Exhibit 10.1
EMPLOYMENT AGREEMENT
     THIS AGREEMENT, dated as of March 20, 2006, is made by and between The
Connecticut Water Company, a Connecticut corporation having its principal place
of business in Clinton, Connecticut, (“Company”), Connecticut Water Service,
Inc., a Connecticut corporation and holder of all of the outstanding capital
stock of Company (“Parent”) and Eric W. Thornburg, a resident of Old Saybrook,
Connecticut (“Employee”).
WITNESSETH:
     WHEREAS, Company and Parent desire to reward Employee for Employee’s
valuable, dedicated service to Company and Parent should Employee’s service be
terminated under circumstances hereinafter described: and
     WHEREAS, Employee has been and continues to be employed by Company and
Parent in an Employee capacity and the parties wish to enter into an Employment
Agreement between Employee and Company and Parent dated as of March 20, 2006
which becomes effective upon a “Change-in-Control,” as defined herein, of
Company or Parent; and
     WHEREAS, Employee, Company and Parent are willing to enter into this
Employment Agreement (“Agreement”) on the terms herein set forth;
     NOW, THEREFORE, to assure Company and Parent of Employee’s continued
dedication and the availability of Employee’s advice and counsel in the event of
any such proposal, to induce Employee to remain in the employ of Company and
Parent and to reward Employee for Employee’s valuable dedicated service to
Company and Parent should Employee’s service be terminated under circumstances
hereinafter described, and for other good and valuable consideration, the
receipt and adequacy of which each party acknowledges, effective March 15, 2006,
Company, Parent and Employee agree as follows:
     1. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
          (a) “Cause” shall mean Employee’s serious, willful misconduct in
respect of Employee’s duties under this Agreement, including conviction for a
felony or perpetration by Employee of a common law fraud upon Company or Parent
which has resulted or is likely to result in material economic damage to Company
or Parent, as determined by a vote of at least seventy-five percent (75%) of all
of the Directors (excluding Employee) of each of Company’s and Parent’s Board of
Directors;
          (b) “Change-in-Control” shall be deemed to have occurred if after the
date hereof (i) a public announcement shall be made or a report on Schedule 13D
shall be filed with the Securities and Exchange Commission pursuant to Section
13(d) of the Securities Exchange

 

--------------------------------------------------------------------------------

 

Act of 1934 (the “Act”) disclosing that any Person (as defined below), other
than Company or Parent or any employee benefit plan sponsored by Company or
Parent, is the beneficial owner (as the term is defined in Rule 13d-3 under the
Act) directly or indirectly, of twenty percent (20%) or more of the total voting
power represented by Company’s or Parent’s then outstanding voting common stock
(calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case
of rights to acquire voting common stock); or (ii) any Person, other than
Company or Parent or any employee benefit plan sponsored by Company or Parent,
shall purchase shares pursuant to a tender offer or exchange offer to acquire
any voting common stock of Company or Parent (or securities convertible into
such voting common stock) for cash, securities or any other consideration,
provided that after consummation of the offer, the Person in question is the
beneficial owner directly or indirectly, of twenty percent (20%) or more of the
total voting power represented by Company’s or Parent’s then outstanding voting
common stock (all as calculated under clause (i)); or (iii) the stockholders of
Company or Parent shall approve (A) any consolidation or merger of Company or
Parent in which Company or Parent is not the continuing or surviving corporation
(other than a merger of Company or Parent in which holders of the outstanding
capital stock of Company or Parent immediately prior to the merger have the same
proportionate ownership of the outstanding capital stock of the surviving
corporation immediately after the merger as immediately before), or pursuant to
which the outstanding capital stock of Company or Parent would be converted into
cash, securities or other property, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of Company or Parent; or (iv) there shall have been
a change in the composition of the Board of Directors of Company or Parent at
any time during any consecutive twenty-four (24) month period such that
“continuing directors” cease for any reason to constitute at least a majority of
the Board unless the election, or the nomination for election of each new
Director was approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who were Directors at the beginning of such period; or
(v) the Board of Directors of Company or Parent, by a vote of a majority of all
the Directors (excluding Employee) adopts a resolution to the effect that a
“Change-in-Control” has occurred for purposes of this Agreement.
          (c) “Disability” shall mean the incapacity of Employee by illness or
any other cause as determined under the long-term disability insurance plan of
Company in effect at the time in question, or if no such plan is in effect, then
such incapacity of Employee as prevents Employee from performing the essential
functions of Employee’s position with or without reasonable accommodation for a
period in excess of two hundred forty (240) days (whether or not consecutive),
or one hundred eighty (180) days consecutively, as the case may be, during any
twelve (12) month period.
          (d) “Effective Date” shall be the date on which a Change-in-Control
occurs. Anything in this Agreement to the contrary notwithstanding, if
Employee’s employment is terminated prior to the date on which a
Change-in-Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in
connection with or anticipation of a Change-in-Control, then for all purposes of
this Agreement the “Effective Date” shall mean the date immediately prior to the
date of such termination.

