ex10-5.htm


    
      
         


      

      
         


        
          

        

      

      
         


      
Exhibit 10.5


    
      


      


      


      


      


      


      


      


      


      COMMERCE
ENERGY GROUP, INC.

      BONUS
PROGRAM

       ____________________________

      


      Plan
Document

      ____________________________

    

    
      


    

    
      As
Amended and Restated, Effective January 25, 2008

      


    

    
      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


    


    
      
        
          


          


          


           

        

         


      

      
         


        
          

        

      

      
         


      

    


    COMMERCE
ENERGY GROUP, INC.

    BONUS
PROGRAM

    ____________________________

    


    Plan
Document

    ____________________________

    


    


    ARTICLE
I

    PURPOSE
OF THE PLAN

    


    The
Commerce Energy Group, Inc. (the “Company”) established this Commerce Energy
Group, Inc. Bonus Program (the “Plan”) to provide employees with an increased
awareness and ongoing interest in the direction of the Company.  The
Plan is designed to ensure that employees are appropriately awarded for both
corporate and individual performance. The Plan is intended to be exempt from
Code Section 409A, and shall be operated and maintained in accordance with that
intention.

    


    


    ARTICLE
II

    DEFINITIONS

    


    
      	
              2.1  

            	
              “Board” shall
      mean the Board of Directors of the
Company.

            


    

    


    
      	
              2.2  

            	
              “Bonus” shall
      mean the amount payable to a Participant under the
  Plan.

            


    

    


    
      	
              2.3  

            	
              “Bonus Group”
      shall mean the Executive Team, the Director and VP Team, the Management
      Team or the Staff Team, or any or all of them, as established and
      comprised of in the Committee’s sole
discretion.

            


    

    


    
      	
              2.4  

            	
              “Bonus Pool”
      shall mean discretionary funds established by the Committee pursuant to
      Sections 4.2(a)(i) and 4.2(a)(vi)
herein.

            


    

    


    
      	
              2.5  

            	
              “Code” shall
      mean the Internal Revenue Code of 1986, as amended, or any successor
      statute.

            


    

    


    
      	
              2.6  

            	
              “Committee”
      shall mean the compensation committee of the
  Board.

            


    

    


    
      	
              2.7  

            	
              “­Contractor”
      shall mean an individual who provides services to the Company, but is not
      employed by the Company.

            


    

    


    
      	
              2.8  

            	
              “Director and VP
      Team” shall mean the director level and vice president level
      employees who together with the Management Team, are responsible for the
      operations of the departments and functional units of the Company and who
      are designated as Director and VP Team members in the Committee’s sole
      discretion.

            


    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

       

    

    
      	
              2.9  

            	
              “Earned Bonus
      Percentage” shall mean the portion of the Potential Bonus
      Percentage that a Participant may receive based on the Committee’s
      evaluation and assessment of the Qualitative Individual Measures set forth
      in Section
4.2(c)  herein.

            


    

    


    
      	
              2.10  

            	
              “Executive Team”
      shall mean the executives responsible for the governance of the Company
      who are designated as Executive Team members in the Committee’s sole
      discretion.

            


    

    


    
      	
              2.11  

            	
              “Fiscal Year”
      shall mean the period commencing August 1st and ending July
      31st.

            


    

    


    
      	
              2.12  

            	
              “Management
      Team” shall mean the managers who are responsible for the
      operations of the departments and functional units of the Company and who
      are designated as Management Team members in the Committee’s sole
      discretion.

            


    

    


    
      	
              2.13  

            	
              “Net Income”
      shall mean the Company’s net income from operations, including interest
      income and expense, for any Fiscal Year after bonus accruals under this
      Plan are deducted.

            


    

    


    
      	
              2.14  

            	
              “Participant”
      shall mean the employees of the Company eligible to receive a Bonus under
      the Plan, pursuant to Article III.

            


    

    


    
      	
              2.15  

            	
              “Part-Time
      Employee” shall mean an employee who is customarily employed by the
      Company for an average of fewer than 20 hours per
  week.

            


    

    


    
      	
              2.16  

            	
              “Potential Bonus
      Percentage” shall mean the maximum amount of Bonus, expressed as a
      percentage of a Participant’s base salary, that is potentially payable to
      the Participant under the Plan based on the attainment of the Quantitative
      Company Measures set forth in Section 4.2(a)
  herein.

