case of any takeover or any Change of Control.
3.6 Other Fringe Benefits. Employee shall be entitled to participate in
all of the Company's incentive and benefit plans and arrangements, including,
without limitation, all bonus, compensation and other incentive and benefit
plans or arrangements made available now or in the future by the Company to its
senior executives, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements, but on a
basis no less favorable than that afforded to any other director, officer or
employee of the Company. The Company shall also provide to Employee at the
Company's expense all health, medical, hospitalization, life and disability
insurance provided to other senior executives of the Company.
3.7 Expenses. The Company shall promptly reimburse Employee for all
out-of-pocket expenses actually incurred by him in connection with the
performance of his duties hereunder, subject to Employee's furnishing the
Company with evidence in the form of receipts satisfactory to the Company
substantiating the claimed expenditures (such expenses being commensurate with
the office and executive position of Employee hereunder, and including first
class hotel and travel arrangements). Employee's right to be reimbursed for
expenses incurred prior to the termination of this Agreement shall survive
termination of this Agreement.
3.8 Vacation. Employee shall be entitled to the number of paid vacation
days in each calendar year determined by the Board from time to time for the
Company's senior executive officers, but not less
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than fifteen (15) business days in any calendar year. Employee shall also be
entitled to all paid holidays given to the Company's senior executive officers.
3.9 Automobile; Telephone; Etc. During the term hereof the Company
shall provide Employee $600 per month for the purposes of the Employee paying
for an automobile and related expenses. In addition, the Company shall provide a
cell phone and shall reimburse Employee for all charges incurred by him in
connection with the use thereof related to the performance of his duties
hereunder.
3.10 Withholding and other Deductions. All compensation payable to
Employee hereunder shall be subject to such deductions as the Company is from
time to time required to make pursuant to law, governmental regulation or order.
4. Representations and Warranties. Employee represents and warrants to the
Company that (a) Employee is under no contractual or other restriction or
obligation which is inconsistent with the execution of this Agreement, the
performance of his duties hereunder, or the other rights of the Company
hereunder; and (b) Employee is under no physical or mental disability that would
hinder the performance of his duties under this Agreement. The Company
represents and warrants to Employee that (i) the execution and delivery of this
Agreement by the Company and the performance of its obligations hereunder have
been duly authorized by the Board and no further corporate action on the
Company's part is necessary to authorize this Agreement and the performance of
such obligations; and (ii) this Agreement constitutes the valid and binding
obligation of the Company, enforceable by Employee against the Company strictly
in accordance with its terms (subject to laws in effect with respect to
creditors' rights generally and applicable principles relating to equitable
remedies).
5. Confidential Information. Employee acknowledges that the nature of Employee's
engagement by the Company is such that Employee will have access to Confidential
Information (as hereinafter defined) which has value to the Company. During the
term of this Agreement and at all times thereafter, Employee shall keep all of
the Confidential Information in confidence and shall not disclose any of the
same to any other person, except the Company's personnel entitled thereto and
other persons designated in writing by the Company or except as otherwise
required by law. Employee shall not use the Confidential Information for
Employee's personal gain or benefit outside the scope of Employee's engagement
by the Company. The term "Confidential Information," as used herein, means all
information or material not generally known by non-Company personnel which (a)
gives the Company some competitive business advantage or the opportunity of
obtaining such advantage or the disclosure of which could be materially
detrimental to the interests of the Company; (b) which is owned by the Company
or in which the Company has an interest; and (c) which is either (i) marked
"Confidential Information," "Proprietary Information" or other similar marking,
(ii) known by Employee to be considered confidential and proprietary by the
Company, or (iii) from all the relevant circumstances should reasonably be
assumed by Employee to be confidential and proprietary to the Company.
6. "Key Man" Insurance. The Company shall have the right to purchase "key-man"
life insurance covering Employee, in the name and for the benefit of the Company
and at the Company's expense in any amount not exceeding $2,000,000. Employee
shall cooperate in all reasonable respects with the Company's efforts to obtain
such insurance and shall submit to any required medical or other examination;
provided; however, that if such medical or other examination cannot be conducted
by Employee's personal physician, then Employee shall have the right to have his
personal physician attend the examination. Upon the termination of his
employment hereunder, Employee may acquire any such life insurance policy upon
paying the Company an amount equal to the insurance policy's cash surrender
value, if any, at the time of termination and reimbursing the Company for the
pro rata portion of any premium paid applicable to periods subsequent to the
termination.