 

--------------------------------------------------------------------------------

 

          (e) “Good Reason” shall mean the occurrence of any action which
(i) removes or changes Employee’s title or reduces Employee’s job
responsibilities or base salary; (ii) results in a significant worsening of
Employee’s work conditions; or (iii) moves Employee’s place of employment to a
location that increases Employee’s commute by more than thirty (30) miles over
the length of Employee’s commute from Employee’s place of principal residence at
the time the move is requested. For purposes of this subparagraph (e), any good
faith determination by Employee that any such action has occurred shall be
conclusive. Notwithstanding the foregoing, at any time during the period
commencing on the Effective Date and ending on the 30th day after the first
anniversary of the Effective Date, except for purposes of Paragraph 5(g), “Good
Reason” shall mean any reason or no reason.
          (f) “Person” shall mean any individual, corporation, partnership,
company or other entity, and shall include a “group” as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934.
     2. Employment.
          (a) As of the Effective Date, Company hereby agrees to continue to
employ Employee and Employee agrees to remain in the employ of Company for the
Term of this Agreement upon the terms and conditions hereinafter set forth.
Subject to the provisions of subparagraph (b) of this Paragraph 2, and to the
provisions of Paragraph 6 below, “Term” shall mean a continuously renewing
period of three (3) years commencing on the Effective Date.
          (b) At any time during the Term, the Board of Directors of Company and
Parent may, by written notice to Employee, advise Employee of their desire to
modify or amend any of the terms or provisions of this Agreement or to delete or
add any terms or provisions. Any such notice (“Notice”) shall describe the
proposed modifications in reasonable detail. In the event a Notice shall be
given to Employee, then Company, Parent and Employee agree to discuss the
proposed modification(s) and to attempt in good faith to reach agreement with
respect thereto and to reduce such agreement to writing in an amendment to be
executed by all the parties (“Amendment”). If a Notice is given hereunder and an
Amendment shall not have been executed on or before the sixtieth (60th) day
following the date on which Notice is given, then the Term shall thereupon be
automatically converted to a fixed period ending three (3) years after the
expiration of such sixty (60) days.
     3. Duties of Employment.
          (a) During the Term, Employee’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the ninety (90)-day period
immediately preceding the Effective Date and Employee’s services shall be
performed at such location as Employee shall determine.
          (b) During the Term, Employee will serve Company faithfully,
diligently and competently and will devote full-time to Employee’s employment
and will hold, in addition to the offices held on the Effective Date, such other
Employee offices of Company or Parent, or

 

--------------------------------------------------------------------------------

 

their respective subsidiaries and affiliates, to which Employee may be elected,
appointed or assigned by the Boards of Directors of Company or Parent from time
to time and will discharge such Employee duties in connection therewith. Nothing
in this Agreement shall preclude Employee, with the prior approval of the Board
of Directors of Company, from devoting reasonable periods of time required for
(i) serving as a director or member of a committee of any organization involving
no conflict of interest with Company or Parent, or (ii) engaging in charitable,
religious and community activities, provided, that such directorships,
memberships or activities do not materially interfere with the performance of
Employee’s duties hereunder.
     4. Compensation. During the Term, Company shall pay to Employee as
compensation for the services to be rendered by Employee hereunder the
following:
          (a) A base salary at a rate equal to the highest base salary paid or
payable to Employee by Company during the twelve (12)-month period immediately
preceding the month in which the Effective Date occurs, or such larger sum as
the Company may from time to time determine in connection with regular periodic
performance reviews pursuant to Company’s policies and practices. Such
compensation shall be payable in accordance with the normal payroll practices of
Company. Employee shall receive an annual increase in base salary at each normal
pay adjustment date during the Term, but no later than one (1) year after the
date of Employee’s last increase and annually thereafter during the Term, of not
less than the percentage increase in the cost-of-living since Employee’s last
pay adjustment, as measured by the Consumer Price Index-All Urban Consumers of
the U.S. Bureau of Labor Statistics.
          (b) In addition, Company shall pay to Employee an annual bonus,
payable in cash or other form of compensation, for which he would have been
eligible in accordance with the Company’s practice or plan in effect at that
time for annual bonuses for said employee for the year preceding the fiscal year
in which the Effective Date occurs.
     5. Benefits. During the Term, Employee shall be entitled to the following
benefits:
          (a) Incentive, Savings and Retirement Plans. In addition to base
salary and bonus payable as hereinabove provided, Employee shall be entitled to
participate during the Term in all, savings and retirement plans, practices,
policies and programs applicable to employees of Company as may be in effect
from time to time. Such plans, practices, policies and programs, in the
aggregate, shall provide Employee with compensation, benefits and reward
opportunities at least as favorable as the most favorable of such compensation,
benefits and reward opportunities provided by Company for Employee under such
plans, practices, policies and programs as in effect at any time during the
ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Employee, as provided at any time thereafter with respect to other
key employees of Company or Parent.
          (b) Welfare Benefit Plans. During the Term, Employee and/or Employee’s
family, as the case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices, policies and
programs applicable to Employee employees of Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life,) at least as favorable as the most favorable of such
plans,

