THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is made and
entered into as of this 27th day of October, 2006, to be effective
as of the 1 st day of August, 2006, by and between EnergySouth,
Inc., an Alabama corporation (the “Company”), and C. S.
“Dean” Liollio (the
“Executive”).
WHEREAS ,
effective August 1, 2006, the Executive became the
Company’s President and Chief Executive Officer and joined
the Board of Directors of the Company; and
WHEREAS ,
the Company and the Executive desire for the Executive’s
employment with the Company to be upon the terms and conditions
hereinafter set forth.
NOW,
THEREFORE , in consideration of the mutual covenants and
agreements of the parties set forth in this Agreement, and other
good and valuable consideration, the parties hereto, intending to
be legally bound, agree as follows:
Section 1 . Employment; Term; Responsibilities;
Standard of Care .
1.1
Employment . The Company employs the Executive and the
Executive enters into the employment of the Company as the
Company’s President and Chief Executive Officer upon and
subject to all of the terms and conditions set forth in this
Agreement.
1.2
Term . The Company employs the Executive for a term (the
“Term”) of three (3) years, commencing on
August 1, 2006 (the “Employment Commencement
Date”), and ending on the first to occur of (a) the date
of termination of the Executive’s employment pursuant to
Section 3 of this Agreement, or (b) July 31, 2009.
The Company and the Executive may extend the Term by mutual
agreement in writing. In the event that the parties extend the
Term, the Executive’s employment with the Company will
continue to be upon and subject to all of the terms and conditions
of this Agreement, except to the extent that the parties modify any
provisions of this Agreement in writing.
1.3.
Responsibilities . In the Executive’s capacity as
President and Chief Executive Officer, the Executive will have the
duties and responsibilities that the Board of Directors of the
Company reasonably assigns to the Executive from time to time
consistent with the typical duties commensurate with this position.
The Executive will be responsible for the general and active
management of the business of the Company under the direction of
the Board of Directors, will preside at all meetings of
shareholders, and will implement all orders and resolutions of the
Board of Directors.
1.4.
Standard of Care . During the term of the
Executive’s employment with the Company, the Executive will
devote his full business time and reasonable best efforts to the
business of the Company. The Executive may not engage in any other
business activity, whether or not such business activity is pursued
for profit, without the prior written consent of the Board of
Directors of the Company. The Executive may serve as a director or
trustee of any other business corporation or charitable
organization as long as such service does not injure the Company
and is approved by the Chairman of the Board of Directors of the
Company. The Executive may hold, as a passive investor, up to two
percent (2%) of the common stock of any public
corporation.
Section 2 . Compensation, Benefits and Perquisites
.
As remuneration for all services to
be rendered by the Executive to the Company during the Term of this
Agreement, the Company will pay and provide to the Executive the
following compensation, benefits and allowances:
2.1
Employment Bonus . EnergySouth will pay to the Executive
an employment bonus in the amount of $60,000 at such time as the
Executive’s family has established residency in Mobile,
Alabama.
2.2 Annual
Direct Compensation .
(a) Annual Base Salary . The Company will pay to the
Executive an annual base salary (the “Base Salary”) in
an amount established by the Compensation Committee of the Board of
Directors of the Company (the “Compensation
Committee”), provided, however, that in no event will the
Base Salary be less than $325,000. The Company will pay the Base
Salary to the Executive in equal installments throughout the year,
consistent with the Company’s normal payroll practices. The
Base Salary will be prorated for any year of the Term that is less
than a full calendar year.
(b) Annual Incentive Compensation . The Company will
provide to the Executive the opportunity to earn an annual cash
incentive award (the “Annual Cash Incentive Award”)
under the Company’s Officer Incentive Compensation Plan. The
Annual Cash Incentive Award will range from 0% to 80% of the
Executive’s annual base salary and will be established by the
Compensation Committee based upon reasonable performance goals and
measures agreed upon by the Company and the Executive. The target
Annual Cash Incentive Award will be 40% of the Executive’s
Base Salary. Any award will be prorated for any year of the Term
that is less than a full calendar year.
2.3 L
ong-Term Incentive Award . The Company will provide to
the Executive the opportunity to earn a long-term incentive award
(the “Long-Term Incentive Award”). The Long-Term
Incentive Award will be established by the Compensation Committee
based upon reasonable performance goals and measures agreed upon by
the Company and the Executive. The target Long-Term Incentive Award
will be 90% of the Executive’s Base Salary. The Compensation
Committee will determine the amount of the award, the date or dates
for payment of the award, and the medium for granting the award (by
way of example, cash, options, restricted stock, performance stock
or common stock). The initial Long-Term Incentive Award will be
made to the Executive in January, 2007.
2.4
Restoration Compensation . In recognition of the
Executive’s loss of certain incentive compensation awards
that he incurred by accepting employment with the Company, the
Company will pay the following compensation awards (the
“Restoration Compensation”) to the
Executive:
(a) Cash Award . The Company will pay a cash award to
the Executive of $750,000 that will vest in increments of $250,000
on the first, second and third anniversary dates, respectively, of
the Employment Commencement Date. The Company will pay each vested
increment of the cash award to the Executive on the first, second
and third anniversary dates, respectively, of the Employment
Commencement Date.
(b) Cash Performance Award . The Company will pay a
cash performance award to the Executive that will range from $0 to
$500,000, and will be determined by multiplying $250,000 by the
percentage change in the average value of the Company’s
common stock for the five (5) trading days immediately
preceding the Employment Commencement Date and the five
(5) trading days immediately preceding the third anniversary
of the Employment Commencement Date. The Company will pay the cash
performance award to the Executive within thirty (30) days
following the third anniversary of the Employment Commencement
Date. If, prior to the third anniversary of the Employment
Commencement Date, the outstanding shares of the Company’s
common stock are increased, decreased or exchanged for a different
number or kind of shares or other securities by reason of a stock
split, reverse
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stock split,
merger, consolidation, sale of all or substantially all of the
assets of the Company, reorganization, or other recapitalization
event, the manner of calculating the cash performance award to the
Executive will be equitably adjusted.