7. Termination; Separation Compensation.
7.1 Termination. Notwithstanding Section 1 above, Employee's employment
with the Company shall terminate upon the earliest to occur of any of the
following:
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the death of Employee;
the "total disability" of Employee (as hereinafter defined);
the expiration of ten (10) days after the receipt by Employee of written notice
of termination executed by the Company if Employee willfully breaches or
habitually neglects the duties which he is required to perform under the terms
of this Agreement (unless caused by Employee's disability), provided that such
termination is approved by not less than a majority of the then current members
of the Company's Board of Directors;
the expiration of ten (10) days after the receipt by Employee of written notice
of termination executed by the Company if Employee shall make any intentional
material misrepresentation to the Company's Board of Directors, commit fraud,
embezzlement, misappropriation or any felony or other criminal act with respect
to Company, and/or any affiliates thereof, whether or not a criminal or civil
charge is filed in connection therewith, provided that such termination is
approved by not less than a majority of the then current members of the
Company's Board of Directors;
the expiration of one hundred eighty (180) days after receipt by the Company of
written notice of termination executed by Employee;
the expiration of ten (10) days after receipt by the Company of written notice
of termination executed by Employee if, without Employee's written consent,
there shall have been any adverse change in Employee's status, title, position,
duties, responsibilities or authorities contemplated by this Agreement; or
the expiration of ten (10) days after receipt by the Company of written notice
of termination executed by Employee if there shall have been a material breach
by the Company of any of its obligations under this Agreement, which default is
not cured within such ten day period.
7.2 Definition of Total Disability. For purposes of this Agreement,
Employee shall be deemed to have suffered a "total disability" if he is unable
to perform substantially all of the duties theretofore performed by him under
this Agreement by reason of any medically determinable physical or mental
impairment which has lasted for not less than one hundred twenty (120)
consecutive calendar days or for one hundred fifty (150) calendar days (whether
or not consecutive) in any one hundred eighty (180) calendar days. Prior to
termination of this Agreement as a result of total disability, and
notwithstanding any failure or inability of Employee to render services
hereunder, the Company shall continue to pay and/or provide to Employee the
compensation and benefits specified in Section 3 hereof.
7.3 Separation Compensation. If Employee's employment terminates
pursuant to Section 7.1(a), (b), (c), (d) or (e) of this Agreement, Employee
shall be entitled to receive the Base Salary and other compensation and benefits
provided for under this Agreement through the date of termination, but shall not
be entitled to receive any severance pay or non-vested employment benefits or
options, or any other termination benefits, except to the extent otherwise
required to be paid under applicable California law. If Employee's employment
terminates for any reason other than pursuant to the provisions of this
Agreement referred to in the immediately preceding sentence, then Employee shall
be entitled to receive (i) the Base Salary and other compensation and benefits
provided for under this Agreement through the date of termination, and (ii) an
amount equal to one and one-half times Employee's then current annual Base
Salary. The amount specified in clause (ii) above shall be payable in eighteen
(18) equal monthly installments, commencing immediately following the
termination of Employee's employment. The Company and Employee both agree that
the amount of the severance payment specified by the immediately preceding
sentence is reasonable under the circumstances existing at the time of the
execution of this Agreement.
7.4 Mitigation. Employee shall not be required to mitigate the amount
of any payment provided for in this Section 7 by seeking other employment or
otherwise, and the amount of any payment or benefit
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provided in this Section 7 shall not be reduced by any compensation earned by
Employee as a result of employment by another employer or by any other benefits.
8. General Relationship. Employee shall be considered an employee of the Company
within the meaning of all federal, state and local laws and regulations
including, but not limited to, laws and regulations governing unemployment
insurance, workers' compensation, industrial accident, labor and taxes.
9. Indemnification Agreement. As a material inducement to Employee to execute
and deliver this Agreement, concurrently with the execution and delivery of this
Agreement, the Company and Employee have executed and delivered an
Indemnification Agreement in the form attached to this Agreement as Exhibit A.
10. Miscellaneous.
10.1 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
10.2 No Assignment. This Agreement may not be assigned by the Company
or Employee without the prior written consent of the other (which consent may be
granted or withheld by such party in its sole and absolute discretion), and any
attempt to assign rights and duties without such written consent shall be null
and void and of no force and effect. Subject to the preceding sentence, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
10.3 Survival. The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
10.4 Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
10.5 Waiver. The failure of either party hereto at any time to enforce
performance by the other party of any provision of this Agreement shall in no
way affect such party's rights thereafter to enforce the same, nor shall the
waiver by either party of any breach of any provision hereof be deemed to be a
waiver by such party of any other breach of the same or any other provision
hereof.
10.6 Section Headings. The headings of the several sections in this
Agreement are inserted solely for the convenience of the parties and are not a
part of and are not intended to govern, limit or aid in the construction of any
term or provision hereof.
