Exhibit 10.3

 

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered into as of the 31st
day of March, 2006, by and between Florida Public Utilities Company, a Florida
corporation (the “Company”), and George M. Bachman (“Executive”).

WHEREAS, Executive has served as an executive officer of the Company and desires
to continue to serve the Company in that capacity, and the Company desires to
continue to employ Executive upon the terms and conditions hereinafter set
forth.

NOW, THEREFORE, in consideration of the compensation and other benefits of
Executive’s employment by the Company and the recitals, mutual covenants and
agreements hereinafter set forth, Executive and the Company agree as follows:

 

1.

Employment Services.

(a)          Executive is hereby employed by the Company, and Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth.
During the Employment Period (as defined below), Executive shall serve as Chief
Financial Officer of the Company. Executive shall report directly to the Chief
Executive Officer of the Company.

(b)          Executive and the Company agree that, throughout the Employment
Period, Executive shall have such authorities, duties and responsibilities as
are customarily assigned to the Chief Financial Officer of an enterprise like
the Company. Such duties, responsibilities, and authorities shall include,
without limitation, but subject to the authority and directions of the Board,
responsibility for the management, operation, strategic direction, budgeting,
reporting, and overall conduct of the accounting and financial areas of the
Company. During the Employment Period, the Executive shall devote substantially
his full business time and best efforts to the business of the Company.

2.            Term of Employment. The term of this Employment Agreement (the
“Employment Period”) shall commence on March 31, 2006 (the “Effective Date”) and
shall end on March 30, 2009; provided, however, that in the event of a Change of
Control (as defined herein), the term of this Agreement shall be automatically
extended to a three-year term commencing on the effective date of such Change of
Control, unless terminated as herein provided.

 

3.

Compensation and Benefits.

(a)          Annual Base Salary. During the Employment Period, the Company shall
pay Executive as compensation for his services an annual base salary in an
amount determined by the Compensation Committee of the Board. Such annual base
salary shall be at the annual rate of not less than one hundred fifty five
thousand Dollars ($155,000) from the Effective Date, and may be adjusted upward
from time to time as the Compensation Committee may determine in its discretion.
Executive’s annual base salary rate shall be reviewed at least annually for
increase in the discretion of the Compensation Committee; Executive’s annual
base salary rate shall not be subject to decrease at any time during the
Employment Period. Executive’s base salary shall be payable in accordance with
the Company’s usual practices.

 

 

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(b)          Incentive Compensation Plan.  During the Employment Period,
Executive shall be eligible for additional compensation under the Company’s
Incentive Compensation Plan established by the Compensation Committee of the
Board and approved by the Board.  Under the Plan, Executive’s incentive
compensation will be tied to performance criteria.  The Executive is paid an
amount of not less than 80% of the total eligible compensation as base salary
and the remaining twenty percent as Incentive Compensation. During the first
year of the Employment Period (i.e., through December 31, 2006), Executive’s
incentive compensation shall be in an amount not less than twenty percent (20%)
of his annual total eligible compensation for such period.

(c)          Benefits. During the Employment Period, Executive shall also (i) be
eligible to participate in all benefit programs from time to time maintained by
the Company for the benefit of its most senior executives, including without
limitation, its group medical, dental and term life insurance coverages, 401(k)
Plan and any executive equity compensation plans that may be put into effect by
the Company, in each case on and subject to the terms and conditions of each of
such programs as such programs apply to the Company’s most senior executives,
and (ii) be reimbursed by the Company for customary business and travel
expenses.

4.            Termination of Employment. Prior to the expiration of the
Employment Period, this Agreement and Executive’s employment may be terminated
as follows:

 

(a)

Automatically upon Executive’s death.

(b)          By the Company, upon thirty (30) day’s prior written notice to
Executive, in the event Executive has been unable to perform a material portion
of the services required of Executive hereunder for a continuous one-hundred
twenty (120) day period by reason of physical or mental illness, and the Board
determines that Executive is unable to materially perform hereunder; in the
event of a disagreement concerning the existence of any such disability (in
which event any such termination shall not become effective until such
disagreement shall have been resolved), the matter shall be resolved by a
disinterested licensed physician chosen by the Company (such physician to be
located within 50 miles of Executive’s principal residence) and otherwise
reasonably satisfactory to the Executive or his legal representative.