 

--------------------------------------------------------------------------------

 

practices, policies and programs in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable
to Employee and/or Employee’s family, as in effect at any time thereafter with
respect to other key employees of Company or Parent.
          (c) Expenses. During the Term, Employee shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by Employee in
accordance with the most favorable policies, practices and procedures of Company
in effect at any time during the ninety (90)-day period immediately preceding
the Effective Date or, if more favorable to Employee, as in effect at any time
thereafter with respect to other key employees of Company or Parent.
          (d) Fringe Benefits. During the Term, Employee shall be entitled to
fringe benefits, including use of an automobile and payment of related expenses
or payment of an allowance for automobile related expenses, in accordance with
the most favorable plans, practices, programs and policies of Company in effect
at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Employee, as in effect at any time
thereafter with respect to other key employees of Company or Parent.
          (e) Office and Support Staff. During the Term, Employee shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to Employee by Company at any time
during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Employee, as provided at any time thereafter with respect
to other key employees of Company or Parent.
          (f) Vacation. During the Term, Employee shall be entitled to paid
vacation in accordance with the most favorable plans, policies, programs and
practices of Company as in effect at any time during the ninety (90)-day period
immediately preceding the Effective Date or, if more favorable to Employee, as
in effect at any time thereafter with respect to other key employees of Company
or Parent.
          (g) Stay-on Bonus: (i) If Employee is employed on a date on which the
Board of Directors of Company or Parent approves a transaction described in
clause (iii) of Paragraph 1(b) and the shareholders of Company or Parent, as
applicable subsequently approve such transaction, provided that such transaction
qualifies as a “Change in Control” within the meaning of Section 409A of the
Code and regulations issued thereunder, Employee shall receive a lump sum equal
to the base salary of Employee, at the rate in effect immediately prior to such
date, plus an amount equal to the target percentage of the midpoint of
Employee’s salary grade under the Company’s Officers Incentive Program for the
year in which such date occurs; provided Employee is employed on the fifth (5th)
day following the closing of such transaction. Payment hereunder shall be made
on the fifth (5th) business day following the closing of such a transaction.
(ii) If the Employee’s employment is terminated by the Company following such
approval by the applicable Board of Directors of a transaction described in
subparagraph (i) of this Paragraph (g) (provided that such transaction qualifies
as a “Change in Control” within the meaning of Section 409A of the Code and
regulations issued thereunder), and prior to the fifth (5th) day following the
closing of such transaction for any reason other than for Cause, or

 

--------------------------------------------------------------------------------

 

Employee’s death, or Employee’s attainment of age sixty-five (65), or if
Employee’s employment is terminated during such period by reason of Employee’s
Disability, or if Employee shall voluntarily terminate Employee’s employment
during such period for Good Reason, then, in addition to the amounts payable to
Employee pursuant to Section 7, Employee shall be paid a lump sum equal to the
base salary of Employee, at the rate in effect immediately prior to the date of
termination, plus an amount equal to the target percentage of the midpoint of
Employee’s salary grade under the Company’s Officers Incentive Program for the
year in which termination occurs. Payment under (ii) shall be made on the later
of the first day of the seventh (7th) month following the Employee’s termination
of Employment, or on the fifth (5th) business day following the closing of such
transaction.
     6. End of Term and Notice of Termination.
          (a) End of Term. The Term shall end upon the occurrence of any of the
following events:

  (i)   Termination of Employee’s employment by Company for Cause.     (ii)  
The voluntary termination of Employee’s employment by Employee other than for
Good Reason.     (iii)   The death of Employee.     (iv)   Employee’s attainment
of age sixty-five (65).     (v)   Full compliance by Company with the provisions
of Paragraph 7(e) below, if Employee’s employment shall have been terminated by
Company during the Term for any reason other than Cause, or if Employee’s
employment shall have been terminated by reason of Employee’s Disability, or if
Employee shall have voluntarily terminated Employee’s employment during the Term
for Good Reason.