10.7 Notices. All notices and other communications required or
permitted under this Agreement shall be in writing, served personally on,
telecopied, sent by courier or other express private mail service, or mailed by
certified, registered or express United States mail postage prepaid, and shall
be deemed given upon receipt if delivered personally, telecopied, or sent by
courier or other express private mail service, or if mailed when actually
received as shown on the return receipt. Notices shall be addressed as follows:
If to the Company, to:
Commonwealth Energy Corporation
15901 Red Hill Avenue
Suite 100
Tustin, CA 92780
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If to Employee, to:
John A. Barthrop
29 Willowood
Aliso Viejo, CA 92656
Either party may change its address for purposes of this
Section by giving to the other, in the manner provided herein, a written notice
of such change.
10.8 Severability. All sections, clauses and covenants contained in
this Agreement are severable, and in the event any of them shall be held to be
invalid by any court, this Agreement shall be interpreted as if such invalid
sections, clauses or covenants were not contained herein.
10.9 Applicable Law. This Agreement is made with reference to the laws
of the State of California, shall be governed by and construed in accordance
therewith, and any court action brought under or arising out of this Agreement
shall be brought in any competent court within the State of California, County
of Orange.
10.10 Attorneys' Fees. If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of any
alleged dispute, breach, default or misrepresentation in connection with this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs it incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
10.11 Gender. Where the context so requires, the use of the masculine
gender shall include the feminine and/or neuter genders and the singular shall
include the plural, and vice versa, and the word "person" shall include any
corporation, firm, partnership or other form of association.
10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date hereinabove set forth.
COMMONWEALTH ENERGY CORP. EMPLOYEE
By: /s/ Ian B. Carter /s/ John A. Barthrop
----------------------------------- -------------------------
Ian B. Carter, Chairman of the John A. Barthrop
Board and CEO
By: /s/ Robert C. Perkins
Robert C. Perkins, Director
Compensation Committee
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EXHIBIT A
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into and is effective as of November 1, 2000, by and between COMMONWEALTH ENERGY
CORPORATION, a California corporation (the "Corporation"), and JOHN A. BARTHROP,
an individual ("Indemnitee").
RECITALS:
A. Indemnitee performs a valuable service to the Corporation in his
capacity as an officer of the Corporation.
B. The shareholders of the Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors,
employees and other agents of the Corporation as authorized by the California
Corporations Code, as amended (the "Code").
C. The Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its directors, officers, employees and
other agents with respect to indemnification of such persons.
D. In accordance with the authorization provided by the Bylaws and the
Code, the Corporation is entitled to purchase a policy or policies of Directors'
and Officers' Liability Insurance ("Insurance") covering certain liabilities
which may be incurred by its directors and officers in the performance of their
duties to the Corporation.
E. As a result of developments affecting the terms, scope and
availability of Insurance, there exists general uncertainty as to the extent of
protection afforded such persons by such Insurance and by statutory and bylaw
indemnification provisions.
F. In order to induce Indemnitee to continue to serve as an officer of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Indemnitee.
NOW, THEREFORE, the parties hereto agree as follows:
1. SERVICES TO THE CORPORATION. Indemnitee will serve, at the will of
the Corporation or under separate contract, if any such contract exists, as an
officer of the Corporation or as a director, officer or other fiduciary of the
Corporation or an affiliate of the Corporation (including any employee benefit
plan of the Corporation) faithfully and to the best of his ability so long as he
is duly elected and qualified in accordance with the provisions of the Bylaws,
other applicable constitutive documents of the Corporation or such affiliate, or
other separate contract, if any such contract exists; provided, however, that
Indemnitee may at any time and for any reason resign from such position (subject
to any contractual obligation that Indemnitee may have assumed apart from this
Agreement) and that the Corporation or any affiliate shall have no obligation
under this Agreement to continue Indemnitee in any such position.
2. INDEMNITY OF INDEMNITEE. The Corporation shall hold harmless,
indemnify and advance expenses to Indemnitee as provided in this Agreement and
to the fullest extent authorized, permitted or required by the provisions of the
Bylaws and the Code, as the same may be amended from time to time (but, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than were permitted by the
Bylaws or the Code prior to adoption of such amendment). The rights of
Indemnitee provided under the preceding sentence shall include, but shall not be
limited to, the rights set forth in the other sections of this Agreement.