 

(c)

By the Company, for “Good Cause.” “Good Cause” shall mean:

(1)          The willful and continued failure of Executive to substantially
perform material duties assigned to Executive by the Board in accordance with
this Agreement (other than any such failure resulting from incapacity due to
physical or mental illness); or

(2)          Executive’s commission of fraud or willful conduct which
significantly harms the Company or its subsidiaries or which significantly
impairs Executive’s ability to perform his duties.

For purposes of this definition, no act, or failure to act, shall be deemed
“willful” unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his action or omission was in the best
interest of the Company.

 

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(d)          By the Executive, upon thirty (30) day’s prior written notice to
the Company, for any reason.

(e)          By the Company, without Good Cause, upon seven (7) days prior
written notice to Executive. A termination without Good Cause shall be deemed to
exist upon any termination of Executive by the Company other than as set forth
in Sections 4(a), (b) or (c).

(f)           By Executive, immediately upon his determination that “Good
Reason” for termination exists. “Good Reason” shall be deemed to exist if:

(1)          Executive’s titles, duties, authorities or responsibilities are
materially reduced or modified without Executive’s consent, from those specified
herein;

(2)          A decision is made that Executive no longer report directly to the
Chief Executive Officer; or

(3)          Upon or after a Change of Control (as defined below), there is a
change in the location of the Company’s executive offices, or reporting
location, to a location that is greater than 100 miles from West Palm Beach,
Florida.

 

(g)

By the Company, upon a Change of Control (as defined below).

(h)          For the purpose of this Agreement, “Change of Control” shall mean
the effective date of any of the following events occurring during the term of
Executive’s employment: (a) consummation of any consolidation, merger, statutory
share exchange or other business combination as a result of which persons who
were stockholders of the Company immediately prior to the effective date thereof
beneficially own less than 50% of the combined voting power in the election of
directors of the surviving or resulting entity following the effective date; (b)
individuals who, as of the date hereof, constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority of the Board of
Directors of the Company, provided that any person who is elected as a director
subsequent to the date hereof by a vote of, or upon the recommendation of, at
least a majority of the directors comprising the current Board (other than an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company) shall be considered a member of the current Board for these purposes;
(c) consummation of any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company; (d) shareholder approval of any plan or proposal for
the liquidation or dissolution of the Company; or (e) acquisition of beneficial
ownership by any “person” or “group” (as such term is used Sections 13(d) and
14(d)(2) of the Exchange Act) of securities representing twenty percent (20%) or
more of the combined voting power in the election of the Company’s directors.

 

5.            Effect of Termination of Employment. Upon termination of
Executive’s employment and this Agreement, the rights and obligations of the
parties pursuant to Sections 7 through 16 shall be unaffected, but all other
rights and obligations of the parties hereunder shall cease, except:

 

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(a)          If this Agreement is terminated pursuant to Section 4(a), (b), (c)
or (d), Executive shall receive his annual base salary and benefits accrued
through the date of such termination of employment.

(b)          If this Agreement is terminated pursuant to Section 4(e), (f) or
(g), Executive shall receive his benefits (as applicable) for a period of two
years from his termination date (or shall receive a cash payment by the Company
within 15 days of his termination date equal to the actuarial equivalent of such
benefits for such period). In addition, Executive shall receive a lump sum
payment within 15 days of his termination date equal to 299 percent of (i) his
then current annual base salary plus (ii) the greater of (x) the annual
incentive compensation amount awarded pursuant to the Company’s Incentive
Compensation Plan with respect to the fiscal year immediately preceding the year
in which the termination occurs, or (y) the average of the Incentive
Compensation Plan award for the Executive with respect to the three fiscal years
immediately preceding the year in which the termination occurs. In addition, the
Executive shall be paid, in a lump sum, an amount equal to the actuarial value
of thirty-six (36) months of additional credited service under the Company’s
retirement plan. In the event any payment under this Section 5(b) would
otherwise be subject to taxation under Section 409A of the Internal Revenue Code
of 1986, as amended (“Code”), such payment plus reasonable interest from the
date of Executive’s termination of Employment shall be made in a lump sum six
months following Executive’s termination of Employment. Within fifteen (15) days
of his termination date, Executive shall be paid in a lump sum, an amount equal
to the cash value of accrued but untaken vacation for the portion of the year in
which such termination occurs.

