**Exhibit 10(ao)**

 

**Maine & Maritimes Corporation**

 

**EMPLOYEE RETENTION AGREEMENT**

 

**THIS EMPLOYEE RETENTION AGREEMENT dated as ofSeptember 5, 2003 (this “Agreement”) is entered into between Maine &Maritimes Corporation, a Maine corporation (the “Company”), and Kurt A.Tornquist (the “Executive”) (the Company and Executive are sometimes referredto as “Party” or collectively “Parties”).**

 

**RECITALS**

 

WHEREAS, the Executive, has been employed by the Company in amanagement capacity and is now its Senior Vice President, Chief FinancialOfficer and Treasurer; and

 

WHEREAS, the Board of Directors of the Company has determined thisAgreement to be in the best interests of the stockholders of the Company, inorder to encourage the attention and dedication of the Executive to hisassigned duties with the Company without distraction in connection withpotentially disruptive circumstances arising from the possibility of a Changein Control (as defined herein) or certain other events specified in thisAgreement;

 

Now, THEREFORE, in consideration of the mutual promises and covenantscontained herein and for other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged by the Parties, the Company and theExecutive agree as follows:

 

Section 1.               **Certain Definitions**

 

As used herein, the following terms have the indicated meanings:

 

(1)*           “Cause”*fortermination by the Company of the Executive’s employment shall mean (i) the *willful*andcontinued failure by the Executive to substantially perform his duties with theCompany after a written notice is delivered to the Executive by the Company,which notice specifically identifies the manner in which the Company believesthat the Executive has not substantially performed the Executive’s duties; or(ii) the *willful*engaging by the Executive in gross misconduct that is injurious tothe Company, monetarily or otherwise (including, without limitation, theExecutive’s conviction, by a court of competent jurisdiction, of a crimeadversely reflecting on the Executive’s honesty, trustworthiness or fitness tocarry out the responsibilities of his position with the Company). An act, orfailure to act, on the Executive’s part shall be deemed “willful” where suchact is done, or not done, by the Executive: (i) in the absence of good faith;or (ii) without a reasonable belief that the Executive’s act, or failure toact, was in the best interest of the Company.

 

(2)           Forthe purpose of this definition *(“Change in Control”)*only, the term“Company,” first defined above, shall also be defined to include Maine PublicService Company in addition to its parent, Maine & Maritime Corporation. *A “Change inControl”*shall be deemed to have occurred if the conditions setforth in any one of the following paragraphs shall have been satisfied:

 

(a)           any “person” (as such term is used inSections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)(other than the Company, any trustee or other fiduciary holding securitiesunder any employee benefit plan of the Company, or any corporation owneddirectly or indirectly by the stockholders of the Company in substantially thesame proportion as their

 

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ownership of stock of the Company) is or becomes the “beneficial owner”(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, asamended), directly or indirectly, of securities of the Company representingfifty percent or more of the combined voting power of the Company’sthenoutstanding voting securities;

 

(b)   a change in the composition ofthe Board of Directors of the Company, as a result of which fewer than amajority of the directors are persons who either (A) are directors of theCompany as of the date hereof or (B) were elected after nomination by amajority of the directors of the Company on the date hereof and directors soelected previously;

 

(c)   any merger or consolidation ofthe Company, approved by the stockholders of the Company, with any othercorporation; *other than:*

 

(A)  any such merger or consolidationthat would result in the voting securities of the Company outstandingimmediately prior to the merger or consolidation, continuing to represent(either by remaining outstanding or by being converted into voting securitiesof the surviving or parent entity) more than fifty percent of the combinedvoting power of the voting securities (entitled to vote generally for theelection of directors) of the Company or such surviving or parent entityoutstanding immediately after such merger or consolidation, or subsequently atany time as contemplated by or as a result of, such merger or consolidation; or

 

(B)   any such merger orconsolidation where such merger or consolidation is effected to implement arecapitalization or reincorporation of the Company (or similar transaction), inwhich no “person” (as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as amended) acquires fifty percent or more ofthe combined voting power of the Company’s then-outstanding voting securities;

 

(d)   any merger or consolidation ofthe Company in which the Company is not the continuing or surviving corporationor pursuant to which shares of the Company’s stock, would be converted intocash, securities or other property; *other than*a merger or consolidation ofthe Company in which the stockholders of the Company immediately prior to themerger or consolidation have substantially the same proportionate ownership andvoting control of the surviving corporation or parent entity immediately afterthe merger or consolidation;

 

(e)   except as described below, theCompany ceases to be a reporting company pursuant to Section 13 (a) of theSecurities Exchange Act of 1934 as amended, or any similar successor provision;

 

(f)    the number of the Company’sOutside Directors, as defined below, is decreased by more than fifty percent inany twenty-five month period or the number of the Company’s directors increasedin such a manner that the Outside Directors constitute less than a majority ofthe Board;

 

(g)   the stockholders of the Companyapprove a plan of complete liquidation of the Company or an agreement for thesale, lease, exchange, liquidation, disposition or other transfer (in onetransaction or a series of transactions) by the Company of all or substantiallyall of the Company’s assets (or any transaction having a similar effect).