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Indemnitee:
(a) Against any and all expenses (including reasonable
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Indemnitee becomes legally obligated to
pay because of any claim or claims made against or by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrative, administrative or investigative (including an action by
or in the right of the Corporation) to which Indemnitee is, was or at any time
becomes a party, or is threatened to be made a party, by reason of the fact that
Indemnitee is, was or at any time becomes a director, officer, employee or other
agent of the Corporation, or is or was serving or at any time serves at the
request of the Corporation as a director, officer, employee or other agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; and
(b) Otherwise to the fullest extent as may be provided to
Indemnitee by the Corporation under the non-exclusivity provisions of the Code.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) On account of any claim against Indemnitee for an accounting
of profits made from the purchase or sale by Indemnitee of securities of the
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) On account of Indemnitee's conduct that was knowingly
fraudulent or deliberately dishonest, or that constituted willful misconduct;
(c) On account of Indemnitee's conduct that constituted a breach
of Indemnitee's duty of loyalty to the Corporation or resulted in any personal
profit or advantage to which Indemnitee was not legally entitled;
(d) For which payment has actually been made to Indemnitee under
a valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement;
(e) If indemnification is not lawful (and, in this respect, both
the Corporation and Indemnitee have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication) or is prohibited by any applicable state
securities laws with respect to any violation of applicable federal or state
securities laws; or
(f) In connection with any proceeding (or part thereof)
initiated by Indemnitee, or any proceeding by Indemnitee against the Corporation
or its directors, officers, employees or other agents, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the Corporation, (iii) such
indemnification is provided by the Corporation, in its sole discretion, pursuant
to the powers vested in the Corporation under the Code, or (iv) the proceeding
is initiated pursuant to Section 9 hereof.
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5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Indemnitee is a
director, officer, employee or other agent of the Corporation (or is or was
severing at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
administrative or investigative, by reason of the fact that Indemnitee was a
director of the Corporation or serving in any other capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Indemnitee shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Indemnitee becomes legally
obligated to pay in connection with any action, suit or proceeding referred to
in Section 3 hereof even if not entitled hereunder to indemnification for the
total amount thereof, and the Corporation shall indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee will, if a claim in respect thereto is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which is may have to Indemnitee otherwise than under this
Agreement. With respect to any such action, suit or proceeding as to which
Indemnitee notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at
its own expense;
(b) Except as otherwise provided below, the Corporation may, at
its option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from the Corporation to
Indemnitee of its election to assume the defense thereof, the Corporation will
not be liable to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof
except for reasonable costs of investigation or otherwise as provided below.
Indemnitee shall have the right to employ separate counsel in such action, suit
or proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Corporation, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Corporation and
Indemnitee in the conduct of the defense of such action, or (iii) the
Corporation shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of Indemnitee's
separate counsel shall be at the expense of the Corporation. The Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Corporation or as to which Indemnitee shall have
made the conclusion provided for in (ii) above; and
(c) The Corporation shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent which may be given
or withheld in Indemnitee's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Indemnitee in connection with such proceeding upon receipt of an
undertaking by or on behalf of Indemnitee to repay said amounts it if shall be
determined ultimately that Indemnitee is not entitled to be indemnified under
the provisions of this Agreement, the Bylaws, the Code or otherwise.
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9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in
any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under Section 3 hereof
(other than an action brought to enforce a claim for advancement of expenses
pursuant to Section 8 hereof, provided that the required undertaking has been
tendered to the Corporation) that Indemnitee is not entitled to indemnification
because of the limitations set forth in Section 4 hereof, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or its shareholders) to have made
a determination prior to the commencement of such enforcement action that
indemnification of Indemnitee is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors or its
shareholders) that such indemnification is improper, shall be a defense to the
action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee by
this Agreement shall not be exclusive of any other right which Indemnitee may
have or hereafter acquire under any statute, provision of the Articles of
Incorporation, the Bylaws, agreement, vote of shareholders or directors or
otherwise, both as to action in his/her official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Indemnitee by this Agreement shall
continue after Indemnitee has ceased to be a director, officer, employee or
other agent of the Corporation or to serve at the request of the Corporation as
a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
shall inure to the benefit of Indemnitee's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify
Indemnitee to the fullest extent provided by the Bylaws, the Code or any other
applicable law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
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16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such notice or other
communication shall have been directed, or (ii) if mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to:
Mr. John A. Barthrop
29 Willowood
Aliso Viejo, CA. 92656
(b) If to the Corporation, to:
Commonwealth Energy Corporation
15901 Redhill Avenue
Tustin, CA 92780
Attn: Chairman of the Board
or to such other address(es) as may have been furnished to/by Indemnitee to/by
the Corporation.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Indemnification Agreement as of the day and year first above written.
CORPORATION
COMMONWEALTH ENERGY CORPORATION, a
California corporation
By: /s/ IAN CARTER
-------------------------------------
Ian Carter, Chairman of the Board and
Chief Executive Officer
INDEMNITEE
/s/ JOHN A. BARTHROP
----------------------------------------
John A. Barthrop
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