          (b) Notice of Termination. Any termination by Company for Cause or by
Employee for Good Reason or on account of Employee’s Disability shall be
communicated by notice to the other party hereto given in accordance with
Section 16 of this Agreement. For purposes of this Agreement, a “notice” means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Employee’s
employment under the provision so indicated and (iii) if the date of termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen (15) days after
the giving of such notice).
          (c) Date of Termination. The date of termination means the date of
receipt of the notice of termination or any later date specified therein, as the
case may be; provided, however, that (i) if Employee’s employment is terminated
by Company other than for Cause or

 

--------------------------------------------------------------------------------

 

on account of Employee’s Disability, the date of termination shall be the date
on which Company notifies Employee of such termination and (ii) if Employee’s
employment is terminated by reason of death, the date of termination shall be
the date of death of Employee.
          (d) Termination of Employment. In order for the Employee to be
considered to have terminated employment with the Company, the Employee must
have incurred a separation from service from the Company (and all related
companies) within the meaning of Section 409A of the Code.
     7. Payment Upon Termination.
          (a) If Employee’s employment is terminated by Company for Cause, as
defined in Paragraph 1(a), the obligations of Company under this Agreement shall
cease and Employee shall forfeit all right to receive any compensation or other
benefits under this Agreement except only compensation or benefits accrued or
earned and vested (if applicable) by Employee as of the date of termination,
including base salary through the date of termination, benefits payable under
the terms of any qualified or nonqualified retirement plans or deferred
compensation plans maintained by Company, any accrued vacation pay as of the
date of termination not yet paid by Company and any benefits required to be paid
by law such as continued health care coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (collectively, the “Accrued
Obligations”).
          (b) If Employee shall voluntarily terminate Employee’s employment
during the Term, other than for Good Reason, as defined in Paragraph 1(e), the
obligations of Company under this Agreement shall cease and Employee shall
forfeit all right to receive any compensation or other benefits under this
Agreement except only the Accrued Obligations.
          (c) In the event of the death of Employee during the Term, then, in
addition to the Accrued Obligations and any other benefits which may be payable
by Company in respect of the death of Employee, the base salary then payable
hereunder shall continue to be paid at the then current rate for a period of six
(6) months after such death to such beneficiary as shall have been designated in
writing by Employee, or if no effective designation exists, then to the estate
of Employee. Such payment shall be made in accordance with the Company’s normal
payment practice.
          (d) If Employee’s employment is terminated by reason of Employee’s
attainment of age sixty-five (65), the obligations of Company under this
Agreement shall cease and Employee shall forfeit all right to receive any
compensation or other benefits under this Agreement except only the Accrued
Obligations.
          (e) If Employee’s employment is terminated by Company during the Term
for any reason other than for Cause, or Employee’s death, or Employee’s
attainment of age sixty-five (65), or if Employee’s employment is terminated
during the Term by reason of Employee’s Disability, or if Employee shall
voluntarily terminate Employee’s employment during the Term for Good Reason,
Employee shall be entitled to receive, and Company shall be obligated to pay and
provide Employee, the following amounts:

 

--------------------------------------------------------------------------------

 

