UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, for the quarter and nine months
ended September 30, 1997, 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 0-17138
NORWICH FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
06-1226755
(IRS Employer Identification Number)
4 BROADWAY, NORWICH, CONNECTICUT
(Address of principal executive offices)
06360
(Zip Code)
860-889-2621
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
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 and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
There were 5,460,791 shares of common stock, par value $.01,
outstanding as of October 31, 1997.
<PAGE>
FORM 10-Q
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flow 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Exhibit A - Consolidated Financial Results 17
Exhibit B - Consolidated Nonperforming Assets
Summary 18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 19
Item 2 - Changes in Securities 19
Item 3 - Defaults Upon Senior Securities 19
Item 4 - Submission of Matters to a Vote of
Securities Holders 19
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 19
SIGNATURES 20
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
(In thousands, September 30, December 31,
except share data) 1997 1996 1996
<CAPTION>
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 21,848 $ 20,629 $ 19,419
Investments
Federal funds sold 2,000 2,500 3,700
Money market instruments,
held to maturity (market
value of $58,123 and
$29,652 at September 30, 1997
and 1996 and $31,765 at
December 31, 1996) 58,129 29,650 31,769
Mortgage-backed securities,
available for sale
(amortized cost of $87,327
and $104,231 at September 30,
1997 and 1996 and $100,844
at December 31, 1996) 88,093 104,357 101,025
Investment securities
Held to maturity (market value
of $38,667 at September 30,
1996 and $20,941 at
December 31, 1996) 0 38,672 20,945
Available for sale
(amortized cost of $17,489
and $8,699 at September 30,
1997 and 1996 and $9,936
at December 31, 1996) 20,025 9,086 10,556
Federal Home Loan Bank
stock, at cost 3,715 3,715 3,715
------- ------- -------
Total investments 171,962 187,980 171,710
Loans
Mortgage 351,662 347,618 350,781
Other 136,857 123,029 126,330
------- ------- -------
Total loans 488,519 470,647 477,111
Less: allowance for
loan losses (13,283) (15,544) (13,928)
------- ------- -------
Net loans 475,236 455,103 463,183
Loans and foreclosed
properties held for sale 1,263 2,381 172
Premises and equipment, net 6,009 6,230 6,216
Accrued income receivable 3,661 3,483 3,474
Foreclosed properties 1,866 437 1,167
Deferred tax asset, net 4,330 4,374 5,356
Other assets 14,685 13,826 12,602
-------- -------- --------
Total assets $700,860 $694,443 $683,299
======== ======== ========
LIABILITIES
Total deposits $594,882 $594,256 $585,080
Mortgagors' escrow
accounts 1,868 1,761 3,654
FHLB advances 15,652 16,349 11,928
Other liabilities 6,682 7,252 6,139
-------- -------- --------
Total liabilities $619,084 $619,618 $606,801
-------- -------- --------
STOCKHOLDERS' EQUITY
Common stock 60 60 60
Additional paid in capital 58,716 58,720 58,708
Retained income 27,236 22,575 23,869
Less: Treasury stock, at
cost (521,540 and 568,890
shares at September 30, 1997
and 1996 and 554,240 shares
at December 31, 1996) (6,184) (6,833) (6,611)
Unrealized gain on
securities available for
sale, net of tax effect 1,948 303 472
------- ------- -------
Total stockholders'
equity 81,776 74,825 76,498
------- ------- -------
Total liabilities and
stockholders' equity $700,860 $694,443 $683,299
======== ======== ========
BOOK VALUE PER SHARE $ 15.05 $ 13.90 $ 14.17
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Income
Nine Months Ended Three Months Ended
(In thousands, September 30, September 30,
except share data) 1997 1996 1997 1996
<CAPTION>
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND
INCOME
Mortgage loans $22,889 $21,569 $7,705 $7,309
Other loans 8,942 8,083 3,083 2,745
Federal funds sold 179 219 62 52
Money market instruments 2,361 916 906 363
U.S. Government and
agency obligations 59 3,758 0 949
Mortgage-backed
securities 4,416 4,322 1,444 1,552
Other bonds 406 45 143 15
Corporate stocks 253 229 87 98
------ ------ ------ ------
Total interest income 39,505 39,141 13,430 13,083
INTEREST EXPENSE
Deposits 16,950 18,511 5,719 6,030
FHLB advances 644 800 261 266
------ ------ ----- -----
Total interest expense 17,594 19,311 5,980 6,296
------ ------ ----- -----
NET INTEREST INCOME 21,911 19,830 7,450 6,787
LOAN LOSS PROVISION 600 800 200 400
------ ------ ----- -----
NET INTEREST INCOME AFTER
LOAN LOSS PROVISION 21,311 19,030 7,250 6,387
------ ------ ----- -----
NONINTEREST INCOME
Mortgage servicing fees 502 482 169 154
Other service fee income 2,235 1,834 768 575
Net securities gains 438 264 314 55
Gains (losses) on loans
sold or held for sale 339 (12) 253 35
Other (48) 300 (20) 238
----- ----- ----- -----
Total noninterest
income 3,466 2,868 1,484 1,057
NONINTEREST EXPENSE
Salaries and employee
benefits 7,292 7,181 2,536 2,340
Furniture and equipment 925 894 306 284
Net occupancy 1,757 1,821 598 595
Data processing 553 499 179 157
Advertising and promotion 384 373 111 70
Legal 231 85 148 22
FDIC/State assessments 56 12 18 1
Amortization of intangibles 536 486 196 162
Provision for losses on
foreclosed properties 77 0 0 0
Other nonperforming asset
expenses 198 23 30 37
Other operating expenses 2,488 2,223 1,077 653
----- ----- ----- -----
Total noninterest
expense 14,497 13,597 5,199 4,321
------ ------ ----- -----
INCOME BEFORE INCOME
TAXES 10,280 8,301 3,535 3,123
INCOME TAX PROVISION 4,210 3,591 1,447 1,335
------ ------ ------ ------
NET INCOME $ 6,070 $ 4,710 $ 2,088 $ 1,788
======= ======= ======= =======
NET INCOME PER SHARE
PRIMARY 1.08 0.84 0.37 0.32
FULLY DILUTED $ 1.07 $ 0.83 $ 0.37 $ 0.32
</TABLE>
<PAGE>
<TABLE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flow
Nine Months Ended
September 30,
(Dollars in thousands) 1997 1996
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 6,070 $ 4,710
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loan loss provision 600 800
Provision for foreclosed real estate 77 0
Depreciation, amortization and
accretion (1,622) (2,397)
Amortization of intangible 536 486
Net gain on sales of securities (438) (264)
(Gain) loss on loans sold (339) 12
Loans originated for sale (27,768) (19,102)
Proceeds from loans sold 27,016 19,482
Gain on nonperforming loans
and foreclosed properties
held for sale 0 (319)
Gain on foreclosed properties (106) (62)
Gain on sale of branch 0 (201)
Change in assets and liabilities net
of effects from the acquisition
of branch offices and the purchase
of Seconn Holding Company:
Change in accrued income receivable (181) 276
Change in deferred tax asset 0 575
Change in all other liabilities 485 372
Change in all other assets 510 127
----- -----
Net cash provided by
operating activities 4,840 4,495
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired net of cash paid
for purchase of Seconn Holding
Company 0 10,387
Mortgage-backed securities
available for sale:
Purchases (9,008) (24,979)
Proceeds from sales 11,987 0
Maturities and repayments 10,486 14,122
Other investment securities
available for sale:
Purchases (13,372) (22,284)
Proceeds from sales 6,248 21,306
Maturities and repayments 0 8,500
Other investment securities
held to maturity:
Purchases (129,999) (136,280)
Maturities and repayments 127,000 182,120
Net advances on loans (13,516) (24,980)
Acquisition of loans and other assets (4,227) 0
Proceeds from sales of foreclosed
properties 1,281 870
Proceeds from sales of loans and
foreclosed properties held for sale 0 2,439
Capital expenditures, net (521) (545)
------- ------
Net cash (used) provided by
investing activities (13,641) 30,676
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in savings,
demand and other deposit accounts (6,151) 6,674
Net decrease in time deposits (9,476) (14,449)
Sale of deposits 0 (9,820)
Assumption of deposits and liabilities
of acquired branches 25,487 0
Net decrease in mortgagors'
escrow accounts (1,786) (1,475)
Proceeds from FHLB advances 14,176 20,902
Repayment of FHLB advances (10,452) (26,953)
Proceeds from exercise of stock options 435 1,041
Purchase of treasury stock 0 (4,109)
Cash dividends paid (2,703) (2,603)
------ ------
Net cash provided (used) by
financing activities 9,530 (30,792)
------ ------
Net increase in cash and cash
equivalents 729 4,379
Cash and cash equivalents at
beginning of period 23,119 18,750
------ ------
Cash and cash equivalents at
end of period $23,848 $23,129
======= =======
</TABLE>
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
September 30, 1997
I. Basis of Presentation
The consolidated financial statements included herein have been
prepared by Norwich Financial Corp., (NFC or the Company), without an
audit except for the December 31, 1996 balance sheet, which was
derived from the Annual Report on Form 10-K, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although NFC believes the disclosures are adequate to
make the information presented not misleading. The information
furnished reflects all adjustments which are, in the opinion of
management, of a normal, recurring nature and necessary for a fair
statement of the results for the interim periods. These consolidated
financial statements should be read in conjunction with the
consolidated financial statements and related notes included in NFC's
Annual Report on Form 10-K for the year ended December 31, 1996 and
with the supplementary schedules presented as Exhibits A and B on
pages 17 and 18. NFC's consolidated financial statements contained
herein have been prepared in accordance with the accounting policies
described in Note 2 to the December 31, 1996 financial statements
included in NFC's 1996 Annual Report on Form 10-K.
II. Net Income Per Share
Earnings per common share have been computed based on the following:
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
<CAPTION>
Net income applicable to
common stock (in thousands)
<S> <C> <C> <C> <C>
$6,070 $4,710 $2,088 $1,788
Average number of common
and common equivalent
shares outstanding 5,617,751 5,623,848 5,661,332 5,533,592
Average number of common
shares outstanding -
assuming full dilution 5,678,966 5,674,430 5,692,265 5,561,658
</TABLE>
III. Capital Ratios
<TABLE>
September 30, 1997
------------------
Regulatory Requirements
to be Considered Well
Actual Capitalized
------- ------------------------
<CAPTION>
<S> <C> <C>
Risk-based
Tier 1 13.53% 6.00%
Total 14.80 10.00
Leverage 10.37% 5.00%
</TABLE>
<PAGE>
IV. Realized and Unrealized Gains and Losses on Investment Securities
Unrealized gains and losses as of September 30, 1997 and September
30, 1996 were as follows:
<TABLE>
September 30, 1997
-------------------------
Available for Sale Held to Maturity
Mortgage-backed All Other All Other
Securities Securities Securities
--------------- ----------- -----------------
<CAPTION>
<S> <C> <C> <C>
Unrealized gains $984 $2,536 $ 0
Unrealized losses 218 0 6
---- ------ ---
Net unrealized gains
(losses) $766 $2,536 $ (6)
</TABLE>
<TABLE>
September 30, 1996
---------------------------
Available for Sale Held to Maturity
Mortgage-backed All Other All Other
Securities Securities Securities
----------------- ------------ -----------------
<CAPTION>
<S> <C> <C> <C>
Unrealized gains $810 $397 $ 8
Unrealized losses 684 10 11
---- ---- ---
Net unrealized gains
(losses) $126 $387 $ (3)
</TABLE>
Proceeds from sales and realized gains and losses on investments were
as follows:
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
(In thousands) 1997 1996 1997 1996
<CAPTION>
<S> <C> <C> <C> <C>
Other investment
securities available
for sale
Proceeds $ 6,248 $21,306 $1,458 $20,968
Realized gains 407 284 314 78
Realized losses (8) (23) 0 (23)
Mortgage-backed securities
available for sale
Proceeds 11,987 0 3,625 0
Realized gains 79 0 0 0
Realized losses $ (67) $ 0 $ 0 $ 0
</TABLE>
The Company did not receive a capital gain distribution during the
quarter ended September 30, 1997 or 1996. During the first nine
months of 1997, the Company received a capital gain distribution of
$27,000 compared to $3,000 received during the nine months ended
September 30, 1996.
<PAGE>
V. Adoption of New Financial Accounting Standards
The Company adopted SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," on
January 1, 1997, with no impact on its results of operations. SFAS
No. 125 provides financial reporting standards for the derecognition
and recognition of financial assets, including the distinction
between transfers of financial assets which should be recorded as
sales and those which should be recorded as secured borrowings.
Transfers relating to secured borrowings, repurchase agreements and
similar transactions made prior to December 31, 1997 are not covered
under this Statement. This Statement also amends the accounting for
mortgage servicing rights and supersedes SFAS No. 122, "Accounting
for Mortgage Servicing Rights."
The Financial Accounting Standards Board has recently issued SFAS No.
128, "Earnings per Share." This statement simplifies the computation
of earnings per share (EPS) by replacing the presentation of primary
EPS with basic EPS. Under the new statement, dual presentation of
basic and diluted EPS is required on the face of the income statement
for entities with complex capital structures. A reconciliation of
the numerator and denominator used in the basic EPS computation to
the diluted EPS computation's numerator and denominator is also
required. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim
periods. Upon adoption of SFAS No. 128, the Company expects basic
EPS to be higher than the currently disclosed primary EPS. Diluted
EPS, under SFAS No. 128, is expected to be comparable to the
currently disclosed fully diluted EPS.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was
issued. The objective of SFAS No. 130 is to report comprehensive
income which is defined as all changes in equity of an enterprise
that result from transactions and other economic events of the period
other than transactions with owners. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements.
This Statement is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required.
VI. Mergers and Acquisitions
On March 7, 1997 the Company completed its acquisition of two
branches of First Union Bank of Connecticut. Under terms of the
acquisition, the newly acquired branches were merged with The Norwich
Savings Society's existing offices in New London and Groton. The
acquisition includes the transfer of approximately $25.5 million in
deposits and $1.1 million in loans.
<PAGE>
On September 4, 1997 the Company announced that it has reached a
definitive agreement for People's Bank of Bridgeport, Connecticut
(People's), to acquire Norwich Financial Corp. The agreement has
been approved by the boards of directors of both companies and is
subject to the approval of NFC's and People's stockholders, as well
as appropriate regulatory agencies. The transaction is expected to
close during the first quarter of 1998.
Based on the September 3, 1997 closing price of $29.50 per People's
share, NFC shareholders will be entitled to receive either cash or
shares of People's common stock having a value of $28.85. In each
case this is subject to possible adjustment in response to
fluctuations in the trading price of People's stock. Approximately
half of the consideration will be in cash and half in People's common
stock. The stock portion is expected to be a tax-free exchange for
the NFC shareholders. Based on the September 3, 1997 trading price of
People's common stock, the resulting purchase price will be
approximately $164 million.
VII. Supplemental Disclosure for Statements of Cash Flows
<TABLE>
Nine Months Ended
September 30,
<CAPTION>
(Dollars in thousands) 1997 1996
<S> <C> <C>
Supplemental disclosure
Interest $17,492 $19,259
Income taxes 2,843 3,235
Supplemental information on
noncash transactions
Transfer to foreclosed properties 1,951 283
Loans to facilitate the sale of
foreclosed properties $ 337 $ 1,272
</TABLE>
VIII. Reclassification
Certain reclassifications have been made to the prior years' amounts
to conform with the 1997 presentation.
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Comparison of the Three and Nine Month Periods Ending
September 30, 1997 and 1996
The following discussion and analysis presents a review of Norwich
Financial Corp's (NFC or the Company) financial condition and
results of operations. This review should be read in conjunction
with the consolidated financial statements and other data presented
herein.
GENERAL
NFC is a holding company and parent to The Norwich Savings Society
(the Bank). The Bank is a state chartered stock savings bank
headquartered in Norwich, Connecticut which originates real estate,
commercial and consumer loans in southeastern Connecticut. The Bank
funds its operations through the taking of deposits in the same
market area.
On March 7, 1997 the Company completed its acquisition of two
branches of First Union Bank of Connecticut. Under terms of the
acquisition, the newly acquired branches were merged with The Norwich
Savings Society's existing offices in New London and Groton. The
acquisition includes the transfer of approximately $25.5 million in
deposits and $1.1 million in loans.
On September 4, 1997 the Company announced that it has reached a
definitive agreement for People's Bank of Bridgeport, Connecticut
(People's), to acquire Norwich Financial Corp. The agreement has
been approved by the boards of directors of both companies and is
subject to the approval of NFC's and People's stockholders, as well
as appropriate regulatory agencies. The transaction is expected to
close during the first quarter of 1998.
Based on the September 3, 1997 closing price of $29.50 per People's
share, NFC shareholders will be entitled to receive either cash or
shares of People's common stock having a value of $28.85. In each
case this is subject to possible adjustment in response to
fluctuations in the trading price of People's stock. Approximately
half of the consideration will be in cash and half in People's common
stock. The stock portion is expected to be a tax-free exchange for
the NFC shareholders. Based on the September 3, 1997 trading price of
People's common stock, the resulting purchase price will be
approximately $164 million.
Located in a region undergoing an economic revival, the Bank is
strategically positioned between two thriving casinos allowing it to
take advantage of the area's recent growth in gaming and tourism.
While southeastern Connecticut was dependent for decades almost
solely on the defense industry, the area's economy is currently
anchored by the Mashantucket Pequot Foxwoods Resort casino in Ledyard
and the Mohegan Sun Resort in Uncasville. Tourism continues to grow
as evidenced by projects such as the expansion of the Mystic
Marinelife Aquarium which is expected to attract additional visitors
to the region. In addition to the regional tourism and gaming
concentration, eastern Connecticut's economy also benefits by the
presence of employers such as Pfizer and General Dynamic's Electric
Boat Division.
