SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 9/30/97
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16143
-------
FIRST ESSEX BANCORP, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2943217
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
71 Main Street, Andover, MA 01810
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 475-4313
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
The number of shares outstanding of each of the registrant's classes of common
stock as of September 30, 1997:
Title of Class Shares Outstanding
-------------- ------------------
Common Stock, $.10 par value 7,526,726
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
------------------------------------------------
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. This Report contains certain
"forward-looking statements" including statements concerning plans, objectives,
future events or performance, assumptions, and other statements which are other
than statements of historical fact. The Company wishes to caution readers that
the following important factors, among others, may have affected, and could in
the future affect, the Company's actual results and could cause the Company's
actual results for subsequent periods to differ materially from those expressed
in any forward-looking statement made by, or on behalf of, the Company herein:
(i) the effect of changes in laws and regulations, including federal and state
banking laws and regulations, with which the Company and its wholly owned
banking subsidiary, First Essex Bank, FSB, must comply, and the associated costs
of compliance with such laws and regulations, either currently or in the future
as applicable; (ii) the effect of changes in accounting policies and practices,
as may be adopted by the regulatory agencies as well as by the Financial
Accounting Standards Board, or of changes in the Company's organization,
compensation and benefit plans; (iii) the effect on the Company's competitive
position within its market area of the increasing consolidation within the
banking and financial services industries, including increased competition from
larger regional and out-of-state banking organizations as well as nonbank
providers of various financial services; (iv) the effect of unforeseen changes
in interest rates; and (v) the effect of changes in the business cycle and
downturns in the local, regional and national economies.
2
<PAGE>
FIRST ESSEX BANCORP, INC.
INDEX
PART I - FINANCIAL INFORMATION
Page
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30,1997
and December 31, 1996 4
Consolidated Statements of Operations for the
three months ended September 30, 1997 and 1996 5
Consolidated Statements of Operations for the
nine months ended September 30, 1997 and 1996 6
Consolidated Statements of Stockholders' Equity
for the year ended December 31, 1996
and the nine months ended September 30, 1997 7
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996 8
Note to the Consolidated Financial Statements 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-20
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 21
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
----------------------------
FIRST ESSEX BANCORP, INC.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents $27,754 $38,078
Investment securities available-for-sale 201,327 174,716
Investment securities held-to-maturity
(fair value $186,597,000 and $103,529,000) 185,398 104,465
Stock in Savings Bank Life Insurance Company 1,194 1,194
Stock in Federal Home Loan Bank of Boston 19,803 15,517
Mortgage loans held-for-sale 10,909 8,915
Loans receivable, less allowance for possible loan losses
of $10,398,000 and $10,538,000 707,122 685,206
Foreclosed property, net of valuation reserve of
$359,000 and $834,000 1,037 1,880
Bank premises and equipment 10,980 11,609
Accrued interest receivable 7,632 5,970
Goodwill 11,209 11,800
Other assets 25,333 7,825
---------- ----------
Total assets $1,209,698 $1,067,175
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Depositors' accounts $740,663 $690,953
Borrowed funds 354,711 274,958
Mortgagors' escrow accounts 1,837 1,116
Other liabilities 22,945 17,007
---------- ----------
Total liabilities 1,120,156 984,034
---------- ----------
STOCKHOLDERS' EQUITY
Serial preferred stock: $.10 par value per share;
5,000,000 shares authorized, no shares issued
or outstanding Common stock, $.10 par value
per share; 25,000,000 shares authorized,
9,512,726 and 9,407,433 shares issued 951 941
Additional paid-in capital 75,222 74,408
Retained earnings 28,350 23,727
Treasury stock, at cost, 1,986,000 shares (15,842) (15,842)
Valuation allowance for unrealized gains (losses) on
investment securities available-for-sale 861 (93)
---------- ----------
Total stockholders' equity 89,542 83,141
---------- ----------
Total liabilities and stockholders' equity $1,209,698 $1,067,175
========== ==========
</TABLE>
4
<PAGE>
FIRST ESSEX BANCORP, INC.
Consolidated Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
(Dollars in thousands, except per share amount)
<S> <C> <C>
Interest and dividend income:
Interest on mortgage loans $9,750 $6,285
Interest on other loans 6,043 5,576
Interest and dividends on investment
securities available-for-sale 3,610 2,138
Interest and dividends on investment
securities held-to-maturity 3,399 1,992
Interest on short-term investments 204 98
Interest on other earning assets 259 --
--------- ---------
Total interest and dividend income 23,265 16,089
--------- ---------
Interest expense
Interest on depositors' accounts 8,063 5,571
Interest on borrowed funds 5,842 3,989
--------- ---------
Total interest expense 13,905 9,560
--------- ---------
Net interest income 9,360 6,529
Provision for possible loan losses 510 240
--------- ---------
Net interest income after provision
for possible loan losses 8,850 6,289
Noninterest income
Net gain on sales of mortgage loans and
mortgage servicing rights 363 222
Net gain (loss) on sale of investment
securities 178 --
Loan fees 110 117
Other fee income 599 471
Other -- --
--------- ---------
Total non-interest income 1,250 810
Noninterest expense
Salaries and employee benefits 2,760 2,344
Buildings and equipment 963 832
Professional services 239 219
Information processing 388 293
Insurance 92 58
Expenses, gains and losses on
and write-downs of, foreclosed property (11) 206
Other 901 612
Amortization of goodwill 197 --
--------- ---------
Total noninterest expenses 5,529 4,564
--------- ---------
Income before provision for income taxes 4,571 2,535
Provision for income taxes 1,921 11
--------- ---------
Net income $2,650 $2,524
========= =========
Earnings per share $0.34 $0.41
========= =========
Dividends declared per share $0.12 $0.12
========= =========
Average common and equivalent
shares outstanding 7,825,265 6,176,188
--------- ---------
</TABLE>
5
<PAGE>
FIRST ESSEX BANCORP, INC.
Consolidated Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
(Dollars in thousands, except per share amount)
<S> <C> <C>
Interest and dividend income:
Interest on mortgage loans $29,088 $18,664
Interest on other loans 17,512 15,469
Interest and dividends on investment
securities available-for-sale 10,886 5,800
Interest and dividends on investment
securities held-to-maturity 8,888 6,402
Interest on federal funds sold 467 317
Interest on Other Earning Assets 259 --
--------- ---------
Total interest and dividend income 67,100 46,652
--------- ---------
Interest expense
Interest on depositors' accounts 23,040 16,244
Interest on borrowed funds 15,948 11,291
--------- ---------
Total interest expense 38,988 27,535
--------- ---------
Net interest income 28,112 19,117
Provision for possible loan losses 1,530 1,055
--------- ---------
Net interest income after provision
for possible loan losses 26,582 18,062
Noninterest income
Net gain on sales of mortgage loans and
mortgage servicing rights 1,281 1,152
Net gain on sale of investment securities 227 --
Loan fees 414 400
Other fee income 1,787 1,382
Other -- 23
--------- ---------
Total non-interest income 3,709 2,957
Noninterest expense
Salaries and employee benefits 8,458 7,315
Buildings and equipment 3,098 2,591
Professional services 1,030 862
Information processing 1,154 913
Insurance 246 153
Expenses, gains and losses on
and write-downs of, foreclosed property 352 514
Other 2,768 2,233
Amortization of goodwill 590 --
--------- ---------
Total noninterest expenses 17,696 14,581
--------- ---------
Income before provision for income taxes 12,595 6,438
Provision for income taxes 5,272 30
--------- ---------
Net income $7,323 $6,408
========= =========
Earnings per share $0.94 $1.04
========= =========
Dividends declared per share $0.36 $0.36
========= =========
Average common and equivalent
shares outstanding 7,767,057 6,164,322
========= =========
</TABLE>
6
<PAGE>
FIRST ESSEX BANCORP, INC.
Consolidated Statements of Stockholders' Equity
Year Ended December 31, 1996
And The Nine Months Ended September 30, 1997
--------------------------------------------
<TABLE>
<CAPTION>
Valuation Allowance
For Unrealized
Gains (Losses)
On Investment
Common Paid Retained Treasury Securities
Stock Capital Earnings Stock Available-For-Sale Total
----- ------- -------- ----- ------------------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $801 $58,208 $17,682 ($15,842) ($677) $60,172
Net income -- 9,113 -- -- 9,113
---
Cash dividends declared -- -- (3,068) -- -- (3,068)
Issuance of common stock in
conjunction with the
acquisition of
Finest Financial Corp. 136 15,871 -- -- -- 16,007
Stock options exercised 4 329 -- -- -- 333
Change in valuation allowance
for unrealized gains on
investment securities
available-for-sale -- -- -- -- 584 584
---- ------- ------- -------- ---- -------
Balance at December 31, 1996 941 74,408 23,727 (15,842) (93) 83,141
Net income -- -- 7,323 -- -- 7,323
Cash dividends declared -- -- (2,700) -- -- (2,700)
Stock options exercised 10 814 -- -- -- 824
Change in valuation allowance
for unrealized gains on
investment securities
available-for-sale -- -- -- -- 954 954
---- ------- ------- -------- ---- -------
Balance at September 30, 1997 $951 $75,222 $28,350 ($15,842) $861 $89,542
==== ======= ======= ======== ==== =======
</TABLE>
7
<PAGE>
FIRST ESSEX BANCORP, INC.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
---- ----
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $7,323 $6,408
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for possible loan losses 1,530 1,055
Provision for depreciation and amortization 1,408 1,338
Gain on sales of foreclosed property (451) (106)
Write-down of foreclosed property 35 83
Amortization of goodwill 591 --
Amortization of investment securities discounts
and premiums, net 437 1,135
Deferred income taxes -- 30
Proceeds from sales of mortgage loans and
mortgage servicing rights 64,597 75,702
Mortgage loans originated for sale (65,317) (76,468)
Realized gains on the sale of investment securities (227) --
Realized gains on the sale of mortgage
loans and mortgage servicing rights, net (1,274) (1,152)
Increase in accrued interest receivable (1,662) (347)
Increase in other assets (17,508) (345)
Increase in other liabilities 5,938 1,682
-------- -------
Net cash provided by (used in) operating activities (4,580) 9,015
Cash flows from investing activities
Proceeds from sales of available-for-sale securities 58,819 --
Proceeds from maturities and principal payments
of available-for-sale securities 28,753 26,772
Proceeds from maturities and principal payments
of held-to-maturity securities 15,069 50,854
Purchases of available-for-sale securities (113,317) (51,447)
Purchases of held-to-maturity securities (96,124) (25,865)
Purchases of Federal Home Loan Bank stock (4,286) --
Loans originated and purchased, net of
principal collected (26,147) (71,628)
Proceeds from sales of foreclosed property 3,949 2,122
Purchases of bank premises and equipment (779) (1,029)
-------- -------
Net cash used in investing activities (134,063) (70,221)
Cash flows from financing activities
Net increase in demand deposits, NOW accounts
and savings accounts 44,684 13
Net increase of term deposits 5,026 21,035
Net increase in borrowed funds with maturities
of three months or less (30,351) 10,514
Proceeds from borrowed funds with maturities
in excess of three months 221,000 89,500
Repayments of borrowed funds with maturities
in excess of three months (110,895) (67,777)
Increase (decrease) in mortgagors' escrow accounts 720 914
Dividends paid (2,689) (2,177)
Stock options exercised 824 271
-------- -------
Net cash provided by financing activities 128,319 52,293
-------- -------
Net decrease in cash and cash equivalents (10,324) (8,913)
Cash and cash equivalents at beginning of period 38,078 27,308
-------- -------
Cash and cash equivalents at end of period $27,754 $18,395
======== =======
Supplemental disclosure of cash flow information:
Interest paid during the year $37,675 $27,501
Income taxes paid during the year 5,231 --
Supplemental schedule of noncash financing
and investing activities:
Real estate acquired through, or deeds
in lieu of, foreclosure 2,414 1,502
</TABLE>
8
<PAGE>
FIRST ESSEX BANCORP, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements are unaudited and include the
accounts of First Essex Bancorp, Inc. (the "Company") and its subsidiary, First
Essex Bank, FSB. These financial statements reflect, in management's opinion,
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position and the results of its
operations and cash flows for the periods presented. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's 1996 annual report.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
-------------
FIRST ESSEX BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 1997
General
-------
First Essex Bancorp, Inc., (the "Company"), is a Delaware corporation whose
primary activity is to act as the parent holding company for First Essex Bank,
FSB (the "Bank").
The Company's net earnings depend to a large extent upon its net interest
income, which is the difference between interest and dividend income earned on
its loans and investments and interest expense paid on its deposits and borrowed
funds. The Company's net earnings also depend upon its provision for possible
loan loss, non-interest income, non-interest expense and income tax expense.
Interest and dividend income and interest expense are significantly affected by
general economic conditions. These economic conditions, together with conditions
in the local real estate markets, affect the levels of non-performing assets and
provisions for possible loan losses.
Results of Operations
---------------------
General
- -------
Significant factors contributing to earnings changes for the third quarter and
nine months ended September 30, 1997, compared to the same periods in 1996,
include the purchase of Finest Financial Corp. ("Finest") on December 30, 1996,
the integration of three branches from Finest's subsidiary, Pelham Bank and
Trust Company, and the opening of two new branches in the latter part of 1996.
Additionally, the Company became fully taxable in 1997 which significantly
increased tax expense for the quarter and nine months ended September 30, 1997.
Net income for the three months ended September 30, 1997 was $2.6 million
compared to $2.5 million for same period in 1996. Net interest income totaled
$9.4 million for the quarter compared to $6.5 million for the same period in
1996. Higher net interest income of $2.8 million and an increase in non-interest
income of $440 thousand were offset by increases in the provision for loan
losses, non-interest expense and income tax expense of $270 thousand, $965
thousand and $1.9 million, respectively.
Net income for the nine months ended September 30, 1997 was $7.3 million
compared to $6.4 million for the same period in 1996. The increase in net income
over the comparative nine months in 1996 was comprised of higher net interest
income of $9.0 million and higher non-interest income of $752 thousand offset by
increases in the provision for loan losses, non-interest expense and income tax
expense of $475 thousand, $3.1 million and $5.2 million, respectively.
10
<PAGE>
The following table presents an analysis of average yields earned and rates
paid for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
1997 1996
-------------------------------------- -------------------------------------
Interest Average Interest Average
Average Earned/ Yield/ Average Earned/ Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Short-term investments $22,857 $204 3.57% $7,103 $98 5.52%
Investment securities 431,707 7,010 6.50 270,851 4,130 6.10
Total loans (1) 721,986 16,050 8.89 546,708 11,861 8.68
--------- ------ ------- -----
Total earning assets 1,176,550 23,264 7.91 824,662 16,089 7.80
Allowance for possible loan losses (10,289) (6,863)
---------- --------
Total earning assets less
allowance for possible
loan losses 1,166,261 817,799
Other assets 71,536 33,048
---------- --------
Total assets $1,237,797 $850,847
========== ========
Liabilities and Stockholders' Equity
Deposits
NOW accounts $40,218 $132 1.31% $33,062 $100 1.21%
Money market accounts 69,694 416 2.39 71,822 400 2.23
Savings accounts 133,925 1,170 3.49 49,495 207 1.67
Time deposits 432,778 6,603 6.10 325,829 4,864 5.97
--------- ------ ------- -----
Total interest bearing deposits 676,615 8,321 4.92 480,208 5,571 4.64
Borrowed funds 390,882 5,976 6.12 265,820 3,989 6.00
--------- ------ ------- -----
Total interest bearing deposits and
borrowed funds 1,067,497 14,297 5.36 746,028 9,560 5.13
--------- ------ ------- -----
Demand deposits 64,192 30,426
Other liabilities 17,953 10,817
---------- --------
Total liabilities 1,149,642 787,271
Stockholders' equity 88,155 63,576
---------- --------
Total liabilities and
stockholders' equity $1,237,797 $850,847
========== ========
Net interest income $8,967 $6,529
====== ======
Weighted average interest
rate spread 2.55% 2.68%
==== ====
Net yield on average
earning assets(2) 3.05% 3.17%
==== ====
Return on average assets 0.85% 1.19%
==== ====
Return on average equity 11.93% 15.88%
===== =====
</TABLE>
(1) Loans on a non-accrual status are included in the average balance.
(2) Net interest income before provision for possible loan losses divided by
average earning assets.
11
<PAGE>
The following table presents an analysis of average yields earned and rates paid
for the periods indicated:
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
1997 1996
------------------------------- ---------------------------------
Interest Average Interest Average
Average Earned/ Yield/ Average Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- ---- ---- ------- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets
Short-term investments $17,535 $467 3.55% $8,003 $317 5.28%
Investment securities 406,747 19,776 6.48 270,333 12,202 6.02
Total loans (1) 713,146 46,856 8.76 523,200 34,133 8.70
--------- ------ ------- ------
Total earning assets 1,137,428 67,099 7.87 801,536 46,652 7.76
Allowance for possible loan losses (10,128) (6,744)
--------- -------
Total earning assets less
allowance for possible
loan losses 1,127,300 794,792
Other assets 61,953 32,175
--------- -------
Total assets $1,189,253 $826,967
--------- =======
Liabilities and Stockholders' Equity
Deposits
NOW accounts $40,594 $390 1.28% $32,217 $291 1.20%
Money market accounts 76,059 1,292 2.26 72,922 1,191 2.18
Savings accounts 113,572 2,717 3.19 49,608 620 1.67
Time deposits 430,468 18,899 5.85 316,705 14,142 5.95
--------- ------ ------- ------
Total interest bearing deposits 660,693 23,298 4.70 471,452 16,244 4.59
Borrowed funds 364,129 15,948 5.84 251,699 11,291 5.98
--------- ------ ------- ------
Total interest bearing deposits and
and borrowed funds 1,024,822 39,246 5.11 723,151 27,535 5.08
--------- ------ ------- ------
Demand deposits 62,547 30,195
Other liabilities 16,326 11,208
--------- -------
Total liabilities 1,103,695 764,554
Stockholders' equity 85,558 62,413
--------- -------
Total liabilities and
stockholders' equity $1,189,253 $826,967
========== ========
Net interest income $27,853 $19,117
======= =======
Weighted average interest
rate spread 2.76% 2.68%
==== ====
Net yield on average
earning assets(2) 3.29% 3.18%
==== ====
Return on average assets 0.82% 1.03%
==== ====
Return on average equity 11.44% 13.69%
===== =====
</TABLE>
(1) Loans on a non-accrual status are included in the average balance.
(2) Net interest income before provision for possible loan losses divided
by average earning assets.
12
<PAGE>
Net Interest Income
- -------------------
Net interest income increased by $2.8 million to $9.4 million for the three
months ended September 30, 1997, and by $9 million to $28.1 million for the nine
months ended September 30, 1997. This represents an increase of 43.4% from $6.5
million and 47.1% from $19.1 million when compared to the same periods in 1996.
Much of the increase in net interest income is a result of the increase in the
size of the Company due to the purchase of Finest.
Interest and Dividend Income
- ----------------------------
Interest and dividend income increased by $7.2 million (44.6%) to $23.3 million,
and by $20.4 million (43.8%) to $67.1 million for the three and nine month
periods ended September 30, 1997, respectively, from $16.1 million and $46.7
million recorded in the same periods in 1996. The changes relate to volume
increases in earning assets primarily related to the acquisition of Finest and
the Company's decision to more fully leverage capital by enlarging its
investment portfolio, funded by increased borrowings.
Interest Expense
- ----------------
Interest expense increased by $4.3 million (45.4%) to $13.9 million, and by
$11.5 million (41.6%) to $39 million, for the three and nine month periods ended
September 30, 1997 when compared to the same periods in 1996. These increases
were primarily attributable to volume increases associated with the additional
deposits acquired in the Finest transaction, and additional borrowings to fund
the growth in the Company's investment portfolio.
Provision for Possible Loan Losses
- ----------------------------------
Possible losses on loans are provided for under the accrual method of
accounting. Assessing the adequacy of the allowance for possible loan losses
involves substantial uncertainties and is based upon management's evaluation of
the amount required to meet estimated losses inherent in the loan portfolio
after weighing various factors. Among the factors management may consider are
the quality of specific loans, risk characteristics of the loan portfolio
generally, the level of non-accruing loans, current economic conditions, trends
in delinquencies and charge-offs and collateral values of the underlying
security. Ultimate losses may vary significantly from the current estimates.
Losses on loans, including impaired loans, are charged against the allowance
when management believes the collectability of principal is doubtful.
The provisions for possible loan losses totaled $510 thousand and $1,530
thousand for the three and nine months ended September 30, 1997, of which $411
thousand and $895 thousand, respectively, related to impaired loans as defined
in SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" as amended
by SFAS No. 118. The provision for possible loan losses totaled $240 thousand
and $1,055 thousand for the comparable three and nine month periods in 1996, of
which $177 thousand and $523 thousand, respectively, related to impaired loans.
Provisions result from management's continuing internal review of the loan
portfolio as well as its judgment as to the adequacy of the reserves in light of
the condition of the regional real estate and other markets, and the economy in
general. As a result of increased loans, there is an expectation that the Bank
will continue to find it necessary to make provisions for possible loan losses
in the future. See "Financial Condition - Non-Performing Assets."
Non-Interest Income
- -------------------
Non-interest income consists of net gains from the sales of mortgage loans and
mortgage loan servicing rights and gains on the sale of investment securities,
together with fee and other non-interest income.
Non-interest income increased by $440 thousand (54.3%) to $1.2 million and by
$752 thousand (25.4%) to $3.7 million for the three and nine months ended
September 30, 1997, respectively, compared to $810 thousand and $3.0 million for
the same periods in 1996. The increase in non-interest income for the three
months ended September 30, 1997 is primarily attributable to a net increase of
$121 thousand in fees collected on loans and deposit accounts and other income,
together with an increase of $141 thousand in the gain on sales of loans and
mortgage servicing rights and a $178 thousand gain on the sale of investment
securities, when compared to the same period in 1996. The increase in
non-interest income for the nine months ended September 30, 1997 is primarily
attributable to a net increase of $396 thousand in fees collected on loans and
deposit accounts and other income, together with an increase of $227 thousand in
the gains on sale of investment securities, and an increase of $129 thousand in
the gain on sales of loans and mortgage servicing rights when compared to the
same period in 1996.
13
<PAGE>
Non-Interest Expense
- --------------------
Non-interest expense increased by $965 thousand (21.1%) to $5.5 million for the
three months ended September 30, 1997, and by $3.1 million (21.4%) to $17.7
million for the nine months ended September 30, 1997, compared to $4.6 million
and $14.6 million for the same periods in 1996. The increase in non-interest
expense is primarily attributable to operations at the three branches acquired
in the Finest acquisition, and the opening of two new branches in the latter
part of 1996. These expansion-related increases for the three and nine month
periods ending September 30, 1997 included, respectively, $416 and $1.1 million
in salaries and employee benefits; $131 and $507 thousand in building and
equipment costs; $95 and $241 thousand for information processing costs; and
$197 and $590 thousand of goodwill amortization related to the Finest
acquisition. Other increases in expenditures related to the overall growth of
the Company amounted to $126 and $634 thousand, respectively, for the three and
nine month periods ending September 30, 1997.
Income Tax Expense
- ------------------
The provision for income taxes increased to $1.9 and $5.3 million for the three
and nine month periods ended September 30, 1997 from $11 and $30 thousand for
the three and nine month periods ended September 30, 1996. These increases
reflect the Company's return to full statutory tax rates due to the complete
utilization of loss carryovers.
14
<PAGE>
Financial Condition
-------------------
Total assets amounted to $1,209.7 million at September 30, 1997, an increase of
$142.5 million or 13.4% from $1,067.2 million at December 31, 1996.
Loans
- -----
At September 30, 1997, the loan portfolio, including mortgage loans held for
sale, and before consideration of the allowance for possible loan losses, was
$728.4 million, representing 60.2% of total assets, compared to $704.7 million
or 66.0% of total assets at December 31, 1996.
The following table sets forth information concerning the Company's loan
portfolio at the dates indicated. The balances shown in the table are net of
unadvanced funds and unearned discounts and fees.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real Estate:
Residential $292,053 40.1% $301,869 42.8%
Commercial 84,899 11.7 102,718 14.6
Construction 30,362 4.2 24,855 3.5
-------- -------- -------- --------
Total Real Estate Loans 407,314 56.0 429,442 60.9
-------- -------- -------- --------
Owner occupied Commercial Real Estate (1) 49,641 6.8 29,465 4.2
Commercial loans 62,978 8.6 63,695 9.1
Aircraft loans 41,479 5.7 33,267 4.7
Consumer loans
Home equity 13,976 1.9 12,088 1.7
Automobile 101,424 13.9 92,175 13.1
Other 51,617 7.1 44,527 6.3
-------- -------- -------- --------
Total consumer loans 167,017 22.9 148,790 21.1
Total loans $728,429 100.0% $704,659 100.0%
======== ======== ======== ========
</TABLE>
(1) During 1996, management began to report this category of loans separate from
its other commercial and commercial real estate loans. Management believes this
category of loans is distinguishable from its other commercial lending products.
In 1996 and 1997, the Company reclassified certain loans to this category from
other more historical classification categories.
- --------------------------------------------------------------------------------
15
<PAGE>
Allowance for Possible Loan Losses
- ----------------------------------
Possible losses on loans are provided for under the accrual method of
accounting. Assessing the adequacy of the allowance for possible loan losses
involves substantial uncertainties and is based upon management's evaluation of
the amount required to meet estimated losses inherent in the loan portfolio
after weighing various factors. Among the factors management may consider are
the quality of specific loans, risk characteristics of the loan portfolio
generally, the level of non-accruing loans, current economic conditions, trends
in delinquencies and charge-offs and collateral values of the underlying
security. Ultimate losses may vary significantly from the current estimates.
