Exhibit 10(aa)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is made and entered into as of this
31st day of July, 2007, to be effective as of the 2 nd day of April,
2007, by and between EnergySouth Midstream, Inc., an Alabama
corporation, and Ben J. Reese (the “Executive”).
WHEREAS , effective
April 2, 2007, the Executive became the Company’s
President and Chief Operating Officer; 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 Operating 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 four (4) years, commencing on April 2,
2007 (the “Employment Commencement Date”), and ending
on the first to occur of (a) April 1, 2011, or
(b) the date of termination of the Executive’s
employment pursuant to Section 3 of this Agreement. The
Company and the Executive may extend the Term by mutual agreement
in writing, or the Term shall be extended on a month-to-month basis
in the event that the Executive’s employment continues beyond
April 1, 2011. In event that the Term is extended in either
such manner, 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. The effective date of
termination of the Executive’s employment is referred to as
the “Employment Termination Date.”
1.3.
Responsibilities . In the Executive’s
capacity as President and Chief Operating Officer, the Executive
will have the duties, functions, responsibilities and authorities
that the Board of Directors or the President and Chief Executive
Officer of EnergySouth, Inc., a Delaware corporation
(“EnergySouth”), reasonably assigns to the Executive
from time to time, consistent with the typical duties commensurate
with the position of president and chief operating officer of a
company. The Executive will be responsible for the general and
active management of the business of the Company and will perform
services from offices of the Company to be established in Houston,
Texas, with travel to Mobile, Alabama, as necessary and
appropriate.
1.4. Standard of
Care . During the term of the Executive’s
employment with the Company, the Executive will devote his full
business time, skill, attention 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 EnergySouth. 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 Board of Directors of EnergySouth.
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 Annual Direct
Compensation .
(a) Annual Base Salary . The Company
will pay to the Executive an annual base salary (the “Base
Salary”) of $245,000. The Board of Directors of EnergySouth
may, but shall not be required to, review the Base Salary from time
to time during the Term and increase the Base Salary by such
amount, if any, as the Board determines, in its sole and absolute
discretion. 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
incentive compensation each year during the Term (the “Annual
Incentive Compensation Award”). The Annual Incentive
Compensation Award will be comprised of the following:
(i) Individual Performance Award
. The Company will provide to the Executive the opportunity
to earn an annual award (the “Individual Performance
Award”) ranging from 0% to 200% of the Executive’s Base
Salary. The amount of the Individual Performance Award will be
determined by Board of Directors of EnergySouth each year,
beginning in 2008, based upon the Company’s actual net
operating income for the previous fiscal year in relation to its
budgeted net operating income for the previous fiscal year. The
Individual Performance Award will be paid (A) 75% in cash, and
(B) 25% in common stock of EnergySouth or such other medium as may
be determined by the Board of Directors of EnergySouth. The
Individual Performance Award will be paid to the Executive no later
than December 31 of the year in which the amount of the award,
if any, is determined. The Individual Performance Award will be
prorated for any fiscal year of the Term with respect to which the
award is made that is less than a full fiscal year.
(ii) Team Performance Award . The
Company will provide to the Executive the opportunity to earn an
annual award (the “Team Performance Award”) ranging
from 0% to 22.5% of a pool established by the Company each year,
beginning in 2008, and funded with 30% of the amount by which the
Company’s actual net operating income for the previous fiscal
year exceeds the Company’s budgeted net operating income for
the previous fiscal year. The Team Performance Award will be paid
(A) one-third (1/3) in cash no later than December 31 of
the year in which the award is determined, and (B) two-thirds
(2/3) in common stock of EnergySouth or such other medium as may be
determined by the Board of Directors of EnergySouth, one-half (1/2)
of which will be paid on the first anniversary date of the cash
award, and one-half (1/2) of which will be paid on the second
anniversary date of the cash award. No Team Performance Award will
be paid with respect to any fiscal year in which the
Company’s actual operating income does not exceed the
Company’s budgeted operating income. If the Executive is
employed by the Company on December 2, 2011, and remains
employed by the Company through and including April 2, 2012,
then, with respect to any common stock of EnergySouth or other
property which has been awarded to the Executive as part of the
Team Performance Award prior to January 1, 2012, but which has
not yet been paid, such common stock or other property shall be
paid over to the Executive on April 2, 2012, if the Executive
delivers a written request therefor to the Board of Directors of
EnergySouth at least ninety (90) days but not more than one
hundred twenty (120) days prior to such date.