2.5
Restoration Pension Plan . The Company and the Executive
will enter into a supplemental deferred compensation agreement (the
“Restoration Pension Plan”) in connection with The
Retirement Plan for Employees of EnergySouth, Inc. and Affiliates
(the “Pension Plan”). The Restoration Pension Plan will
provide benefits to the Executive that would otherwise have been
payable under the Pension Plan but for the limitations imposed by
Section 401(a)(17) and Section 415 of the Internal Revenue
Code of 1986, as amended (the “Code”).
2.6
Employee Benefits . The Executive may participate in all
retirement and group benefit plans in which all EnergySouth
employees are eligible to participate, pursuant to the terms of
such plans.
2.7
Vacation . The Executive will receive four
(4) weeks of paid vacation during each calendar year of the
Term, beginning with the first calendar year of the Term, subject,
except as to length, to the Company’s officer vacation policy
as in effect from time to time. During any year in which the
Executive is employed for less than the full calendar year,
vacation time will be prorated accordingly.
(a) Relocation Expenses . The Company will reimburse
the Executive for the following relocation expenses incurred by the
Executive:
(i) Reasonable out-of-pocket expenses paid in
connection with moving household furniture from Houston to
Mobile.
(ii) Reasonable real estate commission paid in
connection with the sale of the Executive’s home in
Houston.
(iii) Reasonable out-of-pocket closing costs paid in
connection with the sale of the Executive’s home in Houston
and the purchase of the Executive’s home in
Mobile.
(iv) Interest costs paid in connection with purchasing
a residence in Mobile until the earlier of (A) the six
(6) month anniversary of the date of purchase, or (B) the
closing date of the sale of the Executive’s home in
Houston.
(v) Reasonable travel costs paid in connection with
three (3) visits to Mobile by the Executive and his spouse for
house hunting.
(b) Automobile Allowance . The Company will pay to
the Executive a monthly automobile allowance of $1,000.
Section 3 . Termination of Employment
.
3.1
General . The Executive’s employment may be
terminated in accordance with any of the provisions set forth in
this Section 3. The effective date of termination of the
Executive’s employment under this Section 3 will be
referred to as the “Employment Termination Date.” With
the exception of the
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provisions that
survive the termination of this Agreement as set forth in
Section 6.7, this Agreement will terminate on the Employment
Termination Date.
3.2 Events
of Termination .
(a) Termination Due to Death or Disability . The
Company may terminate the Executive’s employment on account
of Executive’s disability (as hereinafter described), and the
Executive’s employment will terminate upon the
Executive’s death. The Executive will be deemed to suffer
from a disability if, as a result of the Executive’s
incapacity due to physical or mental illness, the Executive is
absent from the full-time performance of his duties with the
Company for ninety (90) days, whether or not consecutive, during
any six (6) month period.
(b) Voluntary Termination by the Executive . The
Executive may terminate his employment at any time by delivering to
the Board of Directors of the Company written notice of the
Executive’s intent to terminate, delivered at least thirty
(30) calendar days prior to the effective date of such
termination. The termination will become effective automatically
upon the expiration of the thirty (30) day notice period. Such
notice will also constitute the resignation by the Executive of any
positions he may hold as an officer and/or director of the Company
and/or its subsidiaries or affiliates.
(c) Voluntary Termination by the Company . The
Company may terminate the Executive’s employment at any time
by delivering to the Executive written notice of the
Company’s intent to terminate, delivered at least thirty
(30) calendar days prior to the effective date of such
termination. The termination will become effective automatically
upon the expiration of the thirty (30) day notice period.
Unless otherwise stated in the termination notice, such notice will
also constitute termination of the Executive as to any positions
that he may hold as an officer and/or director of the Company
and/or its subsidiaries or affiliates.
(d) Termination by the Executive for Good Reason .
The Executive may terminate his employment for Good Reason by
delivering to the Board of Directors of the Company written notice
of the Executive’s intent to terminate, delivered at least
thirty (30) calendar days prior to the effective date of such
termination, and stating in reasonable detail the facts and
circumstances claimed to provide a basis for such termination. For
purposes of this Agreement, “Good Reason” means,
without the Executive’s express written consent, the
occurrence of any one or more of the following:
(i) The assignment to the Executive of any duties
inconsistent with his status as President and Chief Executive
Officer of the Company or a substantial reduction in the nature or
status of the Executive’s responsibilities from those set
forth in Section 1.3;
(ii) The Company’s requiring the Executive to be
based at a location that is more than fifty (50) miles from
the current principal location of the Company without the
Executive’s consent;
(iii) The failure by the Company to continue to pay to
or provide the Executive with the compensation, benefits and
perquisites set forth in Section 2, at the times provided for
payment or provision thereof; or
(iv) The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5.1
hereof.
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Notwithstanding
the foregoing, none of the events described in clauses
(i) through (iv) of this Section 3.2(d) will constitute
Good Reason unless the Executive has notified the Company in
writing describing the events which constitute Good Reason and the
Company has failed to cure such events within thirty (30) days
after the Company’s receipt of such written
notice.
(e) Termination by the Company for Cause . The
Company may terminate the Executive’s employment for Cause.
For purposes of this Agreement, “Cause” means any one
or more of the following:
(i) The Executive’s conviction, plea of
“guilty” or plea of “no contest” to any
crime constituting a felony in the jurisdiction in which it is
committed or to any crime involving dishonesty or willful
misconduct that materia
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