               (i) An amount in consideration of the covenants by Executive set
forth in Paragraphs 8 and 9 below to be determined by a nationally recognized
independent certified public accounting firm selected and retained by Company to
be the reasonable value of said covenants as of the date of termination of
Employee’s employment, but in no event shall such amount be greater than the
aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv),
(v) and (viii) hereinbelow. The benefits otherwise payable to Executive pursuant
to said subparagraphs shall be offset by the amount, if any, payable to
Executive in respect of the covenants by Employee set forth in Paragraphs 8 and
9 below. Said amount paid in consideration of the covenants by Executive set
forth in Paragraphs 8 and 9 below shall be paid in accordance with subparagraphs
(e)(ii), (iii), (iv), (v) and (viii) below, and this subparagraph (i) shall not
alter the time or form of payment of such amounts.
               (ii) An amount equal to three (3) times the base salary of
Employee, at the rate in effect immediately prior to the date of termination,
plus an amount equal to three (3) times the target percentage of the midpoint of
Employee’s salary grade under the Company’s Officers Incentive Program for the
year in which termination occurs if the employee is a participant in such plan
at the time of the Change-in-Control. There shall be subtracted from the
aggregate amount determined in accordance with the immediately preceding
sentence the amount, if any, payable to Employee under any then effective
severance pay plan of Company. Such amount so determined shall be divided into
thirty-six (36) equal amounts. Seven (7) such equal amounts shall be paid to the
Employee on the date which is seven (7) months following the date of termination
of employment. The twenty-nine (29) remaining equal amounts shall be payable on
the first day of each month subsequent to the date of the first payment (one
payment per month) until the payments are completed. Payments shall be treated
as supplemental wage payments under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto.
               (iii) An amount equal to the aggregate amounts that Company would
have contributed on behalf of Employee under Company’s qualified defined
contribution retirement plan(s), if any such plan(s) shall be in effect (other
than amounts attributable to Employee’s before-tax contributions to such
plan(s)) plus estimated earnings thereon had Employee continued in the employ of
Company for the three (3)-year period commencing on the date of termination and
made contributions under said plan(s) at a rate, as a percentage of salary,
equal to the rate at which Employee had made contributions to said plan(s) in
the plan year immediately preceding Employee’s termination, to be payable in a
lump sum to Employee thirty (30) days after the expiration of the two (2) year
non-competition period specified in Paragraph 9(a) of this Agreement and in no
event earlier than seven (7) months following the Employee’s termination of
employment, provided that Employee shall not have breached said non-competition
provisions.
               (iv) An amount equal to the difference between: (A) benefits
which would have been payable to Employee under any deferred compensation
agreement between Company and Employee, if any such agreement shall be in
effect, had Employee continued in the employ of Company for the three (3)-year
period commencing on the date of termination, received compensation at least
equal to that specified in Paragraph 4 of this Agreement during

 

--------------------------------------------------------------------------------

 

such time, and deferred pursuant to said deferred compensation agreement the
amount of compensation specified therein; and (B) the benefits actually payable
to Employee under such deferred compensation agreement; such amount to be
payable in a lump sum to Employee thirty (30) days after the expiration of the
two (2) year non-competition period specified in Paragraph 9(a) of this
Agreement and in no event earlier than seven (7) months following the Employee’s
termination of employment, provided that Employee shall not have breached said
non-competition provisions.
               (v) Additional retirement benefits equal to the difference
between: (A) the annual pension benefits that would have been payable to
Employee under Company’s qualified defined benefit retirement plan (the “Plan”)
and under any nonqualified supplemental Employee retirement plan covering
Employee (the “Supplemental Plan”), if any such Plan or Supplemental Plan shall
be in effect, if Employee had been continued in the employ of Company for the
three (3)-year period commencing on the date of termination and had received
compensation at least equal to that specified in Paragraph 4(a) of this
Agreement during such time and had been fully vested in the benefits payable
under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Employee under any such Plan and Supplemental Plan. The discounted
present value of such additional benefits, shall be payable to Employee in a
lump sum, as calculated by the independent actuary for the Plan using the
assumptions specified in the Plan, thirty (30) days after the expiration of the
two (2) year non-competition period specified in Paragraph 9(a) of this
Agreement and in no event earlier than seven (7) months following the Employee’s
termination of employment, provided that Employee shall not have breached said
non-competition provisions.
               (vi) At the date of termination of Employee’s employment,
Employee shall be fully vested in any form of compensation previously granted to
Employee (other than benefits payable under a qualified retirement plan), such
as, by way of example only, restricted stock, stock options, and performance
share awards.
               (vii) If Employee’s employment is terminated by reason of
Employee’s Disability, Employee shall be entitled to receive, in addition to the
other benefits provided under this Paragraph 7(e), disability benefits payable
in accordance with any bona fide disability plan maintained by Company or
Parent, to the extent Employee qualifies for benefits under the terms of such
bona fide disability plan.
               (viii) A lump sum cash payment equal to three (3) times the sum
of the average of the annual contributions, payments, credits or allocations
made by the Company on behalf of the Employee for coverage under all life,
health, disability and similar welfare benefit plans and programs and other
perquisites maintained by the Company during the three (3) calendar year period
preceding his termination of employment. Such payment shall be made on the first
day of the seventh (7th) month following the Employee’s termination of
employment.
               (ix) Company shall reimburse Employee for the amount of any
reasonable legal or accounting fees and expenses incurred by Employee to obtain
or enforce any right or benefit provided to Employee by Company hereunder or as
confirmed or acknowledged hereunder, provided that no such reimbursement shall
be made earlier than seven (7) months