Losses on loans, including impaired loans, are charged against the allowance
when management believes the collectability of principal is doubtful. (See
"Non-Performing Assets" for a discussion of the Company's impaired loans.)
The following table summarizes the activity in the allowance for possible loan
losses (including amounts established for impaired loans) for the nine months
ended September 30, 1997.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance at December 31, 1996 10,538
Provision for possible loan losses 1,530
Charge-offs
Mortgage 1,062
Owner occupied commercial real estate --
Construction --
Commercial 1
Consumer 1,182
-----
Total charge-offs 2,245
-----
Recoveries
Mortgage 427
Owner occupied commercial real estate --
Construction 7
Commercial 52
Consumer 89
-----
Total recoveries 575
-----
Net charge-offs 1,670
-----
Balance at September 30, 1997 10,398
======
Total loans at end of period $728,429
Average loans for the period 713,146
Allowance to loans ratio 1.43%
Net charge-offs to average loans ratio 0.23%
</TABLE>
During 1996 and 1997, the Company reclassified certain loans from other more
historical classification categories. In making these reclassifications, it was
determined that no restatement of charge-offs and/or recoveries, if any, would
be material or meaningful.
- -------------------------------------------------------------------------------
16
<PAGE>
Non-Performing Assets
- ---------------------
Non-performing assets consist of non-accruing loans (including loans impaired
under SFAS No. 114), and foreclosed property. Non-performing assets totaled $7.0
million at September 30, 1997 and $6.6 million at December 31, 1996.
The Bank's policy is to discontinue the accrual of interest on all loans
(including loans impaired under SFAS No. 114), for which payment of interest or
principal is 90 days or more past due or for such other loans as considered
necessary by management if collection of interest and principal is doubtful.
When a loan is placed on non-accrual status, all previously accrued but
uncollected interest is reversed against the current period interest income.
Restructured loans are loans (1) on which concessions have been made in light of
the debtor's financial difficulty with the objective of maximizing recovery and
(2) with respect to which the renegotiated payment terms continue to be met.
Interest income recognized on impaired loans (including restructured loans),
using the cash basis of income recognition, amounted to approximately $38 and
$186 thousand for the three and nine months ended September 30, 1997, compared
to $47 and $183 thousand for the same periods in 1996. The average recorded
investment of impaired loans for the three and nine months ended September 30,
1997 was $2.6 million, compared to $1.9 million and $2.0 million for the same
periods in 1996, and $1.9 million for the twelve month period ended December 31,
1996.
Foreclosed property consists mainly of real estate collateral from loans which
were foreclosed.
The following table indicates the recorded investment of non-performing assets
and the related valuation allowance for impaired loans.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,1997 December 31,1996
Impaired Loan Impaired Loan
Recorded Valuation Recorded Valuation
Investment Allowance Investment Allowance
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Non-accruing Loans
Impaired Loans
Requiring a valuation allowance $810 $475 $25 $25
Not requiring a valuation allowance 699 -- 286 --
------ ------ ------ ------
1,509 475 311 25
Restructured Loans 1,152 536 1,042 466
------ ------ ------ ------
Total impaired 2,661 $1,011 1,353 491
====== ======
Residential Mortgage 2,393 2,458
Other 874 928
------ ------
Total non-accruing 5,928 4,739
Foreclosed property, net 1,037 1,880
------
Total non-performing assets $6,965 $6,619
====== ======
Percentage of non-performing assets
to total assets 0.58% 0.62%
Percentage of allowance for possible
loan losses to non-accruing loans 175.4% 222.4%
</TABLE>
The valuation allowance for impaired loans is included in the allowance for
possible loan losses on the balance sheet.
- -------------------------------------------------------------------------------
17
<PAGE>
Investments
- -----------
At September 30, 1997, the investment portfolio, consisting of short-term
investments, investment securities, mortgage-backed securities, Federal Home
Loan Bank ("FHLB") stock and stock in the Savings Bank Life Insurance Company of
Massachusetts, totaled $407.7 million or 33.7% of total assets, compared to
$295.9 million or 27.7% of total assets at December 31, 1996. The investment
portfolio was increased to more fully leverage the capital of the Company, and
thereby produce a higher return funded by increased borrowings. Interest and
dividend income on the investment portfolio generated 30.2% of total interest
and dividend income for the nine months ended September 30, 1997 compared to
26.8% for the comparable period in 1996.
To identify and control market risks associated with the investment portfolio,
the Company has established policies and procedures, which include stop loss
limits and stress testing on a periodic basis.
Deposits
- --------
Deposits are the primary source of funds for lending and investment activities.
Deposit flows vary significantly and are influenced by prevailing interest
rates, market conditions, economic conditions and competition. At September 30,
1997 the Bank had total deposits of $740.7 million representing a net increase
of $49.7 million compared to total deposits of $690.9 million at December 31,
1996. This increase is attributable to an increase of $73.4 million in savings
and term deposits due primarily to promotional activities to increase savings
product volumes combined with a $.9 million increase in demand and NOW products.
This was offset by a reduction of $24.6 million in money market accounts.
While deposit flows are by nature unpredictable, the Bank attempts to manage its
deposits through selective pricing. Due to the uncertainty of market conditions,
it is not possible for the Bank to predict how aggressively it will compete for
deposits in future quarters or the likely effect of any such decision on deposit
levels, interest expense and net interest income. Strategies are currently in
place to aggressively market more stable deposit sources in such accounts as NOW
and Demand Deposits.
Borrowed Funds
- --------------
The Bank is a member of the FHLB and is entitled to borrow from the FHLB by
pledging certain assets. The Bank also utilizes short term repurchase agreements
with maturities less than three months, as an additional source of funds.
Repurchase agreements are secured by U.S. government and agency securities.
These borrowings are an alternative source of funds compared to deposits and
increased from $275.0 million at December 31, 1996 to $354.7 million at
September 30, 1997 to augment the asset growth of the Company.
Liquidity and Capital Resources
- -------------------------------
The Bank's principal sources of liquidity are customer deposits, borrowings from
the FHLB, scheduled amortization and prepayments of loan principal, cash flow
from operations, maturities of various investments and loan sales.
Management believes it is prudent to maintain an investment portfolio that not
only provides a source of income, but also provides a potential source of
liquidity to meet lending demand and deposit flows. The Bank adjusts the level
of its liquid assets and the mix of its loans and investments based upon
management's judgment as to the quality of specific investment opportunities and
the relative attractiveness of their maturities and yields.
Net cash used in operating activities totaled $4.6 million for the nine months
ended September 30, 1997 compared to $9.0 million that was provided by operating
activities for the same period in 1996. The change is primarily related to the
growth in other assets that was experienced during the first nine months of 1997
compared to the prior period.
Net cash used for investing activities totaled $134.1 million for the nine
months ended September 30, 1997 compared to cash used of $70.2 million for the
comparable period in 1996. The increase in investing activities primarily
reflects the increased level of purchases of investment securities offset by
increased loan payoffs during the first nine months of 1997 compared to a year
ago.
Net cash provided by financing activities totaled $128.3 million for the nine
months ended September 30, 1997, compared to net cash provided of $52.3 million
for the comparable period in 1996. The change reflects increases in borrowed
funds and the net growth of deposits when compared to the prior period.
18
<PAGE>
Regulatory Capital Requirements
- -------------------------------
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1997, that the
Bank meets all capital adequacy requirements to which it is subject.
The most recent notification from the Office of Thrift Supervision ("OTS")
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based, Tier I leverage ratios as
set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's category.
The Bank's actual capital amounts and ratios are also presented in the table. As
of September 30, 1997, the OTS did not deem it necessary for an interest-rate
risk component to be deducted from capital in determining risk-based capital
requirements.
The Bank may not declare or pay cash dividends on its shares of common stock if
the effect thereof would cause stockholders' equity to be reduced below
applicable capital maintenance requirements or if such declaration and payment
would otherwise violate regulatory requirements.
The following table displays the Bank's capital calculations as defined under
prompt corrective action for the periods indicated:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Be Well
First Essex Bank, FSB For Capital Capitalized Under Prompt
Actual Actual Adequacy Purposes Corrective Action Provision:
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
September 30, 1997 (unaudited) (greater
Tangible Capital ( to Adjusted Assets) $69,751 5.83% $17,952 than or) 1.50% n/a
= (greater
Tier 1 (Core) Capital (to Adjusted Assets) 69,751 5.83 35,904 3.00 $59,840 than or) 5.00%
=
Tier 1 (Core) (to Risk Weighted Assets) 69,751 9.53 29,266 4.00 43,899 6.00
Total Risk Based Capital
(to Risk Weighted Assets) 78,895 10.78 58,533 8.00 73,166 10.00
December 31, 1996 (greater
Tangible Capital (to Adjusted Assets) $62,216 5.91% $15,790 than or) 1.50% n/a
= (greater
Tier 1 (Core) Capital (to Adjusted Assets) 62,216 5.91 31,396 3.00 $52,327 than or) 5.00%
=
Tier 1 Capital (to Risk Weighted Assets) 62,216 9.67 25,736 4.00 38,604 6.00
Total Risk Based Capital
(to Risk Weighted Assets) 70,289 10.92 51,471 8.00 64,339 10.00
</TABLE>
19
<PAGE>
Impact of Inflation
- -------------------
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles which require
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.
An important concept in understanding the effect of inflation on financial
institutions is the distinction between monetary and non-monetary items. In a
stable environment, monetary items are those assets and liabilities which are or
will be converted into a fixed amount of dollars regardless of changes in
prices. Examples of monetary items include cash, investment securities, loans,
deposits and borrowings. Non-monetary items are those assets and liabilities
which gain or lose general purchasing power as a result of the relationships
between specific prices for the items and price change levels. Examples of
non-monetary items include equipment and real estate. Additionally, interest
rates do not necessarily move in the same direction, or in the same magnitude,
as the prices of goods and services as measured by the consumer price index.
Year 2000
- ---------
The Company has begun to address the issues inherent in the impending change of
century, otherwise known as "Year 2000". The potential problem with year 2000,
which is common to most corporations, concerns the inability of information
systems, primarily computer software programs, to properly recognize and process
date sensitive information for the year 2000 and beyond. The Company has
commenced the process of assessing its internal and external systems and
software to determine whether they are year 2000 compliant. Anticipated spending
for compliance maintenance and modification will be expensed as incurred, while
the cost of new hardware or software will be capitalized, and depreciated or
amortized over the useful life of the asset acquired. Management does not
believe these changes will have any material effect on the ongoing results of
operations.
Recent Accounting Developments
- ------------------------------
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125").
SFAS 125 supersedes SFAS No. 122 and establishes, among other things, new
criteria for determining whether a transfer of financial assets in exchange for
cash or other consideration should be accounted for as a sale or as a pledge of
collateral in a secured borrowing. SFAS 125 also establishes new accounting
requirements for pledged collateral. SFAS 125 is effective for most transactions
occurring after December 31, 1996 with other provisions of the statement
deferred for one year. The Company has determined that the adoption of SFAS 125
will not have a material impact on its consolidated financial statements. In
February 1997, the FASB issued SFAS No. 128, "Earnings per Share", which
establishes new standards for computing earnings per share (EPS) and makes them
comparable to international earnings per share calculations and standards. This
statement is effective for the Company's 1997 year-end financial statements and,
as previously disclosed, is not expected to have a significant impact on
reported financial results.
In June 1997, the FASB issued SFAS No. 130 and SFAS No. 131, "Reporting
Comprehensive Income" and "Disclosures About Segments of an Enterprise and
Related Information", respectively. Both of these pronouncements are effective
for the Company's 1998 financial statements. SFAS No. 130 will require increased
disclosure regarding a.) unrealized holding gains/losses on securities
classified as available-for-sale; b.) foreign currency translation adjustments,
if any; and c.) minimum pension liabilities. SFAS No. 131 requires additional
disclosures regarding segments of an enterprise, if any, that are used by the
enterprise for making operating decisions and assessing performance. Management
continues to evaluate the applicability of this statement to the Company.
20
<PAGE>
FIRST ESSEX BANCORP, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(3) Articles of Incorporation and By-laws:
3.1 The Restated Certificate of Incorporation of the Company is
incorporated herein by reference to Exhibit 3.1 to Amendment
No. 1 to the Company's Registration Statement on Form S-1,
Registration No. 33-10966, filed with the Securities and
Exchange commission on April 17, 1987 ("Amendment No. 1 to
Form S-1");
3.2 The Amended and Restated By-laws of the Company are
incorporated herein by reference to Exhibit 4.1 of the
Company's current report on Form 8-K filed on December 28,
1992.
(10) Material Contracts
* 10.1 The First Essex Bancorp, Inc. 1987 Stock Option Plan
incorporated herein by reference to Appendix B to the
prospectus included in the Company's Registration Statement
on Form S-8, Registration No. 33-21292, filed on
April 15, 1988;
10.2 The Shareholder Rights Agreement incorporated herein by
reference to the exhibit to the company's Current Report on
Form 8-K filed on October 12, 1989, as amended by the
Amendment to the Shareholder Rights Plan, incorporated
herein by reference to Exhibit 28.2 to the company's Current
Report on Form 8-K filed on February 12, 1990;
* 10.3 Executive Salary Continuation Agreement between First
Essex Bancorp, Inc., First Essex Bank, FSB and Leonard A.
Wilson incorporated herein by reference to Exhibit 10.15 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988;
* 10.4 Amended and Restated Employment Agreement dated as of
October 9, 1997 between Leonard A. Wilson and First
Essex Bancorp, Inc., filed herewith;
* 10.5 Amended and Restated Employment Agreement dated as of
October 9, 1997 between Leonard A. Wilson and First Essex
Bank, FSB, filed herewith;
* 10.6 Amended and Restated Employment Agreement dated as of
October 9, 1997 between David W. Dailey and First Essex
Bancorp, Inc., filed herewith;
* 10.7 Amended and Restated Employment Agreement dated as of
October 9, 1997 between David W. Dailey and First Essex
Bank, FSB, filed herewith;
* 10.8 Amended and Restated Employment Agreement dated as of
October 9, 1997 between Brian W. Thompson and First Essex
Bancorp, Inc., filed herewith;
* 10.9 Amended and Restated Employment Agreement dated as of
October 9, 1997 between Brian W. Thompson and First Essex
Bank, FSB, filed herewith;
* 10.10 Special Termination Agreement dated January 1, 1994
and restated as of October 9, 1997 between Leonard A. Wilson
and First Essex Bancorp, Inc., filed herewith;
* 10.11 Special Termination Agreement dated January 1, 1994
and restated as of October 9, 1997 between David W. Dailey
and First Essex Bancorp, Inc., filed herewith;
* 10.12 Special Termination Agreement dated December 30, 1996
and restated as of October 9, 1997 between Brian W. Thompson
and First Essex Bancorp, Inc., filed herewith;
* 10.13 Form of Special Termination Agreement between First
Essex Bancorp, Inc., First Essex Bank, FSB and each of John
M. DiGaetano, Wayne C. Golon, David L. Savoie and William F.
Burke, filed herewith.
* 10.14 First Essex Bancorp, Inc. Senior Management Incentive
Compensation Plan incorporated herein by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994;
* 10.15 Common Stock Option Plan for Brian W. Thompson
incorporated herein by reference to Form S-8, Registration
No. 333-22183, filed on February 21, 1997;
* 10.16 First Essex Bancorp, Inc. 1997 Stock Incentive Plan
incorporated herein by reference to Form S-8, Registration
No. 333-35057, filed on September 5, 1997.
(27) Financial Data Schedule
* Management contract or compensatory plan
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST ESSEX BANCORP, INC.
-------------------------
(Registrant)
Date: November 14, 1997 By /s/ Thomas P. Coursey
------------------------
Thomas P. Coursey
Senior Vice President
and Principal Accounting Officer
22
Exhibit 10.4
------------
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1997, by and among FIRST
ESSEX BANCORP, INC., a Delaware corporation (the "Holding Company") and the
parent company for FIRST ESSEX BANK, FSB, a federal saving bank, with its
executive offices in Andover, Massachusetts (the "Bank") (the Bank and the
Holding Company shall be hereinafter collectively referred to as the
"Employers"), and Leonard A. Wilson of Andover, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Holding Company desires to continue to provide for the
Executive's employment by the Holding Company and in connection therewith
desires to amend and restate the existing employment agreement among the Bank,
the Holding Company, and the Executive;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Holding Company and the Executive agree as follows:
1. Employment The Executive shall serve the Bank and the Holding
Company as President and Chief Executive Officer. In such positions, the
Executive shall have the duties, responsibilities and authorities and authority
as determined and designated from time to time by the Boards of Directors,
including, without limitation, complete management authority with respect to,
and total responsibility for, the overall operations and day-to-day business and
affairs of the Bank and the Holding Company. The Executive shall serve under the
direction and supervision of, and report only to, the Board. Notwithstanding the
above, the Executive shall not be required to perform any duties and
responsibilities (a) which would result in a noncompliance with or violation of
any applicable law or regulation or (b) on a regular basis in any locations
outside the counties in which the Bank now has branch offices, unless agreed
upon by the Executive. During the pendency of any temporary or permanent
suspension or termination from the Bank, the Executive shall not perform, in any
respect, directly or indirectly, duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as an officer of the
Holding Company.
2. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 1, 1997. The initial term of the
Executive's employment hereunder shall be for three years from the Commencement
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then-remaining term of his employment under this
Agreement shall be three years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank or the Holding Company, unless the Executive elects not to
continue to extend the term of this Agreement by giving written notice in
accordance with
<PAGE>
Section 7.2 of this Agreement, or the Board elects not to continue to extend the
term of this Agreement (in which event the provisions of Section 7.1 shall
apply). The last day of such term as so extended from time to time, is herein
sometimes referred to as the "Expiration Date" and the time period from the
Commencement Date through the Expiration Date shall be the "Term of Employment".
At least once in each calendar year the Board will review the Agreement and
Executive's performance annually for purposes of determining whether to continue
to extend the Agreement and the rationale and results thereof shall be included
in the minutes of the Board's meeting. The Board shall give notice to the
Executive as soon as possible after such review as to whether the Agreement is
to continue to be extended.
3. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:
3.1 Salary. For all services rendered by the Executive to the
Holding Company and its Subsidiaries, the Executive shall be entitled to receive
a base salary at the rate of $__________ per year, subject to increase from time
to time in accordance with the usual practices of the Holding Company with
respect to review of compensation of its senior executives. In addition, if the
Board increases the Executive's annual base salary at any time before the
Expiration Date, such increased annual base salary shall become a floor below
which such annual base salary shall not fall (other than concurrently with
across-the-board salary reductions based on the Employers' financial performance
similarly affecting all senior management personnel of the Holding Company) at
any future time during the Term of Employment without the Executive's written
consent. The Executive's salary shall be payable in periodic installments in
accordance with the Holding Company's usual practice for its senior executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Holding
Company. Such participation shall be subject to (i) the terms of the applicable
plan documents, (ii) generally applicable policies of the Holding Company and
(iii) the discretion of the Board of Directors of the Holding Company or any
administrative or other committee provided for in or contemplated by such plan.
3.3 Other Benefits.
(a) Automobile. The Executive shall be also be provided with the
use of an automobile at the Employers' expense. The Executive shall
comply with such reasonable reporting and expense limitations on the
use of the automobile as may be established from time to time by the
Holding Company. The Holding Company shall include annually on the
Executive's Form W-2 any amount attributable to his personal use of
such automobile.
(b) Business Memberships. The Executive shall also be reimbursed
for the reasonable annual membership fees for the dinner club and
country club of the Executive's choice.
2
<PAGE>
(c) Supplemental Life Insurance. The Executive shall be entitled
to continue to receive the supplemental life insurance now being
maintained on his behalf by the Employers.
3.4 Business Expenses. The Holding Company shall reimburse the
Executive for all reasonable travel and other business expenses incurred by him
in the performance of his duties and responsibilities, subject to such
reasonable requirements with respect to substantiation and documentation as may
be specified by the Holding Company.
3.5 Vacation. The Executive shall be entitled to not less than
five (5) weeks of vacation per year, to be taken at such times and intervals as
shall be determined by the Executive with the approval of the Holding Company,
which approval shall not be unreasonably withheld.
3.6 General. Nothing paid to the Executive under any plan, policy
or arrangement currently in effect or made available in the future shall be
deemed to be in lieu of other compensation to the Executive as described in this
Agreement.
4. Extent of Service. During the Term of Employment, the Executive
shall, subject to the direction and supervision of the Board of Directors of the
Holding Company, devote his full time, best efforts and business judgment, skill
and knowledge to the advancement of the Employers' interests and to the
discharge of his duties and responsibilities hereunder. He shall not engage in
any other business activity, except as may be approved by the Board of
Directors; provided, however, that nothing herein shall be construed as
preventing the Executive from:
(a) investing his assets in such form or manner as shall not
require any material services on his part in the operations or affairs
of the companies or the other entities in which such investments are
made;
(b) serving on the board of directors of any company, provided
that he shall not be required to render any material services with
respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
5. Termination Upon Death. In the event of the Executive's death during
the Term of Employment, the Executive's employment shall terminate on the date
of his death; provided, however, that the Holding Company shall pay to the
Executive's beneficiary designated in writing to the Holding Company prior to
his death (or to his estate, if he fails to make such designation), (i) any base
salary or other compensation earned (together with a pro rata portion of the
bonus payable with respect to the year in which death occurred) but not paid to
Executive prior to the date of death, plus (ii) the base salary that Executive
would have earned for a period of one year following his death, plus (iii) an
amount equal to any bonuses or other incentive compensation that Executive would
have earned if he had been employed for a full year after his death, plus (iv)
any death benefits that Executive is entitled to under the
3
<PAGE>
Holding Company's policies in effect on Executive's date of death. The foregoing
bonus payments shall be payable at the time of payment of similar bonus payments
made to other executives of the Holding Company and shall be computed on the
assumption that all the Executive's individual goals (if any) under any
applicable bonus plans were achieved. In addition, the Holding Company shall
continue in effect the medical benefits of the Executive and Executive's
dependents, or any of the same, at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of death for a one year
period commencing on the date of death (or, if such continuation is not
permitted by applicable law or if the Board so determines in its sole
discretion, the Holding Company shall provide the economic equivalent in lieu
thereof). Such medical benefits shall be deemed to have been provided under the
provisions of COBRA.
6. Termination by the Holding Company for Cause.
6.1 Termination by Holding Company. The Executive's employment
hereunder may be terminated by the Holding Company without further liability on
the part of the Holding Company, effective immediately, by a two-thirds vote of
all of the members of the Board of Directors of the Holding Company for Cause
(as such term is defined in Section 6.2) by written notice to the Executive
setting forth in reasonable detail the nature of such Cause, provided that the
Board has complied with the provisions of Section 6.3.
6.2 Cause. Termination for "Cause" shall mean
(a) willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or the Holding
Company;
(c) conviction of a felony involving a crime of moral turpitude;
(d) willfully engaging in violations of material banking
regulations; or
(e) willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
6.3 Board Termination Procedure. In each case, in determining
Cause the alleged acts or omissions of the Executive shall be measured against
standards prevailing in the banking industry generally and the ultimate
existence of Cause must be confirmed by not less than two-thirds of the Board at
a meeting prior to any termination therefor; provided, however, that it shall be
the Holding Company's burden to prove the alleged facts and omissions and the
prevailing nature of the standards the Holding Company shall have alleged are
violated by such acts or omissions of the Executive. In the event of such a
confirmation by two-thirds or more of the Board, the Holding Company shall
notify the Executive that the Holding Company intends to terminate the
Executive's employment for Cause under this Section 6 (the "Confirmation
Notice"). The Confirmation Notice shall specify the acts or omissions upon the
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basis of which the Board has confirmed the existence of Cause and must be
delivered to the Executive within ninety (90) days after a majority of the Board
(excluding, if applicable, the Executive) has actual knowledge of the events
giving rise to such purported termination. If the Executive notifies the Holding
Company in writing (the "Opportunity Notice") within thirty (30) days after the
Executive has received the Confirmation Notice, the Executive (together with
counsel) shall be provided one opportunity to meet with the Board (or a
sufficient quorum thereof) to discuss such act or acts. Such opportunity to meet
with the Board shall be fixed and shall occur on a date selected by the Board
(such date being not less than ten (10) nor more than forty-five (45) days after
the Holding Company receives the Opportunity Notice from the Executive). Such
meeting shall take place at the principal offices of the Holding Company or such
other location as agreed to by the Executive and the Holding Company. During the
period commencing on the date the Holding Company receives the Opportunity
Notice and ending on the date next succeeding the date on which such meeting
between the Board (or a sufficient quorum thereof) and the Executive is
scheduled to occur and not withstanding anything to the contrary in this
Agreement, the Executive shall be suspended from employment with the Holding
Company (with pay to the extent not prohibited by applicable law). If the Board
properly sets the date of such meeting and if the Board (or a sufficient quorum
thereof) attends such meeting and in good faith does not rescind its
confirmation of Cause at such meeting or if the Executive fails to attend such
meeting for any reason, the Executive's employment by the Holding Company shall,
immediately upon the closing for such meeting and the delivery to the Executive
of the Notice of Termination, be terminated for Cause. If the Executive does not
respond in writing to the Confirmation Notice in the manner and within the time
period specified in this Section 4, the Executive's employment with the Holding
Company shall, on the thirty-first day after the receipt by the Executive of the
Confirmation Notice, be terminated for Cause under this Section 6.
6.4 Termination of Obligations. In the event of termination
pursuant to Section 6, all obligations of the Holding Company under this
Agreement shall terminate as of the date indicated, but vested rights of the
parties hereunder shall not be affected.
7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Executive shall be entitled
to receive the benefits set forth in Section 9.
