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EXHIBIT 10.16
EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT made and entered into as of the 23d day of June,
2004, by and between ENERGY WEST,
INCORPORATED (the "Company"), a Montana
corporation, and David Cerotzke (the
"Executive");
WHEREAS,
the Company desires to secure the employment of the Executive
as
its President and Chief Executive
Officer;
WHEREAS,
the Executive is willing to commit himself to be employed by
the
Company on the terms and conditions herein
set forth and thus to forego
opportunities elsewhere; and
WHEREAS,
the parties desire to enter into this Agreement, as of the
Effective Date, as hereinafter defined,
setting forth the terms and conditions
for the employment relationship of the
Executive with the Company during the
Employment Period (as hereinafter
defined).
NOW,
THEREFORE, IN CONSIDERATION of the premises, and the covenants
and
agreements set forth below, it is hereby
agreed as follows:
1.
Employment and Term.
(a)
Employment. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the
Company, in accordance with the terms and
provisions of this Agreement during the
term hereof (as described below).
(b) Term.
The term of this Agreement shall commence as of July 1, 2004
(the "Effective Date") and shall continue
until terminated in accordance with
Section 4 hereof (the "Employment
Period").
2. Duties
and Powers of Executive.
(a)
Position; Location. Initially, the Executive shall serve as
President
and Chief Executive Officer of the Company
and shall report to the Board of
Directors of the Company (the "Board" (as
applicable, references to the Board
include duly constituted committees of the
Board within the scope of their
respective areas of responsibility)). The
Executive shall perform such duties
and services appertaining to such position
as reasonably directed by the Board
and commensurate with the duties and
authority of officers holding comparable
positions in similar businesses of similar
size in the United States. The
Executive shall have the primary management
responsibility in connection with
the selection, retention and termination of
employees of the Company and outside
consultants, contractors, professionals and
service providers to the Company,
subject to the overall authority of the
Board. The Executive shall use his
reasonable best efforts to carry out such
responsibilities faithfully and
efficiently. The Executive's services shall
be performed primarily at the
Company's headquarters, which shall be
located in the Great Falls, Montana
metropolitan area.
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(b)
Attention. During the Employment Period, and excluding any periods
of
vacation and sick leave to which the
Executive is entitled, the Executive shall
devote substantially all of his business
time, energy and best efforts to the
business and affairs of the Company. The
Executive may not engage, directly or
indirectly, in any other business,
investment or activity that interferes with
the Executive's performance of his duties
hereunder, is contrary to the
interests of the Company, or requires any
significant portion of the Executive's
business time. It shall not be considered a
violation of the foregoing for the
Executive to serve on corporate, industry,
civic or charitable boards or
committees, so long as such activities do
not materially interfere with the
performance of the Executive's
responsibilities as an employee of the Company in
accordance with this Agreement. The
Executive shall remain as a member of the
Board and shall be nominated for election
to the Board at each annual
stockholders' meeting during the term of
his employment. The Executive may serve
on boards of directors of up to two
non-competing for-profit businesses which do
not materially interfere with his duties
hereunder.
3.
Compensation. The Executive shall receive the following
compensation
for his services hereunder to the
Company:
(a) Salary. The Executive's
initial annual base salary (the "Annual Base
Salary"), payable in accordance with the
Company's general payroll practices, in
effect from time to time, shall be at the
annual rate of $160,000. The Board
shall review such base salary at least
annually and may from time to time direct
such upward adjustments in Annual Base
Salary as the Board deems to be necessary
or desirable, including, without
limitation, adjustments in order to reflect
surveys of compensation for comparable
positions at other companies. The Annual
Base Salary shall not be reduced after any
increase thereof. Any increase in the
Annual Base Salary shall not serve to limit
or reduce any other obligation of
the Company under this Agreement.
(b)
Incentive Compensation. During the Employment Period, the
Executive
shall be eligible to receive an annual cash
bonus under an incentive plan to be
developed by the Compensation Committee of
the Board ("Incentive Plan"), and an
annual cash bonus under the Company's
current Balanced Goal Card Program,
provided, however, the Company has the
right to modify, eliminate, or add to its
short-term and long-term incentive
compensation plans at any time in its sole
discretion. Such bonuses will be payable
upon the achievement of performance
goals determined in advance by mutual
agreement of the Board and the Executive.