 

(h)   further, *a “Change in Control”*shall *not*bedeemed to occur if the conditions set forth in the following sub-paragraphshall have been satisfied:

 

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(A)  a merger, consolidation orreorganization of the Company if, upon consummation of such transaction all ofthe outstanding voting stock of the Company is owned, directly or indirectly,by a holding company, and the holders of the Company’s common stock immediatelyprior to the transaction have substantially the same proportionate ownershipand voting control of the holding company.

 

*(3)**          “Good Reason”*fortermination by the Executive of the Executive’s employment shall mean theoccurrence of any one of the following acts unless such act is corrected priorto the Termination Date specified in the Termination Notice given in respectthereof or, in the case of paragraph (d) below, such act is not objected to inwriting by the Executive within four months after notification by the Companyto the Executive of the Company’s intention to take the action contemplated bysuch paragraph (d):

 

(a)           the assignment of duties to the Executivewhich:

 

(i)            are materially different from his dutiesimmediately prior to the Change in Control, or

 

(ii)           result in his having significantly lessauthority or responsibility than he had prior to the Change in Control;

 

(b)           the Executive’s removal from, or any failureto re-elect him to, any position he held immediately prior to the Change inControl;

 

(c)           a reduction of the Executive’s annual basesalary in effect on the date of the Change in Control or as the same may beincreased from time to time thereafter;

 

(d)           the Company’s transferring or assigning theExecutive to a place of employment more than one hundred miles from PresqueIsle, Maine, except where: (1) such transfer or assignment is to a subsidiaryor affiliate entity location, consistent with the Executive’s duties; and (2)in connection with required business travel to an extent substantiallyconsistent with the Executive’s business travel obligations immediately priorto the Change in Control;

 

(e)           the Company’s failure to provide theExecutive with substantially the same health, life and other employee benefitplans, programs and arrangements (specifically including the Company’scompensation and incentive plans, as the same may be amended in the future),and substantially the same perquisites of employment, as provided to himimmediately prior to the Change in Control or as the same may be increasedthereafter;

 

(f)            the Company’s failure to provide the Executivewith substantially the same support staff as provided to him immediately priorto the Change in Control; or

 

(g)           the Company’s failure to increase theExecutive’s salary, employee benefits or perquisites of employment in a manneror amount commensurate with increases provided to the Company’s other executiveofficers.

 

(4)*           “Outside Directors”*an*“OutsideDirector”*as of a given date, shall mean a member of the Company’sboard of directors who has been a director of the Company throughout the sixmonth period prior to such date and who has not been an employee of the Companyat any time during such six month period.

 

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(5)*           “Termination Date”*shallhave the meaning stated in Section 2(2).

 

(6)*           “Termination Notice”*shallhave the meaning stated in Section 2(1).

 

Section 2.               **Termination Procedures**

 

(1)*           Termination Notice.*Anypurported termination of the Executive’s employment (other than by reason ofdeath or at will termination) shall be communicated by a written notice of theterminating party (a “Termination Notice”) in accordance withSection 6(2).

 

(2)*             Termination Date.*“TerminationDate” shall mean the date as of which the Executive’s employment is toterminate as specified in the Termination Notice, which, in the case of atermination by the Company otherwise than for Cause, may be the same date ofthe Termination Notice and, in the case of a termination by the Executive,shall not be less than fourteen days nor more than sixty days, respectively,from the date the Termination Notice is given, unless otherwise agreed to bythe parties.

