REVISED SECURITY AGREEMENT

 

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                                                                   EXHIBIT 10.32

 

                           REVISED SECURITY AGREEMENT

 

      THIS REVISED SECURITY AGREEMENT, dated October 27, 2004, (this

"Agreement") is by and between Commonwealth Energy Corporation, a California

corporation, located at 600 Anton Boulevard, Suite 2000, Costa Mesa, California

92626 (the "Debtor") and DTE Energy Trading, Inc., a Michigan corporation,

located at 414 South Main Street, Suite 200, Ann Arbor, Michigan 48104 (the

"Secured Party"). This Revised Security Agreement replaces the Security

Agreement dated July 24, 2002 between Debtor and Secured Party.

 

                                    RECITALS

 

      A. Debtor and Secured Party are parties to several agreements: (i) an EEI

Power Purchase and Sale Agreement, dated July 1,2003, between Debtor and Secured

Party, together with all Transactions and Confirmations from time to time

thereto (as the same may be amended, extended or replaced from time to time,

(the "Master Agreement"); (ii) a Revised Escrow Agreement, dated October 27,2004

between and among Standard Federal Bank (the "Escrow Agent"), Debtor and Secured

Party (the "Revised Escrow Agreement"); and (iii) a Revised Operating Agreement

dated October 27,2004 between Debtor and Secured Party (the "Revised Operating

Agreement"). The Master Agreement, the Revised Escrow Agreement and the Revised

Operating Agreement, together with this Revised Security Agreement, are each

referred to herein as a "Transaction Agreement" and are collectively referred to

herein as the "Transaction Agreements").

 

      B. As security for the performance and observance by Debtor of its

obligations under the Transaction Agreements, Debtor has agreed to grant to

Secured Party a security interest in certain of Debtor's assets related to the

retail sales customers ("RSC's") of Debtor to be served pursuant to the Master

Agreement.

 

      NOW, THEREFORE, in consideration of the premises and the mutual agreements

contained herein, and other good and valuable consideration the receipt and

adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

                                    AGREEMENT

 

      In consideration of the facts set forth in the Recitals, the execution and

delivery of the Transaction Agreements, and for other good and valuable

consideration, the receipt and adequacy of which are hereby acknowledged, Debtor

hereby agrees with and for the benefit of Secured Party as follows:

 

      1. DEFINED TERMS

 

      The terms "Accounts", "Deposit Accounts", "Investment Property" and

"General Intangibles" shall have the meanings ascribed to them in the Uniform

Commercial Code as adopted by the State of Michigan. Other capitalized terms not

otherwise defined herein shall have the same meanings as in the Master Agreement

unless the context dictates otherwise.

 

      2. CREATION OF SECURITY INTEREST

 

      In order to the secure the full and prompt payment, performance and

observance by Debtor of all of its duties and obligations under any of the

Transaction Agreements (collectively, the "Obligations"), Debtor does hereby

grant to and create in favor of the Secured Party, its successors and assigns, a

present and continuing first priority security interest in: (a) all contracts

and agreements

 

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between Debtor and any RSC for which Secured Party is providing wholesale

electric energy and related services to serve such RSC including, without

limitation, those contracts and agreements listed on Attachment 1 hereto, as the

same may be amended from time to time (collectively, the "RSC Contracts"); (b)

all Accounts arising from, and related to, the RSC Contracts, including, without

limitation, all accounts receivable from an RSC for which Secured Party is

providing energy for purchases of electric energy and related services and any

other right of Secured Party to payment from an RSC in whatever form, all

whether now owned or existing or hereafter arising or acquired (collectively,

the "Secured Party Accounts"); (c) all cash and other funds deposited in Deposit

Account Number #1054515459 (the "Lockbox Account"), maintained with the Escrow

Agent and Deposit Account Number #400641.1 (the "Escrow Account") maintained

with the Escrow Agent established pursuant to the Revised Escrow Agreement; (d)