 

6.

Provisions Relating to Taxation of Payments.

(a)          Gross-up Payment. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or , including any excise tax, interest and penalties
imposed under Section 409A of the Code, with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then Executive shall be entitled
to receive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon such payment or distribution.

(b)          Determination of Gross-Up. Subject to the provisions of paragraph
(c) of this Section 6, all determinations required to be made under this Section
6, including whether a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by an accounting firm satisfactory to the
Company and Executive (“Accounting Firm”). The Accounting Firm shall make such
determination and provide detailed supporting calculations to both the Company
and Executive within fifteen (15) business days after it is requested to do so.
The initial Gross-Up Payment, if any, as determined pursuant to this paragraph
(b) of this Section 6, shall be paid to Executive within five (5) business days
after the Company’s receipt of the Accounting Firm’s determination, but in no
event later than 2½ months

 

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after the close of the year in which the determination of Excise Tax liability
is made under Section 6(a). If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall furnish the Executive with a written
opinion that he has legal authority satisfying the criteria set forth in
Treasury Regulation Section 1.6661-3 or similar successor provisions not to
report any Excise Tax on his federal income tax return. Any determination by the
Accounting Firm shall be binding upon the Company and Executive.

(c)          Dispute of Tax Claim. Executive shall notify the Company in writing
of any proposed assessment or proposed adjustment by the Internal Revenue
Service (“IRS”) pursuant to an audit of Executive’s federal income tax return or
otherwise, that, if successful, would require the payment by the Company of a
Gross-Up Payment (hereinafter referred to as a “Claim”). Such notice shall be
given as soon as practicable but no later than ten (10) business days after the
earlier of (i) the receipt by Executive of a written notice of proposed
adjustment from the IRS or (ii) the receipt by Executive of a statutory notice
of deficiency. Such notice by Executive to the Company shall include (i) notice
of the amount of the proposed assessment or proposed adjustment which relates to
the Claim and the taxable year or years in which the Claim arises, (ii) the
general nature of the Claim and (iii) all relevant written reports of the
examining agent relating to the Claim. Within thirty (30) days of (i) the
receipt by Executive of a final assessment or (ii) the execution by Executive
and the IRS of a closing agreement, with respect to any tax year of Executive in
which a Claim has been raised, pursuant to which Executive is required to pay
any amount with respect to the Claim, Executive shall provide the Company and
the Accounting Firm with a copy of such assessment or agreement, together with
supporting documents sufficient to determine the amount of such tax liability
that was attributable to the Claim. The Accounting Firm shall determine the
amount of the Gross-Up Payment under this Agreement due to such tax liability
and the Company will make such Gross-Up Payment to Executive within five (5)
business days after its receipt of such determination, but in no event later
than 2½ months after the close of the year in which Executive receives the
assessment or agreement described in this Section 6(c).

7.            Withholding. All compensation paid to Executive shall be subject
to applicable withholding taxes and other employment taxes as required with
respect thereto.

8.            Non-Waiver of Rights. The failure of either party to enforce at
any time any of the provisions of this Agreement or to require at any time
performance by the other party of any of the provisions hereof shall in no way
be construed to be a waiver of such provisions or to affect either the validity
of this Agreement, or any part hereof, or the right of either party thereafter
to enforce each and every provision in accordance with the terms of this
Agreement.