            


    

    


    


    ARTICLE
III

    ELIGIBILITY
FOR PARTICIPATION

    


    
      	
              3.1  

            	
              CONDITIONS
      FOR BECOMING AN ELIGIBLE PARTICIPANT.  Conditions for becoming
      an eligible participant are met upon the commencement of full-time
      employment within the first nine months (August 1 through April 30) of the
      Fiscal Year, subject to the limitation set forth in Section
      4.3(a).  Employees who participate in one or more of the
      Company’s commission incentive programs are eligible to participate in
      this Plan, subject to the limitation set forth in Section 4.3
      herein.

            


    

    


    
      	
              3.2  

            	
              EXCLUDED
      EMPLOYEES.  Part-Time Employees and Contractors are not eligible
      to participate in this Plan.

            


    

    
 

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    ARTICLE
IV

    PAYMENTS

    


    
      	
              4.1  

            	
              AUTHORIZATION
      OF PAYMENTS.  No Bonus is payable under the Plan for a Fiscal
      Year unless the Committee determines Bonuses may be payable for such
      Fiscal Year and provides Participants with written notice of such
      determination. The Committee, thereafter, specifically authorizes the
      Bonus payments to the Participants, provided the pre-established
      objectives are met for such Fiscal
Year.

            


    

    


    
      	
              4.2  

            	
              FINANCIAL
      GOAL AND PERFORMANCE FACTORS TRIGGERING BONUS.  In its sole and
      absolute discretion, the Committee determines Bonus payments under the
      Plan by establishing quantitative factors specific to the Company, taking
      into account the Participant’s level in the Company, and assessing the
      Participant’s attainment of qualitative individual performance
      measures.

            


    

    


    
      	
              (a)  

            	
              Quantitative Company
      Measures.  A Participant’s Potential Bonus Percentage is
      determined based on the Company’s Net Income.  If at the close
      of any Fiscal Year, the Company achieves a positive Net Income, the Plan
      will become active for such year; otherwise, the Plan will be inactive for
      any Fiscal Year and no Bonus payments will be made
      hereunder.  Net Income results for any Fiscal Year, Potential
      Bonus Percentages or, if applicable, the discretionary bonus pool is
      determined according to the following
schedule:

            


    

    


    
      	
              (i)  

            	
               Net Income Less Than
      Trigger Target.  If the Company’s Net Income for any
      Fiscal Year is less than the Trigger Target (a Net Income amount
      determined by the Committee from time to time), the Committee in its sole
      discretion may establish a Bonus Pool and allocate bonuses among members
      of the Director and VP Team, the Management Team and/or Staff Team as the
      Committee deems appropriate.  No bonuses may be paid to the
      Executive Team under this Plan if Net Income for any Fiscal Year is less
      than the Trigger Target.

            


    

    


    
      	
              (ii)  

            	
              Trigger
      Target.  If the Company’s Net Income for any Fiscal Year
      is equal to or greater than the Trigger Target but less than the Stretch
      Target (as described below), the Potential Bonus Percentages for the CEO,
      Participants within the Executive Team (other than the CEO), the Director
      and VP Team, the Management Team and the Staff Team shall be amounts
      determined by the Committee as soon as administratively practicable
      following the start of the Fiscal Year to which the bonus
      relates.

            


    

    


    
      	
              (iii)  

            	
               Stretch
      Target.   If the Company’s Net Income for any Fiscal
      Year is equal to or greater than the Stretch Target (a Net Income amount
      in excess of the Trigger Target, which shall be determined by the
      Committee from time to time), but less than the Enhanced Stretch Target
      (as described below), the Potential Bonus Percentages for the CEO,
      Participants within the Executive Team (other than the CEO), the Director
      and VP Team, the Management Team, and the Staff Team shall be amounts
      determined by the Committee as soon as administratively practicable
      following the start of the Fiscal Year to which the bonus
      relates.

            


    

    
 

    
      
         

      

      
        3

        
          

        

      

      
         

      

       

    

    
      	
              (iv)  

            	
              Enhanced Stretch
      Target.  If the Company’s Net Income for any Fiscal Year
      is equal to or greater than the Enhanced Stretch Target (a Net Income
      amount in excess of the Stretch Target, which shall be determined by the
      Committee from time to time), but less than the Super Stretch Target (as
      described below), the Potential Bonus Percentages for the CEO,
      Participants within the Executive Team (other than the CEO), the Director
      and VP Team, the Management Team, and the Staff Team shall be amounts
      determined by the Committee as soon as administratively practicable
      following the start of the Fiscal Year to which the bonus
      relates.