7.2 Other Voluntary Termination by the Executive. During the Term
of Employment, the Executive may effect, upon sixty (60) days prior written
notice to the Holding Company, a Voluntary Termination of his employment
hereunder and thereupon the Term of Employment (if not already expired) shall
end. A "Voluntary Termination" shall mean a termination of employment by the
Executive on his own initiative other than (a) a termination due to death or
becoming Disabled (as defined in Section 11), (b) a termination for Good Reason,
(c) a termination due to Retirement (as defined in Section 7.3), or (d) a
termination as a result of the normal expiration of the full Term of Employment.
If, during the
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Term of Employment, the Executive's employment is so terminated due to Voluntary
Termination, the Term of Employment shall thereupon end and the Executive shall
be entitled to continuation of the Executive's medical benefits at the level in
effect on, and at the same out-of-pocket cost to the Executive as of, the date
of termination for the six month period following the termination of the
Executive's employment due to Voluntary Termination and (ii) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs, if any, of the Holding Company.
Such medical benefits shall be deemed to have been provided under the provisions
of COBRA.
7.3 Termination Due to Retirement. "Retirement" means the
termination of the Executive's employment with the Holding Company for any
reason by the Executive at any time after the Executive attains "Retirement Age"
(as hereinafter defined). "Retirement Age" shall mean the earliest to occur of
(X) age 65, (Y) (if applicable) any lesser age at which the Executive is
entitled to retire from the Employers and receive retirement benefits under the
Employers' qualified pension plan, and (Z) an age of 62 or greater at which the
Employers permit the Executive to retire. The Executive may terminate the
Executive's employment hereunder due to Retirement upon thirty (30) days prior
written notice to the Holding Company. If, during the Term of Employment, the
Executive's employment is so terminated due to Retirement, the Term of
Employment shall thereupon end and the Executive shall be entitled to (i)
continuation of the Executive's medical benefits at the level in effect on, and
at the same out-of-pocket cost to the Executive as of, the date of termination
for the one-year period following the termination of the Executive's employment
due to Retirement (or, if such continuation is not permitted by applicable law
or if the Board so determines in its sole discretion, the Holding Company shall
provide the economic equivalent in lieu thereof), and (ii) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs, if any, of the Holding Company.
Such medical benefits shall be deemed to have been provided under the provisions
of COBRA.
7.4 Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following:
(a) the failure of the Board of Directors of the Holding Company
to elect the Executive to the office of President and Chief Executive
Officer, or to continue the Executive in such offices;
(b) the failure by the Holding Company to comply with the
provisions of Section 3.1;
(c) any failure by the Holding Company to timely pay the amounts
(other than base salary) or provide the benefits described in this
Agreement, other than an isolated failure not occurring in bad faith
and which is remedied promptly after receipt of written notice thereof
given by Executive;
(d) any action by the Holding Company which results in a
diminution in the Executive's authority;
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(e) there occurs any reduction of base salary or material
reduction in other benefits or any material change by the Holding
Company to the Executive's function, duties, or responsibilities in
effect on the date hereof or as set forth in this Agreement, which
change would cause the Executive's position with the Holding Company to
become one of lesser responsibility, importance, or scope from the
position and attributes thereof in effect on the date hereof or as set
forth in this Agreement (and any such material change shall be deemed a
continuing breach of this Agreement);
(f) a material breach by the Holding Company of any of the
provisions of this Agreement which failure or breach shall have
continued for thirty (30) days after written notice from the Executive
to the Holding Company specifying the nature of such failure or breach;
and
(g) a determination by the Board not to continue to extend the
term of this Agreement as provided in Section 2.
In addition,"Good Reason" shall include the following events but only if they
shall occur within two years following a "Change in Control" (which term shall
have the meaning defined in the Special Termination Agreement between the
Executive and the Holding Company):
(h) the failure by the Holding Company to continue to provide the
Executive with benefits substantially similar to those available to the
Executive under any of the life insurance, medical, health and
accident, or disability plans or any other material benefit plans in
which the Executive was participating at the time of the Change in
Control, or the taking of any action by the Holding Company which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Bank to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of years
of service with the Holding Company in accordance with the Holding
Company's normal vacation policy in effect at the time of the Change in
Control;
(i) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control; or
(j) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened.
8. Termination by the Holding Company Without Cause. The Executive's
employment with the Holding Company may be terminated without cause by a
two-thirds vote of all of the members of the Board of Directors of the Holding
Company on written notice to the Executive, provided, however, that the Holding
Company shall have the obligation upon any such termination to make the payments
to the Executive provided for under Section 9 of this Agreement.
9. Certain Termination Benefits. In the event of termination pursuant
to Section 7.1 or 8, the Executive shall be entitled to each of the following
benefits:
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9.1 Earnings to Date of Termination. An amount equal to the sum
of (a) base salary or other compensation earned through the date of termination,
plus (b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus paid during
the three fiscal years preceding the termination of employment, plus (c) all
accrued vacation and deferred compensation.
9.2 Lump Sum Payment of Remaining Salary Obligation. A lump sum
severance benefit equal to three times the sum of (a) the Executive's annual
base salary and (b) the highest annual bonus paid to the Executive during the
three fiscal years preceding the termination of employment.
9.3 Benefit Continuation. For the period subsequent to the date
of termination until the Expiration Date, the Executive shall continue to
receive the disability and medical benefits described in Section 3.2 existing on
the date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination. Any cash bonus plans shall
be prorated through the date of termination.
9.4 Pension Adjustment. An amount equal to the excess of (a) the
actuarial value of the benefits which the Executive would have accrued under the
Employers' qualified defined benefit pension plan and non-qualified supplemental
retirement plan if the Executive's employment had continued for a period of
three years following his date of termination, over (b) the actuarial equivalent
of the Executive's actual benefit under the defined benefit pension plan and the
non-qualified supplemental retirement plan.
10. Adjustment for Unavailability of Benefits. If, in spite of the
provisions of Section 9, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Holding
Company, the Holding Company shall pay or provide for payment of such benefits
and service credits for such benefits to the Executive, or to the Executive's
dependents, beneficiaries or estate.
11. Disability. If, due to physical or mental illness, the Executive
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Holding Company, acting through its Board of
Directors, may designate another executive to act in his place during the period
of his disability. Notwithstanding any such designation, the Executive shall
continue to receive his full salary and benefits under Section 3 of this
Agreement until the earlier of (X) the Expiration Date or (Y) the date on which
he becomes eligible for disability income under the Employer's disability income
plan (at which time the Executive shall be considered to be "Disabled"). While
receiving disability payments under such plan, the Executive shall receive a
salary from the Holding Company which when combined with the Executive's
disability income payments will equal eighty (80%) percent of the Executive's
prior salary from the Holding Company, and shall continue to participate in the
Employers' benefit plans and to receive other benefits as specified in Section
3.2 until the Expiration Date, with all such benefits to be at the level in
effect on, and at the same out-of-pocket cost to the
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Executive as of, the date of disability. In the absence of a disability income
plan at the time of such disability, the Holding Company shall pay the Executive
benefits equal to those the Executive would have received if the Holding
Company's current disability plan were in effect at such time. Upon the
Executive being able to return to full-time employment after being Disabled but
before the expiration of the Term of Employment, the Executive shall be offered
an equivalent available position and otherwise be subject to the provisions of
this Agreement. Nothing contained in this Section 11 shall preclude the Holding
Company from terminating the Executive's employment without cause, subject to
its payment of benefits as provided in Section 9.
12. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received from the Holding Company or
any Subsidiaries, the Holding Company shall pay as additional compensation to
the Executive that amount which, after taking into account all taxes (including
any tax which shall be imposed by Code Section 4999) imposed upon such amount by
any federal, state or local government, shall be equal to the amount of said tax
imposed by Code Section 4999.
13. Confidential Information. The Executive will not disclose to any
other Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either of the Holding Company
obtained by him incident to his employment with the Holding Company. The term
"confidential information" includes, without limitation, financial information,
business plans, prospects and opportunities (such as lending relationships,
financial product developments, or possible acquisitions or dispositions of
business or facilities) which have been discussed or considered by the
management of the Holding Company but does not include any information which has
become part of the public domain by means other than the Executive's
nonobservance of his obligations hereunder.
14. No Mitigation; No Offset. In the event of any termination of
employment under this Agreement, the Executive shall be under no obligation to
seek other employment or to mitigate damages, and there shall be no offset
against any amounts due to him under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
15. Miscellaneous.
15.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
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15.2 Definition of "Person". For purposes of this Agreement, the
term "Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
15.3 Withholding. All payments made by the Holding Company under
this Agreement shall be net of any tax or other amounts required to be withheld
by the Holding Company under applicable law.
15.4 Arbitration of Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Holding Company, one by
the Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 15.4. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Holding Company shall pay (or the
Executive shall be entitled to recover from the Holding Company, as the case may
be) the Executive's reasonable attorneys' fees and other reasonable costs and
expenses in connection with the enforcement of said rights (including the
enforcement of any arbitration award in court) regardless of the final outcome,
unless and to the extent the arbitrators shall determine that under the
circumstances recovery by the Executive of all or a part of any such fees and
costs and expenses would be unjust.
15.5 Assignment; Successors and Assigns, etc. Neither the Holding
Company nor the Executive may make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the other party and without such consent any attempted transfer or
assignment shall be null and of no effect; provided, however, that the Holding
Company may assign its rights under this Agreement without the consent of the
Executive in the event either of the Holding Company shall hereafter effect a
reorganization, consolidate with or merge into any other Person, or transfer all
or substantially all of its properties or assets to any other Person. This
Agreement shall inure to the benefit of and be binding upon the Holding Company
and the Executive, and their respective successors, executors, administrators,
heirs and permitted assigns. In the event of the Executive's death prior to the
completion by the Holding Company of all payments due him under this Agreement,
the Holding Company shall continue such payments to the Executive's beneficiary
designated in writing to the Holding Company prior to his death (or to his
estate, if he fails to make such designation).
15.6 Enforceability. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances
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other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15.7 Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15.8 Prior Agreements. This Agreement supersedes the Amended and
Restarted Employment Agreement made as of April 21, 1994 by and among the
Executive, the Holding Company and the Bank.
15.9 Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in writing
with the Holding Company or, in the case of the Holding Company, at its main
office, attention of the Board of Directors.
15.10 Amendment. This Agreement may be amended or modified only
by a written instrument signed by the Executive and by duly authorized
representatives of the Holding Company.
15.11 Governing Law. This is a Massachusetts contract and shall
be construed under and be governed in all respects by the laws of The
Commonwealth of Massachusetts.
16. Source of Payments.
16.1 Payments by Holding Company. All payments provided in this
Agreement shall be timely paid in cash or check from the general funds of the
Holding Company subject to Section 16.2.
16.2 No Duplicate Payments. Notwithstanding any provision herein
to the contrary, to the extent that payments and benefits, as provided by this
Agreement, are paid to or received by Executive under the Employment Agreement
dated as of the date hereof between the Executive and the Bank, such
compensation payments and benefits paid by the Bank will be subtracted from any
amount due simultaneously to the Executive under similar provisions of this
Agreement. Under no circumstances shall the Executive be entitled to receive
duplicate payments or benefits under this Agreement and such other Employment
Agreement. Payments pursuant to this Agreement and the Bank Employment Agreement
shall be allocated in proportion to the services rendered and time expended on
such activities by the Executive as determined by the Holding Company and the
Bank on a quarterly basis.
17. Noncompetition.
17.1 While Employed. During such time as the Executive is
employed hereunder, the Executive will not compete with the banking or any other
business conducted by either of
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the Employers during the period of his employment hereunder, nor will he attempt
to hire any employee of either of the Employers, assist in such hiring by any
other Person, encourage any such employee to terminate his or her relationship
with either of the Employers, or solicit or encourage any customer of either of
the Employers to terminate its relationship with such Employer or to conduct
with any other person any business or activity which such customer conducts or
could conduct with such Employer.
17.2 Post-Employment. The provisions of this Section 17.2 shall
not be binding on the Executive after a Change in Control shall have occurred.
During the one year period following the date of termination of the Executive's
employment (x) by the Executive on his own initiative for any reason other than
(1) death, (2) becoming Disabled (as defined in Section 11), or (3) Retirement
(as defined in Section 7.3), or (y) by either Employer for Cause or under
circumstances which result in the Executive receiving termination benefits
pursuant to Section 9 hereof, the Executive will not compete from an office
within 20 miles of the Bank's main office with the banking or any other business
conducted by either of the Employers during the period of his employment
hereunder, nor will he attempt to hire any employee of either of the Employers,
assist in such hiring by any other Person, or encourage any such employee to
terminate his or her relationship with either of the Employers.
* * * * *
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
ATTEST: FIRST ESSEX BANCORP, INC.
___________________________ By:_________________________
Title:_______________________
[Seal]
WITNESS EXECUTIVE
- --------------------------- ----------------------------
Leonard A. Wilson
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Exhibit 10.5
------------
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1997, by and among FIRST
ESSEX BANK, FSB, a federal saving bank, with its executive offices in Andover,
Massachusetts (the "Bank"), FIRST ESSEX BANCORP, INC., a Delaware corporation
(the "Holding Company") and the parent company of the Bank (the Bank and the
Holding Company shall be hereinafter collectively referred to as the
"Employers"), and Leonard A. Wilson of Andover, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Bank desires to continue to provide for the Executive's
employment by the Bank and in connection therewith desires to amend and restate
the existing employment agreement among the Bank, the Holding Company, and the
Executive;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Bank and the Executive agree as follows:
1. Employment The Executive shall serve the Bank and the Holding
Company as President and Chief Executive Officer. In such positions, the
Executive shall have the duties, responsibilities and authorities and authority
as determined and designated from time to time by the Boards of Directors,
including, without limitation, complete management authority with respect to,
and total responsibility for, the overall operations and day-to-day business and
affairs of the Bank and the Holding Company. The Executive shall serve under the
direction and supervision of, and report only to, the Board. Notwithstanding the
above, the Executive shall not be required to perform any duties and
responsibilities (a) which would result in a noncompliance with or violation of
any applicable law or regulation or (b) on a regular basis in any locations
outside the counties in which the Bank now has branch offices, unless agreed
upon by the Executive. During the pendency of any temporary or permanent
suspension or termination from the Bank, the Executive shall not perform, in any
respect, directly or indirectly, duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as an officer of the
Holding Company.
2. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 1, 1997. The initial term of the
Executive's employment hereunder shall be for three years from the Commencement
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then-remaining term of his employment under this
Agreement shall be three years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank or the Holding Company, unless the Executive elects not to
continue to extend the term of this Agreement by giving written notice in
accordance with Section 7.2 of this Agreement, or the Board elects not to
continue to extend the term of this Agreement (in which event the provisions of
Section 7.1 shall apply). The last day of such term as so extended from time to
time, is herein sometimes referred to as the "Expiration Date" and the time
period from the Commencement Date through the Expiration Date shall be the "Term
of Employment". At least
<PAGE>
once in each calendar year the Board will review the Agreement and Executive's
performance annually for purposes of determining whether to continue to extend
the Agreement and the rationale and results thereof shall be included in the
minutes of the Board's meeting. The Board shall give notice to the Executive as
soon as possible after such review as to whether the Agreement is to continue to
be extended.
3. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:
3.1 Salary. For all services rendered by the Executive to the Holding
Company and its Subsidiaries, the Executive shall be entitled to receive a base
salary at the rate of $__________ per year, subject to increase from time to
time in accordance with the usual practices of the Bank with respect to review
of compensation of its senior executives. In addition, if the Board increases
the Executive's annual base salary at any time before the Expiration Date, such
increased annual base salary shall become a floor below which such annual base
salary shall not fall (other than concurrently with across-the-board salary
reductions based on the Employers' financial performance similarly affecting all
senior management personnel of the Bank) at any future time during the Term of
Employment without the Executive's written consent. The Executive's salary shall
be payable in periodic installments in accordance with the Bank's usual practice
for its senior executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Bank.
Such participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable policies of the Bank and (iii) the
discretion of the Boards of Directors of the Bank or any administrative or other
committee provided for in or contemplated by such plan.
3.3 Other Benefits.
(a) Automobile. The Executive shall be also be provided with the
use of an automobile at the Employers' expense. The Executive shall comply with
such reasonable reporting and expense limitations on the use of the automobile
as may be established from time to time by the Bank. The Employers shall include
annually on the Executive's Form W-2 any amount attributable to his personal use
of such automobile.
(b) Business Memberships. The Executive shall also be reimbursed
for the reasonable annual membership fees for the dinner club and country club
of the Executive's choice.
(c) Supplemental Life Insurance. The Executive shall be entitled
to continue to receive the supplemental life insurance now being maintained on
his behalf by the Employers.
3.4 Business Expenses. The Bank shall reimburse the Executive for all
reasonable travel and other business expenses incurred by him in the performance
of his duties and responsibilities, subject to such reasonable requirements with
respect to substantiation and documentation as may be specified by the Bank.
3.5 Vacation. The Executive shall be entitled to not less than five (5)
weeks of vacation per year, to be taken at such times and intervals as shall be
determined by the Executive with the approval of the Bank, which approval shall
not be unreasonably withheld.
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3.6 General. Nothing paid to the Executive under any plan, policy or
arrangement currently in effect or made available in the future shall be deemed
to be in lieu of other compensation to the Executive as described in this
Agreement.
4. Extent of Service. During the Term of Employment, the Executive
shall, subject to the direction and supervision of the Board of Directors of the
Bank, devote his full time, best efforts and business judgment, skill and
knowledge to the advancement of the Employers' interests and to the discharge of
his duties and responsibilities hereunder. He shall not engage in any other
business activity, except as may be approved by the Board of Directors;
provided, however, that nothing herein shall be construed as preventing the
Executive from:
(a) investing his assets in such form or manner as shall not
require any material services on his part in the operations or affairs
of the companies or the other entities in which such investments are
made;
(b) serving on the board of directors of any company, provided
that he shall not be required to render any material services with
respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
5. Termination Upon Death. In the event of the Executive's death during
the Term of Employment, the Executive's employment shall terminate on the date
of his death; provided, however, that the Bank shall pay to the Executive's
beneficiary designated in writing to the Bank prior to his death (or to his
estate, if he fails to make such designation), (i) any base salary or other
compensation earned (together with a pro rata portion of the bonus payable with
respect to the year in which death occurred) but not paid to Executive prior to
the date of death, plus (ii) the base salary that Executive would have earned
for a period of one year following his death, plus (iii) an amount equal to any
bonus payments or other incentive compensation that Executive would have earned
if he had been employed for a full year after his death, plus (iv) any death
benefits that Executive is entitled to under the Bank's policies in effect on
Executive's date of death. The foregoing bonus payments shall be payable at the
time of payment of similar bonuses made to other executives of the Bank and
shall be computed on the assumption that all the Executive's individual goals
(if any) under any applicable bonus plans were achieved. In addition, the Bank
shall continue in effect the medical benefits of the Executive and Executive's
dependents, or any of the same, at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of death for a one year
period commencing on the date of death (or, if such continuation is not
permitted by applicable law or if the Board so determines in its sole
discretion, the Bank shall provide the economic equivalent in lieu thereof).
Such medical benefits shall be deemed to have been provided under the provisions
of COBRA.
6. Termination by the Bank for Cause.
6.1 Termination by Bank. The Executive's employment hereunder may
be terminated by the Bank, without further liability on the part of the Bank,
effective immediately, by a two-thirds vote of all of the members of the Board
of Directors of the Bank for Cause (as such term is defined in Section 6.2) by
written notice to the Executive setting forth in reasonable detail the nature of
such Cause, provided that the Board has complied with the provisions of Section
6.3.
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6.2 Cause. Termination for "Cause" shall mean
(a) willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or the Holding
Company;
(c) conviction of a felony involving a crime of moral turpitude;
(d) willfully engaging in violations of material banking
regulations; or
(e) willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
6.3 Board Termination Procedure. In each case, in determining
Cause the alleged acts or omissions of the Executive shall be measured against
standards prevailing in the banking industry generally and the ultimate
existence of Cause must be confirmed by not less than two-thirds of the Board at
a meeting prior to any termination therefor; provided, however, that it shall be
the Bank's burden to prove the alleged facts and omissions and the prevailing
nature of the standards the Bank shall have alleged are violated by such acts or
omissions of the Executive. In the event of such a confirmation by two-thirds or
more of the Board, the Bank shall notify the Executive that the Bank intends to
terminate the Executive's employment for Cause under this Section 6 (the
"Confirmation Notice"). The Confirmation Notice shall specify the acts or
omissions upon the basis of which the Board has confirmed the existence of Cause
and must be delivered to the Executive within ninety (90) days after a majority
of the Board (excluding, if applicable, the Executive) has actual knowledge of
the events giving rise to such purported termination. If the Executive notifies
the Bank in writing (the "Opportunity Notice") within thirty (30) days after the
Executive has received the Confirmation Notice, the Executive (together with
counsel) shall be provided one opportunity to meet with the Board (or a
sufficient quorum thereof) to discuss such acts or omissions. Such opportunity
to meet with the Board shall be fixed and shall occur on a date selected by the
Board (such date being not less than ten (10) nor more than forty-five (45) days
after the Bank receives the Opportunity Notice from the Executive). Such meeting
shall take place at the principal offices of the Bank or such other location as
agreed to by the Executive and the Bank. During the period commencing on the
date the Bank receives the Opportunity Notice and ending on the date next
succeeding the date on which such meeting between the Board (or a sufficient
quorum thereof) and the Executive is scheduled to occur and not withstanding
anything to the contrary in this Agreement, the Executive shall be suspended
from employment with the Bank (with pay to the extent not prohibited by
applicable law). If the Board properly sets the date of such meeting and if the
Board (or a sufficient quorum thereof) attends such meeting and in good faith
does not rescind its confirmation of Cause at such meeting or if the Executive
fails to attend such meeting for any reason, the Executive's employment by the
Bank shall, immediately upon the closing for such meeting and the delivery to
the Executive of the Notice of Termination, be terminated for Cause. If the
Executive does not respond in writing to the Confirmation Notice in the manner
and within the time period specified in this Section 6.3, the Executive's
employment with the Bank shall, on the thirty-first day after the receipt by the
Executive of the Confirmation
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Notice, be terminated for Cause under this Section 6.
6.4 Termination of Obligations. In the event of termination
pursuant to Section 6, all obligations of the Bank under this Agreement shall
terminate as of the date indicated, but vested rights of the parties hereunder
shall not be affected.
7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Executive shall be entitled
to receive the benefits set forth in Section 10.
7.2 Other Voluntary Termination by the Executive. During the Term
of Employment, the Executive may effect, upon sixty (60) days prior written
notice to the Bank, a Voluntary Termination of his employment hereunder and
thereupon the Term of Employment (if not already expired) shall end. A
"Voluntary Termination" shall mean a termination of employment by the Executive
on his own initiative other than (a) a termination due to death or becoming
Disabled (as defined in Section 12), (b) a termination for Good Reason, (c) a
termination due to Retirement (as defined in Section 7.3), or (d) a termination
as a result of the normal expiration of the full Term of Employment. If, during
the Term of Employment, the Executive's employment is so terminated due to
Voluntary Termination, the Term of Employment shall thereupon end and the
Executive shall be entitled to (i) continuation of the Executive's medical
benefits at the level in effect on, and at the same out-of-pocket cost to the
Executive as of, the date of termination for the six month period following the
termination of the Executive's employment due to Voluntary Termination and (ii)
any other compensation and benefits as may be provided in accordance with the
terms and provisions of any applicable plans and programs, if any, of the Bank.
Such medical benefits shall be deemed to have been provided under the provisions
of COBRA.
7.3 Termination Due to Retirement."Retirement" means the
termination of the Executive's employment with the Bank for any reason by the
Executive at any time after the Executive attains "Retirement Age" (as
hereinafter defined). "Retirement Age" shall mean the earliest to occur of (X)
age 65, (Y) (if applicable) any lesser age at which the Executive is entitled to
retire from the Employers and receive retirement benefits under the Employers'
qualified pension plan, and (Z) an age of 62 or greater at which the Employers
permit the Executive to retire. The Executive may terminate the Executive's
employment hereunder due to Retirement upon thirty (30) days prior written
notice to the Bank. If, during the Term of Employment, the Executive's
employment is so terminated due to Retirement, the Term of Employment shall
thereupon end and the Executive shall be entitled to (i) continuation of the
Executive's medical benefits at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of termination for the
one-year period following the termination of the Executive's employment due to
Retirement (or, if such continuation is not permitted by applicable law or if
the Board so determines in its sole discretion, the Bank shall provide the
economic equivalent in lieu thereof), and (ii) any other compensation and
benefits as may be provided in accordance with the terms and provisions of any
applicable plans and programs, if any, of the Bank. Such medical benefits shall
be deemed to have been provided under the provisions of COBRA.
7.4 Good Reason. For purposes of this Agreement, the term "Good
Reason" shall
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mean any of the following:
(a) the failure of the Board of Directors of the Bank to elect
the Executive to the office of President and Chief Executive Officer,
or to continue the Executive in such offices;
(b) the failure by the Bank to comply with the provisions of
Section 3.1;
(c) any failure by the Bank to timely pay the amounts (other than
base salary) or provide the benefits described in this Agreement, other
than an isolated failure not occurring in bad faith and which is
remedied promptly after receipt of written notice thereof given by
Executive;
(d) any action by the Bank which results in a diminution in the
Executive's authority;
(e) there occurs any reduction of base salary or material
reduction in other benefits or any material change by the Bank to the
Executive's function, duties, or responsibilities in effect on the date
hereof or as set forth in this Agreement, which change would cause the
Executive's position with the Bank to become one of lesser
responsibility, importance, or scope from the position and attributes
thereof in effect on the date hereof or as set forth in this Agreement
(and any such material change shall be deemed a continuing breach of
this Agreement);
(f) a material breach by the Bank of any of the provisions of
this Agreement which failure or breach shall have continued for thirty
(30) days after written notice from the Executive to the Bank
specifying the nature of such failure or breach; and
(g) a determination by the Board not to continue to extend the
term of this Agreement as provided in Section 2.