 

Section 3.               **Benefits Upon Certain Terminations**

 

*(1)**          General.*If a Changeof Control occurs and, within one year following the occurrence of such Changeof Control (i) the Company terminates the Executive’s employment for any reasonother than for Cause, or (ii) the Executive terminates his employment for GoodReason, then in lieu of any further salary payments to the Executive forperiods subsequent to the Termination Date, the Company shall provide theExecutive with the following:

 

(a)           Within thirty business days after theTermination Date, a lump sum cash payment equal to the sum of: (i) two hundredpercent *(200%)of*the Executive’s annual base salary in effect upon the Change inControl or the date of the Termination Notice, whichever is higher, and (ii)two hundred percent *(200%)*of the bonus award the Executivewould have received for the year in which such termination occurs pursuant tothe Company’s Incentive Compensation Plan, assuming that his employment had notterminated and that for such year all applicable performance goals will be met.In the event any portion of this award depends on goals that cannot bedetermined until the close of the plan year, then payment of that amount shallbe made within thirty days after the goal has been determined.

 

(b)           The continuation of the Executive’sparticipation and the participation of his dependants (to the extent they wereparticipating on the date of the Termination Notice) in the Company’s health,life, disability and other employee benefit plans, programs and arrangements(excluding the Pension Plan and the Non-Union Retirement Savings Plan) for aperiod of twenty-four *(24)*months after such termination as ifhe were still employed during such period; provided, however, if suchparticipation in any such plan, program or arrangement is specificallyprohibited by the terms thereof, the Company shall provide the Executive (andhis dependants) with benefits substantially similar to those which he wasentitled to receive under such plan, program or arrangement immediately priorto his termination of employment. Additionally, at the end of any period ofsuch coverage, the Executive shall have the right to have assigned to him, forthe cash surrender value thereof, any assignable insurance owned by the Companyon the life of the Executive. For purposes of this paragraph 3(b), any employeebenefit determined with reference to the Executive’s compensation or earningsshall be based on his annual base salary unless otherwise provided under theterms *of*theapplicable employee benefit plan, program or arrangement.

 

(2)*           Death, at willtermination.*Notwithstanding any provision of this Agreement to thecontrary, no benefits are payable hereunder upon the Executive’s death priorto: (1) the involuntary

 

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termination of his employment with the Company for Cause or otherwise,or (2) the voluntary termination by the Executive of the Executive’s employmentwith the Company for Good Reason. No benefits are payable hereunder upon theCompany’s at will termination of employment for reasons other than those setforth in this Agreement.

 

Section 4.               **Term of Agreement**

 

This Agreement initially shall continue in effect until the thirdanniversary of the date hereof.

 

Section 5.               **Successors**

 

In addition to any obligations imposed by law upon any successor to theCompany, the Company will require any successor (whether direct or indirect, bypurchase, merger, consolidation or otherwise) to all or substantially all ofthe business and/or assets of the Company to expressly assume and agree toperform this Agreement in the same manner and to the same extent that theCompany would be required to perform it if no such succession had taken place.Failure of the Company to obtain such assumption and agreement prior to theeffectiveness of any such succession shall be a breach of this Agreement andshall entitle the Executive to compensation from the Company in the same amountand on the same terms as the Executive would be entitled to hereunder if theExecutive were to terminate the Executive’s employment for Good Reason, exceptthat, for purposes of implementing the foregoing, the date on which any suchsuccession becomes effective shall be deemed the Termination Date.

 

Section 6.               **Miscellaneous**

 

(1)*           Amendments.*ThisAgreement may not be amended, modified or supplemented by the parties hereto inany manner, except by an instrument in writing signed on behalf of each of theparties hereto.

 

(2)*           Notices.*Anynotice, request, instruction or other document to be given hereunder by anyparty to the other shall be in writing and delivered personally or sent bycertified mail, postage prepaid, by facsimile (with receipt confirmed), or bycourier service and shall be effective upon receipt if addressed or sent as follows:

 
| To the Company:   |   | Maine & Maritimes Corporation          |
|-------------------|--------|--------------------------------------------|
|              |   | P. 0. Box 789, Presque Isle, ME 04769-0789 |
|              |   | Fax:                                       | 207-760-2498 |   |
|              |   | Attention:                                 | J. Nick Bayne |   |
|              |   |                                       |
| To the Executive: |   | Kurt A. Tornquist                          |
|              |   | 28 Fort Hill Street                        |
|              |   | Fort Fairfield, ME 04742-1129              |
|              |   | Fax:                                       | 207-760-2498 |   |
|                   |        |                                            |  |  |  |  |

 

or to such other address or person as may be designated in writing by aparty, by a notice given to the others as aforesaid.

 

(3)*           No Additional Effect.*Exceptas expressly provided herein, nothing contained herein shall be construed toprovide the Executive with any specific period of employment, right to beretained in the service of the Company or other rights, nor shall thisAgreement be construed to otherwise limit the rights of the Company todischarge or take other action with respect to the Executive. The Executivehereby acknowledges that he or she remains an employee at will of the Companyand that any rights of the

 

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Executive arising under this Agreement arise only upon thecircumstances specifically set forth in this Agreement.