SUMMARY
Net income for the three months ended September 30, 1997 was $2.1
million, $300,000 higher than net income for the three months ended
September 30, 1996 of $1.8 million. The increase in net income for
the three months ended September 30, 1997 is attributable to an
increase in net interest income and other noninterest income
partially offset by an increase in noninterest expenses. Fully
diluted earnings per share were $.37 for the quarter ended September
30, 1997 compared with $.32 per share for the quarter ended September
30, 1996. Core earnings for the third quarter of 1997 were $3.2
million which is consistent with the third quarter of 1996. NFC
defines core earnings as net interest income plus service fee income,
less noninterest expenses other than provision for losses on
foreclosed properties.
<PAGE>
Net income was $6.1 million for the nine months ended September 30,
1997, an increase of $1.4 million from the $4.7 million reported for
the nine months ended September 30, 1996. Consistent with the
quarterly trend, the increase in net income is primarily due to an
increase in net interest income and other noninterest income
partially offset by an increase in noninterest expenses. Fully
diluted earnings per share were $1.07 for the nine months ended
September 30, 1997 compared with $.83 per share for the nine months
ended September 30, 1996.
Total nonperforming assets at September 30, 1997, excluding "loans
and foreclosed properties held for sale," were $8.4 million compared
to $9.0 million at the same date a year earlier. As of September 30,
1997, total nonperforming assets, including "loans and foreclosed
properties held for sale," were $8.4 million compared to $10.7
million at September 30, 1996.
Return on average assets and return on average equity were 1.18% and
10.27%, respectively, for the third quarter of 1997 compared with
1.00% and 9.64% for the third quarter of 1996. Comparable returns
for the nine months ended September 30, 1997 were 1.17% and 10.34%,
respectively, compared to 0.89% and 8.30% for the nine months ended
September 30, 1996.
NET INTEREST INCOME
Net interest income increased to $7.5 million for the quarter ended
September 30, 1997 representing a $663,000 or 9.8% increase from the
$6.8 million of net interest income reported during the third quarter
of 1996. The increase can be attributed to an improvement in net
interest margin (net yield on interest earning assets) on a fully
taxable equivalent basis to 4.48% for the three months ended
September 30, 1997 from 4.07% for the prior year's quarter. Several
factors contributed to this improvement: the increase in the rate of
return on earning assets on a fully taxable equivalent basis to 8.05%
for the third quarter of 1997 from 7.79% for the third quarter of
1996; the shift in the composition of NFC's interest-earning assets
from investment securities to higher yielding loans; and the
conservative pricing policy for time deposits decreased the Bank's
cost of funds to 4.41% for the third quarter of 1997 from 4.50% for
the third quarter of 1996.
Net interest income for the first nine months of 1997 was $21.9
million compared to $19.8 million for the first nine months of 1996.
Net interest margin on a fully taxable basis improved to 4.44% for
the nine months ended September 30, 1997 from 3.94% for the
comparable nine months of 1996. A shift in NFC's interest-earning
assets from investments to higher yielding loans increased the Bank's
yield on interest earning assets to 8.01% for the nine month period
ended September 30, 1997 from 7.76% for the nine months ended
September 30, 1996. In addition, as mentioned above, the Bank has
maintained a conservative pricing policy on time deposits which led
to a decrease in the cost of interest-bearing liabilities to 4.40%
for the first nine months of 1997 from 4.59% during the first nine
months of 1996.
At September 30, 1997, loans represented 74.0% of total earning
assets compared to 71.5% at September 30, 1996. Investments
represented 26.0% of total earning assets at September 30, 1997
versus 28.5% at September 30, 1996.
<PAGE>
RATE SENSITIVITY
An ongoing objective of management is to manage asset and liability
positions so as to moderate the effect of interest rate fluctuations
on net interest income. NFC's position is measured by the ratio of
interest rate sensitive assets to interest rate sensitive liabilities
within a one year time frame. Management attempts to maintain this
ratio within a range of 90% to 110%. In addition, management
continually reviews the potential effect that changes in interest
rates could have on net interest income and on the repayment of rate
sensitive assets and on funding requirements of rate sensitive
liabilities. As of September 30, 1997, NFC's one year ratio of rate
sensitive assets to rate sensitive liabilities was 88.2% compared to
88.8% at September 30, 1996.
The Investment Committee of NFC's Board of Directors reviews
asset/liability guidelines from time to time, including the target
range for the rate sensitivity ratio at one year. The 90% to 110%
guideline is still in effect and the Investment Committee approves
ratios outside the target range.
NONPERFORMING ASSETS (NPAs) AND ALLOWANCES AND PROVISIONS FOR CREDIT
LOSSES
At the end of the third quarter of 1997, NPAs, excluding "loans and
foreclosed properties held for sale," were $8.4 million, which was
$639,000 (7.1%) lower than at the end of the third quarter of 1996
yet was $1.4 million (20.1%) higher than at the end of 1996.
Included in nonperforming assets were nonperforming loans of $6.5
million or 77.8% of nonperforming assets, excluding "loans and
foreclosed properties held for sale," at September 30, 1997 compared
to $8.6 million or 95.2% at September 30, 1996. Foreclosed
properties were $1.9 million at September 30, 1997 compared to
$437,000 at September 30, 1996 and represented 22.2% and 4.8%,
respectively, of total nonperforming assets excluding "loans and
foreclosed properties held for sale."
The allowance for loan losses was $13.3 million at September 30,
1997, $13.9 at December 31, 1996 and $15.5 million one year ago. The
provision for losses on loans was $200,000 for the third quarter of
1997 and $600,000 for the first nine months of 1997 compared to
$400,000 and $800,000 for the third quarter and first nine months of
1996.
NFC's ratio of allowance for loan losses to nonperforming loans,
excluding "loans and foreclosed properties held for sale," was
203.29% as of September 30, 1997 compared to 239.07% at December 31,
1996 and 180.70% at September 30, 1996.
<PAGE>
Net charge-offs for the third quarter and first nine months of 1997
were $773,000 and $1.3 million respectively, compared to $79,000 and
$930,000 for the third quarter and first nine months of 1996. Net
charge-offs on loans and foreclosed properties were as follows:
<TABLE>
Nine Months Ended Three Months Ended
September 30, September 30,
<CAPTION>
(In thousands) 1997 1996 1997 1996
----------------- -----------------
<S> <C> <C> <C> <C>
Loans $1,245 $930 $773 $79
Foreclosed properties 77 0 0 0
------ ---- ---- ---
Total chargeoffs $1,322 $930 $773 $79
</TABLE>
The bulk of NFC's problem assets and charge-offs have been
concentrated in the commercial real estate and business loan
portfolios. As of September 30, 1997, these two portfolios accounted
for $6.5 million or 77.8% of NPAs compared with $6.0 million or 66.8%
at September 30, 1996. Net charge-offs of commercial real estate,
business loans and related foreclosed properties represented $748,000
or 56.6% of NFC's total net charge-offs for the first nine months of
1997 compared to $471,000 or 50.7% for the first nine months of 1996.
Provisions and allowances for losses are dependent on several
factors, including the quality and estimated value of underlying
collateral held on nonperforming assets, the results of NFC's
systematic methodology to evaluate allowance adequacy, and charge-
offs of existing nonperforming assets.
Management monitors the adequacy of the allowance for losses on loans
and foreclosed properties on a continual basis. Management believes
the allowance for losses on loans and foreclosed properties is
adequate. While management uses available information to recognize
losses on loans and foreclosed properties, future additions to the
allowance and additional write-downs may be necessary based on
changes in economic conditions. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Bank's allowance for losses on loans and
valuation of foreclosed properties. Such agencies may require the
Bank to recognize additions to the allowance or additional write-
downs based on their judgment of information available to them at the
time of their examination.
<PAGE>
NONINTEREST INCOME
Noninterest income for the current quarter amounted to $1.5 million
compared to $1.1 million for the year-earlier quarter. Several
factors contributed to this improvement; service fee income increased
$208,000, securities gains increased $259,000 and gains on the sale
of loans increased $218,000. The increase in service fees resulted
both from increased account activity and a change in the Company's
deposit fee structure in late 1996. The increase in gains on sale of
loans is due to the recording of an additional $130,000 of mortgage
servicing rights during the first nine months of 1997 compared to the
corresponding period in the prior year. Also, during the third
quarter 1997, the Bank sold $5.4 million of government loans with
servicing released which generated a servicing release premium of
$98,000. These increases in noninterest income were partially offset
by a decrease in other noninterest income.
For the nine months ended September 30, 1997 noninterest income was
$3.5 million compared to $2.9 million during the same period of 1996.
Consistent with the quarterly trend, service fees increased $421,000,
securities gains increased $174,000 and gains on the sale of loans
increased $351,000. These increases were offset by a decrease in
other noninterest income of $348,000.
NONINTEREST EXPENSE
Noninterest expense was $5.2 million for the third quarter of 1997
compared to $4.3 million for the third quarter of 1996. The increase
of $878,000 is partially attributable to merger related legal and
other operating expenses. Also, the amortization of intangibles
increased during 1997 as two branches of First Union were acquired in
the first quarter of 1997.
Noninterest expense was $14.5 million for the nine months ended
September 30, 1997 compared to $13.6 million for the nine months
ended September 30, 1996. The increase of $900,000 is partially
attributable to the merger related legal and other operating expenses
noted above as well as additional amortization of intangibles as two
branches of First Union were acquired in the first quarter of 1997.
The increase is also attributable to an increase in the provision for
losses on foreclosed properties ($77,000) and an increase in other
nonperforming asset expenses ($175,000).
The increase in other nonperforming asset expenses in the first nine
months of 1997 is due to lower gains on sales of assets in 1997
versus the comparable period of 1996. During the first nine months
of 1997, gains of $89,000 were recognized on sales of nonperforming
loans and foreclosed properties compared with $430,000 in the first
nine months of 1996. The significant gains during 1996 were in part
offset by higher operating costs on the corresponding properties.
INCOME TAXES
The effective tax rate for the third quarter and first nine months of
1997 was 41%, down slightly from 43% for the same periods in 1996.
The $619,000 increase in income taxes to $4.2 million for the nine
months ended September 30, 1997 is substantially attributable to a
higher level of taxable income.
<PAGE>
CHANGES IN FINANCIAL CONDITION
The increase in total assets from December 31, 1996 is due primarily
to the acquisition of two First Union branch offices during the first
quarter of 1997.
Total liabilities were $619.1 million at September 30, 1997, an
increase of $12.3 million from $606.8 million at December 31, 1996.
The increase is due primarily to the First Union transaction in the
first quarter of 1997. This increase was offset by a modest outflow
of deposits as the Bank continued a conservative pricing structure
for time deposits.
Stockholders' equity was $81.8 million at September 30, 1997, an
increase of $5.3 million from $76.5 million at December 31, 1996. At
September 30, 1997, NFC's equity represented 11.67% of total assets
compared to 11.20% at December 31, 1996 and 10.77% at September 30,
1996. Book value per share was $15.05 at September 30, 1997 compared
to $14.17 at December 31, 1996 and $13.90 at September 30, 1996.
CAPITAL RESOURCES
Capital ratios for NFC and the Bank continue to be well in excess of
all regulatory requirements as of September 30, 1997. The leverage
capital ratio was 10.37% and total risk based capital was 14.80%
compared to 9.58% and 15.10%, respectively, at September 30, 1996.
Capital ratios remain well above minimum regulatory requirements of
4% for leverage capital and 8% for total risk-based capital.
LIQUIDITY
Liquidity is the ability of the Company to meet each maturing
obligation or customer demand for funds. NFC's main source of
liquidity is dividends from the Bank. As a result, the liquidity of
the Company is largely dependent upon the liquidity and profitability
of the Bank and the ability of the Bank to pay dividends under
applicable laws and regulations.
The Bank considers liquid assets to be cash and due from banks,
Federal funds sold, time deposits with other banks, money market
instruments and U.S. Government and agency obligations maturing
within one year. As of September 30, 1997, liquid assets were $87.2
million or 12.5% of total assets compared to $91.5 million and 13.2%
as of September 30, 1996.
Liquidity is generated by deposit inflows, loan principle and
interest payments, maturing investments and Federal Home Loan Bank
advances. Principal uses of funds include loan originations,
investment purchases, payments of interest on deposits and payments
to meet operating expenses. Due primarily to the First Union
acquisition, total deposits, including mortgage escrow, showed growth
of $8.0 million during the first nine months of 1997.
INFLATION
The effect of inflation is reflected in the cost of NFC's operations.
Since the assets and liabilities of NFC are primarily monetary in
nature, the extent to which inflation affects interest rates will, in
turn, affect NFC's operation.
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
<TABLE>
Exhibit A
Consolidated Financial Results
Nine Months Ended Three Months Ended
(In thousands, September 30, September 30,
(except share data) 1997 1996 1997 1996
<CAPTION>
<S> <C> <C> <C> <C>
EARNINGS
Interest income $39,505 $39,141 $13,430 $13,083
Interest expense 17,594 19,311 5,980 6,296
Net interest income 21,911 19,830 7,450 6,787
Net income 6,070 4,710 2,088 1,788
Fully diluted earnings
per share 1.07 0.83 0.37 0.32
Weighted average common
shares outstanding,
including common
stock equivalents 5,678,966 5,674,430 5,692,265 5,561,658
RATIOS (annualized)
Return on average
assets 1.17% 0.89% 1.18% 1.00%
Return on average
stockholders' equity 10.34 8.30 10.27 9.64
Average stockholders'
equity to average
assets 11.29 10.71 11.45 10.41
YIELD DATA
(taxable equivalent -
annualized)
Net interest margin 4.44 3.94 4.48 4.07
Net interest spread 3.61 3.17 3.64 3.29
Asset yields
Loans 8.71 8.68 8.75 8.66
Investments 6.02 5.83 6.07 5.86
Earning assets 8.01 7.76 8.05 7.79
Cost of funds
Deposits 4.35 4.54 4.35 4.45
FHLB advances 6.43 6.45 6.48 6.39
Interest bearing
liabilities 4.40% 4.59% 4.41% 4.50%
</TABLE>
<TABLE>
<CAPTION>
(In thousands, September 30, December 31,
except share data) 1997 1996 1996
OUTSTANDING BALANCES
<S> <C> <C> <C>
Total assets $700,860 $694,443 $683,299
Net loans 475,236 455,103 463,183
Deposits 594,882 594,256 585,080
FHLB advances 15,652 16,349 11,928
Stockholders' equity 81,776 74,825 76,498
Stockholders' equity to
total assets 11.67% 10.77% 11.20%
Book value per share $15.05 $13.90 $14.17
Shares of common stock 5,432,341 5,384,991 5,399,641
</TABLE>
<PAGE>
NORWICH FINANCIAL CORP. AND SUBSIDIARY
<TABLE>
Exhibit B
Nonperforming Assets Summary
September 30, December 31,
(Dollars in thousands) 1997 1996 1996
<CAPTION>
<S> <C> <C> <C>
Nonperforming loans
Residential real estate $1,738 $2,667 $1,476
Commercial real estate
Permanent 2,666 3,693 2,932
Land and construction 1,534 248 114
Commercial 471 1,704 1,176
Consumer 125 290 128
----- ----- -----
Total nonperforming loans 6,534 8,602 5,826
----- ----- -----
Foreclosed properties 1,866 437 1,167
------ ----- -----
Total nonperforming assets
before nonperforming assets
held for sale 8,400 9,039 6,993
Nonperforming assets
held for sale
Loans on nonaccrual 0 851 0
Foreclosed properties 0 857 0
------ ----- ------
Total nonperforming assets
held for sale 0 1,708 0
------ ------- ------
Total nonperforming assets $8,400 $10,747 $6,993
====== ======= ======
Performing restructured loans $2,951 $ 800 $ 532
====== ======= ======
</TABLE>
Summary of Impaired Loans
At September 30, 1997, all loans classified as nonperforming in the
above table, as well as performing restructured loans of $3.0
million, are classified as impaired. Impaired loans of $9.5 million
as of September 30, 1997 had an associated allowance for losses of
$1.3 million.
<TABLE>
September 30, December 31,
(Dollars in thousands) 1997 1996 1996
<CAPTION>
<S> <C> <C> <C>
Net charge-offs year to date $1,322 $930 $3,164
Net charge-offs to average
loans and foreclosed
properties
For the period 0.27% 0.20% 0.69%
Annualized 0.36 0.27 (a)
Allowances for losses
On loans $13,283 $15,544 $13,928
On foreclosed properties 0 0 0
------- ------- -------
Combined $13,283 $15,544 $13,928
======= ======= =======
Ratios (exclusive of
nonperforming assets
held for sale)
Allowance for loan losses to
nonperforming loans 203.29% 180.70% 239.07%
Combined allowances for
losses to:
Total nonperforming
assets 158.13 171.97 199.17
Total loans and foreclosed
properties 2.70 3.29 2.91
Total nonperforming assets to:
Total loans and
foreclosed properties 1.71 1.92 1.46
Total assets 1.20% 1.30% 1.02%
(a) Not Applicable
</TABLE>
<PAGE>
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - not applicable
Item 2. Changes in Securities - not applicable
Item 3. Defaults upon Senior Securities - not applicable
Item 4. Submission of Matters to a Vote of Securities Holders
- not applicable
Item 5. Other Information - not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed herewith:
10.1 Outside Director Retainer Continuation Plan for Norwich
Financial Corp. and The Norwich Savings Society
10.2 Employment Agreement between the Company, the Bank and the
President and Chief Executive Officer of the Bank and the Company
10.3 Employment Agreement between the Company, the Bank and the
Executive Vice President, Treasurer and Chief Financial Officer of
the Bank and the Company
10.4 Employment Agreement between the Company, the Bank and the Vice
President and Secretary of the Company and Senior Vice President of
the Bank
10.5 Summary of The Norwich Savings Society 1987 and 1990 Deferred
Compensation Agreements
27 Financial Data Schedule
(b) Reports on Form 8-K
One report on Form 8-K, dated September 3, 1997, was filed
during the third quarter reporting information under Item 5-
Other Events.
<PAGE>
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997
10Q 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.