In addition,"Good Reason" shall include the following events but only if they
shall occur within two years following a "Change in Control" (which term shall
have the meaning defined in the Special Termination Agreement between the
Executive and the Holding Company):
(h) the failure by the Bank to continue to provide the Executive
with benefits substantially similar to those available to the Executive
under any of the life insurance, medical, health and accident, or
disability plans or any other material benefit plans in which the
Executive was participating at the time of the Change in Control, or
the taking of any action by the Bank which would directly or indirectly
materially reduce any of such benefits, or the failure by the Bank to
provide the Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service with the
Bank in accordance with the Bank's normal vacation policy in effect at
the time of the Change in Control;
(i) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control; or
(j) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened.
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8. Termination by the Bank Without Cause. The Executive's employment
with the Bank may be terminated without cause by a two-thirds vote of all of the
members of the Board of Directors of the Bank on written notice to the
Executive, provided, however, that the Bank shall have the obligation upon any
such termination to make the payments to the Executive provided for under
Section 10 of this Agreement.
9. Termination by Operation of Law. The Executive's employment with the
Bank shall terminate:
(a) if the Executive is removed or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. ss. 1818(e)(4) or (g)(1) as of the effective date of the
order.
(b) if the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act) as of the date of the default; or
(c) except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank, by the
Director of the Office of Thrift Supervision (the "Director") or his or
her designee, (x) at the time the Federal Deposit Insurance Corporation
or the Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act; or (y) at the time
the Director or his her designee approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
10. Certain Termination Benefits. In the event of termination pursuant
to Section 7.1 or 8, the Executive shall be entitled to each of the following
benefits:
10.1 Earnings to Date of Termination. An amount equal to the sum
of (a) base salary or other compensation earned through the date of termination,
plus (b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus paid during
the three fiscal years preceding the termination of employment, plus (c) all
accrued vacation and deferred compensation.
10.2 Lump Sum Payment of Remaining Salary Obligation. A lump sum
severance benefit equal to three times the sum of (a) the Executive's annual
base salary and (b) the highest annual bonus paid to the Executive during the
three fiscal years preceding the termination of employment.
10.3 Benefit Continuation. For the period subsequent to the date
of termination until the Expiration Date, the Executive shall continue to
receive the disability and medical benefits described in Section 3.2 existing on
the date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination. Any cash bonus plans shall
be prorated through the date of termination.
10.4 Pension Adjustment. An amount equal to the excess of (a) the
actuarial value of the benefits which the Executive would have accrued under the
Employers' qualified defined benefit pension plan and non-qualified supplemental
retirement plan if the Executive's employment had continued for a period of
three years following his date of termination, over (b) the actuarial
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equivalent of the Executive's actual benefit under the defined benefit pension
plan and the non-qualified supplemental retirement plan.
11. Adjustment for Unavailability of Benefits. If, in spite of the
provisions of Section 10, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Bank, the
Bank shall pay or provide for payment of such benefits and service credits for
such benefits to the Executive, or to the Executive's dependents, beneficiaries
or estate.
12. Disability. If, due to physical or mental illness, the Executive
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Bank, acting through its Board of Directors,
may designate another executive to act in his place during the period of his
disability. Notwithstanding any such designation, the Executive shall continue
to receive his full salary and benefits under Section 3 of this Agreement until
the earlier of (X) the Expiration Date or (Y) the date on which he becomes
eligible for disability income under the Employer's disability income plan (at
which time the Executive shall be considered to be "Disabled"). While receiving
disability payments under such plan, the Executive shall receive a salary from
the Bank which when combined with the Executive's disability income payments
will equal eighty (80%) percent of the Executive's prior salary from the Bank,
and shall continue to participate in the Employers' benefit plans and to receive
other benefits as specified in Section 3.2 until the Expiration Date, with all
such benefits to be at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of disability. In the absence of a
disability income plan at the time of such disability, the Bank shall pay the
Executive benefits equal to those the Executive would have received if the
Bank's current disability plan were in effect at such time. Upon the Executive
being able to return to full-time employment after being Disabled but before the
expiration of the Term of Employment, the Executive shall be offered an
equivalent available position and otherwise be subject to the provisions of this
Agreement. Nothing contained in this Section 12 shall preclude the Holding
Company from terminating the Executive's employment without cause, subject to
its payment of benefits as provided in Section 10.
13. Limitation on Payments. In no event shall payments pursuant to
Section 10, in the aggregate, exceed three times the Executive's average annual
compensation for the five most recent taxable years that Executive has been
employed by the Bank or such lesser number of years in the event that Executive
shall have been employed by the Bank for less than five years. In the event the
Bank is not in compliance with its minimum capital requirements or if such
payments pursuant to Section 10 would cause the Bank's capital to be reduced
below its minimum regulatory capital requirements, such payments shall be
deferred until such time as the Bank or successor thereto is in capital
compliance.
14. Suspension of Agreement. The Executive's employment hereunder shall
ne suspended if the Executive is suspended or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1818(e)(3) and (g)(1)) as of the date of service unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Executive all or part of the compensation withheld while
the Agreement was suspended pursuant to this Section 14 and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.
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15. Confidential Information. The Executive will not disclose to any
other Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either of the Bank obtained by
him incident to his employment with the Bank. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending relationships, financial
product developments, or possible acquisitions or dispositions of business or
facilities) which have been discussed or considered by the management of the
Bank but does not include any information which has become part of the public
domain by means other than the Executive's nonobservance of his obligations
hereunder.
16. No Mitigation; No Offset. In the event of any termination of
employment under this Agreement, the Executive shall be under no obligation to
seek other employment or to mitigate damages, and there shall be no offset
against any amounts due to him under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
17. Miscellaneous.
17.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
17.2 Definition of "Person". For purposes of this Agreement, the
term "Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
17.3 Withholding. All payments made by the Bank under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Bank under applicable law.
17.4 Arbitration of Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Bank, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 17.4. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Bank shall pay (or the Executive
shall be entitled to recover from the Bank, as the case may be) the Executive's
reasonable attorneys' fees and other reasonable costs and expenses in connection
with the enforcement of said rights (including the enforcement of any
arbitration award in court) regardless of the final outcome, unless and to the
extent the arbitrators shall determine that under the circumstances recovery by
the Executive of all or a part of any such
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fees and costs and expenses would be unjust.
17.5 Assignment; Successors and Assigns, etc. Neither the Bank
nor the Executive may make any assignment of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of
the other party and without such consent any attempted transfer or assignment
shall be null and of no effect; provided, however, that the Bank may assign its
rights under this Agreement without the consent of the Executive in the event
either of the Bank shall hereafter effect a reorganization, consolidate with or
merge into any other Person, or transfer all or substantially all of its
properties or assets to any other Person. This Agreement shall inure to the
benefit of and be binding upon the Bank and the Executive, and their respective
successors, executors, administrators, heirs and permitted assigns. In the event
of the Executive's death prior to the completion by the Bank of all payments due
him under this Agreement, the Bank shall continue such payments to the
Executive's beneficiary designated in writing to the Bank prior to his death (or
to his estate, if he fails to make such designation).
17.6. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17.7. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17.8. Prior Agreements. This Agreement supersedes the Amended and
Restarted Employment Agreement made as of April 21, 1994 by and among the
Executive, the Holding Company and the Bank.
17.9. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank, at its main office, attention of the Board of
Directors.
17.10. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by duly authorized
representatives of the Bank.
17.11. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
18. Source of Payments.
18.1 Holding Company Guaranty. All payments provided in this
Agreement shall be timely paid in cash or check from the general funds of the
Bank. The Holding Company, however, unconditionally guarantees payment and
provision of all amounts and benefits due hereunder to the Executive and, if
such amounts and benefits due from the Bank are not timely paid or provided by
the Bank, such amounts and benefits shall be paid or provided by the Holding
Company.
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18.2 Payments by Holding Company. Notwithstanding any provision
herein to the contrary, to the extent that payments and benefits, as provided by
this Agreement, are paid to or received by the Executive under the Employment
Agreement dated as of the date hereof between the Executive and the Holding
Company, such compensation payments and benefits paid by the Holding Company
will be subtracted from any amounts due simultaneously to the Executive under
similar provisions of this Agreement. Under no circumstances shall the Executive
be entitled to receive duplicate payments or benefits under this Agreement and
such other Employment Agreement. Payments pursuant to this Agreement and the
Holding Company Agreement shall be allocated in proportion to the services
rendered and time expended on such activities by the Executive as determined by
the Holding Company and the Bank on a quarterly basis.
19. Noncompetition.
19.1 While Employed. During such time as the Executive is
employed hereunder, the Executive will not compete with the banking or any other
business conducted by either of the Employers during the period of his
employment hereunder, nor will he attempt to hire any employee of either of the
Employers, assist in such hiring by any other Person, encourage any such
employee to terminate his or her relationship with either of the Employers, or
solicit or encourage any customer of either of the Employers to terminate its
relationship with such Employer or to conduct with any other person any business
or activity which such customer conducts or could conduct with such Employer.
19.2 Post-Employment. The provisions of this Section 19.2 shall
not be binding on the Executive after a Change in Control shall have occurred.
During the one year period following the date of termination of the Executive's
employment (x) by the Executive on his own initiative for any reason other than
(1) death, (2) becoming Disabled (as defined in Section 12), or (3) Retirement
(as defined in Section 7.3), or (y) by either Employer for Cause or under
circumstances which result in the Executive receiving termination benefits
pursuant to Section 10 hereof, the Executive will not compete from an office
within 20 miles of the Bank's main office with the banking or any other business
conducted by either of the Employers during the period of his employment
hereunder, nor will he attempt to hire any employee of either of the Employers,
assist in such hiring by any other Person, or encourage any such employee to
terminate his or her relationship with either of the Employers.
* * * * *
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Bank, by their duly authorized officers, and by the Executive,
as of the date first above written.
ATTEST: FIRST ESSEX BANK, FSB
___________________________ By:_________________________
Title:_______________________
[Seal]
WITNESS EXECUTIVE
---------------------------
Leonard A. Wilson
The undersigned hereby guarantees the obligations of First Essex Bank, FSB,
under the foregoing agreement
FIRST ESSEX BANCORP, INC.
- ---------------------------
By:________________________
Title:______________________
[Seal]
Exhibit 10.6
------------
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1997, by and among FIRST
ESSEX BANCORP, INC., a Delaware corporation (the "Holding Company") and the
parent company for FIRST ESSEX BANK, FSB, a federal saving bank, with its
executive offices in Andover, Massachusetts (the "Bank") (the Bank and the
Holding Company shall be hereinafter collectively referred to as the
"Employers"), and David W. Dailey of Billerica, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Holding Company desires to continue to provide for the
Executive's employment by the Holding Company and in connection therewith
desires to amend and restate the existing employment agreement among the Bank,
the Holding Company, and the Executive;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Holding Company and the Executive agree as follows:
1. Employment The Executive shall serve the Bank as Executive Vice
President and Chief Financial Officer and the Holding Company as Executive Vice
President. In such positions, the Executive shall have the duties,
responsibilities and authorities and authority as determined and designated from
time to time by the Chief Executive Officer or the Boards of Directors.
Notwithstanding the above, the Executive shall not be required to perform any
duties and responsibilities (a) which would result in a noncompliance with or
violation of any applicable law or regulation or (b) on a regular basis in any
locations outside the counties in which the Bank now has branch offices, unless
agreed upon by the Executive. During the pendency of any temporary or permanent
suspension or termination from the Bank, the Executive shall not perform, in any
respect, directly or indirectly, duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as an officer of the
Holding Company.
2. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 1, 1997. The initial term of the
Executive's employment hereunder shall be for two years from the Commencement
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then-remaining term of his employment under this
Agreement shall be two years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank or the Holding Company, unless the Executive elects not to
continue to extend the term of this Agreement by giving written notice in
accordance with Section 7.2 of this Agreement, or the Board elects not to
continue to extend the term of this Agreement (in which event the provisions of
Section 7.1 shall apply). The last day of such term as so extended from time to
time, is herein sometimes referred to as the "Expiration Date" and the time
period from the Commencement Date through the Expiration Date shall be the "Term
of Employment". At least once in each calendar year the Board will review the
Agreement and Executive's performance annually for purposes of determining
whether to continue to extend the
<PAGE>
Agreement and the rationale and results thereof shall be included in the minutes
of the Board's meeting. The Board shall give notice to the Executive as soon as
possible after such review as to whether the Agreement is to continue to be
extended.
3. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:
3.1 Salary. For all services rendered by the Executive to the Holding
Company and its Subsidiaries, the Executive shall be entitled to receive a base
salary at the rate of $__________ per year, subject to increase from time to
time in accordance with the usual practices of the Holding Company with respect
to review of compensation of its senior executives. In addition, if the Board
increases the Executive's annual base salary at any time before the Expiration
Date, such increased annual base salary shall become a floor below which such
annual base salary shall not fall (other than concurrently with across-the-board
salary reductions based on the Employers' financial performance similarly
affecting all senior management personnel of the Holding Company) at any future
time during the Term of Employment without the Executive's written consent. The
Executive's salary shall be payable in periodic installments in accordance with
the Holding Company's usual practice for its senior executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Holding
Company. Such participation shall be subject to (i) the terms of the applicable
plan documents, (ii) generally applicable policies of the Holding Company and
(iii) the discretion of the Boards of Directors of the Holding Company or any
administrative or other committee provided for in or contemplated by such plan.
3.3 Business Expenses. The Holding Company shall reimburse the
Executive for all reasonable travel and other business expenses incurred by him
in the performance of his duties and responsibilities, subject to such
reasonable requirements with respect to substantiation and documentation as may
be specified by the Holding Company.
3.4 Vacation. The Executive shall be entitled to not less than four (4)
weeks of vacation per year, to be taken at such times and intervals as shall be
determined by the Executive with the approval of the Holding Company, which
approval shall not be unreasonably withheld.
3.5 General. Nothing paid to the Executive under any plan, policy or
arrangement currently in effect or made available in the future shall be deemed
to be in lieu of other compensation to the Executive as described in this
Agreement.
4. Extent of Service. During the Term of Employment, the Executive
shall, subject to the direction and supervision of the Board of Directors of the
Holding Company, devote his full time, best efforts and business judgment, skill
and knowledge to the advancement of the Employers' interests and to the
discharge of his duties and responsibilities hereunder. He shall not engage in
any other business activity, except as may be approved by the Board of
Directors; provided, however, that nothing herein shall be construed as
preventing the Executive from:
(a) investing his assets in such form or manner as shall not
require any material
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services on his part in the operations or affairs of the companies or
the other entities in which such investments are made;
(b) serving on the board of directors of any company, provided
that he shall not be required to render any material services with
respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
5. Termination Upon Death. In the event of the Executive's death during
the Term of Employment, the Executive's employment shall terminate on the date
of his death; provided, however, that the Holding Company shall pay to the
Executive's beneficiary designated in writing to the Holding Company prior to
his death (or to his estate, if he fails to make such designation), (i) any base
salary or other compensation earned (together with a pro rata portion of the
bonus payable with respect to the year in which death occurred) but not paid to
Executive prior to the date of death, plus (ii) the base salary that Executive
would have earned for a period of six months following his death, plus (iii) any
death benefits that Executive is entitled to under the Holding Company's
policies in effect on Executive's date of death. The foregoing bonus payments
shall be payable at the time of payment of similar bonus payments made to other
executives of the Holding Company and shall be computed on the assumption that
all the Executive's individual goals (if any) under any applicable bonus plans
were achieved. In addition, the Holding Company shall continue in effect the
medical benefits of the Executive and Executive's dependents, or any of the
same, at the level in effect on, and at the same out-of-pocket cost to the
Executive as of, the date of death for a six-month period commencing on the date
of death (or, if such continuation is not permitted by applicable law or if the
Board so determines in its sole discretion, the Holding Company shall provide
the economic equivalent in lieu thereof). Such medical benefits shall be deemed
to have been provided under the provisions of COBRA.
6. Termination by the Holding Company for Cause.
6.1 Termination by Holding Company. The Executive's employment
hereunder may be terminated by the Holding Company, without further liability on
the part of the Holding Company, effective immediately, by a two-thirds vote of
all of the members of the Board of Directors of the Holding Company for Cause
(as such term is defined in Section 6.2) by written notice to the Executive
setting forth in reasonable detail the nature of such Cause, provided that the
Board has complied with the provisions of Section 6.3.
6.2 Cause. Termination for "Cause" shall mean
(a) willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Holding Company or the
Holding Company;
(c) conviction of a felony involving a crime of moral turpitude;
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(d) willfully engaging in violations of material banking
regulations; or
(e) willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
6.3 Board Termination Procedure. In each case, in determining
Cause the alleged acts or omissions of the Executive shall be measured against
standards prevailing in the banking industry generally and the ultimate
existence of Cause must be confirmed by not less than two-thirds of the Board at
a meeting prior to any termination therefor.
6.4 Termination of Obligations. In the event of termination
pursuant to Section 6, all obligations of the Holding Company under this
Agreement shall terminate as of the date indicated, but vested rights of the
parties hereunder shall not be affected.
7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Executive shall be entitled
to receive the benefits set forth in Section 9.
7.2 Other Voluntary Termination by the Executive. During the Term
of Employment, the Executive may effect, upon sixty (60) days prior written
notice to the Holding Company, a Voluntary Termination of his employment
hereunder and thereupon the Term of Employment (if not already expired) shall
end. A "Voluntary Termination" shall mean a termination of employment by the
Executive on his own initiative other than (a) a termination due to death or
becoming Disabled (as defined in Section 11), (b) a termination for Good Reason,
(c) a termination due to Retirement (as defined in Section 7.3), or (d) a
termination as a result of the normal expiration of the full Term of Employment.
If, during the Term of Employment, the Executive's employment is so terminated
due to Voluntary Termination, the Term of Employment shall thereupon end and the
Employers shall pay to the Executive the payments and benefits which the
Executive would be entitled to in the event of a termination of his employment
by the Employers for Cause.
7.3 Termination Due to Retirement. "Retirement" means the
termination of the Executive's employment with the Holding Company for any
reason by the Executive at any time after the Executive attains "Retirement Age"
(as hereinafter defined). "Retirement Age" shall mean the earliest to occur of
(X) age 65, (Y) (if applicable) any lesser age at which the Executive is
entitled to retire from the Employers and receive retirement benefits under the
Employers' qualified pension plan, and (Z) an age of 62 or greater at which the
Employers permit the Executive to retire. The Executive may terminate the
Executive's employment hereunder due to Retirement upon thirty (30) days prior
written notice to the Holding Company. If, during the Term of Employment, the
Executive's employment is so terminated due to Retirement, the Term of
Employment shall thereupon end and the Executive shall be entitled to (i)
continuation of the Executive's medical benefits at the level in effect on, and
at the same out-of-pocket cost to the Executive as of, the date of termination
for the six-month period following the termination of the Executive's employment
due to Retirement (or, if such continuation is not permitted by applicable law
or if the Board so determines in its sole discretion, the Holding Company shall
provide the economic equivalent in lieu thereof), and
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(ii) any other compensation and benefits as may be provided in accordance with
the terms and provisions of any applicable plans and programs, if any, of the
Holding Company. Such medical benefits shall be deemed to have been provided
under the provisions of COBRA.
7.4 Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following:
(a) the failure of the Board of Directors of the Holding Company
to elect the Executive to a senior executive position, or to continue
the Executive in such an office;
(b) the failure by the Holding Company to comply with the
provisions of Section 3.1;
(c) any failure by the Holding Company to timely pay the amounts
(other than base salary) or provide the benefits described in this
Agreement, other than an isolated failure not occurring in bad faith
and which is remedied promptly after receipt of written notice thereof
given by Executive;
(d) any reduction in the Executive's base salary or any material
reduction in other benefits in effect for the Executive on the date
hereof or as set forth in this Agreement;
(e) a material breach by the Holding Company of any of the
provisions of this Agreement which failure or breach shall have
continued for thirty (30) days after written notice from the Executive
to the Holding Company specifying the nature of such failure or breach;
and
(f) a determination by the Board not to continue to extend the
term of this Agreement as provided in Section 2.
In addition,"Good Reason" shall include the following events but only if they
shall occur within two years following a "Change in Control" (which term shall
have the meaning defined in the Special Termination Agreement between the
Executive and the Holding Company):
(g) there occurs any material change by the Holding Company to
the Executive's function, duties, or responsibilities in effect on the
date hereof or as set forth in this Agreement, which change would cause
the Executive's position with the Holding Company to become one of
lesser responsibility, importance, or scope from the position and
attributes thereof in effect on the date hereof or as set forth in this
Agreement;
(h) the failure by the Holding Company to continue to provide the
Executive with benefits substantially similar to those available to the
Executive under any of the life insurance, medical, health and
accident, or disability plans or any other material benefit plans in
which the Executive was participating at the time of the Change in
Control, or the taking of any action by the Holding Company which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Bank to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of years
of service with the Holding Company in accordance with the Holding
Company's normal vacation policy in effect at the time of the Change in
Control;
(i) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or
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duties exercised by the Executive immediately prior to such Change in
Control; or
(j) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened.
8. Termination by the Holding Company Without Cause. The Executive's
employment with the Holding Company may be terminated without cause by a
two-thirds vote of all of the members of the Board of Directors of the Holding
Company on written notice to the Executive, provided, however, that the Holding
Company shall have the obligation upon any such termination to make the payments
to the Executive provided for under Section 9 of this Agreement.
9. Certain Termination Benefits. In the event of termination pursuant
to Section 7.1 or 8, the Executive shall be entitled to each of the following
benefits:
9.1 Earnings to Date of Termination. An amount equal to the sum
of (a) base salary or other compensation earned through the date of termination,
plus (b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus paid during
the three fiscal years preceding the termination of employment, plus (c) all
accrued vacation and deferred compensation.
9.2 Lump Sum Payment of Remaining Salary Obligation. A lump sum
severance benefit equal to three times the sum of (a) the Executive's annual
base salary and (b) the highest annual bonus paid to the Executive during the
three fiscal years preceding the termination of employment.
9.3 Benefit Continuation. For the period subsequent to the date
of termination until the Expiration Date, the Executive shall continue to
receive the disability and medical benefits described in Section 3.2 existing on
the date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination. Any cash bonus plans shall
be prorated through the date of termination. For the period subsequent to the
date of termination until the Expiration Date, the Executive shall also continue
to receive benefits under any non-qualified retirement plans through the
Expiration Date. For purposes of application of such benefits the Executive
shall be treated as if he had remained in the employ of the Holding Company,
with a total annual salary at the rate in effect on the date of termination, and
service credits will continue to accrue during such period as if the Executive
had remained in the employ of the Holding Company.
10. Adjustment for Unavailability of Benefits. If, in spite of the
provisions of Section 9, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Holding
Company, the Holding Company shall pay or provide for payment of such benefits
and service credits for such benefits to the Executive, or to the Executive's
dependents, beneficiaries or estate.
11. Disability. If, due to physical or mental illness, the Executive
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Holding Company, acting through its Board of
Directors, may designate another executive to act
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in his place during the period of his disability. Notwithstanding any such
designation, the Executive shall continue to receive his full salary and
benefits under Section 3 of this Agreement until the earlier of (X) the
Expiration Date or (Y) the date on which he becomes eligible for disability
income under the Employer's disability income plan (at which time the Executive
shall be considered to be "Disabled"). While receiving disability payments under
such plan, the Executive shall receive a salary from the Holding Company which
when combined with the Executive's disability income payments will equal eighty
(80%) percent of the Executive's prior salary from the Holding Company, and
shall continue to participate in the Employers' benefit plans and to receive
other benefits as specified in Section 3.2 until the Expiration Date, with all
such benefits to be at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of disability. In the absence of a
disability income plan at the time of such disability, the Holding Company shall
pay the Executive benefits equal to those the Executive would have received if
the Holding Company's current disability plan were in effect at such time. Upon
the Executive being able to return to full-time employment after being Disabled
but before the expiration of the Term of Employment, the Executive shall be
offered an equivalent available position and otherwise be subject to the
provisions of this Agreement. Nothing contained in this Section 11 shall
preclude the Holding Company from terminating the Executive's employment without
cause, subject to its payment of benefits as provided in Section 9.
12. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received from the Holding Company or
any Subsidiaries, the Holding Company shall pay as additional compensation to
the Executive that amount which, after taking into account all taxes (including
any tax which shall be imposed by Code Section 4999) imposed upon such amount by
any federal, state or local government, shall be equal to the amount of said tax
imposed by Code Section 4999.
13. Confidential Information. The Executive will not disclose to any
other Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either of the Holding Company
obtained by him incident to his employment with the Holding Company. The term
"confidential information" includes, without limitation, financial information,
business plans, prospects and opportunities (such as lending relationships,
financial product developments, or possible acquisitions or dispositions of
business or facilities) which have been discussed or considered by the
management of the Holding Company but does not include any information which has
become part of the public domain by means other than the Executive's
nonobservance of his obligations hereunder.
14. No Mitigation; No Offset. In the event of any termination of
employment under this Agreement, the Executive shall be under no obligation to
seek other employment or to mitigate damages, and there shall be no offset
against any amounts due to him under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
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15. Miscellaneous.
15.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
15.2 Definition of "Person". For purposes of this Agreement, the
term "Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
15.3 Withholding. All payments made by the Holding Company under
this Agreement shall be net of any tax or other amounts required to be withheld
by the Holding Company under applicable law.
15.4 Arbitration of Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Holding Company, one by
the Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 15.4. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Holding Company shall pay (or the
Executive shall be entitled to recover from the Holding Company, as the case may
be) the Executive's reasonable attorneys' fees and other reasonable costs and
expenses in connection with the enforcement of said rights (including the
enforcement of any arbitration award in court) regardless of the final outcome,
unless and to the extent the arbitrators shall determine that under the
circumstances recovery by the Executive of all or a part of any such fees and
costs and expenses would be unjust.