 

--------------------------------------------------------------------------------

 

following the Employee’s termination and in no event any later than December 31
of the second calendar year following the calendar year in which the termination
of employment occurred.
               (x) Company shall provide the Employee with reasonable
outplacement services from a firm selected by the Company for a period of one
(1) year commencing on the date of termination, or until Employee accepts other
employment, if earlier.
     8. Confidential Information. Employee understands that in the course of
Employee’s employment by Company, Employee will receive or have access to
confidential information concerning the business or purposes of Company and
Parent, and which Company and Parent desire to protect. Such confidential
information shall be deemed to include, but not be limited to, Company’s
customer lists and information, and employee lists, including, if known,
personnel information and data. Employee agrees that Employee will not, at any
time during the period ending two (2) years after the date of termination of
Employee’s employment, reveal to anyone outside Company or Parent or use for
Employee’s own benefit any such information without specific written
authorization by Company or Parent. Employee further agrees not to use any such
confidential information or trade secrets in competing with Company or Parent at
any time during or in the two (2) year period immediately following the date of
termination of Employee’s employment with Company.
     9. Covenants by Employee Not to Compete With Company or Parent.
          (a) Upon the date of termination of Employee’s employment with Company
for any reason, Employee covenants and agrees that Employee will not at any time
during the period of two (2) years from and after such date of termination
directly or indirectly in any manner or under any circumstances or conditions
whatsoever be or become interested, as an individual, partner, principal, agent,
clerk, employee, stockholder, officer, director, trustee, or in any other
capacity whatsoever, except as a nominal owner of stock of a public corporation,
in any other business which, at the date of Employee’s termination, is a
Competitor (as defined herein), either directly or indirectly, with Company or
Parent, or engage or participate in, directly or indirectly (whether as an
officer, director, employee, partner, consultant, holder of an equity or debt
investment, lender or in any other manner or capacity), or lend Employee’s name
(or any part or variant thereof) to, any business which, at the date of
Employee’s termination, is a Competitor, either directly or indirectly, with
Company or Parent, or as a result of Employee’s engagement or participation
would become, a Competitor, either directly or indirectly, with any aspect of
the business of Company or Parent as it exists at the time of Employee’s
termination, or solicit any officer, director, employee or agent of Company or
Parent or any subsidiary or affiliate of Company or Parent to become an officer,
director, employee or agent of Employee, Employee’s respective affiliates or
anyone else. Ownership, in the aggregate, of less than one percent (1 %) of the
outstanding shares of capital stock of any corporation with one or more classes
of its capital stock listed on a national securities exchange or publicly traded
in the over-the-counter market shall not constitute a violation of the foregoing
provision. For the purposes of this Agreement, a Competitor is any business
which is similar to the business of Company or Parent or in any way in
competition with the business of Company or Parent within any of the
then-existing water utility service areas of Company.

 

--------------------------------------------------------------------------------

 