Date: November 13, 1997 /s/Daniel R. Dennis, Jr.
Daniel R. Dennis, Jr.
Chairman, President,
Chief Executive Officer
and Director
Date: November 13, 1997 /s/Michael J. Hartl
Michael J. Hartl
Executive Vice President,
Treasurer, Chief Financial
Officer and Director
Date: November 13, 1997 /s/Lori J. Ferro
Lori J. Ferro
Vice President and Controller
<PAGE>
EXHIBIT INDEX
Exhibit No.
10.1 Outside Director Retainer Continuation Plan for Norwich
Financial Corp. and The Norwich Savings Society
10.2 Employment Agreement between the Company, the Bank and the
President and Chief Executive Officer of the Bank and the Company
10.3 Employment Agreement between the Company, the Bank and the
Executive Vice President, Treasurer and Chief Financial Officer of
the Bank and the Company
10.4 Employment Agreement between the Company, the Bank and the Vice
President and Secretary of the Company and Senior Vice President of
the Bank
10.5 Summary of The Norwich Savings Society 1987 and 1990 Deferred
Compensation Agreements
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,848
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 108,118
<INVESTMENTS-CARRYING> 58,129
<INVESTMENTS-MARKET> 58,123
<LOANS> 488,519
<ALLOWANCE> 13,283
<TOTAL-ASSETS> 700,860
<DEPOSITS> 594,882
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,682
<LONG-TERM> 15,652
0
0
<COMMON> 60
<OTHER-SE> 81,716
<TOTAL-LIABILITIES-AND-EQUITY> 700,860
<INTEREST-LOAN> 31,831
<INTEREST-INVEST> 7,674
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 39,505
<INTEREST-DEPOSIT> 16,950
<INTEREST-EXPENSE> 17,594
<INTEREST-INCOME-NET> 21,911
<LOAN-LOSSES> 600
<SECURITIES-GAINS> 438
<EXPENSE-OTHER> 14,497
<INCOME-PRETAX> 10,280
<INCOME-PRE-EXTRAORDINARY> 10,280
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,070
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 4.44
<LOANS-NON> 6,534
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,951
<LOANS-PROBLEM> 551
<ALLOWANCE-OPEN> 13,928
<CHARGE-OFFS> 1,584
<RECOVERIES> 339
<ALLOWANCE-CLOSE> 13,283
<ALLOWANCE-DOMESTIC> 13,283
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
OUTSIDE DIRECTOR RETAINER
CONTINUATION PLAN
FOR
NORWICH FINANCIAL CORP.
AND
THE NORWICH SAVINGS SOCIETY
Effective as of July 1, 1997
<PAGE>
OUTSIDE DIRECTOR RETAINER
CONTINUATION PLAN
FOR
NORWICH FINANCIAL CORP.
AND
THE NORWICH SAVINGS SOCIETY
I. Purpose
The purpose of the Outside Director Retainer Continuation
Plan for Norwich Financial Corp. and The Norwich Savings Society
(the "Plan") is to provide non-employee Directors of Norwich
Financial Corp. ("NFC") and The Norwich Savings Society ("NSS")
with continued compensation following their termination of
service on the Board of Directors of NFC or NSS, as the case may
be, and to assist NFC and NSS in attracting and retaining
Directors of the highest capability who will devote their
attention to the business of NFC, NSS and their subsidiaries.
II. Eligibility for Benefit
Each Director of NFC or NSS who is not an employee of NFC,
NSS or any of its subsidiaries shall be eligible to receive the
benefit set forth in Article III hereof if such Director, at the
time of his or her termination of service as a Director of NFC or
NSS, as the case may be, has completed one (1) or more years of
service on the Board of Directors of NFC or NSS, as the case may
be. Such a Director is hereinafter referred to as an Eligible
Director. Service for purposes of this Article II shall be
<PAGE>
2.
measured from the first date of commencement of service as a
Director of NFC or NSS. With respect to persons who serve or
have served as Director of both NFC and NSS, only one year of
service shall be credited for years of concurrent service as a
Director of NFC and NSS; however, successive, contiguous years of
service as a Director of NFC and NSS shall be aggregated for
purposes of crediting service under this Article II. A Director
shall not become eligible for benefits under this Plan until such
Director shall have terminated service with both NFC and NSS.
III. Amount and Payment of Benefit
Upon the termination of service as a Director, an Eligible
Director, or such Eligible Director's beneficiary in the event
such termination is on account of death, shall be entitled to
receive a benefit under this Plan equal to: (a) the number of
completed years of service on the Board of Directors of NFC or
NSS, as the case may be, not to exceed ten (10) years; times (b)
the amount of the annual retainer then in effect for Directors of
NFC or NSS, as the case may be, such amount to be paid in the
manner hereinafter provided. For purposes of this Article III,
completed years of service as a Director of a bank or bank
holding company that is acquired by NFC or any of its
subsidiaries shall be counted, but only if such service is
contiguous with service as a Director of NFC or NSS, as the case
may be; provided, however, that with respect to persons becoming
Directors of NFC or NSS after July 1, 1997, such service shall be
limited to five (5) years. With respect to persons who serve or
have served as Director of both NFC and NSS, only one year of
<PAGE>
3.
service shall be credited for purposes of this Article III for
years of concurrent service as a Director of NFC and NSS;
however, successive, contiguous years of service as a Director of
NFC and NSS shall be aggregated for purposes of crediting service
in accordance with this Article III. The benefit under this
Plan shall be paid in equal quarterly installments over the
period corresponding to the number of years counted for purposes
of this Article III and on the same dates as the retainer for
active non-employee Directors is paid, with the first such
payment to be made on the quarterly payment date that coincides
with or next follows the Eligible Director=s termination of
service; provided, however, that if the Eligible Director shall
have elected in writing prior to termination of service as a
Director to have payments commence on a later quarterly payment
date, such payments shall commence on the quarterly payment date
specified in such written election.
IV. Death Benefit
Should an Eligible Director die before receiving all of the
payments to which he or she is entitled, such payments shall
continue to be made (or shall commence to be made, in the case of
an Eligible Director who dies while serving on the Board of
Directors of NFC or NSS) to the beneficiary designated in writing
by an Eligible Director on a form provided by NFC and NSS for
such purpose or, in the absence of such designation, to the
estate of the deceased Eligible Director.
<PAGE>
4.
V. Limitation of Benefit
Notwithstanding any other provision of this Plan to the
contrary, if an Eligible Director's service on the Board of
Directors of NFC or NSS, as the case may be, shall be terminated
for cause involving fraud, dishonesty, moral turpitude, gross
misconduct, gross failure to perform his or her duties,
disclosure of secret or confidential information of NFC, NSS or
any of its subsidiaries to any competitor or to any person not
authorized to receive such information, or any breach of the
fiduciary duty owed by the Eligible Director to NFC or NSS,
neither the Eligible Director nor any beneficiary shall be
entitled to receive any benefits under this Plan.
VI. Absence of Funding
Benefits payable pursuant to this Plan shall not be funded,
and neither NFC nor NSS shall be required to segregate or earmark
any of its assets for the benefit of an Eligible Director or any
beneficiary of an Eligible Director. Such benefits shall not be
subject in any manner to anticipation, alienation, transfer or
assignment by an Eligible Director or any beneficiary of an
Eligible Director, and any attempt to anticipate, alienate,
transfer or assign these benefits shall be void. An Eligible
Director or beneficiary shall have only a contractual right
against NFC or NSS for the benefits hereunder. Notwithstanding
the foregoing, in order to pay benefits pursuant to this Plan,
NFC or NSS may establish a grantor trust (hereinafter the
"Trust") within the meaning of Section 671 of the Internal
Revenue Code of 1986, as amended. Some or all of the assets of
the Trust may be dedicated to providing benefits to the Eligible
<PAGE>
5.
Director pursuant to this Plan, but, nevertheless, all assets of
the Trust shall at all times remain subject to the claims of the
general creditors of NFC, NSS and its subsidiaries in the event
of their bankruptcy or insolvency.
VII. Change-in-Control
Notwithstanding any other provision of this Plan to the
contrary, in the event of a Change-in-Control with respect to
NFC, as hereinafter defined, each Eligible Director then serving
on the Board of Directors of NFC or NSS and each Eligible
Director or beneficiary then receiving payments under this Plan
shall receive a lump sum benefit equal to the total amount set
forth in Article III above or, in the case of an Eligible
Director or beneficiary then in pay status under the Plan, a lump
sum amount equal to the remaining unpaid installments pursuant to
Article III above. For purposes of the preceding sentence, a
Change-in-Control shall be deemed to have occurred with respect
to NFC if any Person, as hereinafter defined, has acquired
control of NFC. A Person has control:
(i) if a Distribution Date shall have occurred within
the meaning of the Preferred Stock Rights Plan of NFC adopted by
NFC on November 21, 1989, as amended (the "Rights Plan"), so long
as the Rights Plan is in effect;
(ii) if the Rights Plan is not in effect, ten (10) days
following the public announcement that any Person, directly or
indirectly, or acting through one (1) or more other Persons,
<PAGE>
6.
owns, controls or has power to vote twenty percent (20%) or more
of the voting common stock of NFC (excluding for purposes hereof
any such stock acquired in any one or more transactions approved
by resolution of a majority of the Board of Directors of NFC) and
one or more designees of such Person is a member of or is
thereafter elected to the Board of Directors of NFC;
(iii) if the Rights Plan is not in effect, ten (10)
days following the public announcement of the commencement of a
tender offer or exchange offer that would result in the Person
acquiring twenty percent (20%) or more of the voting common stock
of NFC;
(iv) if NFC consummates a merger, consolidation, sale
of substantially all its assets, or substantially similar
reorganization transaction with such Person, excluding, however,
any merger, consolidation, sale of substantially all its assets,
or substantially similar reorganization transaction in which the
Market Value of the outstanding capital stock of such Person is
forty percent (40%) or less of the Market Value of the
outstanding capital stock of NFC. For purposes hereof, "Market
Value" shall mean the average of the closing prices of the
capital stock over the last ten (10) trading days prior to the
date of execution of a definitive agreement for such merger or
consolidation multiplied by the number of shares of such capital
stock outstanding on the date of execution of such definitive
agreement; or
(v) if during any period of twenty-four (24)
consecutive months, individuals who at the beginning of
such period constitute the Board of Directors of NFC cease for
<PAGE>
7.
any reason to constitute a majority of such Board, unless the
election, or the nomination for election, of each new Director
was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors at the
beginning of such period.
VIII. Miscellaneous
A. All benefits payable under this Plan shall be subject to all
applicable tax withholding.
B. This Plan shall be binding upon and inure to the benefit of
NFC or NSS, as the case may be, and any successor to NFC or NSS,
including, without limitation, any person acquiring, either
directly or indirectly, all or substantially all of the stock,
business and/or assets of NFC or NSS, as the case may be, whether
by purchase, merger, consolidation, reorganization or otherwise.
C. This Plan may be amended at any time by the Board of
Directors of NFC with respect to the Directors of NFC and by the
Board of Directors of NSS with respect to the Directors of NSS,
but no amendment shall operate to give any Eligible Director or
any beneficiary, either directly or indirectly, any interest
whatsoever in any funds or assets of NFC, NSS or its
subsidiaries, except the right to receive the payments herein
provided and the right to receive such payments from assets held
in the Trust, if established and funded by NFC or NSS, as the
case may be.
<PAGE>
8.
D. This Plan shall supersede any other contract, whether oral
or in writing, with respect to the continuation of retainer
payments to an Eligible Director or beneficiary following
termination of service as a Director of NFC or NSS.
E. This Plan shall be construed in all respects under the laws
of the State of Connecticut, without giving effect to the
principles of conflicts of laws of such State.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into, effective as of the third day of
Sept. 1997, by and among THE NORWICH SAVINGS SOCIETY, a Connecticut savings bank
with its principal office and place of business in Norwich, Connecticut
("Bank"), NORWICH FINANCIAL CORP., a Delaware corporation and holder of all of
the outstanding capital stock of Bank ("NFC" or "Parent"), and Daniel R.
Dennis, Jr., a resident of New London, Connecticut ("Executive").
W I T N E S S E T H:
WHEREAS, Executive has been and continues to be employed by Bank and NFC in
an executive capacity pursuant to an Employment Agreement between Executive and
Bank and NFC dated as of the 1st day of June, 1995; and
WHEREAS, Bank, NFC and Executive desire to amend and restate the Employment
Agreement on the terms herein set forth; and
WHEREAS, Bank, NFC and Executive are willing to enter into this Amended and
Restated Employment Agreement ("Agreement") on the terms herein set forth;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
mutually covenant and agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Cause" shall mean:
(i) Executive's conviction of, or plea of nolo contendere to, a
felony or crime involving moral turpitude;
(ii) Executive's commission of an act of personal dishonesty or
breach of fiduciary duty, whether or not involving personal profit, in
connection with Executive's employment by Bank or any other organization of
public trust;
(iii) Executive's commission of an act which the Board of
Directors of Bank by a vote of at least two-thirds (2/3) of all of the Directors
(excluding Executive) shall have found to have involved willful misconduct or
gross negligence on the part of Executive, in the conduct of his duties or
public life or which causes material embarrassment to the Bank or Parent;
(iv) Habitual absenteeism, chronic alcoholism or any other
form of addiction on the part of Executive which prevents him from performing
the essential functions of his position with or without reasonable
accommodation; or
-2-
(v) Entry of any final order of a federal or state regulatory
authority having jurisdiction over Bank or Parent directing the removal of
Executive from office.
(b) "Change-in-Control" shall be deemed to have occurred with respect
to Bank if any "Person," as hereinafter defined, has acquired control of Bank.
A "Person" has control:
(i) if a Distribution Date shall have occurred within the
meaning of the Preferred Stock Rights Plan of Parent adopted by Parent on
November 21, 1989, as amended (the "Rights Plan"), so long as the Rights Plan
is in effect;
(ii) if the Rights Plan is not in effect, ten (10) days
following the public announcement that any Person (other than Parent),
directly or indirectly, or acting through one (1) or more other Persons,
owns, controls or has power to vote twenty percent (20%) or more of the
voting common stock of Bank or Parent (excluding for purposes hereof any
such stock acquired in any one (1) or more transactions approved by
resolution of a majority of the Board of directors of Parent) and one (1)
or more designees of such Person is a member of or is thereafter elected to
the Board of Directors of Bank or Parent;
(iii) if the Rights Plan is not in effect, ten (10) days
following the public announcement of the commencement of a tender offer or
exchange offer that would result in the Person acquiring twenty percent (20%)
or more of the voting common stock of Bank or Parent;
(iv) if Bank or Parent consummates a merger, consolidation,
sale of substantially all its assets, or substantially similar reorganization
transaction with such Person, excluding, however, any merger, consolidation,
sale of substantially all its assets, or substantially similar reorganization
transaction in which the Market Value of the outstanding capital stock of
such Person is forty percent (40%) or less of the Market Value of the
outstanding capital stock of Parent. For purposes hereof, "Market Value"
shall mean the average of the closing price of the capital stock over the
last ten (10) trading days prior to the date of execution of a definitive
agreement for such merger or consolidation multiplied by the number of shares
of such capital stock outstanding on the date of execution of such definitive
agreement:
(v) if during any period of twenty-four (24) consecutive months,
individuals who at the beginning of such period constitute the Board of
Directors of Bank or Parent cease for any reason to constitute a majority of
such Board, unless the election, or the nomination for election of each new
Director was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors at the beginning of such
period; or
(vi) if the Board of Directors of Bank or Parent, by vote of a
majority of all the Directors (excluding Executive), adopts a resolution to the
effect that a "Change-in-Control" has occurred for purposes of this Agreement.
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(c) "Disability" shall mean the incapacity of Executive by illness
or any other cause as determined under the long-term disability insurance
Plan of Bank in effect at the time in question, or if no such plan is in
effect, then such incapacity of Executive as prevents Executive from
performing the essential functions of his position with or without reasonable
accommodation for a period in excess of two hundred forty (240) days (whether
or not consecutive), or one hundred eighty (180) days consecutively, as the
case may be, during any twelve (12) month period.
(d) "Good Reason" shall mean the occurrence of any action which
(i) removes or changes Executive's title or reduces Executive's job
responsibilities or base salary (except pursuant to a general reduction of not
more than ten percent (10%) in executive base salaries effected throughout the
Bank prior to a Change-in-Control; (ii) results in a significant worsening
of Executive's work conditions; or (iii) moves Executive's place of employment
to a location that increases Executive's commute by more than thirty (30) miles
over the length of Executive's commute from his place of principal residence at
the time the move is requested; provided that, following a Change-in-Control,
"Good Reason" shall mean the good faith determination by Executive that any
such action has occurred.
(e) "Material Breach" by Executive shall mean a determination, made
prior to the occurrence of a Change-in-Control by vote of at least two-thirds
(2/3) of all of the Directors of Bank (excluding Executive), that Executive
shall have failed to comply in any material respect with his obligations under
this Agreement following written notice to Executive of the alleged
deficiencies thereunder and a fair opportunity to cure such deficiencies (the
existence of which shall be confirmed by the foregoing required vote). Any
determination in accordance with the preceding sentence shall be conclusive and
binding for all purposes of this Agreement.
(f) "Person" shall mean any individual, corporation, partnership,
company or other entity, and shall include a "group" as defined in Section
(d)(3) of the Securities Exchange Act of 1934.
(g) "Potential Change-in-Control" shall be deemed to have occurred
if(i) Bank or Parent enters into a letter of intent, memorandum of
understanding or definitive agreement providing for, or publicly announces
that it is considering, one (1) or more transactions, the consummation of
which would result in the occurrence of a Change-in-Control; (ii) any Person
publicly announces an intention to take or to consider taking actions which,
if consummated, would constitute a Change-in-Control; or (iii) the Board of
Directors of Bank or Parent adopts a resolution to the effect that a Potential
Change-in-Control has occurred for purposes of this Agreement.