15.5 Assignment; Successors and Assigns, etc. Neither the Holding
Company nor the Executive may make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the other party and without such consent any attempted transfer or
assignment shall be null and of no effect; provided, however, that the Holding
Company may assign its rights under this Agreement without the consent of the
Executive in the event either of the Holding Company shall hereafter effect a
reorganization, consolidate with or merge into any other Person, or transfer all
or substantially all of its properties or assets to any other Person. This
Agreement shall inure to the benefit of and be binding upon the Holding Company
and the Executive, and their respective successors, executors, administrators,
heirs and permitted assigns. In the event of the Executive's death prior to the
completion by the Holding Company of all payments due him under this Agreement,
the Holding Company shall continue such payments to the Executive's beneficiary
designated in writing to the Holding Company prior to his death (or to his
estate, if he fails to
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make such designation).
15.6. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
15.7. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15.8. Prior Agreements. This Agreement supersedes the Amended and
Restarted Employment Agreement made as of April 21, 1994 by and among the
Executive, the Holding Company and the Holding Company.
15.9. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Holding Company or, in the case of the Holding Company, at its main office,
attention of the Board of Directors.
15.10. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by duly authorized
representatives of the Holding Company.
15.11. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
16. Source of Payments.
16.1 Payments by Holding Company. All payments provided in this
Agreement shall be timely paid in cash or check from the general funds of the
Holding Company subject to Section 16.2.
16.2 No Duplicate Payments. Notwithstanding any provision herein
to the contrary, to the extent that payments and benefits, as provided by this
Agreement, are paid to or received by Executive under the Employment Agreement
dated as of the date hereof between the Executive and the Bank, such
compensation payments and benefits paid by the Bank will be subtracted from any
amount due simultaneously to the Executive under similar provisions of this
Agreement. Under no circumstances shall the Executive be entitled to receive
duplicate payments or benefits under this Agreement and such other Employment
Agreement. Payments pursuant to this Agreement and the Bank Employment Agreement
shall be allocated in proportion to the services rendered and time expended on
such activities by the Executive as determined by the Holding Company and the
Bank on a quarterly basis.
17. Noncompetition.
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17.1 While Employed. During such time as the Executive is
employed hereunder, the Executive will not compete with the banking or any other
business conducted by either of the Employers during the period of his
employment hereunder, nor will he attempt to hire any employee of either of the
Employers, assist in such hiring by any other Person, encourage any such
employee to terminate his or her relationship with either of the Employers, or
solicit or encourage any customer of either of the Employers to terminate its
relationship with such Employer or to conduct with any other person any business
or activity which such customer conducts or could conduct with such Employer.
17.2 Post-Employment. The provisions of this Section 17.2 shall
not be binding on the Executive after a Change in Control shall have occurred.
During the one year period following the date of termination of the Executive's
employment (x) by the Executive on his own initiative for any reason other than
(1) death, (2) becoming Disabled (as defined in Section 11), or (3) Retirement
(as defined in Section 7.3), or (y) by either Employer for Cause or under
circumstances which result in the Executive receiving termination benefits
pursuant to Section 9 hereof, the Executive will not compete from an office
within 20 miles of the Bank's main office with the banking or any other business
conducted by either of the Employers during the period of his employment
hereunder, nor will he attempt to hire any employee of either of the Employers,
assist in such hiring by any other Person, or encourage any such employee to
terminate his or her relationship with either of the Employers.
* * * * *
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officers, and by the
Executive, as of the date first above written.
ATTEST: FIRST ESSEX BANCORP, INC.
______________________________ By:___________________________
Title:_________________________
[Seal]
WITNESS EXECUTIVE
- ------------------------------ -----------------------------
David W. Dailey
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Exhibit 10.7
------------
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1997, by and among FIRST
ESSEX BANK, FSB, a federal saving bank, with its executive offices in Andover,
Massachusetts (the "Bank"), FIRST ESSEX BANCORP, INC., a Delaware corporation
(the "Holding Company") and the parent company of the Bank (the Bank and the
Holding Company shall be hereinafter collectively referred to as the
"Employers"), and David W. Dailey of Billerica, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Bank desires to continue to provide for the Executive's
employment by the Bank and in connection therewith desires to amend and restate
the existing employment agreement among the Bank, the Holding Company, and the
Executive;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Bank and the Executive agree as follows:
1. Employment The Executive shall serve the Bank as Executive Vice
President and Chief Financial Officer and the Holding Company as Executive Vice
President. In such positions, the Executive shall have the duties,
responsibilities and authorities and authority as determined and designated from
time to time by the Chief Executive Officer or the Boards of Directors.
Notwithstanding the above, the Executive shall not be required to perform any
duties and responsibilities (a) which would result in a noncompliance with or
violation of any applicable law or regulation or (b) on a regular basis in any
locations outside the counties in which the Bank now has branch offices, unless
agreed upon by the Executive. During the pendency of any temporary or permanent
suspension or termination from the Bank, the Executive shall not perform, in any
respect, directly or indirectly, duties and responsibilities formerly performed
at the Bank as part of his duties and responsibilities as an officer of the
Holding Company.
2. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 1, 1997. The initial term of the
Executive's employment hereunder shall be for two years from the Commencement
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then-remaining term of his employment under this
Agreement shall be two years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank or the Holding Company, unless the Executive elects not to
continue to extend the term of this Agreement by giving written notice in
accordance with Section 7.2 of this Agreement, or the Board elects not to
continue to extend the term of this Agreement (in which event the provisions of
Section 7.1 shall apply). The last day of such term as so extended from time to
time, is herein sometimes referred to as the "Expiration Date" and the time
period from the Commencement Date through the Expiration Date shall be the "Term
of Employment". At least once in each calendar year the Board will review the
Agreement and Executive's performance annually for purposes of determining
whether to continue to extend the
<PAGE>
Agreement and the rationale and results thereof shall be included in the minutes
of the Board's meeting. The Board shall give notice to the Executive as soon as
possible after such review as to whether the Agreement is to continue to be
extended.
3. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:
3.1 Salary. For all services rendered by the Executive to the Holding
Company and its Subsidiaries, the Executive shall be entitled to receive a base
salary at the rate of $__________ per year, subject to increase from time to
time in accordance with the usual practices of the Bank with respect to review
of compensation of its senior executives. In addition, if the Board increases
the Executive's annual base salary at any time before the Expiration Date, such
increased annual base salary shall become a floor below which such annual base
salary shall not fall (other than concurrently with across-the-board salary
reductions based on the Employers' financial performance similarly affecting all
senior management personnel of the Bank) at any future time during the Term of
Employment without the Executive's written consent. The Executive's salary shall
be payable in periodic installments in accordance with the Bank's usual practice
for its senior executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Bank.
Such participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable policies of the Bank and (iii) the
discretion of the Boards of Directors of the Bank or any administrative or other
committee provided for in or contemplated by such plan.
3.3 Business Expenses. The Bank shall reimburse the Executive for all
reasonable travel and other business expenses incurred by him in the performance
of his duties and responsibilities, subject to such reasonable requirements with
respect to substantiation and documentation as may be specified by the Bank.
3.4 Vacation. The Executive shall be entitled to not less than four (4)
weeks of vacation per year, to be taken at such times and intervals as shall be
determined by the Executive with the approval of the Bank, which approval shall
not be unreasonably withheld.
3.5 General. Nothing paid to the Executive under any plan, policy or
arrangement currently in effect or made available in the future shall be deemed
to be in lieu of other compensation to the Executive as described in this
Agreement.
4. Extent of Service. During the Term of Employment, the Executive
shall, subject to the direction and supervision of the Board of Directors of the
Bank, devote his full time, best efforts and business judgment, skill and
knowledge to the advancement of the Employers' interests and to the discharge of
his duties and responsibilities hereunder. He shall not engage in any other
business activity, except as may be approved by the Board of Directors;
provided, however, that nothing herein shall be construed as preventing the
Executive from:
(a) investing his assets in such form or manner as shall not
require any material services on his part in the operations or affairs
of the companies or the other entities in
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which such investments are made;
(b) serving on the board of directors of any company, provided
that he shall not be required to render any material services with
respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
5. Termination Upon Death. In the event of the Executive's death during
the Term of Employment, the Executive's employment shall terminate on the date
of his death; provided, however, that the Bank shall pay to the Executive's
beneficiary designated in writing to the Bank prior to his death (or to his
estate, if he fails to make such designation), (i) any base salary or other
compensation earned (together with a pro rata portion of the bonus payable with
respect to the year in which death occurred) but not paid to Executive prior to
the date of death, plus (ii) the base salary that Executive would have earned
for a period of six months following his death, plus (iii) any death benefits
that Executive is entitled to under the Bank's policies in effect on Executive's
date of death. The foregoing bonus payments shall be payable at the time of
payment of similar bonus payments made to other executives of the Bank and shall
be computed on the assumption that all the Executive's individual goals (if any)
under any applicable bonus plans were achieved. In addition, the Bank shall
continue in effect the medical benefits of the Executive and Executive's
dependents, or any of the same, at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of death for a six-month
period commencing on the date of death (or, if such continuation is not
permitted by applicable law or if the Board so determines in its sole
discretion, the Bank shall provide the economic equivalent in lieu thereof).
Such medical benefits shall be deemed to have been provided under the provisions
of COBRA.
6. Termination by the Bank for Cause.
6.1 Termination by Bank. The Executive's employment hereunder may
be terminated by the Bank, without further liability on the part of the Bank,
effective immediately, by a two-thirds vote of all of the members of the Board
of Directors of the Bank for Cause (as such term is defined in Section 6.2) by
written notice to the Executive setting forth in reasonable detail the nature of
such Cause, provided that the Board has complied with the provisions of Section
6.3.
6.2 Cause. Termination for "Cause" shall mean
(a) willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or the Holding
Company;
(c) conviction of a felony involving a crime of moral turpitude;
(d) willfully engaging in violations of material banking
regulations; or
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(e) willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
6.3 Board Termination Procedure. In each case, in determining
Cause the alleged acts or omissions of the Executive shall be measured against
standards prevailing in the banking industry generally and the ultimate
existence of Cause must be confirmed by not less than two-thirds of the Board at
a meeting prior to any termination therefor.
6.4 Termination of Obligations. In the event of termination
pursuant to Section 6, all obligations of the Bank under this Agreement shall
terminate as of the date indicated, but vested rights of the parties hereunder
shall not be affected.
7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Executive shall be entitled
to receive the benefits set forth in Section 10.
7.2 Other Voluntary Termination by the Executive. During the Term
of Employment, the Executive may effect, upon sixty (60) days prior written
notice to the Bank, a Voluntary Termination of his employment hereunder and
thereupon the Term of Employment (if not already expired) shall end. A
"Voluntary Termination" shall mean a termination of employment by the Executive
on his own initiative other than (a) a termination due to death or becoming
Disabled (as defined in Section 12), (b) a termination for Good Reason, (c) a
termination due to Retirement (as defined in Section 7.3), or (d) a termination
as a result of the normal expiration of the full Term of Employment. If, during
the Term of Employment, the Executive's employment is so terminated due to
Voluntary Termination, the Term of Employment shall thereupon end and the
Employers shall pay to the Executive the payments and benefits which the
Executive would be entitled to in the event of a termination of his employment
by the Employers for Cause.
7.3 Termination Due to Retirement. "Retirement" means the
termination of the Executive's employment with the Bank for any reason by the
Executive at any time after the Executive attains "Retirement Age" (as
hereinafter defined). "Retirement Age" shall mean the earliest to occur of (X)
age 65, (Y) (if applicable) any lesser age at which the Executive is entitled to
retire from the Employers and receive retirement benefits under the Employers'
qualified pension plan, and (Z) an age of 62 or greater at which the Employers
permit the Executive to retire. The Executive may terminate the Executive's
employment hereunder due to Retirement upon thirty (30) days prior written
notice to the Bank. If, during the Term of Employment, the Executive's
employment is so terminated due to Retirement, the Term of Employment shall
thereupon end and the Executive shall be entitled to (i) continuation of the
Executive's medical benefits at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of termination for the
six-month period following the termination of the Executive's employment due to
Retirement (or, if such continuation is not permitted by applicable law or if
the Board so determines in its sole discretion, the Bank shall provide the
economic equivalent in lieu thereof), and (ii) any other compensation and
benefits as may be provided in accordance with the terms and provisions of any
applicable plans and programs, if any, of the Bank. Such
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medical benefits shall be deemed to have been provided under the provisions of
COBRA.
7.4 Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following:
(a) the failure of the Board of Directors of the Bank to elect
the Executive to a senior executive position, or to continue the
Executive in such an office;
(b) the failure by the Bank to comply with the provisions of
Section 3.1;
(c) any failure by the Bank to timely pay the amounts (other than
base salary) or provide the benefits described in this Agreement, other
than an isolated failure not occurring in bad faith and which is
remedied promptly after receipt of written notice thereof given by
Executive;
(d) any reduction in the Executive's base salary or any material
reduction in other benefits in effect for the Executive on the date
hereof or as set forth in this Agreement;
(e) a material breach by the Bank of any of the provisions of
this Agreement which failure or breach shall have continued for thirty
(30) days after written notice from the Executive to the Bank
specifying the nature of such failure or breach; and
(f) a determination by the Board not to continue to extend the
term of this Agreement as provided in Section 2.
In addition,"Good Reason" shall include the following events but only if they
shall occur within two years following a "Change in Control" (which term shall
have the meaning defined in the Special Termination Agreement between the
Executive and the Holding Company):
(g) there occurs any material change by the Bank to the
Executive's function, duties, or responsibilities in effect on the date
hereof or as set forth in this Agreement, which change would cause the
Executive's position with the Bank to become one of lesser
responsibility, importance, or scope from the position and attributes
thereof in effect on the date hereof or as set forth in this Agreement;
(h) the failure by the Bank to continue to provide the Executive
with benefits substantially similar to those available to the Executive
under any of the life insurance, medical, health and accident, or
disability plans or any other material benefit plans in which the
Executive was participating at the time of the Change in Control, or
the taking of any action by the Bank which would directly or indirectly
materially reduce any of such benefits, or the failure by the Bank to
provide the Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service with the
Bank in accordance with the Bank's normal vacation policy in effect at
the time of the Change in Control;
(i) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control; or
(j) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened.
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8. Termination by the Bank Without Cause. The Executive's employment
with the Bank may be terminated without cause by a two-thirds vote of all of the
members of the Board of Directors of the Bank on written notice to the
Executive, provided, however, that the Bank shall have the obligation upon any
such termination to make the payments to the Executive provided for under
Section 10 of this Agreement.
9. Termination by Operation of Law. The Executive's employment with the
Bank shall terminate:
(a) if the Executive is removed or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. ss. 1818(e)(4) or (g)(1) as of the effective date of the
order.
(b) if the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act) as of the date of the default; or
(c) except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank, by the
Director of the Office of Thrift Supervision (the "Director") or his or
her designee, (x) at the time the Federal Deposit Insurance Corporation
or the Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act; or (y) at the time
the Director or his her designee approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
10. Certain Termination Benefits. In the event of termination pursuant
to Section 7.1 or 8, the Executive shall be entitled to each of the following
benefits:
10.1 Earnings to Date of Termination. An amount equal to the sum
of (a) base salary or other compensation earned through the date of termination,
plus (b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus paid during
the three fiscal years preceding the termination of employment, plus (c) all
accrued vacation and deferred compensation.
10.2 Lump Sum Payment of Remaining Salary Obligation. A lump sum
severance benefit equal to three times the sum of (a) the Executive's annual
base salary and (b) the highest annual bonus paid to the Executive during the
three fiscal years preceding the termination of employment.
10.3 Benefit Continuation. For the period subsequent to the date
of termination until the Expiration Date, the Executive shall continue to
receive the disability and medical benefits described in Section 3.2 existing on
the date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination. Any cash bonus plans shall
be prorated through the date of termination. For the period subsequent to the
date of termination until the Expiration Date, the Executive shall also continue
to receive benefits under any non-qualified retirement plans through the
Expiration Date. For purposes of application of such benefits the Executive
shall be treated as if he had remained in the employ
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of the Bank, with a total annual salary at the rate in effect on the date of
termination, and service credits will continue to accrue during such period as
if the Executive had remained in the employ of the Bank.
11. Adjustment for Unavailability of Benefits. If, in spite of the
provisions of Section 10, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Bank, the
Bank shall pay or provide for payment of such benefits and service credits for
such benefits to the Executive, or to the Executive's dependents, beneficiaries
or estate.
12. Disability. If, due to physical or mental illness, the Executive
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Bank, acting through its Board of Directors,
may designate another executive to act in his place during the period of his
disability. Notwithstanding any such designation, the Executive shall continue
to receive his full salary and benefits under Section 3 of this Agreement until
the earlier of (X) the Expiration Date or (Y) the date on which he becomes
eligible for disability income under the Employer's disability income plan (at
which time the Executive shall be considered to be "Disabled"). While receiving
disability payments under such plan, the Executive shall receive a salary from
the Bank which when combined with the Executive's disability income payments
will equal eighty (80%) percent of the Executive's prior salary from the Bank,
and shall continue to participate in the Employers' benefit plans and to receive
other benefits as specified in Section 3.2 until the Expiration Date, with all
such benefits to be at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of disability. In the absence of a
disability income plan at the time of such disability, the Bank shall pay the
Executive benefits equal to those the Executive would have received if the
Bank's current disability plan were in effect at such time. Upon the Executive
being able to return to full-time employment after being Disabled but before the
expiration of the Term of Employment, the Executive shall be offered an
equivalent available position and otherwise be subject to the provisions of this
Agreement. Nothing contained in this Section 12 shall preclude the Holding
Company from terminating the Executive's employment without cause, subject to
its payment of benefits as provided in Section 10.
13. Limitation on Payments. In no event shall payments pursuant to
Section 10, in the aggregate, exceed three times the Executive's average annual
compensation for the five most recent taxable years that Executive has been
employed by the Bank or such lesser number of years in the event that Executive
shall have been employed by the Bank for less than five years. In the event the
Bank is not in compliance with its minimum capital requirements or if such
payments pursuant to Section 10 would cause the Bank's capital to be reduced
below its minimum regulatory capital requirements, such payments shall be
deferred until such time as the Bank or successor thereto is in capital
compliance.
14. Suspension of Agreement. The Executive's employment hereunder shall
ne suspended if the Executive is suspended or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1818(e)(3) and (g)(1)) as of the date of service unless
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<PAGE>
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank may in its discretion (i) pay the Executive all or part of the
compensation withheld while the Agreement was suspended pursuant to this Section
14 and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.
15. Confidential Information. The Executive will not disclose to any
other Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either of the Bank obtained by
him incident to his employment with the Bank. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending relationships, financial
product developments, or possible acquisitions or dispositions of business or
facilities) which have been discussed or considered by the management of the
Bank but does not include any information which has become part of the public
domain by means other than the Executive's nonobservance of his obligations
hereunder.
16. No Mitigation; No Offset. In the event of any termination of
employment under this Agreement, the Executive shall be under no obligation to
seek other employment or to mitigate damages, and there shall be no offset
against any amounts due to him under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
17. Miscellaneous.
17.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
17.2 Definition of "Person". For purposes of this Agreement, the
term "Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
17.3 Withholding. All payments made by the Bank under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Bank under applicable law.
17.4 Arbitration of Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Bank, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 17.4. Judgment upon the award rendered by the arbitrators
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may be entered in any court having jurisdiction thereof. In the event that it
shall be necessary or desirable for the Executive to retain legal counsel or
incur other costs and expenses in connection with the enforcement of any or all
of the Executive's rights under this Agreement, the Bank shall pay (or the
Executive shall be entitled to recover from the Bank, as the case may be) the
Executive's reasonable attorneys' fees and other reasonable costs and expenses
in connection with the enforcement of said rights (including the enforcement of
any arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances recovery
by the Executive of all or a part of any such fees and costs and expenses would
be unjust.
17.5 Assignment; Successors and Assigns, etc. Neither the Bank
nor the Executive may make any assignment of this Agreement or any interest
herein, by operation of law or otherwise, without the prior written consent of
the other party and without such consent any attempted transfer or assignment
shall be null and of no effect; provided, however, that the Bank may assign its
rights under this Agreement without the consent of the Executive in the event
either of the Bank shall hereafter effect a reorganization, consolidate with or
merge into any other Person, or transfer all or substantially all of its
properties or assets to any other Person. This Agreement shall inure to the
benefit of and be binding upon the Bank and the Executive, and their respective
successors, executors, administrators, heirs and permitted assigns. In the event
of the Executive's death prior to the completion by the Bank of all payments due
him under this Agreement, the Bank shall continue such payments to the
Executive's beneficiary designated in writing to the Bank prior to his death (or
to his estate, if he fails to make such designation).
17.6. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
17.7. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
17.8. Prior Agreements. This Agreement supersedes the Amended and
Restarted Employment Agreement made as of April 21, 1994 by and among the
Executive, the Holding Company and the Bank.
17.9. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank, at its main office, attention of the Board of
Directors.
17.10. Amendment. This Agreement may be amended or modified only by a
written
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instrument signed by the Executive and by duly authorized representatives of the
Bank.
17.11. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
18. Source of Payments.
18.1 Holding Company Guaranty. All payments provided in this
Agreement shall be timely paid in cash or check from the general funds of the
Bank. The Holding Company, however, unconditionally guarantees payment and
provision of all amounts and benefits due hereunder to the Executive and, if
such amounts and benefits due from the Bank are not timely paid or provided by
the Bank, such amounts and benefits shall be paid or provided by the Holding
Company.
18.2 Payments by Holding Company. Notwithstanding any provision
herein to the contrary, to the extent that payments and benefits, as provided by
this Agreement, are paid to or received by the Executive under the Employment
Agreement dated as of the date hereof between the Executive and the Holding
Company, such compensation payments and benefits paid by the Holding Company
will be subtracted from any amounts due simultaneously to the Executive under
similar provisions of this Agreement. Under no circumstances shall the Executive
be entitled to receive duplicate payments or benefits under this Agreement and
such other Employment Agreement. Payments pursuant to this Agreement and the
Holding Company Agreement shall be allocated in proportion to the services
rendered and time expended on such activities by the Executive as determined by
the Holding Company and the Bank on a quarterly basis.
19. Noncompetition.
19.1 While Employed. During such time as the Executive is
employed hereunder, the Executive will not compete with the banking or any other
business conducted by either of the Employers during the period of his
employment hereunder, nor will he attempt to hire any employee of either of the
Employers, assist in such hiring by any other Person, encourage any such
employee to terminate his or her relationship with either of the Employers, or
solicit or encourage any customer of either of the Employers to terminate its
relationship with such Employer or to conduct with any other person any business
or activity which such customer conducts or could conduct with such Employer.
19.2 Post-Employment. The provisions of this Section 19.2 shall
not be binding on the Executive after a Change in Control shall have occurred.
During the one year period following the date of termination of the Executive's
employment (x) by the Executive on his own initiative for any reason other than
(1) death, (2) becoming Disabled (as defined in Section 12), or (3) Retirement
(as defined in Section 7.3), or (y) by either Employer for Cause or under
circumstances which result in the Executive receiving termination benefits
pursuant to Section 10 hereof, the Executive will not compete from an office
within 20 miles of the Bank's main office with the banking or any other business
conducted by either of the Employers during the period of his employment
hereunder, nor will he attempt to hire any employee of either of the Employers,
assist in such hiring by any other Person, or encourage any such employee to
terminate his or her relationship with either of the Employers.
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* * * * *
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employers, by their duly authorized officers, and by the
Executive, as of the date first above written.
ATTEST: FIRST ESSEX BANK, FSB
___________________________ By:__________________________
Title:________________________
[Seal]
WITNESS EXECUTIVE
- --------------------------- ----------------------------
David W. Dailey
The undersigned hereby guarantees the obligations of First Essex Bank, FSB,
under the foregoing agreement
FIRST ESSEX BANCORP, INC.
- ---------------------------
By:________________________
Title:______________________
[Seal]
11
Exhibit 10.8
------------
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1997, by and among FIRST
ESSEX BANCORP, INC., a Delaware corporation (the "Holding Company") and the
parent company for FIRST ESSEX BANK, FSB, a federal saving bank, with its
executive offices in Andover, Massachusetts (the "Bank") (the Bank and the
Holding Company shall be hereinafter collectively referred to as the
"Employers"), and Brian W. Thompson of Amherst, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Holding Company desires to continue to provide for the
Executive's employment by the Holding Company and in connection therewith
desires to amend and restate the existing employment agreement among the Bank,
the Holding Company, and the Executive;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Holding Company and the Executive agree as follows:
1. Employment The Executive shall serve the Bank and the Holding
Company as an Executive Vice President, responsible for corporate banking and
commercial real estate activities, subject to his election by the Boards. In
such positions, the Executive shall have the duties, responsibilities and
authorities and authority as determined and designated from time to time by the
Chief Executive Officer or the Boards of Directors. Notwithstanding the above,
the Executive shall not be required to perform any duties and responsibilities
(a) which would result in a noncompliance with or violation of any applicable
law or regulation or (b) on a regular basis in any locations outside the
counties in which the Bank now has branch offices, unless agreed upon by the
Executive. During the pendency of any temporary or permanent suspension or
termination from the Bank, the Executive shall not perform, in any respect,
directly or indirectly, duties and responsibilities formerly performed at the
Bank as part of his duties and responsibilities as an officer of the Holding
Company.
2. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 1, 1997. The initial term of the
Executive's employment hereunder shall be for two years from the Commencement
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then-remaining term of his employment under this
Agreement shall be two years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank or the Holding Company, unless the Executive elects not to
continue to extend the term of this Agreement by giving written notice in
accordance with Section 7.2 of this Agreement, or the Board elects not to
continue to extend the term of this Agreement (in which event the provisions of
Section 7.1 shall apply). The last day of such
<PAGE>
term as so extended from time to time, is herein sometimes referred to as the
"Expiration Date" and the time period from the Commencement Date through the
Expiration Date shall be the "Term of Employment". At least once in each
calendar year the Board will review the Agreement and Executive's performance
annually for purposes of determining whether to continue to extend the Agreement
and the rationale and results thereof shall be included in the minutes of the
Board's meeting. The Board shall give notice to the Executive as soon as
possible after such review as to whether the Agreement is to continue to be
extended.
3. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:
3.1 Salary and Bonus. For all services rendered by the Executive
to the Holding Company and its Subsidiaries, the Executive shall be entitled to
receive a base salary at the rate of $__________ per year, subject to increase
from time to time in accordance with the usual practices of the Holding Company
with respect to review of compensation of its senior executives. In addition, if
the Board increases the Executive's annual base salary at any time before the
Expiration Date, such increased annual base salary shall become a floor below
which such annual base salary shall not fall (other than concurrently with
across-the-board salary reductions based on the Employers' financial performance
similarly affecting all senior management personnel of the Holding Company) at
any future time during the Term of Employment without the Executive's written
consent. The Executive's salary shall be payable in periodic installments in
accordance with the Holding Company's usual practice for its senior executives.
During the term of this Agreement, Executive shall be paid an annual bonus of up
to thirty percent (30%) of Executive's total salary for the preceding calendar
year of employment with the Employers, such bonus to be paid in accordance with
the Employers' established terms and conditions for payment of annual incentive
bonuses to senior executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Holding
Company. Such participation shall be subject to (i) Section 5.12(a) of the
Agreement and Plan of Reorganization dated as of August 5, 1996, as amended, by
and among the Company, Finest Financial Corp. ("Finest") and Pelham Bank and
Trust Company ("Pelham") (the "Acquisition Agreement"), to the extent
applicable, and the terms of the applicable plan documents, (ii) generally
applicable policies of the Holding Company and (iii) the discretion of the
Boards of Directors of the Holding Company or any administrative or other
committee provided for in or contemplated by such plan.
3.3 Other Benefits. The Executive shall be also be provided with
the use of an automobile at the Employers' expense. The Executive shall comply
with such reasonable reporting and expense limitations on the use of the
automobile as may be established from time to time by the Holding Company. The
Holding Company shall include annually on the Executive's Form W-2 any amount
attributable to his personal use of such automobile. The Executive shall also be
reimbursed for the reasonable annual membership fee for the country club of
Executive's choice.
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3.4 Business Expenses. The Holding Company shall reimburse the
Executive for all reasonable travel and other business expenses incurred by him
in the performance of his duties and responsibilities, subject to such
reasonable requirements with respect to substantiation and documentation as may
be specified by the Holding Company. The Employers shall also reimburse the
Executive for costs and expenses related to the relocation by the Executive of
his primary personal residence from Amherst, Massachusetts, to a location within
reasonable proximity for commuting purposes to the Employers' executive offices
in Andover, Massachusetts, such reimbursement to be in accordance with the
Employers' customary practices and procedures pertaining to senior executive
officer relocation expense coverage, including reasonable requirements with
respect to substantiation and documentation as may be specified by the
Employers.
3.5 Vacation. The Executive shall be entitled to not less than
four (4) weeks of vacation per year, to be taken at such times and intervals as
shall be determined by the Executive with the approval of the Holding Company,
which approval shall not be unreasonably withheld.
3.6 General. Nothing paid to the Executive under any plan, policy
or arrangement currently in effect or made available in the future shall be
deemed to be in lieu of other compensation to the Executive as described in this
Agreement.
4. Extent of Service. During the Term of Employment, the Executive
shall, subject to the direction and supervision of the Board of Directors of the
Holding Company, devote his full time, best efforts and business judgment, skill
and knowledge to the advancement of the Employers' interests and to the
discharge of his duties and responsibilities hereunder. He shall not engage in
any other business activity, except as may be approved by the Board of
Directors; provided, however, that nothing herein shall be construed as
preventing the Executive from:
(a) investing his assets in such form or manner as shall not
require any material services on his part in the operations or affairs
of the companies or the other entities in which such investments are
made;
(b) serving on the board of directors of any company, provided
that he shall not be required to render any material services with
respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
5. Termination Upon Death. In the event of the Executive's death during
the Term of Employment, the Executive's employment shall terminate on the date
of his death; provided, however, that the Holding Company shall pay to the
Executive's beneficiary designated in writing to the Holding Company prior to
his death (or to his estate, if he fails to make such designation), (i) any base
salary or other compensation earned (together with a pro rata portion of the
bonus payable with respect to the year in which death occurred) but not
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paid to Executive prior to the date of death, plus (ii) the base salary that
Executive would have earned for a period of six months following his death, plus
(iii) any death benefits that Executive is entitled to under the Holding
Company's policies in effect on Executive's date of death. The foregoing bonus
payments shall be payable at the time of payment of similar bonus payments made
to other executives of the Holding Company and shall be computed on the
assumption that all the Executive's individual goals (if any) under any
applicable bonus plans were achieved. In addition, the Holding Company shall
continue in effect the medical benefits of the Executive and Executive's
dependents, or any of the same, at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of death for a six-month
period commencing on the date of death (or, if such continuation is not
permitted by applicable law or if the Board so determines in its sole
discretion, the Holding Company shall provide the economic equivalent in lieu
thereof). Such medical benefits shall be deemed to have been provided under the
provisions of COBRA.
6. Termination by the Holding Company for Cause.
6.1 Termination by Holding Company. The Executive's employment
hereunder may be terminated by the Holding Company, without further liability on
the part of the Holding Company, effective immediately, by a two-thirds vote of
all of the members of the Board of Directors of the Holding Company for Cause
(as such term is defined in Section 6.2) by written notice to the Executive
setting forth in reasonable detail the nature of such Cause, provided that the
Board has complied with the provisions of Section 6.3.
6.2 Cause. Termination for "Cause" shall mean
(a) willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or the Holding
Company;
(c) conviction of a felony involving a crime of moral turpitude;
(d) willfully engaging in violations of material banking
regulations; or
(e) willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
6.3 Board Termination Procedure. In each case, in determining
Cause the alleged acts or omissions of the Executive shall be measured against
standards prevailing in the banking industry generally and the ultimate
existence of Cause must be confirmed by not less than two-thirds of the Board at
a meeting prior to any termination therefor.
6.4 Termination of Obligations. In the event of termination
pursuant to Section 6, all obligations of the Holding Company under this
Agreement shall terminate as of the date indicated, but vested rights of the
parties hereunder shall not be affected.
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7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Executive shall be entitled
to receive the benefits set forth in Section 9.
7.2 Other Voluntary Termination by the Executive. During the Term
of Employment, the Executive may effect, upon sixty (60) days prior written
notice to the Holding Company, a Voluntary Termination of his employment
hereunder and thereupon the Term of Employment (if not already expired) shall
end. A "Voluntary Termination" shall mean a termination of employment by the
Executive on his own initiative other than (a) a termination due to death or
becoming Disabled (as defined in Section 12), (b) a termination for Good Reason,
(c) a termination due to Retirement (as defined in Section 7.3), or (d) a
termination as a result of the normal expiration of the full Term of Employment.
If, during the Term of Employment, the Executive's employment is so terminated
due to Voluntary Termination, the Term of Employment shall thereupon end and the
Employers shall pay to the Executive the payments and benefits which the
Executive would be entitled to in the event of a termination of his employment
by the Employers for Cause.
7.3 Termination Due to Retirement. "Retirement" means the
termination of the Executive's employment with the Holding Company for any
reason by the Executive at any time after the Executive attains "Retirement Age"
(as hereinafter defined). "Retirement Age" shall mean the earliest to occur of
(X) age 65, (Y) (if applicable) any lesser age at which the Executive is
entitled to retire from the Employers and receive retirement benefits under the
Employers' qualified pension plan, and (Z) an age of 62 or greater at which the
Employers permit the Executive to retire. The Executive may terminate the
Executive's employment hereunder due to Retirement upon thirty (30) days prior
written notice to the Holding Company. If, during the Term of Employment, the
Executive's employment is so terminated due to Retirement, the Term of
Employment shall thereupon end and the Executive shall be entitled to (i)
continuation of the Executive's medical benefits at the level in effect on, and
at the same out-of-pocket cost to the Executive as of, the date of termination
for the six-month period following the termination of the Executive's employment
due to Retirement (or, if such continuation is not permitted by applicable law
or if the Board so determines in its sole discretion, the Holding Company shall
provide the economic equivalent in lieu thereof), and (ii) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs, if any, of the Holding Company.
Such medical benefits shall be deemed to have been provided under the provisions
of COBRA.
7.4 Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following:
(a) the failure of the Board of Directors of the Holding Company
to elect the Executive to a senior executive position, or to continue
the Executive in such an office;
(b) the failure by the Holding Company to comply with the
provisions of Section 3.1;
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(c) any failure by the Holding Company to timely pay the amounts
(other than base salary) or provide the benefits described in this
Agreement, other than an isolated failure not occurring in bad faith
and which is remedied promptly after receipt of written notice thereof
given by Executive;
(d) any reduction in the Executive's base salary or any material
reduction in other benefits in effect for the Executive on the date
hereof or as set forth in this Agreement;
(e) a material breach by the Holding Company of any of the
provisions of this Agreement which failure or breach shall have
continued for thirty (30) days after written notice from the Executive
to the Holding Company specifying the nature of such failure or breach;
and
(f) a determination by the Board not to continue to extend the
term of this Agreement as provided in Section 2.
In addition,"Good Reason" shall include the following events but only if they
shall occur within two years following a "Change in Control" (which term shall
have the meaning defined in the Special Termination Agreement between the
Executive and the Holding Company):
(g) there occurs any material change by the Holding Company to
the Executive's function, duties, or responsibilities in effect on the
date hereof or as set forth in this Agreement, which change would cause
the Executive's position with the Holding Company to become one of
lesser responsibility, importance, or scope from the position and
attributes thereof in effect on the date hereof or as set forth in this
Agreement;
(h) the failure by the Holding Company to continue to provide the
Executive with benefits substantially similar to those available to the
Executive under any of the life insurance, medical, health and
accident, or disability plans or any other material benefit plans in
which the Executive was participating at the time of the Change in
Control, or the taking of any action by the Holding Company which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Bank to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of years
of service with the Holding Company in accordance with the Holding
Company's normal vacation policy in effect at the time of the Change in
Control;
(i) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control; or
(j) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened.
8. Termination by the Holding Company Without Cause. The Executive's
employment with the Holding Company may be terminated without cause by a
two-thirds vote
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of all of the members of the Board of Directors of the Holding Company on
written notice to the Executive, provided, however, that the Holding Company
shall have the obligation upon any such termination to make the payments to the
Executive provided for under Section 9 of this Agreement.
9. Certain Termination Benefits. In the event of termination pursuant
to Section 7.1 or 8, the Executive shall be entitled to each of the following
benefits:
9.1 Earnings to Date of Termination. An amount equal to the sum
of (a) base salary or other compensation earned through the date of termination,
plus (b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus paid (by
either Employer or a predecessor in interest to the Bank) during the three
fiscal years preceding the termination of employment, plus (c) all accrued
vacation and deferred compensation.
9.2 Lump Sum Payment of Remaining Salary Obligation. A lump sum
severance benefit equal to three times the sum of (a) the Executive's annual
base salary and (b) the highest annual bonus paid (by either Employer or a
predecessor in interest to the Bank) to the Executive during the three fiscal
years preceding the termination of employment.
9.3 Benefit Continuation. For the period subsequent to the date
of termination until the Expiration Date, the Executive shall continue to
receive the disability and medical benefits described in Section 3.2 existing on
the date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination. Any cash bonus plans shall
be prorated through the date of termination. For the period subsequent to the
date of termination until the Expiration Date, the Executive shall also continue
to receive benefits under any non-qualified retirement plans through the
Expiration Date. For purposes of application of such benefits the Executive
shall be treated as if he had remained in the employ of the Holding Company,
with a total annual salary at the rate in effect on the date of termination, and
service credits will continue to accrue during such period as if the Executive
had remained in the employ of the Holding Company.
10. Additional Right of Executive to Terminate Employment.
Notwithstanding any other provision of this Agreement, Executive shall be
permitted to terminate his employment hereunder for any reason at any time prior
to December 30, 1997. Upon any such termination, the Executive shall be entitled
to receive a lump sum payment of $225,000 and all of the benefits described in
Section 9.3 above, except for any payments of any amount under any bonus or
other compensation plans.
11. Adjustment for Unavailability of Benefits. If, in spite of the
provisions of Section 9, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Holding
Company, the Holding Company shall pay or provide for payment of such benefits
and service credits for such benefits to the Executive, or to the Executive's
dependents, beneficiaries or estate.
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12. Disability. If, due to physical or mental illness, the Executive
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Holding Company, acting through its Board of
Directors, may designate another executive to act in his place during the period
of his disability. Notwithstanding any such designation, the Executive shall
continue to receive his full salary and benefits under Section 3 of this
Agreement until the earlier of (X) the Expiration Date or (Y) the date on which
he becomes eligible for disability income under the Employer's disability income
plan (at which time the Executive shall be considered to be "Disabled"). While
receiving disability payments under such plan, the Executive shall receive a
salary from the Holding Company which when combined with the Executive's
disability income payments will equal eighty (80%) percent of the Executive's
prior salary from the Holding Company, and shall continue to participate in the
Employers' benefit plans and to receive other benefits as specified in Section
3.2 until the Expiration Date, with all such benefits to be at the level in
effect on, and at the same out-of-pocket cost to the Executive as of, the date
of disability. In the absence of a disability income plan at the time of such
disability, the Holding Company shall pay the Executive benefits equal to those
the Executive would have received if the Holding Company's current disability
plan were in effect at such time. Upon the Executive being able to return to
full-time employment after being Disabled but before the expiration of the Term
of Employment, the Executive shall be offered an equivalent available position
and otherwise be subject to the provisions of this Agreement. Nothing contained
in this Section 12 shall preclude the Holding Company from terminating the
Executive's employment without cause, subject to its payment of benefits as
provided in Section 9.
13. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received from the Holding Company or
any Subsidiaries, the Holding Company shall pay as additional compensation to
the Executive that amount which, after taking into account all taxes (including
any tax which shall be imposed by Code Section 4999) imposed upon such amount by
any federal, state or local government, shall be equal to the amount of said tax
imposed by Code Section 4999.
14. Confidential Information. The Executive will not disclose to any
other Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either of the Holding Company
obtained by him incident to his employment with the Holding Company. The term
"confidential information" includes, without limitation, financial information,
business plans, prospects and opportunities (such as lending relationships,
financial product developments, or possible acquisitions or dispositions of
business or facilities) which have been discussed or considered by the
management of the Holding Company but does not include any information which has
become part of the public domain by means other than the Executive's
nonobservance of his obligations hereunder.
15. No Mitigation; No Offset. In the event of any termination of
employment under
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this Agreement, the Executive shall be under no obligation to seek other
employment or to mitigate damages, and there shall be no offset against any
amounts due to him under this Agreement for any reason, including, without
limitation, on account of any remuneration attributable to any subsequent
employment that the Executive may obtain. Any amounts due under this Agreement
are in the nature of severance payments or liquidated damages, or both, and are
not in the nature of a penalty.
16. Miscellaneous.
16.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
16.2 Definition of "Person". For purposes of this Agreement, the
term "Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
16.3 Withholding. All payments made by the Holding Company under
this Agreement shall be net of any tax or other amounts required to be withheld
by the Holding Company under applicable law.
16.4 Arbitration of Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Holding Company, one by
the Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 16.4. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Holding Company shall pay (or the
Executive shall be entitled to recover from the Holding Company, as the case may
be) the Executive's reasonable attorneys' fees and other reasonable costs and
expenses in connection with the enforcement of said rights (including the
enforcement of any arbitration award in court) regardless of the final outcome,
unless and to the extent the arbitrators shall determine that under the
circumstances recovery by the Executive of all or a part of any such fees and
costs and expenses would be unjust.
16.5 Assignment; Successors and Assigns, etc. Neither the Holding
Company nor the Executive may make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the other party and without such consent any attempted transfer or
assignment shall be null and of no effect; provided,
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however, that the Holding Company may assign its rights under this Agreement
without the consent of the Executive in the event either of the Holding Company
shall hereafter effect a reorganization, consolidate with or merge into any
other Person, or transfer all or substantially all of its properties or assets
to any other Person. This Agreement shall inure to the benefit of and be binding
upon the Holding Company and the Executive, and their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Holding Company of all payments
due him under this Agreement, the Holding Company shall continue such payments
to the Executive's beneficiary designated in writing to the Holding Company
prior to his death (or to his estate, if he fails to make such designation).
16.6 Enforceability. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16.7 Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
16.8 Prior Agreements. This Agreement supersedes the Employment
Agreement made as of December 30, 1996 by and among the Executive, the Holding
Company and the Bank.
16.9 Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in writing
with the Holding Company or, in the case of the Holding Company, at its main
office, attention of the Board of Directors.
16.10 Amendment. This Agreement may be amended or modified only
by a written instrument signed by the Executive and by duly authorized
representatives of the Holding Company.
16.11 Governing Law. This is a Massachusetts contract and shall
be construed under and be governed in all respects by the laws of The
Commonwealth of Massachusetts.
17. Source of Payments.
17.1 Payments by Holding Company. All payments provided in this
Agreement shall be timely paid in cash or check from the general funds of the
Holding Company subject to Section 17.2.
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17.2 No Duplicate Payments. Notwithstanding any provision herein
to the contrary, to the extent that payments and benefits, as provided by this
Agreement, are paid to or received by Executive under the Employment Agreement
dated as of the date hereof between the Executive and the Bank, such
compensation payments and benefits paid by the Bank will be subtracted from any
amount due simultaneously to the Executive under similar provisions of this
Agreement. Under no circumstances shall the Executive be entitled to receive
duplicate payments or benefits under this Agreement and such other Employment
Agreement. Payments pursuant to this Agreement and the Bank Employment Agreement
shall be allocated in proportion to the services rendered and time expended on
such activities by the Executive as determined by the Holding Company and the
Bank on a quarterly basis.
18. Noncompetition.
18.1 While Employed. During such time as the Executive is
employed hereunder, the Executive will not compete with the banking or any other
business conducted by either of the Employers during the period of his
employment hereunder, nor will he attempt to hire any employee of either of the
Employers, assist in such hiring by any other Person, encourage any such
employee to terminate his or her relationship with either of the Employers, or
solicit or encourage any customer of either of the Employers to terminate its
relationship with such Employer or to conduct with any other person any business
or activity which such customer conducts or could conduct with such Employer.
18.2 Post-Employment. The provisions of this Section 18.2 shall
not be binding on the Executive after a Change in Control shall have occurred.
During the one year period following the date of termination of the Executive's
employment (x) by the Executive on his own initiative for any reason other than
(1) death, (2) becoming Disabled (as defined in Section 12), or (3) Retirement
(as defined in Section 7.3), or (y) by either Employer for Cause or under
circumstances which result in the Executive receiving termination benefits
pursuant to Section 9 hereof, the Executive will not compete from an office
within 20 miles of the Bank's main office with the banking or any other business
conducted by either of the Employers during the period of his employment
hereunder, nor will he attempt to hire any employee of either of the Employers,
assist in such hiring by any other Person, or encourage any such employee to
terminate his or her relationship with either of the Employers.
* * * * *
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
ATTEST: FIRST ESSEX BANCORP, INC.
___________________________ By:________________________
Title:______________________
[Seal]
WITNESS EXECUTIVE
- --------------------------- ---------------------------
Brian W. Thompson
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Exhibit 10.9
------------
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1997, by and among FIRST
ESSEX BANK, FSB, a federal saving bank, with its main office in Lawrence,
Massachusetts (the "Bank"), FIRST ESSEX BANCORP, INC., a Delaware corporation
(the "Holding Company") and the parent company of the Bank (the Bank and the
Holding Company shall be hereinafter collectively referred to as the
"Employers"), and Brian W. Thompson of Amherst, Massachusetts (the "Executive").
WITNESSETH
WHEREAS, the Bank desires to continue to provide for the Executive's
employment by the Bank and in connection therewith desires to amend and restate
the existing employment agreement among the Bank, the Holding Company, and the
Executive;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Bank and the Executive agree as follows:
1. Employment The Executive shall serve the Bank and the Holding
Company as an Executive Vice President, responsible for corporate banking and
commercial real estate activities, subject to his election by the Boards. In
such positions, the Executive shall have the duties, responsibilities and
authorities and authority as determined and designated from time to time by the
Chief Executive Officer or the Boards of Directors. Notwithstanding the above,
the Executive shall not be required to perform any duties and responsibilities
(a) which would result in a noncompliance with or violation of any applicable
law or regulation or (b) on a regular basis in any locations outside the
counties in which the Bank now has branch offices, unless agreed upon by the
Executive. During the pendency of any temporary or permanent suspension or
termination from the Bank, the Executive shall not perform, in any respect,
directly or indirectly, duties and responsibilities formerly performed at the
Bank as part of his duties and responsibilities as an officer of the Holding
Company.
2. Effective Date and Term. The commencement date (the "Commencement
Date") of this Agreement shall be January 1, 1997. The initial term of the
Executive's employment hereunder shall be for two years from the Commencement
Date. The parties intend that, at any point in time during the Executive's
employment hereunder, the then-remaining term of his employment under this
Agreement shall be two years. Accordingly, the term of employment shall be
automatically extended by one day for each day that the Executive remains
employed by the Bank or the Holding Company, unless the Executive elects not to
continue to extend the term of this Agreement by giving written notice in
accordance with Section 7.2 of this Agreement, or the Board elects not to
continue to extend the term of this Agreement (in which event the provisions of
Section 7.1 shall apply). The last day of such term as so extended from time to
time, is herein sometimes referred to as the "Expiration Date" and the time
period from the Commencement Date through the Expiration Date shall be the "Term
of Employment". At least once in each calendar year the Board will review the
<PAGE>
Agreement and the Executive's performance annually for purposes of determining
whether to continue to extend the Agreement and the rationale and results
thereof shall be included in the minutes of the Board's meeting. The Board shall
give notice to the Executive as soon as possible after such review as to whether
the Agreement is to continue to be extended.
3. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:
3.1 Salary and Bonus. For all services rendered by the Executive to the
Holding Company and its Subsidiaries, the Executive shall be entitled to receive
a base salary at the rate of $__________ per year, subject to increase from time
to time in accordance with the usual practices of the Bank with respect to
review of compensation of its senior executives. In addition, if the Board
increases the Executive's annual base salary at any time before the Expiration
Date, such increased annual base salary shall become a floor below which such
annual base salary shall not fall (other than concurrently with across-the-board
salary reductions based on the Employers' financial performance similarly
affecting all senior management personnel of the Bank) at any future time during
the Term of Employment without the Executive's written consent. The Executive's
salary shall be payable in periodic installments in accordance with the Bank's
usual practice for its senior executives. During the term of this Agreement, the
Executive shall be paid an annual bonus of up to thirty percent (30%) of the
Executive's total salary for the preceding calendar year of employment with the
Employers, such bonus to be paid in accordance with the Employers' established
terms and conditions for payment of annual incentive bonuses to senior
executives.
3.2 Regular Benefits. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Bank.
Such participation shall be subject to (i) Section 5.12(a) of the Agreement and
Plan of Reorganization dated as of August 5, 1996, as amended, by and among the
Company, Finest Financial Corp. ("Finest") and Pelham Bank and Trust Company
("Pelham") (the "Acquisition Agreement"), to the extent applicable, and the
terms of the applicable plan documents, (ii) generally applicable policies of
the Bank and (iii) the discretion of the Boards of Directors of the Bank or any
administrative or other committee provided for in or contemplated by such plan.
3.3 Other Benefits. The Executive shall be also be provided with the
use of an automobile at the Employers' expense. The Executive shall comply with
such reasonable reporting and expense limitations on the use of the automobile
as may be established from time to time by the Bank. The Bank shall include
annually on the Executive's Form W-2 any amount attributable to his personal use
of such automobile. The Executive shall also be reimbursed for the reasonable
annual membership fee for the country club of the Executive's choice.
3.4 Business Expenses. The Bank shall reimburse the Executive for all
reasonable travel and other business expenses incurred by him in the performance
of his duties and responsibilities, subject to such reasonable requirements with
respect to substantiation and documentation as may be specified by the Bank. The
Employers shall also reimburse the
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Executive for costs and expenses related to the relocation by the Executive of
his primary personal residence from Amherst, Massachusetts, to a location within
reasonable proximity for commuting purposes to the Employers' executive offices
in Andover, Massachusetts, such reimbursement to be in accordance with the
Employers' customary practices and procedures pertaining to senior executive
officer relocation expense coverage, including reasonable requirements with
respect to substantiation and documentation as may be specified by the
Employers.
3.5 Vacation. The Executive shall be entitled to not less than four (4)
weeks of vacation per year, to be taken at such times and intervals as shall be
determined by the Executive with the approval of the Bank, which approval shall
not be unreasonably withheld.
3.6 General. Nothing paid to the Executive under any plan, policy or
arrangement currently in effect or made available in the future shall be deemed
to be in lieu of other compensation to the Executive as described in this
Agreement.