          (b) Employee hereby acknowledges that Employee’s services are unique
and extraordinary, and are not readily replaceable, and hereby expressly agrees
that Company and Parent, in enforcing the covenants contained in Paragraphs 8
and 9 herein, in addition to any other remedies provided for herein or otherwise
available at law, shall be entitled in any court of equity having jurisdiction
to an injunction restraining Employee in the event of a breach, actual or
threatened, of the agreements and covenants contained in these Paragraphs.
          (c) The parties hereto believe that the restrictive covenants of these
Paragraphs are reasonable. However, if at any time it shall be determined by any
court of competent jurisdiction that these Paragraphs or any portion of them as
written, are unenforceable because the restrictions are unreasonable, the
parties hereto agree that such portions as shall have been determined to be
unreasonably restrictive shall thereupon be deemed so amended as to make such
restrictions reasonable in the determination of such court, and the said
covenants, as so modified, shall be enforceable between the parties to the same
extent as if such amendments had been made prior to the date of any alleged
breach of said covenants.
          (d) The provisions of this Paragraph 9 shall not apply if Company and
Parent shall be prohibited under Paragraph 15 below from making any payments to
Employee pursuant to Paragraph 7 above.
     10. No Obligation to Mitigate. So long as Employee shall not be in breach
of any provision of Paragraph 8 or 9, Employee shall have no duty to mitigate
damages in the event of a termination and if Employee voluntarily obtains other
employment (including self-employment), any compensation or profits received or
accrued, directly or indirectly, from such other employment shall not reduce or
otherwise affect the obligations of Company and Parent to make payments
hereunder.
     11. Resignation. In the event that Employee’s services hereunder are
terminated under any of the provisions of this Agreement (except by death),
Employee agrees that Employee will deliver Employee’s written resignation as an
officer of Company or Parent, or their subsidiaries and affiliates, to the Board
of Directors, such resignation to become effective immediately, or, at the
option of the Board of Directors, on a later date as specified by the Board.
     12. Insurance. Company shall have the right at its own cost and expense to
apply for and to secure in its own name, or otherwise, life, health or accident
insurance or any or all of them covering Employee, and Employee agrees to submit
to the usual and customary medical examination and otherwise to cooperate with
Company in connection with the procurement of any such insurance, and any claims
thereunder.
     13. Release. As a condition of receiving payments or benefits provided for
in this Agreement, at the request of Company or Parent, Employee shall execute
and deliver for the benefit of Company and Parent, and any subsidiary or
affiliate of Company or Parent, a general release in the form set forth in
Attachment A, and such release shall become effective in accordance with its
terms. The failure or refusal of Employee to sign such a release or the
revocation of such a release shall cause the termination of any and all
obligations of Company and Parent to make payments or provide benefits
hereunder, and the forfeiture of the right of

 

--------------------------------------------------------------------------------

 

Employee to receive any such payments and benefits. Employee acknowledges that
Company and Parent have advised Employee to consult with an attorney prior to
signing this Agreement and that Employee has had an opportunity to do so.
     14. Additional Benefits. In addition to the other benefits payable to
Employee pursuant to this Agreement, in the event that any payment or benefit
received or to be received by Employee under this Agreement (a “Payment”) is
subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), or any successor to such
Section, as determined by a nationally recognized independent certified public
accounting firm selected by the Company (the “Tax Advisor”), then the Company
shall make an additional payment to Employee in a lump sum seven (7) months
following termination in an amount such that after receipt of such lump sum and
payment of all excise and income taxes imposed with respect to such receipt and
receipt of the Payment, Employee will have received an after-tax amount equal to
the amount the Employee would have received had the Excise Tax had not been
applicable to the Payment. The determination of the Tax Advisor as provided
herein shall be completed not later than forty-five (45) days following
Employee’s date of termination of employment, and such determination shall be
communicated in writing to Company, with a copy to Employee within said
forty-five (45) day period. The determination of the Tax Advisor as provided
herein shall be deemed conclusive and binding on Company and Employee. Company
shall pay the fees and other costs of the Tax Advisor hereunder.
     15. Regulatory Limitation. Notwithstanding any other provision of this
Agreement, Company shall not be obligated to make, and Employee shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Company or
Parent at the time such payment, benefit or amount is due (“Prohibited
Payment”). In such event, however, payment shall be made at the earliest date at
which Company reasonably anticipates that the making of the payment will not
cause such a violation.
     16. Notices. All notices under this Agreement shall be in writing and shall
be deemed effective when delivered in person to Employee or to the Secretary of
Company and Parent, or if mailed, postage prepaid, registered or certified mail,
addressed, in the case of Employee, to Employee’s last known address as carried
on the personnel records of Company, and, in the case of Company and Parent, to
the corporate headquarters, attention of the Secretary, or to such other address
as the party to be notified may specify by notice to the other party.
     17. Successors and Binding Agreement.
          (a) Company and Parent will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of Company and/or Parent, as the
case may be, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Company and Parent are required to perform
it. Failure of Company and Parent to obtain such assumption and agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement.
As used in this Agreement, “Company” and “Parent” shall include any successor to
Company’s and/or Parent’s,

 