2. Employment.
(a) Bank and NFC hereby agree to employ Executive as President and
Chief Executive Officer of Bank and NFC and Executive accepts said employment
and agrees to serve for the Term of this Agreement in such capacity upon the
terms and conditions hereinafter set forth. Subject to the provisions of
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subparagraph (b) of this Paragraph 2, and to the provisions of Paragraph
6 below, "Term" shall mean a continuously renewing period of three (3) years.
(b) Except as provided in subparagraph (c) below, at any time during
the Term, Board of Directors of Bank and NFC may, by written notice to
Executive, advise Executive of their desire to modify or amend any of the
terms or provisions of this Agreement or to delete or add any terms or
provisions. Any such notice ("Notice") shall describe the proposed
modifications in reasonable detail. In the event a Notice shall be given to
Executive, Bank, NFC and Executive agree to discuss the proposed
modification(s) and to attempt in good faith to reach agreement with respect
thereto and to reduce such agreement to writing in an amendment to be executed
by all the parties ("Amendment"). If a Notice is given hereunder and an
Amendment shall not have hereunder been executed on or before the sixtieth
(60th) day following the date on which Notice is given, then the Term shall
thereupon be automatically converted to a fixed period ending three
(3) years after the expiration of such sixty (60) days.
(c) No Notice given pursuant to subparagraph (b) above shall be
effective if given during the period commencing on the date a Potential
Change-in-Control occurs during the Term and ending on the earlier of
(i) abandonment of the event giving rise to such Potential Change-in-Control
(as determined by the Board of Directors) and (ii) six (6) months following
occurrence of the Change-in-Control which gave rise to the Potential
Change-in-Control.
3. Duties of Employment.
(a) During the Term, Executive will serve as President and Chief
Executive Officer of Bank and NFC, subject to the terms of this Employment
Agreement and the direction and control of the Boards of Directors of Bank and
NFC. During the Term, Executive will serve Bank and NFC faithfully, diligently
and competently and will devote full-time to his employment and will hold, in
addition to the offices of President and Chief Executive Officer of Bank
and NFC, such other executive offices of Bank or NFC, or their respective
subsidiaries and affiliates, to which he may be elected, appointed or assigned
by the Boards of Directors of Bank or NFC from time to time and will discharge
such executive duties in connection therewith. Nothing in this Agreement
shall preclude Executive, with the prior approval of the Boards of
Directors of Bank and NFC, from devoting reasonable periods of time required
for (i) serving as a director or member of a committee of any organization
involving no conflict of interest with Bank or NFC, or (ii) engaging in
charitable, religious and community activities, provided, that such
directorships, memberships or activities do not materially interfere with
the performance of his duties hereunder.
(b) In the event that (1) a Potential Change-in-Control shall occur
while Executive is employed by Bank and/or Parent and (2) the Term shall have
expired prior to the earlier of (x) abandonment of the event giving rise to
such Potential Change-in-Control (as determined by the Board of Directors) and
(y) occurrence of the Change-in-Control which gave rise to the Potential
Change-in-Control, Executive agrees that he will remain in the employ of
Bank and Parent at the request of Bank and Parent, and in such event Bank and
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Parent agree to continue to employ Executive, in the offices then held by him
with Bank and Parent and on the terms of employment then in effect until the
earlier to occur of the following: (i) the event giving rise to the
Potential Change-in-Control shall have been abandoned or terminated; (ii) a
Change-in-Control has occurred; or (iii) the Board of Directors of Bank shall
have determined by vote of at least two-thirds (2/3) of all the Directors
(excluding Executive) that Executive's obligations under this subparagraph
shall cease. During the period covered by the preceding sentence, Executive
shall render such services as shall be required of him in order to explore and
pursue fully the Potential Change-in-Control in accordance with directions,
policies and determinations from time to time made by the Board of Directors
of Bank or Parent and communicated to Executive. During said period,
Executive shall use his reasonable best efforts to fulfill his
responsibilities to Bank in the interests of Bank and the shareholders of
Parent and as reasonably requested of him by the Board of Directors of Bank
or Parent for such purposes. The employment of Executive pursuant to the
first sentence of this subparagraph (b) may be terminated, without breach
of this Agreement, either by Bank or Parent for Cause, Disability or Material
Breach, or by Executive for Good Reason.
4. Compensation. During the Term, Bank shall pay to Executive as
compensation for the services to be rendered by him hereunder the following:
(a) A base salary at the rate of Two Hundred Forty Thousand Dollars
($240,000) per year, or such larger sum as the Board of Directors of Bank may
from time to time determine in connection with regular periodic performance
reviews pursuant to Bank's policies and practices. Such compensation shall be
payable in accordance with normal payroll practices of Bank.
(b) In addition, Executive may be entitled to a bonus, payable in
cash or other form of compensation, at the end of each calendar year during
such Term in an amount and form set by the Board of Directors of Bank. The
Board of Directors may establish one or more individual or corporate goals
for each such year, the achievement of which may be made a condition to the
payment of the foregoing bonus to Executive. Such goals shall be
communicated to Executive and shall be stated to be a condition to payment
of said bonus.
5. Benefits. During the Term, Executive shall be entitled to the
following benefits:
(a) Comprehensive health insurance and major medical coverage
comparable to such coverage provided for executive employees of Bank generally
in compliance with plans or practices in effect at Bank.
(b) Participation in Bank's long-term disability insurance plan and
pension plan, in accordance with the terms thereof, as may be in effect from
time to time.
(c) Life insurance on the life of Executive in an amount not less
than three (3) times the base salary of Executive in accordance with the life
insurance plan as may be in effect from time to time for executives of Bank
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in the same benefits classification as Executive, payable to a beneficiary
selected by Executive.
(d) A vacation of at least four (4) weeks per year, during which
Executive's compensation shall be paid in full. The period of vacation
selected each year shall be with the approval of the Board of Directors of
Bank. Vacation time which is not taken by Executive in any year may be
deferred and taken in the first quarter of the following year.
(e) Reimbursement of all travel and other reasonable business
expenses incident to the rendering of services by Executive hereunder subject
to the submission of appropriate vouchers and receipts in accordance with
Bank's policy from time to time in effect.
(f) A late model American automobile as approved by the Board of
Directors of Bank, together with reimbursement for the ordinary and necessary
expenses of said automobile incurred by Executive in the course of performing
his duties for Bank hereunder.
6. End of Term. The Term shall end upon the occurrence of any of the
following events:
(a) Termination of Executive's employment by Bank or NFC for "Cause."
(b) The voluntary termination of Executive's employment by Executive
other than for "Good Reason."
(c) The Disability of Executive. If this Agreement is terminated by
reason of the Disability of the Executive, Bank shall give written notice to
that effect to Executive in the manner provided in Paragraph 16 herein.
(d) The death of Executive.
(e) The retirement of Executive in accordance with the retirement
policy of Bank, including early retirement, generally applicable to its
executives or in accordance with any retirement arrangement established with
the consent of Executive with respect to him.
(f) Full compliance by Bank with the provisions of Paragraph 7(f)
below, if Executive's employment shall have been terminated by Bank during the
Term for any reason other than "Cause," "Disability," or if Executive shall
have voluntarily terminated his employment during the Term for "Good Reason."
(g) The Executive attains the age of sixty-five (65).
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7. Payment Upon Termination.
(a) If Executive's employment is terminated by Bank for "Cause," as
defined in Paragraph 1(a), the obligations of Bank and NFC under this Agreement
shall cease and Executive shall forfeit all right to receive any compensation
or other benefits under this Agreement except only salary and reimbursable
expenses accrued through the date of such termination.
(b) If Executive shall voluntarily terminate his employment during
the Term other than for "Good Reason," as defined in Paragraph 1(d), the
obligations of Bank and NFC under this Agreement shall cease and Executive
shall forfeit all right to receive any compensation or other benefits under
this Agreement except only salary and reimbursable expenses accrued through the
date of such termination.
(c) If Executive's employment is terminated during the Term by
reason of Disability, then Executive shall receive, in addition to his
disability benefits under the Bank's long-term disability plan, the difference
between such disability benefits and his then current rate of base salary for
six (6) months after termination of employment.
(d) In the event of the death of Executive during the Term, then,
in addition to and not in substitution for any other benefits which may be
payable by Bank in respect of the death of Executive, the base salary then
payable hereunder shall continue to be paid at the then current rate for a
period of six (6) months after such death to such beneficiary as shall have
been designated in writing by Executive, or if no effective designation
exists, then to the estate of Executive.
(e) If Executive's employment is terminated by reason of retirement
as specified in Paragraph 6(e), the obligations of Bank and NFC under this
Agreement shall cease and Executive shall forfeit all right to receive any
compensation or other benefits under this Agreement except only salary and
reimbursable expenses accrued through the date of such retirement.
(f) If Executive's employment is terminated by Bank during the
Term for any reason other than for "Cause," or "Disability," or if Executive
shall voluntarily terminate his employment during the Term for "Good Reason,"
Executive shall be entitled to receive, and Bank shall be obligated to pay and
provide Executive, the following amounts:
(i) An amount in consideration of the covenants by Executive
set forth in Paragraphs 8 and 9 below to be determined by an independent
certified public accounting firm retained by Bank to be the reasonable value of
said covenants as of the date of termination of Executive's employment. Said
amount shall be paid in cash in a lump sum in the month next following
Executive's termination of employment and shall be treated as a supplemental
wage payment under applicable Treasury Regulations subject to federal tax
withholding at the flat percentage rate applicable thereto.
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(ii) The base salary of Executive, at the rate in effect
immediately prior to Executive's termination, for the remainder of the Term in
effect under Paragraph 2 of this Agreement, from which shall be subtracted
the amount payable to Executive pursuant to subparagraph (f)(i) above and the
amount, if any, payable to Executive under any then effective severance pay
plan of Bank, payable in accordance with normal payroll practices of Bank, or
at Bank's option the commuted value (determined by discounting all payments
at a rate equal to the bond equivalent yield of the latest two-year Treasury
Bill auction) of such salary to be paid in cash in a lump sum in the month next
following Executive's termination of employment and to be treated as a
supplemental wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable thereto;
provided that if Executive's termination is after a Change-in-Control such
payment shall be in the form of a lump sum as aforesaid, but calculated
without any discount as aforesaid.
(iii) An amount equal to the aggregate amounts that Bank
would have contributed on behalf of Executive under Bank's Thrift Plan, if any
such plan shall be in effect, until the end of the Term (plus estimated
earnings thereon) had Executive continued in the employ of Bank until the end
of the Term and made contributions under said plan at a rate, as a
percentage of salary, equal to the rate at which Executive had made
contributions to said plan in the plan year immediately preceding Executive's
termination.
(iv) Additional retirement benefits equal to the difference
between (A) the annual pension benefits that would have been payable to
Executive under the Retirement Plan of Bank (the "Plan") and under any
supplemental retirement plan or agreement covering Executive ("Supplemental
Plan"), if Executive had been continued in the employ of Bank until
the end of the Term and had received compensation at least equal to that
specified in Paragraph 4(a) of this Agreement until such time, and (B) the
annual benefits actually payable to Executive under the Plan and any such
Supplemental Plan, the discounted present value of such additional
benefits, as calculated by the independent actuary for the Plan, to be payable
in a lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided
that Executive shall not have breached said non-competition provisions.
(v) To the extent that any form of compensation previously
granted to Executive, such as, by way of example only, restricted stock or
performance share awards, shall not be fully vested or shall require additional
service as an employee at the time of the termination of Executive's
employment, Executive shall be credited with additional service
through the end of the Term for such purpose.
(vi) During the period of eighteen (18) months following
Executive's termination of employment (or such other period as shall be
prescribed by the then applicable COBRA law) (the "continuation period"),
Executive shall continue to receive such individual and/or family health
benefits coverage as he was receiving at the time of termination of
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employment, with Bank and Executive paying the same portion of the cost of such
coverage as existed at the time of Executive's termination, for so long during
the continuation period as Executive elects to continue coverage and pays his
portion of the costs of coverage.
(vii) To the extent that Bank maintains life insurance for
the benefit of Executive at the time of Executive's termination of employment,
Executive shall have the right to convert such policy to an individually owned
term life policy (to the extent permitted under the governing contracts) and
Bank will pay an annual amount of up to one hundred fifty percent (150%)
of the amount of the average annual premium paid for such life insurance on
behalf of Executive over the three (3) fiscal years of Bank preceding
termination of employment to continue up to the same amount of coverage on a
term basis for the remainder of Executive's Term. Executive shall have the
right to pay any additional premium amount to maintain the full amount of
insurance in effect or elect to receive lesser coverage for the same premium.
Executive shall also have the right to decline any continued insurance
coverage, in which event Bank will pay to Executive in a single sum an amount
equal to the discounted present value of the cost of continued coverage as
aforesaid.
(viii) Bank shall not be obligated to continue any disability
or disability income insurance on behalf of Executive following the date of
Executive's termination of employment. To the extent permitted under any
contracts, programs or policies of such nature in effect at the time of such
termination, Executive may continue at his sole cost and expense coverage
thereunder for a period of up to eighteen (18) months.
(ix) During the balance of the Term, Executive shall
continue to receive such perquisites, other than those specified in the
preceding subparagraphs above, as he was receiving at the time of termination
of employment with, to the extent applicable, the same cost sharing with Bank
as was in effect immediately prior to Executive's termination of employment.
(x) If Executive's termination is after a Change-in-Control,
Bank shall reimburse Executive for the amount of any reasonable legal fees
and expenses incurred by Executive in any successful action (whether or not
arbitration or litigation shall be involved) to obtain or enforce any right
or benefit provided to Executive by Bank hereunder or as confirmed or
acknowledged hereunder.
8. Confidential Information. Executive understands that in the course
of his employment by Bank and NFC, Executive will receive or have access to
confidential information concerning the business or purposes of Bank and NFC,
and which Bank and NFC desire to protect. Such confidential information
shall be deemed to include, but not be limited to, Bank's customer lists,
loan lists and information, and employee lists, including, if known, personnel
personnel information and data. Executive agrees that he will not at any time
during the period ending one (1) year after the later of (a) the end of the
Term and (b) the end of the period in which Executive is entitled to receive
any payments or benefits under this Agreement, reveal to anyone outside Bank
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or NFC or use for his own benefit any such information without specific
written authorization by Bank or NFC. Executive further agrees not to use any
such confidential information or trade secrets in competing with Bank or NFC at
any time during or in the one (1) year period immediately following termination
of employment with Bank and NFC.
9. Covenants by Executive Not to Compete With Bank or NFC.
(a) Upon termination of Executive's employment with Bank and NFC
for any reason, Executive covenants and agrees that he will not at any time
during the period of two (2) years from and after such termination directly or
indirectly in any manner or under any circumstances or conditions whatsoever
be or become interested, as an individual, partner, principal, agent, clerk,
employee, stockholder, officer, director, trustee, or in any other capacity
whatsoever, except as a nominal owner of stock of a public corporation, in
any other business in any city or town where Bank or NFC operates a full
service branch office at the time of Executive's termination that in any way
competes with the business of Bank or NFC as it exists at the time of
Executive's termination, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an
equity or debt investment, lender or in any other manner or capacity), or
lend his name (or any part or variant thereof) to,
any business in any city or town where Bank or NFC operates a full service
branch office at the time of Executive's termination which is, or as a result
of the Executive's engagement or participation would become, competitive with
any aspect of the business of Bank or NFC as it exists at the time of
Executive's termination or solicit any officer, director, employee or agent of
Bank or NFC or any subsidiary or affiliate of Bank or NFC to become an officer,
director, employee or agent of Executive, his respective affiliates or anyone
else; ownership, in the aggregate, of less than one percent (1 %) of the
outstanding shares of capital stock of any corporation with one or more
classes of its capital stock listed on a national securities exchange
or publicly traded in the over-the-counter market shall not constitute a
violation of the foregoing provision.
(b) Executive hereby acknowledges that his services are unique and
extraordinary, and are not readily replaceable, and hereby expressly agrees
that Bank and NFC, in enforcing the covenants contained in Paragraphs 8 and 9
herein, in addition to any other remedies provided for herein or otherwise
available at law, shall be entitled in any court of equity having
jurisdiction to an injunction restraining him in the event of a breach,
actual or threatened, of the agreements and covenants contained in these
Paragraphs.
(c) The parties hereto believe that the restrictive covenants of
these Paragraphs are reasonable. However, if at any time it shall be
determined by any court of competent jurisdiction that these Paragraphs or
any portion of them as written, are unenforceable because the restrictions
are unreasonable, the parties hereto agree that such portions as shall have
been determined to be unreasonably restrictive shall thereupon be deemed so
amended as to make such restrictions reasonable in the determination of such
court, and the said covenants, as so modified, shall be enforceable between
the parties to the same extent as if such amendments had been made prior to
the date of any alleged breach of said covenants.
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(d) The provisions of this Paragraph 9 shall not apply if Bank
shall be prohibited under Paragraph 15 below from making any payments to
Executive pursuant to Paragraph 7 above.
10. No Obligation to Mitigate. So long as Executive shall not be in
breach of any provision of Paragraph 8 or 9, Executive shall have no duty to
mitigate damages in the event of a termination and if he voluntarily obtains
other employment (including self-employment), any compensation or profits
received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Bank to make payments
hereunder.
11. Resignation. In the event that Executive's services hereunder are
terminated under any of the provisions of this Agreement (except by death),
Executive agrees that he will deliver his written resignation as a Director
and/or an officer of Bank or NFC, or their subsidiaries and affiliates, to
the Board of Directors, such resignation to become effective immediately,
or, at the option of the Board of Directors, on a later date as specified by
the Board.
12. Insurance. Bank shall have the right at its own cost and expense to
apply for and to secure in its own name, or otherwise, life, health or accident
insurance or any or all of them covering Executive, and Executive agrees to
submit to the usual and customary medical examination and otherwise to
cooperate with Bank in connection with the procurement of any such insurance,
and any claims thereunder.