The target opportunity under the Incentive
Plan is to be fifty percent (50%) of
Annual Base Salary and the target
opportunity under the Balanced Goal Card
Program is to be ten percent (10%) of
Annual Base Salary. Written performance
goals under both the Incentive Plan and the
Balanced Goal Card Program shall be
determined within the first thirty (30)
days of the beginning of each fiscal
year.
(c)
Retirement and Welfare Benefit Plans. In addition to the
benefits
available under Section 3(b), during the
Employment Period and so long as the
Executive is employed by the Company, he
shall be immediately eligible (subject
to any generally applicable waiting
periods) to participate in all other
savings, retirement and welfare plans,
practices, policies and programs
applicable generally to employees and/or
senior executive officers of the
Company in accordance with the terms of
such plans, all on a basis no less
favorable than for any other senior
executive
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of the Company. The Company reserves the
right to modify, eliminate or add to
its retirement and welfare benefit plans,
practices and policies at any time in
its sole discretion.
(d)
Options. The Company shall grant the executive stock options
for
10,000 shares of Company common stock on
the Effective Date, pursuant to the
terms of the Company's 2002 Stock Option
Plan (the "Option Plan"). Twenty-five
percent (25%) of the options shall vest on
the Effective Date and the balance of
the options shall vest ratably on the next
three anniversaries of the Effective
Date, provided that Executive remains
employed by the Company on such
anniversary date. In addition, the Company
shall grant the Executive options for
not less than 10,000 shares of Company
common stock on the first and second
anniversaries of the Effective Date with
ratable vesting of not more than three
years, subject to any limitations under the
Option Plan. Option grants following
the second anniversary of the Effective
Date shall be made in the discretion of
the Board. The exercise price for each
option granted pursuant to this Section
3(d) shall be equal to the fair market
value of a share of the Company's common
stock on the date of grant.
(e)
Expenses. The Company shall reimburse the Executive for all
expenses,
including those for travel and
entertainment, properly incurred by him in the
performance of his duties hereunder,
subject to any reasonable policies
established from time to time by the
Board.
(f) Fringe
Benefits. During the Employment Period and so long as the
Executive is employed by the Company, he
shall be entitled to receive vacation
and fringe benefits in accordance with the
plans, practices, programs and
policies of the Company from time to time
in effect, commensurate with his
position, which benefits shall be at least
the same as those received by any
senior executive officer of the Company;
provided, however, the Company reserves
the right to modify, eliminate or add to
its fringe benefits at any time in its
sole discretion. For purposes of the
Company's sick leave policy, the Executive
shall be deemed to have six months of
service as of the Effective Date. In
addition, the Company shall pay (i)
reasonable legal fees incurred by the
Executive in the development of this
Agreement and (ii) relocation expenses
(including temporary living expenses not to
exceed 90 days during the 180 days
after the Effective Date). The Company
shall pay to the Executive an additional
amount, if necessary, so that the Executive
is made whole for any taxes paid on
any relocation expenses that are not
excludible from the Executive's gross
income or fully deductible by the Executive
for federal income tax purposes.
4.
Termination of Employment.
(a) Death.
The Executive's employment shall terminate automatically upon
the Executive's death during the Employment
Period.
(b)
Disability. The Executive shall be relieved of his position as
President and Chief Executive Officer of
the Company automatically upon the
Executive being unable to perform the
material duties of his position due to
physical or mental illness or injury for a
period of 60 consecutive days, or for
90 days within any one-year time period and
his employment shall terminate
automatically 120 days after the date that
he is relieved of his position.
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(c) By the
Company for Cause. The Company, by action of the Board, may
terminate the Executive's employment during
the Employment Period for Cause. For
purposes of this Agreement, "Cause" shall
mean (i) conduct which is a material
breach of this Agreement and is not cured
within 30 days after written notice to
Executive or willfully repeated thereafter,
(ii) conduct which is a material
violation of Company policies; (iii)
willful failure to perform substantially
all of Executive's duties as lawfully
delineated by the Board; (iv) conduct that
constitutes fraud, gross negligence of
willful misconduct; or (v) the Executive
is convicted of, or enters a plea of guilty
or no contest to, any felony or
other criminal offense involving moral
turpitude.