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The Executive must be employed by the
Company in order for an Annual Incentive Compensation Award to be
made. No Annual Incentive Compensation Award will be made to the
Executive following the Employment Termination Date. If an Annual
Incentive Compensation Award has been made prior to the Employment
Termination Date but has not been paid to the Executive as of such
date, payment of such award, if at all, will be in accordance with
Section 3.2.
2.2 Long-Term Incentive
Award . The Company will provide to the Executive
the opportunity to earn a long-term incentive award (the
“Long-Term Incentive Award”) ranging from 0% to 40% of
the Executive’s Base Salary by participating in a long-term
compensation plan of EnergySouth in effect from time to time.
2.3 Bridge Stock Option
Grant . The Company will grant to the Executive,
pursuant to the terms and provisions of the 2003 Stock Option Plan
of EnergySouth, Inc. (the “Stock Option Plan”), a stock
option (the “Option”) to purchase 43,600 shares (the
“Option Shares”) of EnergySouth’s common stock.
The Option will vest cumulatively following the date of grant in
four (4) equal annual installments, with the Executive having
the right to purchase from the Company up to 25% of the Option
Shares on and after April 2, 2008, and up to an additional 25%
of the Option Shares on and after each of the first anniversary,
the second anniversary and the third anniversary of such date. The
terms and provisions of the Stock Option will be set forth in a
separate agreement (the “Option Agreement”) between the
Company and the Executive in accordance with the provisions of the
Stock Option Plan, and the Stock Option and the Option Agreement
will be subject to all of the terms and provisions of the Stock
Option Plan.
2.4 Benefits and
Perquisites . The Executive will be eligible to
participate in all medical, insurance, retirement and other
employee benefit plans, whether now in place or that may be
hereafter implemented from time to time, in which all EnergySouth
employees are eligible to participate, pursuant to the terms of
such plans. The Executive will have such additional benefits and
perquisites that are consistent with those provided to
EnergySouth’s senior management.
2.5 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
EnergySouth’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.
Section 3 . Termination of
Employment . The Executive’s employment may be
terminated in accordance with any of the provisions set forth in
this Section 3.
3.1 Events of
Termination .
(a) Termination Due to Death or
Disability . The Company may terminate the
Executive’s employment on account of Executive’s
disability, 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) or more 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
EnergySouth written notice of the
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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
other positions that he may hold as an officer and/or director of
EnergySouth and/or its affiliates.
(c) Voluntary Termination by the Company
. The Company may terminate the Executive’s employment
at any time, either for Cause or without Cause, 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 other positions that he may hold as an
officer and/or director of EnergySouth and/or its 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
EnergySouth 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 Operating
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 or EnergySouth’s
requiring the Executive to be based at a location that is more than
fifty (50) miles from Houston, Texas, without the
Executive’s consent; or
(iii) The failure by the Company or EnergySouth to pay
to the Executive or provide the Executive with the compensation,
benefits and perquisites set forth in Section 2.
Notwithstanding the foregoing, none
of the events described in clauses (i) through (iii) of
this Section will constitute Good Reason unless the Executive has
delivered written notice to the Board of Directors of EnergySouth
describing the events which constitute Good Reason, and such events
are not cured within thirty (30) days after delivery of such
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 of, or plea of
“guilty” or “no contest” to, any crime
constituting a felony in the jurisdiction in which it is committed,
or to any crime involving acts of theft, fraud, embezzlement,
dishonesty, moral turpitude or similar conduct, or to any offense
that materially injures or is likely to materially injure the
Company, EnergySouth or any affiliate of EnergySouth;
(ii) Willful or grossly negligent violation of any
policy of the Company, EnergySouth or any affiliate of EnergySouth
which materially injures any of them;
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(iii) Malfeasance with respect to the Company,
EnergySouth or any affiliate of EnergySouth, including, without
limitation, fraud, embezzlement or willful or grossly negligent
misuse or diversion of funds, assets or property belonging to any
of them;
(iv) The
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