13. Release. As a condition of receiving payments or benefits provided
for in this Agreement, at the request of Bank, Executive shall execute and
deliver for the benefit of Bank and NFC, and any subsidiary or affiliate of
Bank or NFC, a general release in the form set forth in Attachment A, and
such release shall become effective in accordance with its terms. The
failure or refusal of Executive to sign such a release or the revocation of
such a release shall cause the termination of any and all obligations of Bank
and NFC to make payments or provide benefits hereunder, and the forfeiture of
the right of Executive to receive any such payments and benefits. Executive
acknowledges that Bank and NFC have advised him to consult with an
attorney prior to signing this Agreement and that he has had an opportunity to
do so.
14. Section 280G Limit. Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received or to be received
by Executive, whether payable pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with Bank, its succesors, or any person
affiliated with Bank ("Affiliate") within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code") (collectively "Total
Payments") would, in the determination of the independent certified public
accounting firm then retained by Bank (the "Tax Advisor"), not be deductible
(in whole or in part) by Bank, an Affiliate or other person making such
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payment or providing such benefit as a result of Section 280G of the Code, or
any successor to such Section, payments and benefits pursuant to this
Agreement shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or payments and benefits
pursuant to this Agreement are reduced to zero. For purposes of this
limitation, (i) no portion of the Total Payments the receipt of which
Executive, in the determination of the Tax Advisor, shall have effectively
waived prior to the date which is fifteen (15) days following termination of
employment and prior to the earlier of the date of constructive receipt and
the date of payment thereof shall be taken into account; and (ii) any
reduction in the payments and benefits pursuant to this Paragraph shall be
made from the payments and benefits to be made pursuant to clauses (i) through
(iv) of Paragraph 7(f), in such order as may be determined by Executive, except
to the extent that such payments and benefits, in the determination of the
Tax Advisor, are reasonable compensation within the meaning of Section 280G
of the Code. The determination of the Tax Advisor as to the deductibility
of the Total Payments shall be completed not later than forty-five (45) days
following Executive's termination of employment, and such determination shall
be communicated in writing to Bank, with a copy to Executive, within said
forty-five (45) day period. The determination of the Tax Advisor as to the
deductibility of the Total Payments shall be deemed conclusive and binding of
Bank and Executive and shall not be subject to the arbitration provisions
hereof Bank shall pay the fees and other costs of the Tax Advisor hereunder.
In the event that the independent certified public accounting firm then
retained by Bank is unable or declines to serve as Tax Advisor for
purposes of making the foregoing determination, Bank shall appoint another
accounting firm of national reputation to serve as Tax Advisor.
15. Regulatory Limitation. Notwithstanding any other provision of this
Agreement, Bank shall not be obligated to make, and Executive shall have no
right to receive, any payment, benefit or amount under this Agreement which
would violate any law, regulation or regulatory order applicable to Bank or
its parent at the time such payment, benefit or amount is due, including,
without limitation, Section 1828(k)(1) of Title 12 of the United States Code
and any regulation or order thereunder of the Federal Deposit Insurance
Corporation ("Prohibited Payment"). In such event the provisions of Section
18 below shall apply. If and to the extent Bank shall at a later date be
relieved of the restriction on its ability to make any Prohibited Payment,
then at such time Bank shall promptly make payment of any such amounts to
Executive.
16. Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person to Executive or to the
Secretary of Bank and NFC, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Executive, to his last known address
as carried on the personnel records of Bank, and, in the case of Bank and
NFC, to the corporate headquarters, attention of the Secretary, or to such
other address as the party to be notified may specify by notice to the other
party. Executive hereby agrees to give Bank and NFC not less than sixty (60)
days' advance notice of his intended resignation or other termination from
Bank or NFC, whether or not at the end of the Term.
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17. Successors and Assigns. The rights and obligations of Bank and NFC
under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of Bank and NFC, including, without limitation;
any corporation, individual or other person or entity which may acquire all
or substantially all of the assets and business of Bank or NFC, or of any
division of Bank for which Executive has primary management responsibility,
or with or into which Bank or NFC may be consolidated or merged or any
surviving corporation in any merger involving Bank or NFC. All references
in this Agreement to Bank and NFC shall be deemed to include all such
successors and assigns.
18. Arbitration. Any dispute which may arise between the parties hereto
may, if both parties agree, be submitted to binding arbitration in the City of
Hartford in accordance with the Rules of the American Arbitration Association;
provided that any such dispute shall first be submitted to Bank's Board of
Directors in an effort to resolve such dispute without resort to arbitratin.
19. Severability. If any of the terms or conditions of this Agreement
shall be declared void or unenforceable by any court or administrative body
of competent jurisdiction, such term or condition shall be deemed severable
from the remainder of this Agreement, and the other terms and conditions of
Agreement shall continue to be valid and enforceable.
20. Amendment. This Agreement may be modified or amended only by an
instrument in writing executed by the parties hereto.
21. Construction. This Agreement shall supersede and replace all prior
agreements and understandings between the parties hereto on the subject matter
covered hereby. This Agreement shall be governed and construed under the
laws of the State of Connecticut. Words of the masculine gender mean and
include correlative words of the feminine gender. Paragraph headings are for
convenience only and shall not be considered a part of the terms and provisions
of the Agreement.
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IN WITNESS WHEREOF, Bank and NFC have caused this Agreement to be executed
by a duly authorized officer, and Executive has hereunto set his hand, this
3rd day of September, 1997.
THE NORWICH SAVINGS SOCIETY AND
NORWICH FINANCIAL CORP.
By /s/ Richard P. Reed
Richard P. Reed
For Compensation Committee of
the Board of Directors
/s/ Daniel R. Dennis, Jr.
Daniel R. Dennis, Jr.
Executive
<PAGE>
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this Release. You
have until the date which is seven (7) days after the Release is signed and
returned to The Norwich Savings Society (the "Bank") to change your mind and
revoke your Release. Your Release shall not become effective or enforceable
until after that date.
In consideration for the benefits provided under your Amended and Restated
Employment Agreement with the Bank and Norwich Financial Corp. ("NFC"), and more
specifically enumerated in Exhibit 1 hereto, by your signature below you agree
to accept such benefits and not to make any claims of any kind against the
Bank, its past and present and future parent corporations, subsidiaries,
divisions, subdivisions, affiliates and related companies or their successors
and assigns, including without limitation NFC, or any and all past, present and
future Directors, officers, fiduciaries or employees of any of the foregoing
(all parties referred to in the foregoing are hereinafter referred to as the
"Releasees") before any agency, court or other forum, and you agree to release
the Releasees from all claims, known or unknown, arising in any way from any
way from any actions taken by the Releasees up to the date of this Release,
including, without limiting the foregoing, any claim for wrongful discharge or
breach of contract or any claims arising under the Age Discrimination in
Employment Act of 1967, Title VII of the Civil Right Act of 1964, the
Americans with Disabilities Act of 1990, the Employee Retirement Income
Security Act of 1974, or any other federal, state or local statute or
regulation and any claim for attorneys' fees, expenses or costs of litigation,
except that this Release is not intended, and shall not be construed, to
release the Bank from any vested obligations it may have under its
employee pension benefit plans.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE
YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT
OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY
ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully understand its terms;
2. You have had at least twenty-one (21) days to consider the terms of
the Release;
3. You have seven (7) days from the date you sign this Release to
revoke it by written notification to the Bank. After this seven (7)
day period, this Release is final and binding and may not be revoked;
4. You have been advised to seek legal counsel and have had an
opportunity to do so;
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5. You would not otherwise be entitled to the benefits provided under
your Amended and Restated Employment Agreement with the Bank had you
not agreed to waive any right you have to bring a lawsuit or legal
claim against the Releasees; and
6. Your agreement to the terms set forth above is voluntary.
Name:
Signature: Date:
Received by: Date:
<PAGE>
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION
TO REFLECT ALL BENEFITS AND PAYMENTS MADE UNDER AGREEMENT.
Acknowledged and Agreed:
NORWICH FINANCIAL CORP. AND
THE NORWICH SAVINGS SOCIETY EXECUTIVE
By
Their
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into, effective as of the
3rd day of September, 1997, by and among THE NORWICH SAVINGS
SOCIETY, a Connecticut savings bank with its principal office and
place of business in Norwich, Connecticut ("Bank"), NORWICH
FINANCIAL CORP., a Delaware corporation and holder of all of the
outstanding capital stock of Bank ("NFC" or "Parent"), and Daphne
P. Cannata, a resident of East Lyme, Connecticut
("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been and continues to be employed by
Bank and NFC in an executive capacity pursuant to an Employment
Agreement between Executive and Bank and NFC dated as of the 1st
day of June, 1995; and
WHEREAS, Bank, NFC and Executive desire to amend and restate
the Employment Agreement on the terms herein set forth; and
WHEREAS, Bank, NFC and Executive are willing to enter into
this Amended and Restated Employment Agreement ("Agreement") on
the terms herein set forth;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants herein contained, the parties hereto, intending
to be legally bound, do hereby mutually covenant and agree as
follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Cause" shall mean:
(i) Executive's conviction of, or plea of nolo
contendere to, a felony or crime involving moral turpitude;
(ii) Executive's commission of an act of personal
dishonesty or breach of fiduciary duty, whether or not involving
personal profit, in connection with Executive's employment by
Bank or any other organization of public trust;
(iii) Executive's commission of an act which
the Board of Directors of Bank by a vote of at least two-thirds
(2/3) of all of the Directors (excluding Executive) shall
have found to have involved willful misconduct or gross
negligence on the part of Executive, in the conduct of her duties
or public life or which causes material embarrassment to the Bank
or Parent;
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(iv) Habitual absenteeism, chronic alcoholism or
any other form of addiction on the part of Executive which
prevents her from performing the essential functions of her
position with or without reasonable accommodation; or
(v) Entry of any final order of a federal or
state regulatory authority having jurisdiction over Bank or
Parent directing the removal of Executive from office.
(b) "Change-in-Control" shall be deemed to have
occurred with respect to Bank if any "Person," as hereinafter
defined, has acquired control of Bank. A "Person" has control:
(i) if a Distribution Date shall have occurred
within the meaning of the Preferred Stock Rights Plan of Parent
adopted by Parent on November 21, 1989, as amended (the "Rights
Plan"), so long as the Rights Plan is in effect;
(ii) if the Rights Plan is not in effect, ten (10)
days following the public announcement that any Person (other
than Parent), directly or indirectly, or acting through one (1)
or more other Persons, owns, controls or has power to vote twenty
percent (20%) or more of the voting common stock of Bank or of
Parent (excluding for purposes hereof any such stock acquired in
any one (1) or more transactions approved by resolution of a
majority of the Board of Directors of Parent) and one (1) or more
designees of such Person is a member of or is thereafter elected
to the Board of Directors of Bank or Parent;
(iii) if the Rights Plan in not in effect, ten
(10) days following the public announcement of the commencement
of a tender offer or exchange offer that would result in the
Person acquiring twenty percent (20%) or more of the voting
common stock of Bank or Parent;
(iv) if Bank or Parent consummates a merger,
consolidation, sale of substantially all its assets, or
substantially similar reorganization transaction with such
Person, excluding, however, any merger, consolidation, sale of
substantially all its assets, or substantially similar
reorganization transaction in which the Market Value of the
outstanding capital stock of such Person is forty percent (40%)
or less of the Market Value of the outstanding capital stock of
Parent. For purposes hereof, "Market Value" shall mean the
average of the closing price of the capital stock over the last
ten (10) trading days prior to the date of execution of a
definitive agreement for such merger or consolidation multiplied
by the number of shares of such capital stock outstanding on the
date of execution of such definitive agreement;
(v) if during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such
period constitute the Board of Directors of Bank or Parent cease
for any reason to constitute a majority of such Board, unless the
election, or the nomination for election of each new Director was
approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who were Directors at the beginning of such
period; or
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(vi) if the Board of Directors of Bank or Parent,
by vote of a majority of all the Directors (excluding Executive),
adopts a resolution to the effect that a "Change-in-Control" has
occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of
Executive by illness or any other cause as determined under the
long-term disability insurance Plan of Bank in effect at the time
in question, or if no such plan is in effect, then such
incapacity of Executive as prevents Executive from performing the
essential functions of her position with or without reasonable
accommodation for a period in excess of two hundred forty (240)
days (whether or not consecutive), or one hundred eighty (180)
days consecutively, as the case may be, during any twelve (12)
month period.
(d) "Good Reason" shall mean the occurrence of any
action which (i) removes or changes Executive's title or reduces
Executive's job responsibilities or base salary (except pursuant
to a general reduction of not more than ten percent (10%) in
executive base salaries effected throughout the Bank prior to a
Change-in-Control; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of
employment to a location that increases Executive's commute by
more than thirty (30) miles over the length of Executive's
commute from her place of principal residence at the time the
move is requested; provided that, following a Change-in-Control,
"God Reason" shall mean the good faith determination by Executive
that any such action has occurred.
(e) "Material Breach" by Executive shall mean a
determination, made prior to the occurrence of a Change-in-
Control by vote of at least two-thirds (2/3) of all of the
Directors of Bank (excluding Executive), that Executive shall
have failed to comply in any material respect with her
obligations under this Agreement following written notice to
Executive of the alleged deficiencies thereunder and a fair
opportunity to cure such deficiencies (the existence of which
shall be confirmed by the foregoing required vote). Any
determination in accordance with the preceding sentence shall be
conclusive and binding for all purposes of this Agreement.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of
1934.
(g) "Potential Change-in-Control" shall be deemed to
have occurred if (i) Bank or Parent enters into a letter of
intent, memorandum of understanding or definitive agreement
providing for, or publicly announces that it is considering, one
(1) or more transactions, the consummation of which would result
in the occurrence of a Change-in-Control; (ii) any Person
publicly announces an intention to take or to consider taking
actions which, if consummated, would constitute a Change-in-
Control; or (iii) the Board of Directors of Bank or Parent adopts
a resolution to the effect that a Potential Change-in-Control has
occurred for purposes of this Agreement.
-4-
2. Employment.
(a) Bank and NFC hereby agree to employ Executive as
Vice President and Secretary of NFC and Senior Vice President of
Bank and Executive accepts said employment and agrees to serve
for the Term of this Agreement in such capacity upon the terms
and conditions hereinafter set forth. Subject to the provisions
of subparagraphs (b) and (d) of this Paragraph 2, and to the
provisions of Paragraph 6 below, "Term" shall mean a continuously
renewing period of two (2) years.
(b) Except as provided in subparagraph (c) below, at
any time during the Term, Bank and NFC may, by written notice to
Executive, advise Executive of their desire to modify or amend
any of the terms or provisions of this Agreement or to delete or
add any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the
event a Notice shall be given to Executive, Bank, NFC and
Executive agree to discuss the proposed modification(s) and to
attempt in good faith to reach agreement with respect thereto and
to reduce such agreement to writing in an amendment to be
executed by all the parties ("Amendment"). If a Notice is given
hereunder and an Amendment shall not have been executed on or
before the sixtieth (60th) day following the date on which Notice
is given, then the Term shall thereupon be automatically
converted to a fixed period ending two (2) years after the
expiration of such sixty (60) days.
(c) No Notice given pursuant to subparagraph (b) above
shall be effective if given during the period commencing on the
date a Potential Change-in-Control occurs during the Term and
ending on the earlier of (i) abandonment of the event giving rise
to such Potential Change-in-Control (as determined by the Board
of Directors) and (ii) six (6) months following occurrence of the
Change-in-Control which gave rise to the Potential Change-in-
Control.
(d) Notwithstanding any other provision hereof, if a
Change-in-Control shall occur while this Agreement is in effect,
one (1) year shall automatically be added to the Term on the date
of such Change-in-Control; provided that, once effective, the
foregoing provision shall not be effective again on the
occurrence of any subsequent or successive Change-in-Control.
3. Duties of Employment.
(a) During the Term, Executive will serve as Vice
President and Secretary of NFC and Senior Vice President of Bank,
subject to the terms of this Employment Agreement and the
direction and control of the Boards of Directors and the
President of Bank and NFC. During the Term, Executive will serve
Bank and NFC faithfully, diligently and competently and will
devote full-time to her employment and will hold, in addition to
the offices of Vice President and Secretary of NFC and Senior
Vice President of Bank, such other executive offices of Bank or
NFC, or their respective subsidiaries and affiliates, to which
she may be elected, appointed or assigned by the Boards of
Directors of Bank or NFC from time to time and will discharge
such executive duties in connection therewith. Nothing in this
-5-
Agreement shall preclude Executive, with the prior approval of
the President of Bank and NFC, from devoting reasonable periods
of time required for (i) serving as a director or member of a
committee of any organization involving no conflict of interest
with Bank or NFC, or (ii) engaging in charitable, religious and
community activities, provided, that such directorships,
memberships or activities do not materially interfere with the
performance of her duties hereunder.
(b) In the event that (1) a Potential Change-in-
Control shall occur while Executive is employed by Bank and/or
Parent and (2) the Term shall have expired prior to the earlier
of (x) abandonment of the event giving rise to such Potential
Change-in-Control (as determined by the Board of Directors) and
(y) occurrence of the Change-in-Control which gave rise to the
Potential Change-in-Control, Executive agrees that she will
remain in the employ of Bank and Parent at the request of Bank
and Parent, and in such event Bank and Parent agree to continue
to employ Executive, in the offices then held by her with Bank
and Parent and on the terms of employment then in effect until
the earlier to occur of the following: (i) the event giving rise
to the Potential Change-in-Control shall have been abandoned or
terminated; (ii) a Change-in-Control has occurred; or (iii) the
Board of Directors of Bank shall have determined by vote of at
least two-thirds (2/3) of all the Directors (excluding Executive)
that Executive's obligations under this subparagraph shall cease.