4. Extent of Service. During the Term of Employment, the Executive
shall, subject to the direction and supervision of the Board of Directors of the
Bank, devote his full time, best efforts and business judgment, skill and
knowledge to the advancement of the Employers' interests and to the discharge of
his duties and responsibilities hereunder. He shall not engage in any other
business activity, except as may be approved by the Board of Directors;
provided, however, that nothing herein shall be construed as preventing the
Executive from:
(a) investing his assets in such form or manner as shall not
require any material services on his part in the operations or affairs
of the companies or the other entities in which such investments are
made;
(b) serving on the board of directors of any company, provided
that he shall not be required to render any material services with
respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
5. Termination Upon Death. In the event of the Executive's death during
the Term of Employment, the Executive's employment shall terminate on the date
of his death; provided, however, that the Bank shall pay to the Executive's
beneficiary designated in writing to the Bank prior to his death (or to his
estate, if he fails to make such designation), (i) any base salary or other
compensation earned (together with a pro rata portion of the bonus payable with
respect to the year in which death occurred) but not paid to the Executive prior
to the date of death, plus (ii) the base salary that the Executive would have
earned for a period of six months following his death, plus (iii) any death
benefits that the Executive is entitled to under the Bank's policies in effect
on the Executive's date of death. The foregoing bonus payments shall be payable
at the time of payment of similar bonus payments to other executives of the Bank
and shall be computed on the assumption that all the Executive's individual
goals (if any) under any applicable bonus plans were achieved. In addition, the
Bank shall continue in effect the medical benefits of the Executive and the
Executive's dependents,
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or any of the same, at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of death for a six-month period commencing
on the date of death (or, if such continuation is not permitted by applicable
law or if the Board so determines in its sole discretion, the Bank shall provide
the economic equivalent in lieu thereof). Such medical benefits shall be deemed
to have been provided under the provisions of COBRA.
6. Termination by the Bank for Cause.
6.1 Termination by Bank. The Executive's employment hereunder may
be terminated by the Bank, without further liability on the part of the Bank,
effective immediately, by a two-thirds vote of all of the members of the Board
of Directors of the Bank for Cause (as such term is defined in Section 6.2) by
written notice to the Executive setting forth in reasonable detail the nature of
such Cause, provided that the Board has complied with the provisions of Section
6.3.
6.2 Cause. Termination for "Cause" shall mean
(a) willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or the Holding
Company;
(c) conviction of a felony involving a crime of moral turpitude;
(d) willfully engaging in violations of material banking
regulations; or
(e) willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
6.3 Board Termination Procedure. In each case, in determining
Cause the alleged acts or omissions of the Executive shall be measured against
standards prevailing in the banking industry generally and the ultimate
existence of Cause must be confirmed by not less than two-thirds of the Board at
a meeting prior to any termination therefor.
6.4 Termination of Obligations. In the event of termination
pursuant to Section 6, all obligations of the Bank under this Agreement shall
terminate as of the date indicated, but vested rights of the parties hereunder
shall not be affected.
7. Termination by the Executive
7.1 Termination by the Executive for Good Reason. The Executive
shall be entitled to terminate his employment hereunder for Good Reason (as
defined in Section 7.4) effective immediately by giving written notice to the
Board of Directors. Upon any such termination, the Executive shall be entitled
to receive the benefits set forth in Section 10.
7.2 Other Voluntary Termination by the Executive. During the Term
of Employment, the Executive may effect, upon sixty (60) days prior written
notice to the Bank, a Voluntary Termination of his employment hereunder and
thereupon the Term of Employment (if not already expired) shall end. A
"Voluntary Termination" shall mean a
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termination of employment by the Executive on his own initiative other than (a)
a termination due to death or becoming Disabled (as defined in Section 13), (b)
a termination for Good Reason, (c) a termination due to Retirement (as defined
in Section 7.3), or (d) a termination as a result of the normal expiration of
the full Term of Employment. If, during the Term of Employment, the Executive's
employment is so terminated due to Voluntary Termination, the Term of Employment
shall thereupon end and the Employers shall pay to the Executive the payments
and benefits which the Executive would be entitled to in the event of a
termination of his employment by the Employers for Cause.
7.3 Termination Due to Retirement. "Retirement" means the
termination of the Executive's employment with the Bank for any reason by the
Executive at any time after the Executive attains "Retirement Age" (as
hereinafter defined). "Retirement Age" shall mean the earliest to occur of (X)
age 65, (Y) (if applicable) any lesser age at which the Executive is entitled to
retire from the Employers and receive retirement benefits under the Employers'
qualified pension plan, and (Z) an age of 62 or greater at which the Employers
permit the Executive to retire. The Executive may terminate the Executive's
employment hereunder due to Retirement upon thirty (30) days prior written
notice to the Bank. If, during the Term of Employment, the Executive's
employment is so terminated due to Retirement, the Term of Employment shall
thereupon end and the Executive shall be entitled to (i) continuation of the
Executive's medical benefits at the level in effect on, and at the same
out-of-pocket cost to the Executive as of, the date of termination for the
six-month period following the termination of the Executive's employment due to
Retirement (or, if such continuation is not permitted by applicable law or if
the Board so determines in its sole discretion, the Bank shall provide the
economic equivalent in lieu thereof), and (ii) any other compensation and
benefits as may be provided in accordance with the terms and provisions of any
applicable plans and programs, if any, of the Bank. Such medical benefits shall
be deemed to have been provided under the provisions of COBRA.
7.4 Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following:
(a) the failure of the Board of Directors of the Bank to elect
the Executive to a senior executive position, or to continue the
Executive in such an office;
(b) the failure by the Bank to comply with the provisions of
Section 3.1;
(c) any failure by the Bank to timely pay the amounts (other than
base salary) or provide the benefits described in this Agreement, other
than an isolated failure not occurring in bad faith and which is
remedied promptly after receipt of written notice thereof given by
Executive;
(d) any reduction in the Executive's base salary or any material
reduction in other benefits in effect for the Executive on the date
hereof or as set forth in this Agreement;
(e) a material breach by the Bank of any of the provisions of
this Agreement which failure or breach shall have continued for thirty
(30) days after written notice from the Executive to the Bank
specifying the nature of such failure or breach; and
(f) a determination by the Board not to continue to extend the
term of this
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Agreement as provided in Section 2.
In addition,"Good Reason" shall include the following events but only if they
shall occur within two years following a "Change in Control" (which term shall
have the meaning defined in the Special Termination Agreement between the
Executive and the Holding Company):
(g) there occurs any material change by the Bank to the
Executive's function, duties, or responsibilities in effect on the date
hereof or as set forth in this Agreement, which change would cause the
Executive's position with the Bank to become one of lesser
responsibility, importance, or scope from the position and attributes
thereof in effect on the date hereof or as set forth in this Agreement;
(h) the failure by the Bank to continue to provide the Executive
with benefits substantially similar to those available to the Executive
under any of the life insurance, medical, health and accident, or
disability plans or any other material benefit plans in which the
Executive was participating at the time of the Change in Control, or
the taking of any action by the Bank which would directly or indirectly
materially reduce any of such benefits, or the failure by the Bank to
provide the Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service with the
Bank in accordance with the Bank's normal vacation policy in effect at
the time of the Change in Control;
(i) A reasonable determination by the Executive that, as a result
of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive
immediately prior to such Change in Control; or
(j) A reasonable determination by the Executive that, as a result
of a Change in Control, his working conditions have significantly
worsened.
8. Termination by the Bank Without Cause. The Executive's employment
with the Bank may be terminated without cause by a two-thirds vote of all of the
members of the Board of Directors of the Bank on written notice to the
Executive, provided, however, that the Bank shall have the obligation upon any
such termination to make the payments to the Executive provided for under
Section 10 of this Agreement.
9. Termination by Operation of Law. The Executive's employment with the
Bank shall terminate:
(a) if the Executive is removed or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. ss. 1818(e)(4) or (g)(1) as of the effective date of the
order.
(b) if the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act) as of the date of the default; or
(c) except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank, by the
Director of the Office of Thrift Supervision (the "Director") or his or
her designee, (x) at the time the Federal Deposit Insurance Corporation
or the Resolution Trust Corporation enters into an
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agreement to provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) of the Federal Deposit Insurance
Act; or (y) at the time the Director or his her designee approves a
supervisory merger to resolve problems related to operation of the Bank
or when the Bank is determined by the Director to be in an unsafe or
unsound condition.
10. Certain Termination Benefits. In the event of termination pursuant
to Section 7.1 or 8, the Executive shall be entitled to each of the following
benefits:
10.1 Earnings to Date of Termination. An amount equal to the sum
of (a) base salary or other compensation earned through the date of termination,
plus (b) the Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus paid (by
either Employer or a predecessor in interest to the Bank) during the three
fiscal years preceding the termination of employment, plus (c) all accrued
vacation and deferred compensation.
10.2 Lump Sum Payment of Remaining Salary Obligation. A lump sum
severance benefit equal to three times the sum of (a) the Executive's annual
base salary and (b) the highest annual bonus paid (by either Employer or a
predecessor in interest to the Bank) to the Executive during the three fiscal
years preceding the termination of employment.
10.3 Benefit Continuation. For the period subsequent to the date
of termination until the Expiration Date, the Executive shall continue to
receive the disability and medical benefits described in Section 3.2 existing on
the date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination. Any cash bonus plans shall
be prorated through the date of termination. For the period subsequent to the
date of termination until the Expiration Date, the Executive shall also continue
to receive benefits under any non-qualified retirement plans through the
Expiration Date. For purposes of application of such benefits the Executive
shall be treated as if he had remained in the employ of the Bank, with a total
annual salary at the rate in effect on the date of termination, and service
credits will continue to accrue during such period as if the Executive had
remained in the employ of the Bank.
11. Additional Right of Executive to Terminate Employment.
Notwithstanding any other provision of this Agreement, Executive shall be
permitted to terminate his employment hereunder for any reason at any time prior
to December 30, 1997. Upon any such termination, the Executive shall be entitled
to receive a lump sum payment of $225,000 and all of the benefits described in
Section 10.3 above, except for any payments of any amount under any bonus or
other compensation plans.
12. Adjustment for Unavailability of Benefits. If, in spite of the
provisions of Section 10, benefits or service credits under any benefit plan
provided by a third party shall not be payable or provided under any such plan
to the Executive, or to the Executive's dependents, beneficiaries or estate,
because the Executive is no longer deemed to be an employee of the Bank, the
Bank shall pay or provide for payment of such benefits and service credits for
such benefits to the Executive, or to the Executive's dependents, beneficiaries
or estate.
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13. Disability. If, due to physical or mental illness, the Executive
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Bank, acting through its Board of Directors,
may designate another executive to act in his place during the period of his
disability. Notwithstanding any such designation, the Executive shall continue
to receive his full salary and benefits under Section 3 of this Agreement until
the earlier of (X) the Expiration Date or (Y) the date on which he becomes
eligible for disability income under the Employer's disability income plan (at
which time the Executive shall be considered to be "Disabled"). While receiving
disability payments under such plan, the Executive shall receive a salary from
the Bank which when combined with the Executive's disability income payments
will equal eighty (80%) percent of the Executive's prior salary from the Bank,
and shall continue to participate in the Employers' benefit plans and to receive
other benefits as specified in Section 3.2 until the Expiration Date, with all
such benefits to be at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of disability. In the absence of a
disability income plan at the time of such disability, the Bank shall pay the
Executive benefits equal to those the Executive would have received if the
Bank's current disability plan were in effect at such time. Upon the Executive
being able to return to full-time employment after being Disabled but before the
expiration of the Term of Employment, the Executive shall be offered an
equivalent available position and otherwise be subject to the provisions of this
Agreement. Nothing contained in this Section 13 shall preclude the Holding
Company from terminating the Executive's employment without cause, subject to
its payment of benefits as provided in Section 10.
14. Limitation on Payments. In no event shall payments pursuant to
Section 10, in the aggregate, exceed three times the Executive's average annual
compensation for the five most recent taxable years that Executive has been
employed by the Bank or such lesser number of years in the event that Executive
shall have been employed by the Bank for less than five years. In the event the
Bank is not in compliance with its minimum capital requirements or if such
payments pursuant to Section 10 would cause the Bank's capital to be reduced
below its minimum regulatory capital requirements, such payments shall be
deferred until such time as the Bank or successor thereto is in capital
compliance.
15. Suspension of Agreement. The Executive's employment hereunder shall
ne suspended if the Executive is suspended or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. ss.
1818(e)(3) and (g)(1)) as of the date of service unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Executive all or part of the compensation withheld while
the Agreement was suspended pursuant to this Section 15 and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.
16. Confidential Information. The Executive will not disclose to any
other Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either of the Bank obtained by
him incident to his employment with the Bank. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending relationships, financial
product developments, or
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possible acquisitions or dispositions of business or facilities) which have been
discussed or considered by the management of the Bank but does not include any
information which has become part of the public domain by means other than the
Executive's nonobservance of his obligations hereunder.
17. No Mitigation; No Offset. In the event of any termination of
employment under this Agreement, the Executive shall be under no obligation to
seek other employment or to mitigate damages, and there shall be no offset
against any amounts due to him under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
18. Miscellaneous.
18.1 Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
18.2 Definition of "Person". For purposes of this Agreement, the
term "Person" shall mean an individual, a corporation, an association, a
partnership, an estate, a trust and any other entity or organization.
18.3 Withholding. All payments made by the Bank under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Bank under applicable law.
18.4 Arbitration of Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Bank, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 18.4. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel or incur other
costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Bank shall pay (or the Executive
shall be entitled to recover from the Bank, as the case may be) the Executive's
reasonable attorneys' fees and other reasonable costs and expenses in connection
with the enforcement of said rights (including the enforcement of any
arbitration award in court) regardless of the final outcome, unless and to the
extent the arbitrators shall determine that under the circumstances recovery by
the Executive of all or a part of any such fees and costs and expenses would be
unjust.
18.5 Assignment; Successors and Assigns, etc. Neither the Bank
nor the
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Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party and without such consent any attempted transfer or assignment shall be
null and of no effect; provided, however, that the Bank may assign its rights
under this Agreement without the consent of the Executive in the event either of
the Bank shall hereafter effect a reorganization, consolidate with or merge into
any other Person, or transfer all or substantially all of its properties or
assets to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Bank and the Executive, and their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Bank of all payments due him
under this Agreement, the Bank shall continue such payments to the Executive's
beneficiary designated in writing to the Bank prior to his death (or to his
estate, if he fails to make such designation).
18.6. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
18.7. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
18.8. Prior Agreements. This Agreement supersedes the Amended and
Restarted Employment Agreement made as of December 30, 1996 by and among the
Executive, the Holding Company and the Bank.
18.9. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank, at its main office, attention of the Board of
Directors.
18.10. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by duly authorized
representatives of the Bank.
18.11. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
19. Source of Payments.
19.1 Holding Company Guaranty. All payments provided in this
Agreement shall be timely paid in cash or check from the general funds of the
Bank. The Holding Company, however, unconditionally guarantees payment and
provision of all amounts and benefits due hereunder to the Executive and, if
such amounts and benefits due from the Bank are not timely paid or provided by
the Bank, such amounts and benefits shall be paid or
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provided by the Holding Company.
19.2 Payments by Holding Company. Notwithstanding any provision
herein to the contrary, to the extent that payments and benefits, as provided by
this Agreement, are paid to or received by the Executive under the Employment
Agreement dated as of the date hereof between the Executive and the Holding
Company, such compensation payments and benefits paid by the Holding Company
will be subtracted from any amounts due simultaneously to the Executive under
similar provisions of this Agreement. Under no circumstances shall the Executive
be entitled to receive duplicate payments or benefits under this Agreement and
such other Employment Agreement. Payments pursuant to this Agreement and the
Holding Company Agreement shall be allocated in proportion to the services
rendered and time expended on such activities by the Executive as determined by
the Holding Company and the Bank on a quarterly basis.
20. Noncompetition.
20.1 While Employed. During such time as the Executive is
employed hereunder, the Executive will not compete with the banking or any other
business conducted by either of the Employers during the period of his
employment hereunder, nor will he attempt to hire any employee of either of the
Employers, assist in such hiring by any other Person, encourage any such
employee to terminate his or her relationship with either of the Employers, or
solicit or encourage any customer of either of the Employers to terminate its
relationship with such Employer or to conduct with any other person any business
or activity which such customer conducts or could conduct with such Employer.
20.2 Post-Employment. The provisions of this Section 20.2 shall
not be binding on the Executive after a Change in Control shall have occurred.
During the one year period following the date of termination of the Executive's
employment (x) by the Executive on his own initiative for any reason other than
(1) death, (2) becoming Disabled (as defined in Section 13), or (3) Retirement
(as defined in Section 7.3), or (y) by either Employer for Cause or under
circumstances which result in the Executive receiving termination benefits
pursuant to Section 10 hereof, the Executive will not compete from an office
within 20 miles of the Bank's main office with the banking or any other business
conducted by either of the Employers during the period of his employment
hereunder, nor will he attempt to hire any employee of either of the Employers,
assist in such hiring by any other Person, or encourage any such employee to
terminate his or her relationship with either of the Employers.
* * * * *
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employers, by their duly authorized officers, and by the
Executive, as of the date first above written.
ATTEST: FIRST ESSEX BANK, FSB
___________________________ By:________________________
Title:______________________
[Seal]
WITNESS EXECUTIVE
- --------------------------- ---------------------------
Brian W. Thompson
The undersigned hereby guarantees the obligations of First Essex Bank, FSB,
under the foregoing agreement
FIRST ESSEX BANCORP, INC.
- ---------------------------
By:________________________
Title:______________________
[Seal]
12
Exhibit 10.10
-------------
Execution Copy
SPECIAL TERMINATION AGREEMENT
AGREEMENT made as of the 1st day of January, 1994 and restated as of
October 9, 1997, by and between First Essex Bancorp, Inc., a Delaware
corporation (the "Holding Company" and the parent of First Essex Bank, FSB, a
federal savings bank (the "Bank")) (the Bank and the Holding Company shall be
hereinafter collectively referred to as the "Employers") and Leonard A. Wilson
of Andover, Massachusetts (the "Executive").
1. Purpose. In order to allow the Executive to consider the prospect of
a Change in Control (as defined in Section 2) in an objective manner and in
consideration of the execution of those certain Amended and Restated Employment
Agreements between the Executive and each of the Employers dated as of the date
hereof (the "Employment Agreements"), the services to be rendered by the
Executive to the Employers and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Holding Company,
the Holding Company is willing to provide, subject to the terms of this
Agreement, certain severance benefits to protect the Executive from the
consequences of a Terminating Event (as defined in Section 3) occurring
subsequent to a Change in Control.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in either of the following events:
2.1 If there has occurred a change in control which the Holding
Company would be required to report in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or, if such regulation is no longer in effect, any
regulations promulgated by the Securities and Exchange Commission
pursuant to the 1934 Act which are intended to serve similar purposes;
2.2 When any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Holding Company or the Bank
representing twenty-five percent (25%) or more of the total number of
votes that may be cast for the election of directors of the Holding
Company or the Bank, as the case may be;
2.3 During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Holding Company, and any new director (other than a director
designated by a person who has entered into an agreement with the
Holding Company to effect a transaction described in Section 2.2, 2.4,
or 2.5 of this Agreement) whose election by the Board or nomination for
election by the Holding Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors of
the Holding Company;
<PAGE>
2.4 The stockholders of the Holding Company approve a merger,
share exchange or consolidation ("merger or consolidation") of the
Holding Company with any other corporation, other than (a) a merger or
consolidation which would result in the voting securities of the
Holding Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Holding Company
or such surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to implement a
recapitalization of the Holding Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 30% of
the combined voting power of the Holding Company's then outstanding
securities; or
2.5 The stockholders of the Holding Company or the Bank approve a
plan of complete liquidation of the Holding Company or the Bank or an
agreement for the sale or disposition by the Holding Company or the
Bank of all or substantially all of the Holding Company's or the Bank's
assets.
3. Terminating Event. A "Terminating Event" shall mean
3.1 Termination by either of the Employers of the employment of
the Executive with either of the Employers for any reason other than
(i) death or (ii) for Cause (as such term is defined in the Employment
Agreements), or
3.2 Resignation of the Executive from the employ of either of the
Employers, while the Executive is not receiving payments or benefits
from either of the Employers by reason of the Executive's disability,
subsequent to the occurrence of any of the following events:
(a) a significant change in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions
or duties exercised by the Executive immediately prior to the
Change in Control; or
(b) a determination by the Executive that, as a result of a
Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the
Executive immediately prior to such Change in Control; or
(c) a reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time; or
(d) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date
of the Change in Control to a location more than 25 miles from
Andover, Massachusetts, or either Employer's requiring the
Executive to be based anywhere other than the Employers' offices
at such location; or
(e) the failure by either Employer to pay to the Executive
any portion of his current compensation or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation under any deferred
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compensation program of the either Employer within seven (7)
days of the date such compensation is due; or
(f) the failure by either Employer to continue in effect any
material compensation, incentive, bonus or benefit plan in which
the Executive participates immediately prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by either Employer to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change in Control; or
(g) the failure by either Employer to continue to provide
the Executive with benefits substantially similar to those
available to the Executive under any of either Employer's life
insurance, medical, health and accident, or disability plans or
any other material benefit plans in which the Executive as
participating at the time of the Change in Control, the taking of
any action by either Employer which would directly or indirectly
materially reduce any such benefits, or the failure by either
Employer to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the
Employers' normal vacation policy in effect at the time of the
Change in Control; or
(h) the failure of either Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement.
4. Severance Payment. In the event a Terminating Event occurs within
three (3) years after a Change in Control, the Holding Company shall pay to the
Executive the following amounts, payable in one lump-sum payment on the date of
termination.
4.1 An amount equal to the sum of (a) base salary or other
compensation earned through the date of termination, plus (b) the
Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus
paid during the three fiscal years preceding the termination of
employment, plus (c) all accrued vacation and deferred compensation;
and
4.2 An aggregate amount equal to three times the Executive's
Highest Average Total Compensation. Highest Average Total Compensation
shall be determined by computing the Executive's Total Yearly
Compensation (as hereinafter defined) for each of the then-preceding
five calendar years and by averaging the three highest of the Total
Yearly Compensations thus calculated. Total Yearly Compensation shall
equal the aggregate of all base compensation and any commissions, or
bonuses paid, together with any contributions or accruals made on
behalf of Executive to any profit sharing plan or defined benefit
pension or retirement plan, by the Bank or the Holding Company (or any
predecessor in interest) for the benefit of the Executive for the
calendar year. If the Executive is a participant in a defined benefit
pension or retirement plan, the increase in the actuarial value of the
Executive's benefits under
-3-
<PAGE>
such plan between the start of the calendar year and the end of the
calendar year shall be deemed to have been "paid" by the Executive's
employer for the benefit of the Executive during such calendar year and
shall be included in the calculation of Total Yearly Compensation.
5. Benefit Continuation. In the event a Terminating Event occurs within
three (3) years after a Change in Control, the Holding Company shall continue to
pay to the Executive the disability and medical benefits existing on the date of
the Terminating Event at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of such Terminating Event, for a period of
three (3) years. Such medical benefits shall be deemed to have been provided
under the provisions of COBRA.
6. Employment Status. This Agreement is not an agreement for the
employment of the Executive and shall confer no rights on the Executive except
as herein expressly provided.
7. Term. This Agreement shall take effect on as of the date hereof and
shall terminate upon the earlier of (a) the resignation or termination of the
Executive for any reason prior to a Change in Control, or (b) the resignation of
the Executive after a Change in Control for any reason other than the occurrence
of any of the events enumerated in Section 3.2 of this Agreement.
8. Withholding. All payments made by the Holding Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Holding Company under applicable law.
9. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of The Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Holding Company, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 9. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any or all of the Executive's
rights under this Agreement, the Holding Company shall pay (or the Executive
shall be entitled to recover from the Holding Company, as the case may be) the
Executive's reasonable attorneys' fees and other reasonable costs and expenses
in connection with the enforcement of said rights (including the enforcement of
any arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances recovery
by the Executive of all or a part of any such fees and costs and expenses would
be unjust.
10. Assignment. Neither the Holding Company nor the Executive may make
any assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party and without such
consent any attempted transfer shall be null and void and of no effect. This
Agreement shall inure to the benefit of and be
-4-
<PAGE>
binding upon the Holding Company and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Holding Company of all payments
due him under this Agreement, the Holding Company shall continue such payments
to the Executive's beneficiary designated in writing to the Holding Company
prior to his death (or to his estate, if he fails to make such designation).
11. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
12. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
13. Prior Agreement. This Agreement restates and supersedes in its
entirety the Agreement dated January 1, 1994 among the Employers and the
Executive.
14. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Holding Company at its main office, attention of the Board of Directors.
15. Election of Remedies. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not constitute
a breach by the Executive of any employment agreement the Executive may have
with either Employer and shall not be deemed a voluntary termination of
employment by the Executive for the purpose of interpreting the provisions of
any of the Employers' benefit plans, programs or policies. Nothing in this
Agreement shall be construed to limit the rights of the Executive under any
employment agreement he may then have with either Employer, provided, however,
that if there is a Terminating Event under Section 3 hereof, the Executive may
elect either to receive the severance and other payments provided under Section
4 and Section 5 or such termination benefits as he may have under any such
employment agreement, but may not elect to receive both.
16. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received under this Agreement, the
Holding Company shall pay as additional compensation to the Executive that
amount which, after taking into account all taxes (including any tax which shall
be imposed by Code Section 4999) imposed upon such amount by any federal, state
or local government, shall be equal to the amount of said tax imposed by Code
Section 4999.
-5-
<PAGE>
17. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representatives of the Holding Company.
18. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
WITNESS: EXECUTIVE
- ---------------------------- ------------------------------
Leonard A. Wilson
ATTEST: FIRST ESSEX BANCORP, INC.
By:
- ----------------------------- -----------------------------
Title:
[Seal]
-6-
Exhibit 10.11
-------------
Execution Copy
SPECIAL TERMINATION AGREEMENT
AGREEMENT made as of the 1st day of January, 1994 and restated as of
October 9, 1997, by and between First Essex Bancorp, Inc., a Delaware
corporation (the "Holding Company" and the parent of First Essex Bank, FSB, a
federal savings bank (the "Bank")) (the Bank and the Holding Company shall be
hereinafter collectively referred to as the "Employers") and David W. Dailey of
Billerica, Massachusetts, Massachusetts (the "Executive").