 

(4)           *Construction.*The headings in this Agreement are included only for convenience and shallnot affect the meaning or interpretation of this Agreement. The words “herein”and “hereof’ and other words of similar import refer to this Agreement as awhole and not to any particular part of this Agreement. The word “including” asused herein shall not be construed so as to exclude any other thing notreferred to or described. The Outside Directors shall have the authority toconstrue and interpret this Agreement on behalf of the Company, and any suchdetermination by the Outside Directors shall be the conclusive construction onbehalf of the Company.

 

(5)*          **Entire Agreement, Assignability, etc. This*Agreement (i) constitutes the entireagreement, and supersedes all other prior agreements, including withoutlimitation prior employee continuity agreements, and understandings, bothwritten and oral, between the parties with respect to the subject matterhereof, (ii) is not intended to confer upon any person other than the partieshereto any rights or remedies hereunder, except as otherwise expressly providedherein, and (iii) shall not be assignable by operation of law or otherwise. Noprovisions of this Agreement are intended, nor will be interpreted, to provideor create any third party beneficiary rights or any other rights of any kind inany person unless specifically provided otherwise herein, and, except as soprovided, all provisions hereof will be personal solely among the parties tothis Agreement.

 

(6)*          **Validity.*Theinvalidity or unenforceability of any provisions of this Agreement shall notaffect the validity or enforceability of any other provisions of thisAgreement, each of which shall remain in full force and effect.

 

(7)*          **Governing Law.*This Agreement shall be governed by the laws of the State of Maine,regardless of the laws that otherwise might govern under applicable principlesof conflicts of laws thereof.

 

(8)*          **Counterparts.*This Agreement may be executed in counterparts, each of which shall bedeemed to be an original but both of which together shall constitute one andthe same instrument.

 

(9)*          **Funding.*ThisAgreement shall not be construed to create or require the Company to create atrust or to otherwise act to fund the amounts payable hereunder.

 

(10)*        **Limitation on Amount to be Paid.*If payment of any amount under this Agreementwould cause the Executive to be subject to an excise tax pursuant toSection 4999 of the Internal Revenue Code (as amended from time to time)or the regulations thereunder, then such amount shall not be paid to the extentnecessary to avoid the imposition of such tax. The preceding sentence shallapply only if the aggregate amount payable to the Executive or for his or herbenefit under this Agreement, after payment of such excise tax, would be lessthan the aggregate amount payable in accordance with the preceding sentence.

 

(11)*        **Arbitration.*The Parties agree to resolve all disputes arising under this Agreementin arbitration as follows:

 

(a)           Any arbitration under this Agreement, and any related judicialproceeding, shall be initiated and shall proceed pursuant to the provisions ofthe Maine Uniform Arbitration Act (the “Act”) and, to the extent consistentwith the Act, the then prevailing rules of the American Arbitration Association(the “Association”) for labor and employment contracts. To initiate arbitrationhereunder, demand shall be given in writing to the Association and the otherParty no later than one year after the

 

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claim arises. Any claim for which such demand is not made within oneyear after the claim arises shall be barred and discharged.

 

(b)           Anyarbitration under this Agreement shall be before a single arbitrator mutuallyacceptable to the Parties, and an award in such arbitration may include onlydamages which the arbitrator determines to be due under express provisions ofthis Agreement. The arbitrator shall have no authority to award any otherdamages including without limitation, consequential and exemplary damages. Anyaward in arbitration shall be subject to enforcement and appeal pursuant to theAct.

 

(c)           TheParties shall share equally all costs and fees charged by the Association orthe arbitrator.

 

(12)*        **Execution of Further Documents.*In the event the Executive receives paymentsor benefits pursuant to this Agreement and the Company’s legal counsel deems itnecessary for the Company to receive a release or other acknowledgement theExecutive agrees to execute any such document as may be reasonably required asa condition of his/her receipt of such payment or benefits.

 

INWITNESS WHEREOF, the parties have duly executed this Agreement as of thedate first above written.

 

 
|   | **MAINE & MARITIMES CORPORATION** |
|--------|---------------------------------------|
|   |                                  |
|   |                                  |
|   | /s/ Nathan L. Grass                   |   |
|   | **By:**                               |
|   | **Title:**                            |
|   |                                  |
|   |                                  |
|   | EXECUTIVE                             |
|   |                                  |
|   |                                  |
|   | /s/ Kurt A. Tornquist                 |   |
|   | **Name:**                             |

 

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