During the period covered by the preceding sentence, Executive
shall render such services as shall be required of her in order
to explore and pursue fully the Potential Change-in-Control in
accordance with directions, policies and determinations from time
to time made by the Board of Directors of Bank or Parent or the
President of Bank and communicated to Executive. During said
period, Executive shall use her reasonable best efforts to
fulfill her responsibilities to Bank in the interests of Bank and
the shareholders of Parent and as reasonably requested of her by
the Board of Directors of Bank or Parent or the President of Bank
for such purposes. The employment of Executive pursuant to the
first sentence of this subparagraph (b) may be terminated,
without breach of this Agreement, either by Bank or Parent for
Cause, Disability or Material Breach, or by Executive for Good
Reason.
4. Compensation. During the Term, Bank shall pay to
Executive as compensation for the services to be rendered by her
hereunder the following:
(a) A base salary at the rate of Ninety-Eight Thousand
Dollars ($98,000) per year, or such larger sum as the Board of
Directors of Bank may from time to time determine in connection
with regular periodic performance reviews pursuant to Bank's
policies and practices. Such compensation shall be payable in
accordance with normal payroll practices of Bank.
(b) In addition, Executive may be entitled to a bonus,
payable in cash or other form of compensation, at the end of each
calendar year during such Term in an amount and form set by the
Board of Directors of Bank. The Board of Directors may establish
one or more individual or corporate goals for each such year, the
achievement of which may be made a condition to the payment of
the foregoing bonus to Executive. Such goals shall be
communicated to Executive and shall be stated to be a condition
to payment of said bonus.
-6-
5. Benefits. During the Term, Executive shall be entitled
to the following benefits:
(a) Comprehensive health insurance and major medical
coverage comparable to such coverage provided for executive
employees of Bank generally in compliance with plans or practices
in effect at Bank.
(b) Participation in Bank's long-term disability
insurance plan and pension plan, in accordance with the terms
thereof, as may be in effect from time to time.
(c) Life insurance on the life of Executive in an
amount not less than three (3) times the base salary of Executive
in accordance with the life insurance plan as may be in effect
from time to time for executives of Bank in the same benefits
classification as Executive, payable to a beneficiary selected by
Executive.
(d) A vacation of at least four (4) weeks per year,
during which Executive's compensation shall be paid in full. The
period of vacation selected each year shall be with the approval
of the President of Bank. Vacation time which is not taken by
Executive in any year may be deferred and taken in the first
quarter of the following year.
(e) Reimbursement of all travel and other reasonable
business expenses incident to the rendering of services by
Executive hereunder subject to the submission of appropriate
vouchers and receipts in accordance with Bank's policy from time
to time in effect.
6. End of Term. The Term shall end upon the occurrence of
any of the following events:
(a) Termination of Executive's employment by Bank or
NFC for "Cause."
(b) The voluntary termination of Executive's
employment by Executive other than for "Good Reason."
(c) The Disability of Executive. If this Agreement is
terminated by reason of the Disability of the Executive, Bank
shall give written notice to that effect to Executive in the
manner provided in Paragraph 16 herein.
(d) The death of Executive.
(e) The retirement of Executive in accordance with the
retirement policy of Bank, including early retirement, generally
applicable to its executives or in accordance with any retirement
arrangement established with the consent of Executive with
respect to him.
(f) Full compliance by Bank with the provisions of
Paragraph 7(f) below, if Executive's employment shall have been
terminated by Bank during the Term for any reason other than
-7-
"Cause," "Disability," or if Executive shall have voluntarily
terminated her employment during the Term for "Good Reason."
(g) The Executive attains the age of sixty-five (65).
7. Payment Upon Termination.
(a) If Executive's employment is terminated by Bank
for "Cause," as defined in Paragraph 1(a), the obligations of
Bank and NFC under this Agreement shall cease and Executive shall
forfeit all right to receive any compensation or other benefits
under this Agreement except only salary and reimbursable expenses
accrued through the date of such termination.
(b) If Executive shall voluntarily terminate her
employment during the Term other than for "Good Reason," as
defined in Paragraph 1(d), the obligations of Bank and NFC under
this Agreement shall cease and Executive shall forfeit all right
to receive any compensation or other benefits under this
Agreement except only salary and reimbursable expenses accrued
through the date of such termination.
(c) If Executive's employment is terminated during the
Term by reason of Disability, then Executive shall receive, in
addition to her disability benefits under the Bank's long-term
disability plan, the difference between such disability benefits
and her then current rate of base salary for six (6) months after
termination of employment.
(d) In the event of the death of Executive during the
Term, then, in addition to and not in substitution for any other
benefits which may be payable by Bank in respect of the death of
Executive, the base salary then payable hereunder shall continue
to be paid at the then current rate for a period of six (6)
months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective
designation exists, then to the estate of Executive.
(e) If Executive's employment is terminated by reason of
retirement as specified in Paragraph 6(e), the obligations of
Bank and NFC under this Agreement shall cease and Executive shall
forfeit all right to receive any compensation or other benefits
under this Agreement except only salary and reimbursable expenses
accrued through the date of such retirement.
(f) If Executive's employment is terminated by Bank
during the Term for any reason other than for "Cause," or
"Disability," or if Executive shall voluntarily terminate her
employment during the Term for "Good Reason," Executive shall be
entitled to receive, and Bank shall be obligated to pay and
provide Executive, the following amounts:
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(i) An amount in consideration of the covenants
by Executive set forth in Paragraphs 8 and 9 below to be
determined by an independent certified public accounting firm
retained by Bank to be the reasonable value of said covenants as
of the date of termination of Executive's employment. Said
amount shall be paid in cash in a lump sum in the month next
following Executive's termination of employment and shall be
treated as a supplemental wage payment under applicable Treasury
Regulations subject to federal tax withholding at the flat
percentage rate applicable thereto.
(ii) The base salary of Executive, at the rate
in effect immediately prior to Executive's termination, for the
remainder of the Term in effect under Paragraph 2 of this
Agreement, from which shall be subtracted the amount payable to
Executive pursuant to subparagraph (f)(i) above and the amount,
if any, payable to Executive under any then effective severance
pay plan of Bank, payable in accordance with normal payroll
practices of Bank, or at Bank's option the commuted value
(determined by discounting all payments at a rate equal to the
bond equivalent yield of the latest two-year Treasury Bill
auction) of such salary to be paid in cash in a lump sum in the
month next following Executive's termination of employment and to
be treated as a supplemental wage payment under applicable
Treasury Regulations subject to federal tax withholding at the
flat percentage rate applicable thereto; provided that if
Executive's termination is after a Change-in-Control such payment
shall be in the form of a lump sum as aforesaid, but calculated
without any discount as aforesaid.
(iii) An amount equal to the aggregate amounts
that Bank would have contributed on behalf of Executive under
Bank's Thrift Plan, if any such plan shall be in effect, until
the end of the Term (plus estimated earnings thereon) had
Executive continued in the employ of Bank until the end of the
Term and made contributions under said plan at a rate, as a
percentage of salary, equal to the rate at which Executive had
made contributions to said plan in the plan year immediately
preceding Executive's termination.
(iv) Additional retirement benefits equal to the
difference between (A) the annual pension benefits that would
have been payable to Executive under the Retirement Plan of Bank
(the "Plan") and under any supplemental retirement plan or
agreement covering Executive ("Supplemental Plan"), if Executive
had been continued in the employ of Bank until the end of the
Term and had received compensation at least equal to that
specified in Paragraph 4(a) of this Agreement until such time,
and (B) the annual benefits actually payable to Executive under
the Plan and any such Supplemental Plan, the discounted present
value of such additional benefits, as calculated by the
independent actuary for the Plan, to be payable in a lump sum to
Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said
non-competition provisions.
(v) To the extent that any form of compensation
previously granted to Executive, such as, by way of example only,
restricted stock or performance share awards, shall not be fully
vested or shall require additional service as an employee at the
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time of the termination of Executive's employment, Executive
shall be credited with additional service through the end of the
Term for such purpose.
(vi) During the period of eighteen (18) months
following Executive's termination of employment (or such other
period as shall be prescribed by the then applicable COBRA law)
(the "continuation period"), Executive shall continue to receive
such individual and/or family health benefits coverage as she was
receiving at the time of termination of employment, with Bank and
Executive paying the same portion of the cost of such coverage as
existed at the time of Executive's termination, for so long
during the continuation period as Executive elects to continue
coverage and pays her portion of the costs of coverage.
(vii) To the extent that Bank maintains life
insurance for the benefit of Executive at the time of Executive's
termination of employment, Executive shall have the right to
convert such policy to an individually owned term life policy (to
the extent permitted under the governing contracts) and Bank will
pay an annual amount of up to one hundred fifty percent (150%) of
the amount of the average annual premium paid for such life
insurance on behalf of Executive over the three (3) fiscal years
of Bank preceding termination of employment to continue up to the
same amount of coverage on a term basis for the remainder of
Executive's Term. Executive shall have the right to pay any
additional premium amount to maintain the full amount of
insurance in effect or elect to receive lesser coverage for the
same premium. Executive shall also have the right to decline any
continued insurance coverage, in which event Bank will pay to
Executive in a single sum an amount equal to the discounted
present value of the cost of continued coverage as aforesaid.
(viii) Bank shall not be obligated to continue any
disability or disability income insurance on behalf of Executive
following the date of Executive's termination of
employment. To the extent permitted under any contracts,
programs or policies of such nature in effect at the time of such
termination, Executive may continue at her sole cost and expense
coverage thereunder for a period of up to eighteen (18) months.
(ix) During the balance of the Term, Executive
shall continue to receive such perquisites, other than those
specified in the preceding subparagraphs above, as she was
receiving at the time of termination of employment with, to the
extent applicable, the same cost sharing with Bank as was in
effect immediately prior to Executive's termination of
employment.
(x) If Executive's termination is after a
Change-in-Control, Bank shall reimburse Executive for the amount
of any reasonable legal fees and expenses incurred by Executive
in any successful action (whether or not arbitration or
litigation shall be involved) to obtain or enforce any right or
benefit provided to Executive by Bank hereunder or as confirmed
or acknowledged hereunder.
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8. Confidential Information. Executive understands that
in the course of her employment by Bank and NFC, Executive will
receive or have access to confidential information concerning the
business or purposes of Bank and NFC, and which Bank and NFC
desire to protect. Such confidential information shall be deemed
to include, but not be limited to, Bank's customer lists, loan
lists and information, and employee lists, including, if known,
personnel information and data. Executive agrees that she will
not at any time during the period ending one (1) year after the
later of (a) the end of the Term and (b) the end of the period in
which Executive is entitled to receive any payments or benefits
under this Agreement, reveal to anyone outside Bank or NFC or use
for her own benefit any such information without specific
written authorization by Bank or NFC. Executive further agrees
not to use any such confidential information or trade secrets in
competing with Bank or NFC at any time during or in the one (1)
year period immediately following termination of employment with
Bank and NFC.
9. Covenants by Executive Not to Compete With Bank or NFC.
(a) Upon termination of Executive's employment with
Bank and NFC for any reason, Executive covenants and agrees that
she will not at any time during the period of one (1) year from
and after such termination if such termination shall occur after
or in connection with a Change-in-Control, or two (2) years from
and after any other such termination, directly or indirectly in
any manner or under any circumstances or conditions whatsoever be
or become interested, as an individual, partner, principal,
agent, clerk, employee, stockholder, officer, director, trustee,
or in any other capacity whatsoever, except as a nominal owner of
stock of a public corporation, in any other business in any city
or town where Bank or NFC operates a full service branch office
at the time of Executive's termination that in any way competes
with the business of Bank or NFC as it exists at the time of
Executive's termination, or engage or participate in, directly or
indirectly (whether as an officer, director, employee, partner,
consultant, holder of an equity or debt investment, lender or in
any other manner or capacity), or lend her name (or any part or
variant thereof) to, any business in any city or town where Bank
or NFC operates a full service branch office at the time of
Executive's termination which is, or as a result of the
Executive's engagement or participation would become, competitive
with any aspect of the business of Bank or NFC as it exists at
the time of Executive's termination or solicit any officer,
director, employee or agent of Bank or NFC or any subsidiary or
affiliate of Bank or NFC to become an officer, director, employee
or agent of Executive, her respective affiliates or anyone else;
ownership, in the aggregate, of less than one percent (1%) of the
outstanding shares of capital stock of any corporation with one
or more classes of its capital stock listed on a national
securities exchange or publicly traded in the over-the-counter
market shall not constitute a violation of the foregoing
provision.
(b) Executive hereby acknowledges that her services
are unique and extraordinary, and are not readily replaceable,
and hereby expressly agrees that Bank and NFC, in enforcing the
covenants contained in Paragraphs 8 and 9 herein, in addition to
any other remedies provided for herein or otherwise available at
-11-
law, shall be entitled in any court of equity having jurisdiction
to an injunction restraining her in the event of a breach, actual
or threatened, of the agreements and covenants contained in these
Paragraphs.
(c) The parties hereto believe that the restrictive
covenants of these Paragraphs are reasonable. However, if at any
time it shall be determined by any court of competent
jurisdiction that these Paragraphs or any portion of them as
written, are unenforceable because the restrictions are
unreasonable, the parties hereto agree that such portions as
shall have been determined to be unreasonably restrictive shall
thereupon be deemed so amended as to make such restrictions
reasonable in the determination of such court, and the said
covenants, as so modified, shall be enforceable between the
parties to the same extent as if such amendments had been made
prior to the date of any alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply
if Bank shall be prohibited under Paragraph 15 below from making
any payments to Executive pursuant to Paragraph 7 above.
10. No Obligation to Mitigate. So long as Executive shall
not be in breach of any provision of Paragraph 8 or 9, Executive
shall have no duty to mitigate damages in the event of a
termination and if she voluntarily obtains other employment
(including self-employment), any compensation or profits received
or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Bank to
make payments hereunder.
11. Resignation. In the event that Executive's services
hereunder are terminated under any of the provisions of this
Agreement (except by death), Executive agrees that she will
deliver her written resignation as a Director and/or an officer
of Bank or NFC, or their subsidiaries and affiliates, to the
Board of Directors, such resignation to become effective
immediately or, at the option of the Board of Directors, on a
later date as specified by the Board.
12. Insurance. Bank shall have the right at its own cost
and expense to apply for and to secure in its own name, or
otherwise, life, health or accident insurance or any or all of
them covering Executive, and Executive agrees to submit to the
usual and customary medical examination and otherwise to
cooperate with Bank in connection with the procurement of any
such insurance, and any claims thereunder.
13. Release. As a condition of receiving payments or
benefits provided for in this Agreement, at the request of Bank,
Executive shall execute and deliver for the benefit of Bank
and NFC, and any subsidiary or affiliate of Bank or NFC, a
general release in the form set forth in Attachment A, and such
release shall become effective in accordance with its terms. The
failure or refusal of Executive to sign such a release or the
revocation of such a release shall
cause the termination of any and all obligations of Bank and NFC
to make payments or provide benefits hereunder, and the
forfeiture of the right of Executive to receive any such payments
and benefits. Executive acknowledges that Bank and NFC have
advised her to consult with an attorney prior to signing this
Agreement and that she has had an opportunity to do so.
-12-
14. Section 280G Limit. Notwithstanding any other
provision of this Agreement, in the event that any payment or
benefit received or to be received by Executive, whether payable
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with Bank, its successors, or any person
affiliated with Bank ("Affiliate") within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the
"Code") (collectively "Total Payments") would, in the
determination of the independent certified public accounting firm
then retained by Bank (the "Tax Advisor"), not be deductible (in
whole or in part) by Bank, an Affiliate or other person making
such payment or providing such benefit as a result of Section
280G of the Code, or any successor to such Section, payments and
benefits pursuant to this Agreement shall be reduced until no
portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or payments and benefits pursuant to
this Agreement are reduced to zero. For purposes of this
limitation, (i) no portion of the Total Payments the receipt of
which Executive, in the determination of the Tax Advisor, shall
have effectively waived prior to the date which is fifteen (15)
days following termination of employment and prior to the earlier
of the date of constructive receipt and the date of payment
thereof shall be taken into account; and (ii) any reduction in
the payments and benefits pursuant to this Paragraph shall be
made from the payments and benefits to be made pursuant to
clauses (i) through (iv) of Paragraph 7(f), in such order as may
be determined by Executive, except to the extent that such
payments and benefits, in the determination of the Tax Advisor,
are reasonable compensation within the meaning of Section 280G of
the Code. The determination of the Tax Advisor as to the
deductibility of the Total Payments shall be completed not later
than forty-five (45) days following Executive's termination of
employment, and such determination shall be communicated in
writing to Bank, with a copy to Executive, within said forty-five
(45) day period. The determination of the Tax Advisor as to the
deductibility of the Total Payments shall be deemed conclusive
and binding of Bank and Executive and shall not be subject to the
arbitration provisions hereof Bank shall pay the fees and other
costs of the Tax Advisor hereunder. In the event that the
independent certified public accounting firm then retained by
Bank is unable or declines to serve as Tax Advisor for
purposes of making the foregoing determination, Bank shall
appoint another accounting firm of national reputation to serve
as Tax Advisor.
15. Regulatory Limitation. Notwithstanding any other
provision of this Agreement, Bank shall not be obligated to make,
and Executive shall have no right to receive, any payment,
benefit or amount under this Agreement which would violate any
law, regulation or regulatory order applicable to Bank or its
parent at the time such payment, benefit or amount is due,
including, without limitation, Section 1828(k)(1) of Title 12 of
the United States Code and any regulation or order thereunder of
the Federal Deposit Insurance Corporation ("Prohibited Payment").
In such event the provisions of Section 18 below shall apply. If
and to the extent Bank shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then
at such time Bank shall promptly make payment of any such amounts
to Executive.
16. Notices. All notices under this Agreement shall be in
writing and shall be deemed effective when delivered in person to
Executive or to the President of Bank and NFC, or if mailed,
-13-
postage prepaid, registered or certified mail, addressed, in the
case of Executive, to her last known address as carried on the
personnel records of Bank, and, in the case of Bank and NFC, to
the corporate headquarters, attention of the President, or to
such other address as the party to be notified may specify by
notice to the other party. Executive hereby agrees to give
Bank and NFC not less than sixty (60) days' advance notice of her
intended resignation or other termination from Bank or NFC,
whether or not at the end of the Term.