9.            Severability and Interpretation. In the event of a conflict
between the terms of this Agreement and any of the definitions or provisions in
the Incentive Compensation Plan, the terms of this Agreement shall prevail.
Whenever possible, each provision of this Agreement and any portion hereof shall
be interpreted in such a manner as to be effective and valid under applicable
law, rules and regulations. If any covenant or other provision of this Agreement
(or portion thereof) shall be held to be invalid, illegal, or incapable of being
enforced, by reason of any rule of law, rule, regulation, administrative order,
judicial decision or public policy, all other conditions and provisions of this
Agreement shall, nevertheless, remain in full force and effect, and no covenant
or provision shall be deemed dependent upon any other

 

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covenant or provision (or portion) unless so expressed herein. The parties
hereto desire and consent that the court or other body making such determination
shall, to the extent necessary to avoid any unenforceability, so reform such
covenant or other provision or portions of this Agreement to the minimum extent
necessary so as to render the same enforceable in accordance with the intent
herein expressed.

10.          Entire Agreement. This Agreement represents the entire and
integrated Employment Agreement between Executive and the Company and supersedes
all prior negotiations, representations and agreements, either written or oral,
with respect thereto.

11.          Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier, addressed as set forth in this Section 11 or to such other address as
may hereafter be notified by such party to the other party. Notices and
communications shall be effective at the time they are given in the foregoing
manner (provided that notice by mail shall be deemed given three business days
after posting).

If to Executive:

George M. Bachman

4127 Cedar Avenue

Palm Beach Gardens, FL 33410

 

If to the Company:

Florida Public Utilities Company

401 South Dixie Highway

West Palm Beach, FL 33401

Attn: Corporate Secretary

12.          Amendments and Waivers. No modification, amendment or waiver of any
of the provisions of this Agreement shall be effective unless in writing
specifically referring hereto, and signed by the parties hereto.

13.          Assignments. This Agreement shall inure to the benefit of, and be
binding upon, the Company, its successors and assigns and/or any other entity
which shall succeed to the business presently being conducted by the Company.
Being a contract for personal services, neither this Agreement nor any rights
hereunder shall be assigned by Executive.

14.          Governing Law. The parties agree that this Agreement shall be
interpreted in accordance with and governed by the laws of the State of Florida,
without regard for any conflict of law principles.

15.          Headings. Section headings are provided in this Agreement for
convenience only and shall not be deemed to substantively alter the content of
such sections.

16.          Indemnification. To the fullest extent permitted by the
indemnification provisions of the Certificate of Incorporation and By-laws of
the Company in effect as of the date

 

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of this Agreement and the indemnification provisions of the corporation statute
of the jurisdiction of the Company’s incorporation in effect from time to time
(collectively, the “Indemnification Provisions”), and in each case subject to
the conditions thereof, the Company shall (i) indemnify the Executive, as a
director and officer of the Company or a subsidiary of the Company or a trustee
or fiduciary of an employee benefit plan of the Company or a subsidiary of the
Company, or, if the Executive shall be serving in such capacity at the Company’s
written request, as a director or officer of any other corporation (other than a
subsidiary of the Company) or as a trustee or fiduciary of an employee benefit
plan not sponsored by the Company or a subsidiary of the Company, against all
liabilities and reasonable expenses that may be incurred by the Executive in any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal,
because the Executive is or was a director or officer of the Company, a director
or officer of such other corporation or a trustee or fiduciary of such employee
benefit plan, and against which the Executive may be indemnified by the Company,
and (ii) pay for or reimburse the reasonable expenses incurred by the Executive
in the defense of any proceeding to which the Executive is a party because the
Executive is or was a director or officer of the Company, a director or officer
of such other corporation or a trustee or fiduciary of such employee benefit
plan. The rights of the Executive under the Indemnification Provisions shall
survive the termination of the employment of the Executive by the Company.
Payment under this Section 16 shall be made to the Executive no later than 2½
months after the close of the year in which the Executive incurs an expense or
liability hereunder.

17.          Payment Restriction. Notwithstanding any provision in this
Agreement to the contrary, in the event any payment under this Agreement would
otherwise be subject to taxation under 409A of the Code, such payment plus
reasonable interest from the date of Executive’s termination of Employment shall
be made in a lump sum six months following Executive’s termination of
Employment.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first above written.

 

/s/ George M. Bachman

 

Executive:  George M. Bachman

 

 

 

 

 

Florida Public Utilities Company

 

 

 

 

By:

/s/ Paul L. Maddock, Jr.

 

Name

Paul L. Maddock, Jr.

 

Title:

Chairman of the Compensation Committee

 

 

 

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