the Lockbox Account and the Escrow Account themselves; (e) all Investment

Property into which the cash and other funds deposited into the Lockbox Account

and the Escrow Account are invested from time to time including, without

limitation, money market funds and other securities; (f) all General Intangibles

of Debtor relating to the RSC's; and (g) all proceeds and products of any of the

foregoing, including without limitation all proceeds of the Secured Party

Accounts, the Lockbox Account and the Escrow Account, and all proceeds of, and

all other profits, rentals or receipts, in whatever form, arising from the

collection, sale, lease, exchange, assignment, licensing or other disposition

of, or realization upon, any Collateral or the proceeds thereof, including,

without limitation, all claims of Debtor against third parties for loss of,

damage to or destruction of, or for proceeds payable under, or unearned premiums

with respect to, policies of insurance with respect to any Collateral, and any

condemnation or requisition payments with respect to any Collateral, in each

case whether now existing or hereafter arising (collectively, "Proceeds") (the

collateral referenced in items (a) through (g) above is collectively referred to

herein as the "Collateral").

 

      3. SECURITY INTEREST ABSOLUTE

 

      Debtor agrees that all rights of Secured Party and the security interests

granted to Secured Party hereunder, shall be absolute and unconditional,

irrespective of:

 

            (a) any lack of validity or enforceability of any of the

      Obligations;

 

            (b) the failure of Secured Party: (i) to assert any claim or demand

      or to enforce any right or remedy against the Debtor or any other person

      or entity under the provisions of any Transaction Agreement and this

      Agreement; or (ii) to exercise any right or remedy against any guarantor

      of, or collateral securing, any Obligations;

 

            (c) any change in the time, manner or place of payment of, or in any

      other term of, all or any of the Obligations, or any other extension,

      compromise or renewal of any Obligations;

 

            (d) any reduction, limitation, impairment or termination of any

      Obligations for any reason, including any claim of waiver, release,

      surrender, alteration or compromise, and shall not be subject to (and

      Debtor hereby waives any right to or claim of) any defense or setoff,

      counterclaim, recoupment or termination whatsoever by reason of the

      invalidity, illegality, nongenuineness, irregularity, compromise,

      unenforceability of, or any other event or occurrence affecting, any

      Obligations or otherwise;

 

            (e) any amendment to, recission, waiver, or other modification of,

      or any consent to departure from, any of the terms of any Transaction

      Agreement or this Agreement;

 

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            (f) any addition, exchange, release, surrender or nonperfection of

      any collateral (including the Collateral), or any amendment to or waiver

       or release of or addition to or consent to departure from any guaranty,

      for any of the Obligations; or

 

            (g) any other circumstance which might otherwise constitute a

      defense available to, or a legal or equitable discharge of, the Debtor,

      any surety or any guarantor.

 

      4. DEBTOR'S WARRANTIES AND REPRESENTATIONS

 

      In addition to any representations and warranties of Debtor set forth in

the Transaction Agreements, all of which are incorporated herein by this

reference. Debtor hereby warrants and represents to and for the benefit of

Secured Party that:

 

            (a) Organization: Good Standing. Debtor is a corporation, duly

      organized, validly existing and in good standing under the laws of the

      State of California. Debtor's exact legal name is as set forth in the

      first paragraph of this Agreement. Debtor is qualified to do business and

      in good standing under the laws of the State of Michigan.

 

            (b) Authority. Debtor has full power and authority, and has

      completed all proceedings and obtained all approvals and consents of

      whatever kind necessary, to execute, deliver, and perform this Agreement

      and the transactions contemplated hereby;

 

            (c) No Default or Lien. The execution, delivery, and performance of

      this Agreement will not contravene, or constitute a default under or

      result in a lien upon any property of Debtor (other than the lien granted

      hereby) pursuant to Debtor's organizational documents, any applicable law

      or regulation or any contract, agreement, judgment, order, decree, or

      other instrument binding upon or affecting Debtor;

 

            (d) Enforceability. This Agreement constitutes a legal, valid, and

      binding obligation of Debtor, enforceable in accordance with its terms

      except as such enforceability may be limited by applicable bankruptcy,

      insolvency, fraudulent conveyance or similar laws affecting the

      enforcement of creditors' rights generally, or by equitable principles

      relating to enforceability (regardless of whether the application of such

      principles is considered in a proceeding in equity or at law). This

      Agreement grants to Secured Party a valid, first-priority, enforceable

      lien on and security interest in the Collateral;

 

            (e) Ownership. Debtor is the sole owner of, and has good and

      marketable title to, the Collateral, free and clear of all claims,

      interests, charges, options, liens, encumbran