17. Successors and Assigns. The rights and obligations of
Bank and NFC under this Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of Bank and
NFC, including, without limitation, any corporation, individual
or other person or entity which may acquire all or substantially
all of the assets and business of Bank or NFC, or of any division
of Bank for which Executive has primary management
responsibility, or with or into which Bank or NFC may be
consolidated or merged or any surviving corporation in any merger
involving Bank or NFC. All references in this Agreement to Bank
and NFC shall be deemed to include all such successors and
assigns.
18. Arbitration. Any dispute which may arise between the
parties hereto may, if both parties agree, be submitted to
binding arbitration in the City of Hartford in accordance with
the Rules of the American Arbitration Association; provided that
any such dispute shall first be submitted to Bank's Board of
Directors in an effort to resolve such dispute without resort to
arbitration.
19. Severability. If any of the terms or conditions of
this Agreement shall be declared void or unenforceable by any
court or administrative body of competent jurisdiction, such term
or condition shall be deemed severable from the remainder of this
Agreement, and the other terms and conditions of this Agreement
shall continue to be valid and enforceable.
20. Amendment. This Agreement may be modified or amended
only by an instrument in writing executed by the parties hereto.
21. Construction. This Agreement shall supersede and
replace all prior agreements and understandings between the
parties hereto on the subject matter covered hereby. This
Agreement shall be governed and construed under the laws of the
State of Connecticut. Words of the masculine gender mean and
include correlative words of the feminine gender. Paragraph
headings are for convenience only and shall not be considered a
part of the terms and provisions of the Agreement.
-14-
IN WITNESS WHEREOF, Bank and NFC have caused this Agreement
to be executed by a duly authorized officer, and Executive has
hereunto set her hand, this 3rd day of September, 1997.
THE NORWICH SAVINGS SOCIETY AND
NORWICH FINANCIAL CORP.
By /s/Daniel R. Dennis, Jr.
Daniel R. Dennis, Jr.
Their President
/s/ Daphne P. Cannata
Daphne P. Cannata
Executive
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this
Release. You have until the date which is seven (7) days after
the Release is signed and returned to The Norwich Savings Society
(the "Bank") to change your mind and revoke your Release. Your
Release shall not become effective or enforceable until after
that date.
In consideration for the benefits provided under your
Amended and Restated Employment Agreement with the Bank and
Norwich Financial Corp. ("NFC"), and more specifically enumerated
in Exhibit 1 hereto, by your signature below you agree to accept
such benefits and not to make any claims of any kind against the
Bank, its past and present and future parent corporations,
subsidiaries, divisions, subdivisions, affiliates and related
companies or their successors and assigns, including without
limitation NFC, or any and all past, present and future
Directors, officers, fiduciaries or employees of any of the
foregoing (all parties referred to in the foregoing are
hereinafter referred to as the "Releasees") before any agency,
court or other forum, and you agree to release the Releasees from
all claims, known or unknown, arising in any way from any actions
taken by the Releasees up to the date of this Release, including,
without limiting the foregoing, any claim for wrongful discharge
or breach of contract or any claims arising under the Age
Discrimination in Employment Act of 1967, Title VII of the Civil
Rights Act of 1964, the Americans with Disabilities Act of 1990,
the Employee Retirement Income Security Act of 1974, or any other
federal, state or local statute or regulation and any claim for
attorneys' fees, expenses or costs of litigation, except that
this Release is not intended, and shall not be construed, to
release the Bank from any vested obligations it may have under
its employee pension benefit plans.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS
RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING
A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED
ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE OF THIS
RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully
understand its terms;
2. You have had at least twenty-one (21) days to consider
the terms of the Release;
3. You have seven (7) days from the date you sign this
Release to revoke it by written notification to the Bank. After
this seven (7) day period, this Release is final and binding and
may not be revoked;
-2-
4. You have been advised to seek legal counsel and have
had an opportunity to do so;
5. You would not otherwise be entitled to the benefits
provided under your Amended and Restated Employment Agreement
with the Bank had you not agreed to waive any right you have to
bring a lawsuit or legal claim against the Releasees; and
6. Your agreement to the terms set forth above is
voluntary.
Name:
Signature: Date:
Received by: Date:
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF
TERMINATION TO REFLECT ALL BENEFITS AND PAYMENTS MADE UNDER
AGREEMENT.
Acknowledged and Agreed:
NORWICH FINANCIAL CORP. AND
THE NORWICH SAVINGS SOCIETY EXECUTIVE
By
Their
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into, effective as of the
3RD day of September 1997, by and among THE NORWICH SAVINGS
SOCIETY, a Connecticut savings bank with its principal office and
place of business in Norwich, Connecticut ("Bank"), NORWICH
FINANCIAL CORP., a Delaware corporation and holder of all of the
outstanding capital stock of Bank ("NFC" or "Parent"), and Michael
J. Hartl, a resident of Glastonbury, Connecticut ("Executive").
W I T N E S S E T H:
WHEREAS, Executive has been and continues to be employed by
Bank and NFC in an executive capacity pursuant to an Employment
Agreement between Executive and Bank and NFC dated as of the 1st
day of June, 1995; and
WHEREAS, Bank, NFC and Executive desire to amend and restate
the Employment Agreement on the terms herein set forth; and
WHEREAS, Bank, NFC and Executive are willing to enter into
this Amended and Restated Employment Agreement ("Agreement") on
the terms herein set forth;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants herein contained, the parties hereto, intending
to be legally bound, do hereby mutually covenant and agree as
follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Cause" shall mean:
(i) Executive's conviction of, or plea of nolo
contendere to, a felony or crime involving moral turpitude;
(ii) Executive's commission of an act of personal
dishonesty or breach of fiduciary duty, whether or not involving
personal profit, in connection with Executive's employment by Bank
or any other organization of public trust;
(iii) Executive's commission of an act which the
Board of Directors of Bank by a vote of at least two-thirds (2/3)
of all of the Directors (excluding Executive) shall have found to
have involved willful misconduct or gross negligence on the part
of Executive, in the conduct of his duties or public life or which
causes material embarrassment to the Bank or Parent;
-2-
(iv) Habitual absenteeism, chronic alcoholism or
any other form of addiction on the part of Executive which
prevents him from performing the essential functions of his
position with or without reasonable accommodation; or
(v) Entry of any final order of a federal or
state regulatory authority having jurisdiction over Bank or Parent
directing the removal of Executive from office.
(b) "Change-in-Control" shall be deemed to have
occurred with respect to Bank if any "Person," as hereinafter
defined, has acquired control of Bank. A "Person" has control:
(i) if a Distribution Date shall have occurred
within the meaning of the Preferred Stock Rights Plan of Parent
adopted by Parent on November 21, 1989, as amended (the "Rights
Plan"), so long as the Rights Plan is in effect;
(ii) if the Rights Plan is not in effect, ten (10)
days following the public announcement that any Person (other than
Parent), directly or indirectly, or acting through one (1) or more
other Persons, owns, controls or has power to vote twenty percent
(20%) or more of the voting common stock of Bank or of Parent
(excluding for purposes hereof any such stock acquired in any one
(1) or more transactions approved by resolution of a majority of
the Board of Directors of Parent) and one (1) or more designees of
such Person is a member of or is thereafter elected to the Board
of Directors of Bank or Parent;
(iii) if the Rights Plan is not in effect, ten (10)
days following the public announcement of the commencement of a
tender offer or exchange offer that would result in the Person
acquiring twenty percent (20%) or more of the voting common stock
of Bank or Parent;
(iv) if Bank or Parent consummates a merger,
consolidation, sale of substantially all its assets, or
substantially similar reorganization transaction with such Person,
excluding, however, any merger, consolidation, sale of
substantially all its assets, or substantially similar
reorganization transaction in which the Market Value of the
outstanding capital stock of such Person is forty percent (40%) or
less of the Market Value of the outstanding capital stock of
Parent. For purposes hereof, "Market Value" shall mean the
average of the closing price of the capital stock over the last
ten (10) trading days prior to the date of execution of a
definitive agreement for such merger or consolidation multiplied
by the number of shares of such capital stock outstanding on the
date of execution of such definitive agreement;
(v) if during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such
period constitute the Board of Directors of Bank or Parent cease
for any reason to constitute a majority of such Board, unless the
election, or the nomination for election of each new Director was
approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who were Directors at the beginning of such
period; or
-3-
(vi) if the Board of Directors of Bank or Parent,
by vote of a majority of all the Directors (excluding Executive),
adopts a resolution to the effect that a "Change-in-Control" has
occurred for purposes of this Agreement.
(c) "Disability" shall mean the incapacity of Executive
by illness or any other cause as determined under the long-term
disability insurance Plan of Bank in effect at the time in
question, or if no such plan is in effect, then such incapacity of
Executive as prevents Executive from performing the essential
functions of his position with or without reasonable accommodation
for a period in excess of two hundred forty (240) days (whether or
not consecutive), or one hundred eighty (180) days consecutively,
as the case may be, during any twelve (12) month period.
(d) "Good Reason" shall mean the occurrence of any
action which (i) removes or changes Executive's title or reduces
Executive's job responsibilities or base salary (except pursuant
to a general reduction of not more than ten percent (10%) in
executive base salaries effected throughout the Bank prior to a
Change-in-Control; (ii) results in a significant worsening of
Executive's work conditions; or (iii) moves Executive's place of
employment to a location that increases Executive's commute by
more than thirty (30) miles over the length of Executive's
commute from his place of principal residence at the time the move
is requested; provided that, following a Change-in-Control, "Good
Reason" shall mean the good faith determination by Executive that
any such action has occurred.
(e) "Material Breach" by Executive shall mean a
determination, made prior to the occurrence of a Change-in-Control
by vote of at least two-thirds (2/3) of all of the Directors of
Bank (excluding Executive), that Executive shall have failed to
comply in any material respect with his obligations under this
Agreement following written notice to Executive of the alleged
deficiencies thereunder and a fair opportunity to cure such
deficiencies (the existence of which shall be confirmed by the
foregoing required vote). Any determination in accordance with
the preceding sentence shall be conclusive and binding for all
purposes of this Agreement.
(f) "Person" shall mean any individual, corporation,
partnership, company or other entity, and shall include a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of
1934.
(g) "Potential Change-in-Control" shall be deemed to
have occurred if (i) Bank or Parent enters into a letter of
intent, memorandum of understanding or definitive agreement
providing for, or publicly announces that it is considering, one
(1) or more transactions, the consummation of which would result
in the occurrence of a Change-in-Control; (ii) any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change-in-Control; or
(iii) the Board of Directors of Bank or Parent adopts a resolution
to the effect that a Potential Change-in-Control has occurred for
purposes of this Agreement.
-4-
2. Employment.
(a) Bank and NFC hereby agree to employ Executive as
Executive Vice President, Treasurer and Chief Financial Officer of
Bank and NFC and Executive accepts said employment and agrees to
serve for the Term of this Agreement in such capacity upon the
terms and conditions hereinafter set forth. Subject to the
provisions of subparagraphs (b) and (d) of this Paragraph 2, and
to the provisions of Paragraph 6 below, "Term" shall mean a
continuously renewing period of two (2) years.
(b) Except as provided in subparagraph (c) below, at
any time during the Term, Bank and NFC may, by written notice to
Executive, advise Executive of their desire to modify or amend any
of the terms or provisions of this Agreement or to delete or add
any terms or provisions. Any such notice ("Notice") shall
describe the proposed modifications in reasonable detail. In the
event a Notice shall be given to Executive, Bank, NFC and
Executive agree to discuss the proposed modification(s) and to
attempt in good faith to reach agreement with respect thereto and
to reduce such agreement to writing in an amendment to be executed
by all the parties ("Amendment"). If a Notice is given hereunder
and an Amendment shall not have been executed on or before the
sixtieth (60th) day following the date on which Notice is given,
then the Term shall thereupon be automatically converted to a
fixed period ending two (2) years after the expiration of such
sixty (60) days.
(c) No Notice given pursuant to subparagraph (b) above
shall be effective if given during the period commencing on the
date a Potential Change-in-Control occurs during the Term and
ending on the earlier of (i) abandonment of the event giving rise
to such Potential Change-in-Control (as determined by the Board of
Directors) and (ii) six (6) months following occurrence of the
Change-in-Control which gave rise to the Potential Change-in-
Control.
(d) Notwithstanding any other provision hereof, if a
Change-in-Control shall occur while this Agreement is in effect,
one (1) year shall automatically be added to the Term on the date
of such Change-in-Control; provided that, once effective, the
foregoing provision shall not be effective again on the occurrence
of any subsequent or successive Change-in-Control.
3. Duties of Employment.
(a) During the Term, Executive will serve as Executive Vice
President, Treasurer and Chief Financial Officer of Bank and NFC,
subject to the terms of this Employment Agreement and the
direction and control of the Boards of Directors and the President
of Bank and NFC. During the Term, Executive will serve Bank and
NFC faithfully, diligently and competently and will devote full-
time to his employment and will hold, in addition to the offices
of Executive Vice President, Treasurer and Chief Financial Officer
of Bank and NFC, such other executive offices of Bank or NFC, or
their respective subsidiaries and affiliates, to which he may be
elected, appointed or assigned by the Boards of Directors of Bank
or NFC from time to time and will discharge such executive duties
in connection therewith. Nothing in this Agreement shall preclude
-5-
Executive, with the prior approval of the President of Bank and
NFC, from devoting reasonable periods of time required for (i)
serving as a director or member of a committee of any organization
involving no conflict of interest with Bank or NFC, or (ii)
engaging in charitable, religious and community activities,
provided, that such directorships, memberships or activities do
not materially interfere with the performance of his duties
hereunder.
(b) In the event that (1) a Potential Change-in-Control
shall occur while Executive is employed by Bank and/or Parent and
(2) the Term shall have expired prior to the earlier of (x)
abandonment of the event giving rise to such Potential Change-in-
Control (as determined by the Board of Directors) and (y)
occurrence of the Change-in-Control which gave rise to the
Potential Change-in-Control, Executive agrees that he will remain
in the employ of Bank and Parent at the request of Bank and
Parent, and in such event Bank and Parent agree to continue to
employ Executive, in the offices then held by him with Bank and
Parent and on the terms of employment then in effect until the
earlier to occur of the following: (i) the event giving rise to
the Potential Change-in-Control shall have been abandoned or
terminated; (ii) a Change-in-Control has occurred; or (iii) the
Board of Directors of Bank shall have determined by vote of at
least two-thirds (2/3) of all the Directors (excluding Executive)
that Executive's obligations under this subparagraph shall cease.
During the period covered by the preceding sentence, Executive
shall render such services as shall be required of him in order to
explore and pursue fully the Potential Change-in-Control in
accordance with directions, policies and determinations from time
to time made by the Board of Directors of Bank or Parent or the
President of Bank and communicated to Executive. During said
period, Executive shall use his reasonable best efforts to fulfill
his responsibilities to Bank in the interests of Bank and the
shareholders of Parent and as reasonably requested of him by the
Board of Directors of Bank or Parent or the President of Bank for
such purposes. The employment of Executive pursuant to the first
sentence of this subparagraph (b) may be terminated, without
breach of this Agreement, either by Bank or Parent for Cause,
Disability or Material Breach, or by Executive for Good Reason.
4. Compensation. During the Term, Bank shall pay to
Executive as compensation for the services to be rendered by him
hereunder the following:
(a) A base salary at the rate of One Hundred Sixty-
Eight Thousand Seven Hundred Dollars ($168,700) per year, or such
larger sum as the Board of Directors of Bank may from time to time
determine in connection with regular periodic performance reviews
pursuant to Bank's policies and practices. Such compensation shall
be payable in accordance with normal payroll practices of Bank.
(b) In addition, Executive may be entitled to a bonus,
payable in cash or other form of compensation, at the end of each
calendar year during such Term in an amount and form set by the
Board of Directors of Bank. The Board of Directors may establish
one or more individual or corporate goals for each such year, the
achievement of which may be made a condition to the payment of the
foregoing bonus to Executive. Such goals shall be communicated to
Executive and shall be stated to be a condition to payment of said
bonus.
-6-
5. Benefits. During the Term, Executive shall be entitled
to the following benefits:
(a) Comprehensive health insurance and major medical
coverage comparable to such coverage provided for executive
employees of Bank generally in compliance with plans or practices
in effect at Bank.
(b) Participation in Bank's long-term disability
insurance plan and pension plan, in accordance with the terms
thereof, as may be in effect from time to time.
(c) Life insurance on the life of Executive in an
amount not less than three (3) times the base salary of Executive
in accordance with the life insurance plan as may be in effect
from time to time for executives of Bank in the same benefits
classification as Executive, payable to a beneficiary selected by
Executive.
(d) A vacation of at least four (4) weeks per year,
during which Executive's compensation shall be paid in full. The
period of vacation selected each year shall be with the approval
of the President of Bank. Vacation time which is not taken by
Executive in any year may be deferred and taken in the first
quarter of the following year.
(e) Reimbursement of all travel and other reasonable
business expenses incident to the rendering of services by
Executive hereunder subject to the submission of appropriate
vouchers and receipts in accordance with Bank's policy from time
to time in effect.
(f) A late model American automobile as approved by the
Board of Directors of Bank, together with reimbursement for the
ordinary and necessary expenses of said automobile incurred by
Executive in the course of performing his duties for Bank
hereunder.
6. End of Term. The Term shall end upon the occurrence of
any of the following events:
(a) Termination of Executive's employment by Bank or
NFC for "Cause."
(b) The voluntary termination of Executive's employment
by Executive other than for "Good Reason."
(c) The Disability of Executive. If this Agreement is
terminated by reason of the Disability of the Executive, Bank
shall give written notice to that effect to Executive in the
manner provided in Paragraph 16 herein.
(d) The death of Executive.
-7-
(e) The retirement of Executive in accordance with the
retirement policy of Bank, including early retirement, generally
applicable to its executives or in accordance with any retirement
arrangement established with the consent of Executive with respect
to him.