1. Purpose. In order to allow the Executive to consider the prospect of
a Change in Control (as defined in Section 2) in an objective manner and in
consideration of the execution of those certain Amended and Restated Employment
Agreements between the Executive and each of the Employers dated as of the date
hereof (the "Employment Agreements"), the services to be rendered by the
Executive to the Employers and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Holding Company,
the Holding Company is willing to provide, subject to the terms of this
Agreement, certain severance benefits to protect the Executive from the
consequences of a Terminating Event (as defined in Section 3) occurring
subsequent to a Change in Control.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in either of the following events:
2.1 If there has occurred a change in control which the Holding
Company would be required to report in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or, if such regulation is no longer in effect, any
regulations promulgated by the Securities and Exchange Commission
pursuant to the 1934 Act which are intended to serve similar purposes;
2.2 When any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Holding Company or the Bank
representing twenty-five percent (25%) or more of the total number of
votes that may be cast for the election of directors of the Holding
Company or the Bank, as the case may be;
2.3 During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Holding Company, and any new director (other than a director
designated by a person who has entered into an agreement with the
Holding Company to effect a transaction described in Section 2.2, 2.4,
or 2.5 of this Agreement) whose election by the Board or nomination for
election by the Holding Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors of
the
<PAGE>
Holding Company;
2.4 The stockholders of the Holding Company approve a merger,
share exchange or consolidation ("merger or consolidation") of the
Holding Company with any other corporation, other than (a) a merger or
consolidation which would result in the voting securities of the
Holding Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Holding Company
or such surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to implement a
recapitalization of the Holding Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 30% of
the combined voting power of the Holding Company's then outstanding
securities; or
2.5 The stockholders of the Holding Company or the Bank approve a
plan of complete liquidation of the Holding Company or the Bank or an
agreement for the sale or disposition by the Holding Company or the
Bank of all or substantially all of the Holding Company's or the Bank's
assets.
3. Terminating Event. A "Terminating Event" shall mean
3.1 Termination by either of the Employers of the employment of
the Executive with either of the Employers for any reason other than
(i) death or (ii) for Cause (as such term is defined in the Employment
Agreements), or
3.2 Resignation of the Executive from the employ of either of the
Employers, while the Executive is not receiving payments or benefits
from either of the Employers by reason of the Executive's disability,
subsequent to the occurrence of any of the following events:
(a) a significant change in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions
or duties exercised by the Executive immediately prior to the
Change in Control; or
(b) a determination by the Executive that, as a result of a
Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the
Executive immediately prior to such Change in Control; or
(c) a reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time; or
(d) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date
of the Change in Control to a location more than 25 miles from
Andover, Massachusetts, or either Employer's requiring the
Executive to be based anywhere other than the Employers' offices
at such location; or
(e) the failure by either Employer to pay to the Executive
any portion of his current compensation or to pay to the
Executive any portion of an installment of
-2-
<PAGE>
deferred compensation under any deferred compensation under any
deferred compensation program of the either Employer within seven
(7) days of the date such compensation is due; or
(f) the failure by either Employer to continue in effect any
material compensation, incentive, bonus or benefit plan in which
the Executive participates immediately prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by either Employer to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change in Control; or
(g) the failure by either Employer to continue to provide
the Executive with benefits substantially similar to those
available to the Executive under any of either Employer's life
insurance, medical, health and accident, or disability plans or
any other material benefit plans in which the Executive as
participating at the time of the Change in Control, the taking of
any action by either Employer which would directly or indirectly
materially reduce any such benefits, or the failure by either
Employer to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the
Employers' normal vacation policy in effect at the time of the
Change in Control; or
(h) the failure of either Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement.
4. Severance Payment. In the event a Terminating Event occurs within
two (2) years after a Change in Control, the Holding Company shall pay to the
Executive the following amounts, payable in one lump-sum payment on the date of
termination.
4.1 An amount equal to the sum of (a) base salary or other
compensation earned through the date of termination, plus (b) the
Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus
paid during the three fiscal years preceding the termination of
employment, plus (c) all accrued vacation and deferred compensation;
and
4.2 An aggregate amount equal to two (2) times the Executive's
Highest Average Total Compensation. Highest Average Total Compensation
shall be determined by computing the Executive's Total Yearly
Compensation (as hereinafter defined) for each of the then-preceding
five calendar years and by averaging the three highest of the Total
Yearly Compensations thus calculated. Total Yearly Compensation shall
equal the aggregate of all base compensation and any commissions, or
bonuses paid, together with any contributions or accruals made on
behalf of Executive to any profit sharing plan or defined benefit
pension or retirement plan, by the Bank or the Holding Company (or any
predecessor in interest) for the benefit of the Executive for the
calendar year. If the Executive is a participant in a defined benefit
pension or
-3-
<PAGE>
retirement plan, the increase in the actuarial value of the Executive's
benefits under such plan between the start of the calendar year and the
end of the calendar year shall be deemed to have been "paid" by the
Executive's employer for the benefit of the Executive during such
calendar year and shall be included in the calculation of Total Yearly
Compensation.
5. Benefit Continuation. In the event a Terminating Event occurs within
two (2) years after a Change in Control, the Holding Company shall continue to
pay to the Executive the disability and medical benefits existing on the date of
the Terminating Event at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of such Terminating Event, for a period of
two (2) years. Such medical benefits shall be deemed to have been provided under
the provisions of COBRA.
6. Employment Status. This Agreement is not an agreement for the
employment of the Executive and shall confer no rights on the Executive except
as herein expressly provided.
7. Term. This Agreement shall take effect on as of the date hereof and
shall terminate upon the earlier of (a) the resignation or termination of the
Executive for any reason prior to a Change in Control, or (b) the resignation of
the Executive after a Change in Control for any reason other than the occurrence
of any of the events enumerated in Section 3.2 of this Agreement.
8. Withholding. All payments made by the Holding Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Holding Company under applicable law.
9. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of The Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Holding Company, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 9. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any or all of the Executive's
rights under this Agreement, the Holding Company shall pay (or the Executive
shall be entitled to recover from the Holding Company, as the case may be) the
Executive's reasonable attorneys' fees and other reasonable costs and expenses
in connection with the enforcement of said rights (including the enforcement of
any arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances recovery
by the Executive of all or a part of any such fees and costs and expenses would
be unjust.
10. Assignment. Neither the Holding Company nor the Executive may make
any assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party and without such
consent any attempted transfer
-4-
<PAGE>
shall be null and void and of no effect. This Agreement shall inure to the
benefit of and be binding upon the Holding Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
In the event of the Executive's death prior to the completion by the Holding
Company of all payments due him under this Agreement, the Holding Company shall
continue such payments to the Executive's beneficiary designated in writing to
the Holding Company prior to his death (or to his estate, if he fails to make
such designation).
11. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
12. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
13. Prior Agreement. This Agreement restates and supersedes in its
entirety the Agreement dated January 1, 1994 among the Employers and the
Executive.
14. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Holding Company at its main office, attention of the Board of Directors.
15. Election of Remedies. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not constitute
a breach by the Executive of any employment agreement the Executive may have
with either Employer and shall not be deemed a voluntary termination of
employment by the Executive for the purpose of interpreting the provisions of
any of the Employers' benefit plans, programs or policies. Nothing in this
Agreement shall be construed to limit the rights of the Executive under any
employment agreement he may then have with either Employer, provided, however,
that if there is a Terminating Event under Section 3 hereof, the Executive may
elect either to receive the severance and other payments provided under Section
4 and Section 5 or such termination benefits as he may have under any such
employment agreement, but may not elect to receive both.
16. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received under this Agreement, the
Holding Company shall pay as additional compensation to the Executive that
amount which, after taking into account all taxes (including any tax which shall
be imposed by Code Section 4999) imposed upon such amount by any federal, state
or local government, shall be equal to the amount of said tax imposed by Code
-5-
<PAGE>
Section 4999.
17. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representatives of the Holding Company.
18. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
WITNESS: EXECUTIVE
- ------------------------- -------------------------------
David W. Dailey
ATTEST: FIRST ESSEX BANCORP, INC.
By:
- ------------------------- -------------------------------
Title:
[Seal]
-6-
Exhibit 10.12
-------------
Execution Copy
SPECIAL TERMINATION AGREEMENT
AGREEMENT made as of the 30th day of December, 1996 and restated as of
October 9, 1997, by and between First Essex Bancorp, Inc., a Delaware
corporation (the "Holding Company" and the parent of First Essex Bank, FSB, a
federal savings bank (the "Bank")) (the Bank and the Holding Company shall be
hereinafter collectively referred to as the "Employers") and Brian W. Thompson
of Amherst, Massachusetts (the "Executive").
1. Purpose. In order to allow the Executive to consider the prospect of
a Change in Control (as defined in Section 2) in an objective manner and in
consideration of the execution of those certain Amended and Restated Employment
Agreements between the Executive and each of the Employers dated as of the date
hereof (the "Employment Agreements"), the services to be rendered by the
Executive to the Employers and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Holding Company,
the Holding Company is willing to provide, subject to the terms of this
Agreement, certain severance benefits to protect the Executive from the
consequences of a Terminating Event (as defined in Section 3) occurring
subsequent to a Change in Control.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in either of the following events:
2.1 If there has occurred a change in control which the Holding
Company would be required to report in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or, if such regulation is no longer in effect, any
regulations promulgated by the Securities and Exchange Commission
pursuant to the 1934 Act which are intended to serve similar purposes;
2.2 When any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Holding Company or the Bank
representing twenty-five percent (25%) or more of the total number of
votes that may be cast for the election of directors of the Holding
Company or the Bank, as the case may be;
2.3 During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Holding Company, and any new director (other than a director
designated by a person who has entered into an agreement with the
Holding Company to effect a transaction described in Section 2.2, 2.4,
or 2.5 of this Agreement) whose election by the Board or nomination for
election by the Holding Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors of
the Holding Company;
<PAGE>
2.4 The stockholders of the Holding Company approve a merger,
share exchange or consolidation ("merger or consolidation") of the
Holding Company with any other corporation, other than (a) a merger or
consolidation which would result in the voting securities of the
Holding Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Holding Company
or such surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to implement a
recapitalization of the Holding Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 30% of
the combined voting power of the Holding Company's then outstanding
securities; or
2.5 The stockholders of the Holding Company or the Bank approve a
plan of complete liquidation of the Holding Company or the Bank or an
agreement for the sale or disposition by the Holding Company or the
Bank of all or substantially all of the Holding Company's or the Bank's
assets.
3. Terminating Event. A "Terminating Event" shall mean
3.1 Termination by either of the Employers of the employment of
the Executive with either of the Employers for any reason other than
(i) death or (ii) for Cause (as such term is defined in the Employment
Agreements), or
3.2 Resignation of the Executive from the employ of either of the
Employers, while the Executive is not receiving payments or benefits
from either of the Employers by reason of the Executive's disability,
subsequent to the occurrence of any of the following events:
(a) a significant change in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions
or duties exercised by the Executive immediately prior to the
Change in Control; or
(b) a determination by the Executive that, as a result of a
Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the
Executive immediately prior to such Change in Control; or
(c) a reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time; or
(d) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date
of the Change in Control to a location more than 25 miles from
Andover, Massachusetts, or either Employer's requiring the
Executive to be based anywhere other than the Employers' offices
at such location; or
(e) the failure by either Employer to pay to the Executive
any portion of his current compensation or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation under any deferred
-2-
<PAGE>
compensation program of the either Employer within seven (7)
days of the date such compensation is due; or
(f) the failure by either Employer to continue in effect any
material compensation, incentive, bonus or benefit plan in which
the Executive participates immediately prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by either Employer to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change in Control; or
(g) the failure by either Employer to continue to provide
the Executive with benefits substantially similar to those
available to the Executive under any of either Employer's life
insurance, medical, health and accident, or disability plans or
any other material benefit plans in which the Executive as
participating at the time of the Change in Control, the taking of
any action by either Employer which would directly or indirectly
materially reduce any such benefits, or the failure by either
Employer to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the
Employers' normal vacation policy in effect at the time of the
Change in Control; or
(h) the failure of either Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement.
4. Severance Payment. In the event a Terminating Event occurs within
three (3) years after a Change in Control, the Holding Company shall pay to the
Executive the following amounts, payable in one lump-sum payment on the date of
termination.
4.1 An amount equal to the sum of (a) base salary or other
compensation earned through the date of termination, plus (b) the
Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus
paid during the three fiscal years preceding the termination of
employment, plus (c) all accrued vacation and deferred compensation;
and
4.2 An aggregate amount equal to three times the Executive's
Highest Average Total Compensation. Highest Average Total Compensation
shall be determined by computing the Executive's Total Yearly
Compensation (as hereinafter defined) for each of the then-preceding
five calendar years and by averaging the three highest of the Total
Yearly Compensations thus calculated. Total Yearly Compensation shall
equal the aggregate of all base compensation and any commissions, or
bonuses paid, together with any contributions or accruals made on
behalf of Executive to any profit sharing plan or defined benefit
pension or retirement plan, by the Bank or the Holding Company (or any
predecessor in interest) for the benefit of the Executive for the
calendar year. If the Executive is a participant in a defined benefit
pension or retirement plan, the increase in the actuarial value of the
Executive's benefits under
-3-
<PAGE>
such plan between the start of the calendar year and the end of the
calendar year shall be deemed to have been "paid" by the Executive's
employer for the benefit of the Executive during such calendar year and
shall be included in the calculation of Total Yearly Compensation.
5. Benefit Continuation. In the event a Terminating Event occurs within
three (3) years after a Change in Control, the Holding Company shall continue to
pay to the Executive the disability and medical benefits existing on the date of
the Terminating Event at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of such Terminating Event, for a period of
three (3) years. Such medical benefits shall be deemed to have been provided
under the provisions of COBRA.
6. Employment Status. This Agreement is not an agreement for the
employment of the Executive and shall confer no rights on the Executive except
as herein expressly provided.
7. Term. This Agreement shall take effect on as of the date hereof and
shall terminate upon the earlier of (a) the resignation or termination of the
Executive for any reason prior to a Change in Control, or (b) the resignation of
the Executive after a Change in Control for any reason other than the occurrence
of any of the events enumerated in Section 3.2 of this Agreement.
8. Withholding. All payments made by the Holding Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Holding Company under applicable law.
9. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of The Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Holding Company, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 9. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any or all of the Executive's
rights under this Agreement, the Holding Company shall pay (or the Executive
shall be entitled to recover from the Holding Company, as the case may be) the
Executive's reasonable attorneys' fees and other reasonable costs and expenses
in connection with the enforcement of said rights (including the enforcement of
any arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances recovery
by the Executive of all or a part of any such fees and costs and expenses would
be unjust.
10. Assignment. Neither the Holding Company nor the Executive may make
any assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party and without such
consent any attempted transfer shall be null and void and of no effect. This
Agreement shall inure to the benefit of and be
-4-
<PAGE>
binding upon the Holding Company and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Holding Company of all payments
due him under this Agreement, the Holding Company shall continue such payments
to the Executive's beneficiary designated in writing to the Holding Company
prior to his death (or to his estate, if he fails to make such designation).
11. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
12. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
13. Prior Agreement. This Agreement restates and supersedes in its
entirety the Agreement dated December 30, 1996 among the Employers and the
Executive.
14. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Holding Company at its main office, attention of the Board of Directors.
15. Election of Remedies. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not constitute
a breach by the Executive of any employment agreement the Executive may have
with either Employer and shall not be deemed a voluntary termination of
employment by the Executive for the purpose of interpreting the provisions of
any of the Employers' benefit plans, programs or policies. Nothing in this
Agreement shall be construed to limit the rights of the Executive under any
employment agreement he may then have with either Employer, provided, however,
that if there is a Terminating Event under Section 3 hereof, the Executive may
elect either to receive the severance and other payments provided under Section
4 and Section 5 or such termination benefits as he may have under any such
employment agreement, but may not elect to receive both.
16. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received under this Agreement, the
Holding Company shall pay as additional compensation to the Executive that
amount which, after taking into account all taxes (including any tax which shall
be imposed by Code Section 4999) imposed upon such amount by any federal, state
or local government, shall be equal to the amount of said tax imposed by Code
Section 4999.
-5-
<PAGE>
17. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representatives of the Holding Company.
18. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
WITNESS: EXECUTIVE
- --------------------------- --------------------------------
Brian W. Thompson
ATTEST: FIRST ESSEX BANCORP, INC.
By:
- --------------------------- --------------------------------
Title:
[Seal]
-6-
Exhibit 10.13
-------------
[FORM OF AGREEMENT USED FOR DIGAETANO, SAVOIE, BURKE AND GOLON]
Execution Copy
SPECIAL TERMINATION AGREEMENT
AGREEMENT made as of the _________ and restated as of October 9, 1997,
by and between First Essex Bancorp, Inc., a Delaware corporation (the "Holding
Company" and the parent of First Essex Bank, FSB, a federal savings bank (the
"Bank")) (the Bank and the Holding Company shall be hereinafter collectively
referred to as the "Employers") and ____________ of ________________ (the
"Executive").
1. Purpose. In order to allow the Executive to consider the prospect of
a Change in Control (as defined in Section 2) in an objective manner, the
services to be rendered by the Executive to the Employers and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Holding Company, the Holding Company is willing to provide,
subject to the terms of this Agreement, certain severance benefits to protect
the Executive from the consequences of a Terminating Event (as defined in
Section 3) occurring subsequent to a Change in Control.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in either of the following events:
2.1 If there has occurred a change in control which the Holding
Company would be required to report in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or, if such regulation is no longer in effect, any
regulations promulgated by the Securities and Exchange Commission
pursuant to the 1934 Act which are intended to serve similar purposes;
2.2 When any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Holding Company or the Bank
representing twenty-five percent (25%) or more of the total number of
votes that may be cast for the election of directors of the Holding
Company or the Bank, as the case may be;
2.3 During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Holding Company, and any new director (other than a director
designated by a person who has entered into an agreement with the
Holding Company to effect a transaction described in Section 2.2, 2.4,
or 2.5 of this Agreement) whose election by the Board or nomination for
election by the Holding Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors of
the Holding Company;
2.4 The stockholders of the Holding Company approve a merger,
share exchange
<PAGE>
or consolidation ("merger or consolidation") of the Holding Company
with any other corporation, other than (a) a merger or consolidation
which would result in the voting securities of the Holding Company
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity) more than 80% of the combined voting power of
the voting securities of the Holding Company or such surviving entity
outstanding immediately after such merger or consolidation or (b) a
merger or consolidation effected to implement a recapitalization of the
Holding Company (or similar transaction) in which no "person" (as
hereinabove defined) acquires more than 30% of the combined voting
power of the Holding Company's then outstanding securities; or
2.5 The stockholders of the Holding Company or the Bank approve a
plan of complete liquidation of the Holding Company or the Bank or an
agreement for the sale or disposition by the Holding Company or the
Bank of all or substantially all of the Holding Company's or the Bank's
assets.
3. Terminating Event. A "Terminating Event" shall mean
3.1 Termination by either of the Employers of the employment of
the Executive with either of the Employers for any reason other than
(i) death or (ii) for Cause (as such term is defined in Section 4), or
3.2 Resignation of the Executive from the employ of either of the
Employers, while the Executive is not receiving payments or benefits
from either of the Employers by reason of the Executive's disability,
subsequent to the occurrence of any of the following events:
(a) a significant change in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions
or duties exercised by the Executive immediately prior to the
Change in Control; or
(b) a determination by the Executive that, as a result of a
Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the
Executive immediately prior to such Change in Control; or
(c) a reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time; or
(d) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date
of the Change in Control to a location more than 25 miles from
Andover, Massachusetts, or either Employer's requiring the
Executive to be based anywhere other than the Employers' offices
at such location; or
(e) the failure by either Employer to pay to the Executive
any portion of his current compensation or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation under any deferred compensation
program of either Employer within seven (7) days of the date such
-2-
<PAGE>
compensation is due; or
(f) the failure by either Employer to continue in effect any
material compensation, incentive, bonus or benefit plan in which
the Executive participates immediately prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by either Employer to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change in Control; or
(g) the failure by either Employer to continue to provide
the Executive with benefits substantially similar to those
available to the Executive under any of either Employer's life
insurance, medical, health and accident, or disability plans or
any other material benefit plans in which the Executive as
participating at the time of the Change in Control, the taking of
any action by either Employer which would directly or indirectly
materially reduce any such benefits, or the failure by either
Employer to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the
Employers' normal vacation policy in effect at the time of the
Change in Control; or
(h) the failure of either Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement.
4. Cause. Termination for "Cause" shall mean
4.1 Willful or gross neglect of duties for which employed (other
than on account of a medically determinable disability which renders
the Executive incapable of performing such services);
4.2 Committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Bank or the Holding
Company;
4.3 Conviction of a felony involving a crime of moral turpitude;
4.4 Willfully engaging in violations of material banking
regulations; or
4.5 Willfully engaging in conduct materially injurious to the
Bank or the Holding Company in violation of the covenants contained in
this Agreement.
5. Severance Payment. In the event a Terminating Event occurs within
two (2) years after a Change in Control, the Holding Company shall pay to the
Executive the following amounts, payable in one lump-sum payment on the date of
termination.
5.1 An amount equal to the sum of (a) base salary or other
compensation earned through the date of termination, plus (b) the
Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus
paid during the three fiscal years preceding the termination of
-3-
<PAGE>
employment, plus (c) all accrued vacation and deferred compensation;
and
5.2 An aggregate amount equal to two (2) times the Executive's
Highest Average Total Compensation. Highest Average Total Compensation
shall be determined by computing the Executive's Total Yearly
Compensation (as hereinafter defined) for each of the then-preceding
five calendar years and by averaging the three highest of the Total
Yearly Compensations thus calculated. Total Yearly Compensation shall
equal the aggregate of all base compensation and any commissions, or
bonuses paid, together with any contributions or accruals made on
behalf of Executive to any profit sharing plan or defined benefit
pension or retirement plan, by the Bank or the Holding Company (or any
predecessor in interest) for the benefit of the Executive for the
calendar year. If the Executive is a participant in a defined benefit
pension or retirement plan, the increase in the actuarial value of the
Executive's benefits under such plan between the start of the calendar
year and the end of the calendar year shall be deemed to have been
"paid" by the Executive's employer for the benefit of the Executive
during such calendar year and shall be included in the calculation of
Total Yearly Compensation.
6. Benefit Continuation. In the event a Terminating Event occurs within
two (2) years after a Change in Control, the Holding Company shall continue to
pay to the Executive the disability and medical benefits existing on the date of
the Terminating Event at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of such Terminating Event, for a period of
two (2) years. Such medical benefits shall be deemed to have been provided under
the provisions of COBRA.
7. Employment Status. This Agreement is not an agreement for the
employment of the Executive and shall confer no rights on the Executive except
as herein expressly provided.
8. Term. This Agreement shall take effect on as of the date hereof and
shall terminate upon the earlier of (a) the resignation or termination of the
Executive for any reason prior to a Change in Control, or (b) the resignation of
the Executive after a Change in Control for any reason other than the occurrence
of any of the events enumerated in Section 3.2 of this Agreement.
9. Withholding. All payments made by the Holding Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Holding Company under applicable law.
10. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of The Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Holding Company, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 10. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary
-4-
<PAGE>
or desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any or all of the Executive's
rights under this Agreement, the Holding Company shall pay (or the Executive
shall be entitled to recover from the Holding Company, as the case may be) the
Executive's reasonable attorneys' fees and other reasonable costs and expenses
in connection with the enforcement of said rights (including the enforcement of
any arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances recovery
by the Executive of all or a part of any such fees and costs and expenses would
be unjust.
11. Assignment. Neither the Holding Company nor the Executive may make
any assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party and without such
consent any attempted transfer shall be null and void and of no effect. This
Agreement shall inure to the benefit of and be binding upon the Holding Company
and the Executive, their respective successors, executors, administrators, heirs
and permitted assigns. In the event of the Executive's death prior to the
completion by the Holding Company of all payments due him under this Agreement,
the Holding Company shall continue such payments to the Executive's beneficiary
designated in writing to the Holding Company prior to his death (or to his
estate, if he fails to make such designation).
12. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
13. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
14. Prior Agreement. This Agreement restates and supersedes in its
entirety the Agreement dated January 1, 1994 among the Employers and the
Executive.
15. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Holding Company at its main office, attention of the Board of Directors.
16. Election of Remedies. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not constitute
a breach by the Executive of any employment agreement the Executive may have
with either Employer and shall not be deemed a voluntary termination of
employment by the Executive for the purpose of interpreting the provisions of
any of the Employers' benefit plans, programs or policies. Nothing in this
Agreement shall be construed to limit the rights of the Executive under any
employment agreement he may then have with either Employer, provided, however,
that if
-5-
<PAGE>
there is a Terminating Event under Section 3 hereof, the Executive may elect
either to receive the severance and other payments provided under Section 5 and
Section 6 or such termination benefits as he may have under any such employment
agreement, but may not elect to receive both.
17. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received under this Agreement, the
Holding Company shall pay as additional compensation to the Executive that
amount which, after taking into account all taxes (including any tax which shall
be imposed by Code Section 4999) imposed upon such amount by any federal, state
or local government, shall be equal to the amount of said tax imposed by Code
Section 4999.
18. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by duly authorized
representatives of the Holding Company.
19. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
WITNESS: EXECUTIVE
- -------------------------- ------------------------------
[Name]
ATTEST: FIRST ESSEX BANCORP, INC.
By:
- -------------------------- ------------------------------
Title:
[Seal]
-6-
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