(d) By the
Company Without Cause. During the term of this Agreement, the
Company, by action of the Board, may
terminate the Executive's employment for
any reason other than for Cause during the
Employment Period upon 30 days'
advance written notice.
(e) By the
Executive. The Executive may terminate his employment during
the Employment Period, either with Good
Reason, or without Good Reason upon 30
days' advance written notice to the Board.
For purposes of this Agreement, "Good
Reason" shall mean:
(i) Without the prior consent of the Executive: any change in
title; any material diminution in the Executive's duties or
authority; assignment of duties materially inconsistent with
the
Executive's duties; any change resulting in Executive's being
required to report internally to a person other than the Board;
any
cessation of the Executive's Board membership (other than by
voluntary resignation of the Executive); any requirement imposed
by
the Company that the Executive relocate his principal residence
once
the Executive has relocated to the Great Falls, Montana,
metropolitan area; or
(ii) Any material breach by the Company of this Agreement not
cured within thirty days after written notice to the Company.
(f)
Retirement. This Agreement shall terminate upon the Executive
reaching
normal retirement age under the Company's
then existing retirement plan;
provided, however, that the Executive and
the Company may mutually agree to
continue the Executive's employment on an
at will basis.
5.
Obligations of the Company Upon Termination.
(a)
Obligations Upon Termination for any Reason. If, during the
Employment
Period, the Executive's employment shall
terminate for any reason (termination
in any such case being referred to as a
"Termination"), the Company shall pay to
the Executive a lump sum amount in cash
equal to the sum of (A) the Executive's
salary at the rate of the Annual Base
Salary earned through the date of
Termination to the extent not theretofore
paid, provided that in the case of
termination because of the Executive's
disability, the Executive shall be
entitled only to the amount provided in the
Company's sick leave policy, (B) any
earned but unpaid annual cash bonus or
other incentive award for a prior fiscal
year, and (C) accrued but unpaid vacation
pay. In addition, the Company shall
provide benefit continuation or conversion
rights (including
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COBRA) as provided under Company benefit
plans and vested benefits under Company
benefit plans. The amounts specified in
this Section 5(a)(A), (B), and (C) shall
be paid within 30 days after the date of
Termination.
(b)
Obligations Upon Termination with Good Reason or Without Cause. In
the
event of Termination by the Executive with
Good Reason or by the Company without
Cause, in addition to the amounts and
benefits set out in Section 5(a), the
Company shall pay to the Executive (A)
Annual Base Salary and annual cash bonus
described in Section 3(b) of this Agreement
at the target level payable monthly
for twelve months following the date of
Termination; (B) a lump sum amount, in
cash, equal to the annual cash bonus
described in Section 3(b) of this Agreement
at the target level for the fiscal year of
the Company that includes the date of
Termination multiplied by a fraction the
numerator of which shall be the number
of days from the beginning of such fiscal
year to and including the date of
Termination and the denominator of which
shall be 365, which calculation shall
be based on the terms of the Company's
incentive compensation plan, assuming
that all performance goals in effect on the
date of termination were met at the
target level for such year, such amount to
be paid within 30 days of such date
of Termination; (C) executive level career
transition assistance services by a
firm designated by the Executive (up to a
maximum of $10,000); (D) full vesting
of any unvested options with such options
to be exercisable for the remaining
term of the option or one year from the
date of Termination, whichever occurs
first; (E) full vesting of any shares of
restricted stock and elimination of any
restrictions, and (F) continuation of
medical benefits to the Executive and/or
the Executive's family at least equal to
those which would have been provided
had the Executive remained employed for
twelve months, such benefits to be in
accordance with the most favorable medical
benefit plans, practices, programs or
policies of the Company as in effect and
applicable to any senior executive
officer of the Company and his or her
family immediately preceding the date of
Termination, provided, however, that if the
Executive becomes employed with
another employer and is eligible to receive
medical benefits under another
emplo