            


    

    


    
      	
              (v)  

            	
              Super Stretch
      Target.  If the Company’s Net Income for any Fiscal Year
      is equal to or greater than the Super Stretch Target (a Net Income amount
      in excess of the Enhanced Stretch Target, which shall be determined by the
      Committee from time to time), the Potential Bonus Percentages for the CEO,
      Participants within the Executive Team (other than the CEO), the Director
      and VP Team, the Management Team, and the Staff Team shall be amounts
      determined by the Committee as soon as administratively practicable
      following the start of the Fiscal Year to which the bonus
      relates.

            


    

    


    
      	
              (vi)  

            	
              Net Income in Excess of the
      Super Stretch Target.  If the Company’s Net Income for
      any Fiscal Year is greater than Super Stretch Target, the Committee may
      establish a Bonus Pool and allocate among and distribute the Bonus Pool to
      members of the Bonus Groups as the Committee determines in its sole
      discretion.

            


    

    


    
      	
              (b)  

            	
              Participant’s
      Level.  If the Committee determines that the Plan is
      active for any Fiscal Year (as determined under Section 4.2(a) herein),
      the Bonus is payable in an amount appropriate for the Participant’s level
      in the Company.  Bonus Groups consisting of the Executive Team,
      the Director and VP Team, the Management Team, and the Staff Team, are
      used to categorize the levels and bonus amounts of the
      Participants.

            


    

    


    
      	
              (c)  

            	
              Qualitative Individual
      Measures.  The Plan, if active for any Fiscal Year (as
      determined under Section 4.2(a) herein), is designed to link a
      Participant’s Bonus with the Company’s performance by establishing target
      objectives for each Participant and assessing the Participant’s attainment
      of such objectives.  The objectives for each Bonus Group fall
      within the following categories (also referred to as “Compass
      Points”):

            


    

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
 

    
      	
              (i)  

            	
              Executive Team –
      Financial, investors, customers, peers and
  leadership.

            


    

    


    
      	
              (ii)  

            	
              Director and VP Team –
      Financial, departmental and
leadership.

            


    

    


    
      	
              (iii)  

            	
              Management Team – Financial,
      departmental and leadership.

            


    

    


    
      	
              (iv)  

            	
               Staff Team –
      Financial, departmental and
individual.

            


    

    


    
      	
              (d)  

            	
              Creation of
      Goals.  The Participants’ objectives and measurements
      thereof shall be written and pre-established.  To be
      pre-established, the objective must be approved (consistent with the
      procedures set forth in parts (i) through (iii) of this sub-section (d))
      as soon as administratively practicable following the start of the Fiscal
      Year to which the objective relates (or within 30 days after the date the
      individual first becomes eligible to participate in the Plan, if later),
      and the outcome must be uncertain at the time the objective is
      established.  To ensure a balanced approach to the various
      objectives applied to determine a Participant’s Bonus, each objective will
      be assigned a weight value (expressed as a percentage) based upon the
      overall objectives of the Company.  The foregoing shall be
      communicated to each Participant as soon as practicable after the
      establishment of the objectives, measurements and weight
      values.

            


    

    


    
      	
              (i)  

            	
              CEO and Executive
      Team.   The CEO and members of the Executive Team
      shall recommend objectives (as well as measurements and weight values
      thereof) applicable to the CEO and members of the Executive Team for
      approval by the Committee.  Each Executive Team member shall
      have goals that are specific to their position.  Members of the
      Executive Team shall share at least two common objectives, which
      encourages and requires the team to work closely together to achieve the
      objectives.

            


    

    


    
      	
              (ii)  

            	
              Director and VP Team.
      The CEO and members of the Executive Team shall establish and approve
      financial, departmental and leadership objectives (as well as measurements
      and weight values thereof) for members of the Director and VP
      Team.

            


    

    


    
      	
              (iii)  

            	
              Management
      Team.  The CEO and members of the Executive Team shall
      establish and approve financial, departmental and leadership objectives
      (as well as measurements and weight values thereof) for members of the
      Management Team.

            


    

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
 

    
      	
              (iv)  

            	
               Staff
      Team.  The CEO, Executive Team, the Director and VP Team,
      and Management Team, acting jointly or severally, shall establish and
      approve financial, departmental and leadership objectives (as well as
      measurements and weight values thereof) for members of the Staff
      Team.

            


    

    


    
      	
              (e)  

            	
              Review
      Process.  As soon as practicable after the Fiscal Year
      audit is completed and the Plan is determined to be active, each
      Participant’s performance will be reviewed in relation to the
      pre-established Company objectives, as well as the execution of the
      individually-assigned duties.  The performance ratings,
      expressed as a percentage (the Earned Bonus Percentage) are applied to
      determine the amount of the Bonus Payment in accordance with Section 4.3
      herein.