--------------------------------------------------------------------------------

 

as the case may be, business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.
          (b) This Agreement shall inure to the benefit of, and be enforceable
by, Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee dies while
any amount is still payable hereunder, all such amounts shall be paid in
accordance with the terms of this Agreement to Employee’s devisee, legatee or
other designee or, if there is no such designee, to Employee’s estate.
     18. Arbitration. Any dispute which may arise between the parties hereto
may, if both parties agree, be submitted to binding arbitration in the State of
Connecticut in accordance with the Rules of the American Arbitration
Association; provided that any such dispute shall first be submitted to
Company’s Board of Directors in an effort to resolve such dispute without resort
to arbitration.
     19. Severability. If any of the terms or conditions of this Agreement shall
be declared void or unenforceable by any court or administrative body of
competent jurisdiction, such term or condition shall be deemed severable from
the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
     20. Amendment. This Agreement may be modified or amended only by an
instrument in writing executed by the parties hereto.
     21. Construction. This Agreement shall supersede and replace all prior
agreements and understandings between the parties hereto on the subject-matter
covered hereby. This Agreement shall be governed and construed under the laws of
the State of Connecticut. Words of the masculine gender mean and include
correlative words of the feminine gender. Paragraph headings are for convenience
only and shall not be considered a part of the terms and provisions of the
Agreement.
     22. Deferred Compensation. This Agreement has been prepared with reference
to Section 409A of the Internal Revenue Code and should be interpreted and
administered in a manner consistent with Section 409A. In the event that any
part of this Agreement is determined to be in violation of 409A, such part of
the Agreement shall be automatically revised to be in compliance with 409A in
such way as most closely approximates the intent of the parties.
     23. Assignment Prohibited. Benefits hereunder shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment or garnishment by creditors of the Employee, his spouse,
beneficiary, or estate, and any attempt to anticipate, alienate, transfer,
assign or attach the same shall be void. The Employee, his spouse, beneficiary
or estate shall only have a contractual right to benefits hereunder and shall
have the status of general unsecured creditors.

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be
executed by an authorized officer, and Employee has hereunto set Employee’s
hand, this 20th day of March 2006.

              The Connecticut Water Company
 
       
 
  By   /s/ Michele G. DiAcri
 
            Michele G. DiAcri, Corporate Secretary
 
            Connecticut Water Service, Inc.
 
       
 
  By   /s/ Michele G. DiAcri
 
            Michele G. DiAcri, Corporate Secretary
 
            /s/ Eric W. Thornburg           Eric W. Thornburg

 

--------------------------------------------------------------------------------

 

ATTACHMENT A
RELEASE
     We advise you to consult an attorney before you sign this Release. You have
until the date which is seven (7) days after the Release is signed and returned
to                      (“Company”) to change your mind and revoke your Release.
Your Release shall not become effective or enforceable until after that date.
In consideration for the benefits provided under your Employment Agreement dated
                         with Company and                     (“Parent”), and
more specifically enumerated in Exhibit 1 hereto, by your signature below you
agree to accept such benefits and not to make any claims of any kind against
Company, its past and present and future parent corporations, subsidiaries,
divisions, subdivisions, affiliates and related companies or their successors
and assigns, including without limitation Parent, or any and all past, present
and future Directors, officers, fiduciaries or employees of any of the foregoing
(all parties referred to in the foregoing are hereinafter referred to as the
“Releasees”) before any agency, court or other forum, and you agree to release
the Releasees from all claims, known or unknown, arising in any way from any
actions taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge or breach of
contract or any claims arising under the Age Discrimination in Employment Act of
1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut’s
Fair Employment Practices Act or any other federal, state or local statute or
regulation and any claim for attorneys’ fees, expenses or costs of litigation.
     THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE
WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST
THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE OF THIS
RELEASE.
     By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its terms;
2. You have had at least twenty-one (21) days to consider the terms of the
Release;
     3. You have seven (7) days from the date you sign this Release to revoke it
by written notification to Company. After this seven (7) day period, this
Release is final and binding and may not be revoked;

 

--------------------------------------------------------------------------------

 

     4. You have been advised to seek legal counsel and have had an opportunity
to do so;
     5. You would not otherwise be entitled to the benefits provided under your
Employment Agreement with Company and Parent had you not agreed to waive any
right you have to bring a lawsuit or legal claim against the Releasees; and
     6. Your agreement to the terms set forth above is voluntary.

             
Name:
           
 
           
 
           
Signature:
      Date:    
 
           
 
           
Received by:
      Date:    
 
           

 

--------------------------------------------------------------------------------

 

EXHIBIT 1
1.
2.
3.
4.
5.
Etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL
BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:

              THE CONNECTICUT WATER COMPANY       EMPLOYEE
 
           
By
           
 
           
 
  Its        
 
            CONNECTICUT WATER SERVICE, INC.        
 
           
By
           
 
           
 
  Its