            


    

    


    
      	
              (i)  

            	
              CEO Review
      Process.  An annual review of the CEO will be completed
      by the Chairman of the Board and the Chairman of the
      Committee.

            


    

    


    
      	
              (ii)  

            	
              Executive Team Review
      Process.  An annual review of the Executive Team members,
      other than the CEO, will be completed by the CEO and the
      Committee.

            


    

    


    
      	
              (iii)  

            	
              Director and VP Team
      Review Process. An annual review of the Director and VP Team
      members will be completed by the CEO and members of the Executive
      Team.

            


    

    


    
      	
              (iv)  

            	
              Management Team Review
      Process.  An annual review of the Management Team members
      will be completed by the CEO and members of the Executive
      Team.

            


    

    


    
      	
              (v)  

            	
              Staff Team Review
      Process.  An annual review of the Staff Team members will
      be completed by the members of the Management
  Team.

            


    

    


    
      	
              (f)  

            	
              Initial Year of
      Plan.  For Fiscal Year 2007, the Committee shall, upon
      the effective date of the Plan, (i) establish the Trigger Target, Stretch
      Target, Enhanced Stretch Target, and Super Stretch Target (collectively,
      the “Target Thresholds”); (ii) establish the Potential Bonus Percentages
      for the CEO and the Bonus Groups with respect to the various Target
      Thresholds; and (iii) create Participant objectives and corresponding
      measurements and weight values thereof, notwithstanding the provisions of
      Sections 4.2(a) and 4.2(d) herein with respect to the timing for
      completion of the foregoing.

            


    

    


    
      	
              4.3  

            	
              CALCULATION
      OF BONUSES.  If the Plan is active for any Fiscal Year (as
      determined under Section 4.2(a) herein), each Participant shall become
      eligible to receive a Bonus, to be paid in accordance with Section 4.5
      herein, equal to:  the product of (x) the Participant’s
      Potential Bonus Percentage, and (y) the Participant’s Earned Bonus
      Percentage, and (z) the Participant’s base annual salary, as in effect on
      the last day of the ninth month (April 30th) of the Fiscal Year to which
      the Bonus relates; plus any allocation from the Bonus Pool as determined
      under Sections 4.2(a)(i) and 4.2(a)(vi) herein; and reduced (but not below
      zero) by any amounts paid from the Company’s commission incentive
      programs.

            


    

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
 

    
      	
              (a)  

            	
              Proration.  If
      an employee enters the Plan after the first day of the Fiscal Year to
      which the Bonus payment relates, the Bonus may be prorated, in the sole
      discretion of the Committee, based on the length of time the individual
      served as an employee of the Company during such Fiscal
    Year.

            


    

    


    
      	
              4.4  

            	
              VESTING.  To
      receive a Bonus pursuant to Section 4.5 below, a Participant must complete
      at least three months of service and be an active employee of the Company
      in good standing on the date the bonus is paid.  The Bonus has
      no cash out value until the payment date.  If a Participant’s
      termination of service occurs for any reason prior to the payment date,
      the Participant shall forfeit all rights to the
  Bonus.

            


    

    


    
      	
              4.5  

            	
              TIME
      AND METHOD OF PAYMENT.  Each Participant’s Bonus shall be paid
      in a lump sum payment after the Fiscal Year audit to which the Bonus
      relates is completed and the individual evaluation process has been
      finalized.

            


    

    


    
      	
              4.6  

            	
              APPLICABLE
      TAXES.

            


    

    


    
      	
              (a)  

            	
              Employment
      Taxes.  The Company shall withhold from each
      Participant’s Bonus, in a manner determined by the Company, the
      Participant’s share of FICA, withholding taxes and other employment
      taxes.

            


    

    


    
      	
              (b)  

            	
              Income Taxes and
      Deferred Compensation.  Participants are solely
      responsible and liable for the satisfaction of all taxes and penalties
      that may arise in connection with this Plan (including any taxes arising
      under Section 409A of the Internal Revenue Code).  Neither the
      Company nor its affiliates nor any of their directors, agents or employees
      shall have any obligation to indemnify or otherwise hold any Participant
      harmless from any or all of such
taxes.

            


    

    


    


    ARTICLE
V

    RIGHTS OF
PARTICIPANTS

    


    
      	
              5.1  

            	
              IN
      GENERAL. All payments are subject to the terms and conditions
      herein.  Although Participant’s performance may be rated
      periodically during any Fiscal Year and progress may be tracked, all Bonus
      payments are subject to the calculation as set forth in Section 4.3
      herein.  The mere existence of periodic performance assessments
      or Company performance tracking does not give the Participant any basis
      for claiming any Bonus under this Plan on a pro rata basis during the
      fiscal year or otherwise.

            


    

    
      	
              5.2  

            	
              NOT
      A CONTRACT OF EMPLOYMENT.  Nothing in this Plan gives a
      Participant the right to remain in the employ of the
      Company.  Except to the extent explicitly provided otherwise in
      a then effective written employment contract executed by the Participant
      and the Company, Participant is an at will employee whose employment may
      be terminated without liability at any time for any
  reason.

            


    

     

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    
 

    
      	
              5.3  

            	
              CLAWBACK
      RELATING TO CERTAIN FINANCIAL RESTATEMENT.  To the extent
      permitted by governing law, the Board shall have the discretion to require
      that each member of the Executive Team reimburse the Company for all or
      any portion of the Bonus if:

            


    

    


    
      	
              (a)  

            	
              Bonus Payment Is
      Dependent on Financial Results.  The payment, grant or
      vesting was predicated upon the achievement of certain financial results
      that were subsequently the subject of a material financial
      restatement;

            


    

    


    
      	
              (b)  

            	
              Fraud or
      Misconduct.  In the Board’s view, the member of the
      Executive Team engaged in fraud or misconduct that caused or partially
      caused the need for a material financial restatement by the Company or any
      substantial affiliate; and

            


    

    


    
      	
              (c)  

            	
              Lower Payment
      Results.  A lower payment, award or vesting would have
      occurred based upon the restated financial
  results.

            


    

    


    
      	
               
      

            	
              In
      each such instance, the Company will, to the extent practicable and
      allowable under applicable laws, require reimbursement of any Bonus
      awarded to a member of the Executive Team in the amount by which the
      individual’s annual bonus exceeded the lower payment that would have been
      made based on the restated financial results, plus a reasonable rate of
      interest; provided that the Company will not seek to recover bonuses paid
      more than three years prior to the date the applicable restatement is
      disclosed.

            


    

    


    In
addition, the Board could terminate the member of the Executive Team for cause,
authorize legal action for breach of fiduciary duty, assert rights under Section
304 of the Sarbanes-Oxley Act, or take such other action to enforce the
executive’s obligations to the Company as may fit the facts surrounding the
particular case.

    


    


    ARTICLE
VI

    ADMINISTRATION

    


    The Plan
shall be administered by the Committee.  The Committee shall have the
right to construe the Plan, to interpret any provision of the Plan, to make
rules and regulations relating to the Plan, and to determine any factual
question arising in connection with the Plan’s operation after such
investigation or hearing as the Committee may deem appropriate.  Any
decision made by the Committee under the provisions of this Article shall be
conclusive and binding on all parties concerned.  The Committee may
delegate to the officers or employees of the Company the authority to execute
and deliver those instruments and documents, to do all acts and things, and to
take all other steps deemed necessary, advisable or convenient for the
administration of this Plan in accordance with its terms and
purpose.

    
 

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    


    


    ARTICLE
VII

    AMENDMENT
OR TERMINATION OF PLAN

    


    The Board
or the Committee shall have the unilateral right to amend, suspend or terminate
this Plan at any time with respect to all or some Participants and with respect
to any unearned or unvested Bonus that is or could become payable.  If
such amendment or termination of the Plan would have a material and adverse
affect on a Participant’s earned, but unvested Bonus, then written consent of
the Participant is required with respect to such Bonus.

    


    This Plan is
intended to or be exempt from Code Section 409A, and
the Company shall have complete discretion to interpret and construe this
Plan and any associated documents in any manner that establishes an exemption
from (or otherwise conforms them to) the requirements of Code Section
409A.  If, for any reason including imprecision in drafting, any Plan
provision does not accurately reflect its intended establishment of an exemption
from Code Section 409A, as demonstrated by consistent interpretations or other
evidence of intent, the provision shall be considered ambiguous and shall be
interpreted by the Company in a fashion consistent herewith, as
determined in the sole and absolute discretion of the Company.  The
Company reserves the right to unilaterally amend this Plan without the
consent of any Participant in order to accurately reflect its correct
interpretation and operation, as well as to maintain an exemption from or
compliance with Code Section 409A.

    


    


    


    ARTICLE
VIII

    EFFECTIVE
DATE

    


    This Plan
shall be effective January 25, 2007.


    
      
        
           

          


          


           

        

         


      

      
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