(f) Full compliance by Bank with the provisions of
Paragraph 7(f) below, if Executive's employment shall have been
terminated by Bank during the Term for any reason other than
"Cause," "Disability," or if Executive shall have voluntarily
terminated his employment during the Term for "Good Reason."
(g) The Executive attains the age of sixty-five (65).
7. Payment Upon Termination.
(a) If Executive's employment is terminated by Bank for
"Cause," as defined in Paragraph 1(a), the obligations of Bank and
NFC under this Agreement shall cease and Executive shall forfeit
all right to receive any compensation or other benefits under this
Agreement except only salary and reimbursable expenses accrued
through the date of such termination.
(b) If Executive shall voluntarily terminate his
employment during the Term other than for "Good Reason," as
defined in Paragraph 1(d), the obligations of Bank and NFC under
this Agreement shall cease and Executive shall forfeit all right
to receive any compensation or other benefits under this Agreement
except only salary and reimbursable expenses accrued through the
date of such termination.
(c) If Executive's employment is terminated during the
Term by reason of Disability, then Executive shall receive, in
addition to his disability benefits under the Bank's long-term
disability plan, the difference between such disability benefits
and his then current rate of base salary for six (6) months after
termination of employment.
(d) In the event of the death of Executive during the
Term, then, in addition to and not in substitution for any other
benefits which may be payable by Bank in respect of the death of
Executive, the base salary then payable hereunder shall continue
to be paid at the then current rate for a period of six (6) months
after such death to such beneficiary as shall have been designated
in writing by Executive, or if no effective designation exists,
then to the estate of Executive.
(e) If Executive's employment is terminated by reason
of retirement as specified in Paragraph 6(e), the obligations of
Bank and NFC under this Agreement shall cease and Executive shall
forfeit all right to receive any compensation or other benefits
under this Agreement except only salary and reimbursable expenses
accrued through the date of such retirement.
-8-
(f) If Executive's employment is terminated by Bank
during the Term for any reason other than for "Cause," or
"Disability," or if Executive shall voluntarily terminate his
employment during the Term for "Good Reason," Executive shall be
entitled to receive, and Bank shall be obligated to pay and
provide Executive, the following amounts:
(i) An amount in consideration of the covenants by
Executive set forth in Paragraphs 8 and 9 below to be determined
by an independent certified public accounting firm retained by
Bank to be the reasonable value of said covenants as of the date
of termination of Executive's employment. Said amount shall be
paid in cash in a lump sum in the month next following Executive's
termination of employment and shall be treated as a supplemental
wage payment under applicable Treasury Regulations subject to
federal tax withholding at the flat percentage rate applicable
thereto.
(ii) The base salary of Executive, at the rate in
effect immediately prior to Executive's termination, for the
remainder of the Term in effect under Paragraph 2 of this
Agreement, from which shall be subtracted the amount payable to
Executive pursuant to subparagraph (f)(i) above and the amount, if
any, payable to Executive under any then effective severance pay
plan of Bank, payable in accordance with normal payroll practices
of Bank, or at Bank's option the commuted value (determined by
discounting all payments at a rate equal to the bond equivalent
yield of the latest two-year Treasury Note auction) of such salary
to be paid in cash in a lump sum in the month next following
Executive's termination of employment and to be treated as a
supplemental wage payment under applicable Treasury Regulations
subject to federal tax withholding at the flat percentage rate
applicable thereto; provided that if Executive's termination is
after a Change-in-Control such payment shall be in the form of a
lump sum as aforesaid, but calculated without any discount as
aforesaid.
(iii) An amount equal to the aggregate amounts
that Bank would have contributed on behalf of Executive under
Bank's Thrift Plan, if any such plan shall be in effect, until the
end of the Term (plus estimated earnings thereon) had Executive
continued in the employ of Bank until the end of the Term and made
contributions under said plan at a rate, as a percentage of
salary, equal to the rate at which Executive had made
contributions to said plan in the plan year immediately preceding
Executive's termination.
(iv) Additional retirement benefits equal to the
difference between (A) the annual pension benefits that would have
been payable to Executive under the Retirement Plan of Bank (the
"Plan") and under any supplemental retirement plan or agreement
covering Executive ("Supplemental Plan"), if Executive had been
continued in the employ of Bank until the end of the Term and had
received compensation at least equal to that specified in
Paragraph 4(a) of this Agreement until such time, and (B) the
annual benefits actually payable to Executive under the Plan and
any such Supplemental Plan, the discounted present value of such
additional benefits, as calculated by the independent actuary for
the Plan, to be payable in a lump sum to Executive within thirty
(30) days after the expiration of the non-competition period
specified in Paragraph 9(a) of this Agreement, provided that
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Executive shall not have breached said non-competition provisions.
(v) To the extent that any form of compensation
previously granted to Executive, such as, by way of example only,
restricted stock or performance share awards, shall not be fully
vested or shall require additional service as an employee at the
time of the termination of Executive's employment, Executive shall
be credited with additional service through the end of the Term
for such purpose.
(vi) During the period of eighteen (18) months
following Executive's termination of employment (or such other
period as shall be prescribed by the then applicable COBRA law)
(the "continuation period"), Executive shall continue to receive
such individual and/or family health benefits coverage as he was
receiving at the time of termination of employment, with Bank and
Executive paying the same portion of the cost of such coverage as
existed at the time of Executive's termination, for so long during
the continuation period as Executive elects to continue coverage
and pays his portion of the costs of coverage.
(vii) To the extent that Bank maintains life
insurance for the benefit of Executive at the time of Executive's
termination of employment, Executive shall have the right to
convert such policy to an individually owned term life policy (to
the extent permitted under the governing contracts) and Bank will
pay an annual amount of up to one hundred fifty percent (150%) of
the amount of the average annual premium paid for such life
insurance on behalf of Executive over the three (3) fiscal years
of Bank preceding termination of employment to continue up to the
same amount of coverage on a term basis for the remainder of
Executive's Term. Executive shall have the right to pay any
additional premium amount to maintain the full amount of insurance
in effect or elect to receive lesser coverage for the same
premium. Executive shall also have the right to decline any
continued insurance coverage, in which event Bank will pay to
Executive in a single sum an amount equal to the discounted
present value of the cost of continued coverage as aforesaid.
(viii) Bank shall not be obligated to continue
any disability or disability income insurance on behalf of
Executive following the date of Executive's termination of
employment. To the extent permitted under any contracts, programs
or policies of such nature in effect at the time of such
termination, Executive may continue at his sole cost and expense
coverage thereunder for a period of up to eighteen (18) months.
(ix) During the balance of the Term, Executive
shall continue to receive such perquisites, other than those
specified in the preceding subparagraphs above, as he was
receiving at the time of termination of employment with, to the
extent applicable, the same cost sharing with Bank as was in
effect immediately prior to Executive's termination of
employment.
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(x) If Executive's termination is after a Change-
in-Control, Bank shall reimburse Executive for the amount of any
reasonable legal fees and expenses incurred by Executive in any
successful action (whether or not arbitration or litigation shall
be involved) to obtain or enforce any right or benefit provided to
Executive by Bank hereunder or as confirmed or acknowledged
hereunder.
8. Confidential Information. Executive understands that in
the course of his employment by Bank and NFC, Executive will
receive or have access to confidential information concerning the
business or purposes of Bank and NFC, and which Bank and NFC
desire to protect. Such confidential information shall be deemed
to include, but not be limited to, Bank's customer lists, loan
lists and information, and employee lists, including, if known,
personnel information and data. Executive agrees that he will not
at any time during the period ending one (1) year after the later
of (a) the end of the Term and (b) the end of the period in which
Executive is entitled to receive any payments or benefits under
this Agreement, reveal to anyone outside Bank or NFC or use for
his own benefit any such information without specific written
authorization by Bank or NFC. Executive further agrees not to use
any such confidential information or trade secrets in competing
with Bank or NFC at any time during or in. the one (1) year period
immediately following termination of employment with Bank and NFC.
9. Covenants by Executive Not to Compete With Bank or NFC.
(a) Upon termination of Executive's employment with
Bank and NFC for any reason, Executive covenants and agrees that
he will not at any time during the period of two (2) years from
and after such termination directly or indirectly in any manner or
under any circumstances or conditions whatsoever be or become
interested, as an individual, partner, principal, agent, clerk,
employee, stockholder, officer, director, trustee, or in any other
capacity whatsoever, except as a nominal owner of stock of a
public corporation, in any other business in any city or town
where Bank or NFC operates a full service branch office at the
time of Executive's termination that in any way competes with the
business of Bank or NFC as it exists at the time of Executive's
termination, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant,
holder of an equity or debt investment, lender or in any other
manner or capacity), or lend his name (or any part or variant
thereof) to, any business in any city or town where Bank or NFC
operates a full service branch office at the time of Executive's
termination which is, or as a result of the Executive's engagement
or participation would become, competitive with any aspect of the
business of Bank or NFC as it exists at the time of Executive's
termination or solicit any officer, director, employee or agent of
Bank or NFC or any subsidiary or affiliate of Bank or NFC to
become an officer, director, employee or agent of Executive, his
respective affiliates or anyone else; ownership, in the aggregate,
of less than one percent (1%) of the outstanding shares of capital
stock of any corporation with one or more classes of its capital
stock listed on a national securities exchange or publicly traded
in the over-the-counter market shall not constitute a violation of
the foregoing provision.
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(b) Executive hereby acknowledges that his services are
unique and extraordinary, and are not readily replaceable, and
hereby expressly agrees that Bank and NFC, in enforcing the
covenants contained in Paragraphs 8 and 9 herein, in addition to
any other remedies provided for herein or otherwise available at
law, shall be entitled in any court of equity having jurisdiction
to an injunction restraining him in the event of a breach, actual
or threatened, of the agreements and covenants contained in these
Paragraphs.
(c) The parties hereto believe that the restrictive
covenants of these Paragraphs are reasonable. However, if at any
time it shall be determined by any court of competent jurisdiction
that these Paragraphs or any portion of them as written, are
unenforceable because the restrictions are unreasonable, the
parties hereto agree that such portions as shall have been
determined to be unreasonably restrictive shall thereupon be
deemed so amended as to make such restrictions reasonable in die
determination of such court, and the said covenants, as so
modified, shall be enforceable between the parties to the same
extent as if such amendments had been made prior to the date of
any alleged breach of said covenants.
(d) The provisions of this Paragraph 9 shall not apply
if Bank shall be prohibited under Paragraph 15 below from making
any payments to Executive pursuant to Paragraph 7 above.
10. No Obligation to Mitigate. So long as Executive shall
not be in breach of any provision of Paragraph 8 or 9, Executive
shall have no duty to mitigate damages in the event of a
termination and if he voluntarily obtains other employment
(including self-employment), any compensation or profits received
or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Bank to
make payments hereunder.
11. Resignation. In the event that Executive's services
hereunder are terminated under any of the provisions of this
Agreement (except by death), Executive agrees that he will deliver
his written resignation as a Director and/or an officer of Bank or
NFC, or their subsidiaries and affiliates, to the Board of
Directors, such resignation to become effective immediately or, at
the option of the Board of Directors, on a later date as specified
by the Board.
12. Insurance. Bank shall have the right at its own cost
and expense to apply for and to secure in its own name, or
otherwise, life, health or accident insurance or any or all of
them covering Executive, and Executive agrees to submit to the
usual and customary medical examination and otherwise to cooperate
with Bank in connection with the procurement of any such
insurance, and any claims thereunder.
13. Release. As a condition of receiving payments or
benefits provided for in this Agreement, at the request of Bank,
Executive shall execute and deliver for the benefit of Bank and
NFC, and any subsidiary or affiliate of Bank or NFC, a general
release in the form set forth in Attachment A, and such release
shall become effective in accordance with its terms. The failure
or refusal of Executive to sign such a release or the revocation
of such a release shall cause the termination of any and all
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obligations of Bank and NFC to make payments or provide benefits
hereunder, and the forfeiture of the right of Executive to receive
any such payments and benefits. Executive acknowledges that Bank
and NFC have advised him to consult with an attorney prior to
signing this Agreement and that he has had an opportunity to do
so.
14. Section 280G Limit. Notwithstanding any other provision
of this Agreement, in the event that any payment or benefit
received or to be received by Executive, whether payable pursuant
to the terms of this Agreement or any other plan, arrangement or
agreement with Bank, its successors, or any person affiliated with
Bank ("Affiliate") within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code")
(collectively "Total Payments") would, in the determination of the
independent certified public accounting firm then retained by Bank
(the "Tax Advisor"), not be deductible (in whole or in part) by
Bank, an Affiliate or other person making such payment or
providing such benefit as a result of Section 280G of the Code, or
any successor to such Section, payments and benefits pursuant to
this Agreement shall be reduced until no portion of the Total
Payments is not deductible as a result of Section 280G of the
Code, or payments and benefits pursuant to this Agreement are
reduced to zero. For purposes of this limitation, (i) no portion
of the Total Payments the receipt of which Executive, in the
determination of the Tax Advisor, shall have effectively waived
prior to the date which is fifteen (15) days following termination
of employment and prior to the earlier of the date of constructive
receipt and the date of payment thereof shall be taken into
account; and (ii) any reduction in the payments and benefits
pursuant to this Paragraph shall be made from the payments and
benefits to be made pursuant to clauses (i) through (iv) of
Paragraph 7(f), in such order as may be determined by Executive,
except to the extent that such payments and benefits, in the
determination of the Tax Advisor, are reasonable compensation
within the meaning of Section 280G of the Code. The determination
of the Tax Advisor as to the deductibility of the Total Payments
shall be completed not later than forty-five (45) days following
Executive's termination of employment, and such determination
shall be communicated in writing to Bank, with a copy to
Executive, within said forty-five (45) day period. The
determination of the Tax Advisor as to the deductibility of the
Total Payments shall be deemed conclusive and binding of Bank and
Executive and shall not be subject to the arbitration provisions
hereof Bank shall pay the fees and other costs of the Tax Advisor
hereunder. In the event that the independent certified public
accounting firm then retained by Bank is unable or declines to
serve as Tax Advisor for purposes of making the foregoing
determination, Bank shall appoint another accounting firm of
national reputation to serve as Tax Advisor.
15. Regulatory Limitation. Notwithstanding any other
provision of this Agreement, Bank shall not be obligated to make,
and Executive shall have no right to receive, any payment, benefit
or amount under this Agreement which would violate any law,
regulation or regulatory order applicable to Bank or its parent at
the time such payment, benefit or amount is due, including,
without limitation, Section 1828(k)(1) of Title 12 of the United
States Code and any regulation or order thereunder of the Federal
Deposit. Insurance Corporation ("Prohibited Payment"). In such
event the provisions of Section 18 below shall apply. If and to
the extent Bank shall at a later date be relieved of the
restriction on its ability to make any Prohibited Payment, then at
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such time Bank shall promptly make payment of any such amounts to
Executive.
16. Notices. All notices under this Agreement shall be in
writing and shall be deemed effective when delivered in person to
Executive or to the Secretary of Bank and NFC, or if mailed,
postage prepaid, registered or certified mail, addressed, in the
case of Executive, to his last known address as carried on the
personnel records of Bank, and, in the case of Bank and NFC, to
the corporate headquarters, attention of the Secretary, or to such
other address as the party to be notified may specify by notice to
the other party. Executive hereby agrees to give Bank and NFC not
less than sixty (60) days' advance notice of his intended
resignation or other termination from Bank or NFC, whether or not
at the end of the Term.
17. Successors and Assigns. The rights and obligations of
Bank and NFC under this Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of Bank and
NFC, including, without limitation, any corporation, individual or
other person or entity which may acquire all or substantially all
of the assets and business of Bank or NFC, or of any division of
Bank for which Executive has primary management responsibility, or
with or into which Bank or NFC may be consolidated or merged or
any surviving corporation in any merger involving Bank or NFC.
All references in this Agreement to Bank and NFC shall be deemed
to include all such successors and assigns.
18. Arbitration. Any dispute which may arise between the
parties hereto may, if both parties agree, be submitted to binding
arbitration in the City of Hartford in accordance with the Rules
of the American Arbitration Association; provided that any such
dispute shall first be submitted to Bank's Board of Directors in
an effort to resolve such dispute without resort to arbitration.
19. Severability. If any of the terms or conditions of this
Agreement shall be declared void or unenforceable by any court or
administrative body of competent jurisdiction, such term or
condition shall be deemed severable from the remainder of this
Agreement, and the other terms and conditions of this Agreement
shall continue to be valid and enforceable.
20. Amendment. This Agreement may be modified or amended
only by an instrument in writing executed by the parties hereto.
21. Construction. This Agreement shall supersede and
replace all prior agreements and understandings between the
parties hereto on the subject matter covered hereby. This
Agreement shall be governed and construed under the laws of the
State of Connecticut. Words of the masculine gender mean and
include correlative words of the feminine gender. Paragraph
headings are for convenience only and shall not be considered a
part of the terms and provisions of the Agreement.
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IN WITNESS WHEREOF, Bank and NFC have caused this Agreement
to be executed by a duly authorized officer, and Executive has
hereunto set his hand, this 3rd day of September, 1997.
THE NORWICH SAVINGS SOCIETY AND
NORWICH FINANCIAL CORP.
By: /s/ Daniel R. Dennis, Jr.
Daniel R. Dennis, Jr.
Their President
By: /s/ Michael J. Hartl
Michael J. Hartl
Executive
ATTACHMENT A
RELEASE
We advise you to consult an attorney before you sign this
Release. You have until the date which is seven (7) days after the
Release is signed and returned to The Norwich Savings Society (the
"Bank") to change your mind and revoke your Release. Your Release
shall not become effective or enforceable until after that date.
In consideration for the benefits provided under your Amended
and Restated Employment Agreement with the Bank and Norwich
Financial Corp. ("NFC"), and more specifically enumerated in
Exhibit 1 hereto, by your signature below you agree to accept such
benefits and not to make any claims of any kind against the Bank,
its past and present and future parent corporations, subsidiaries,
divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation NFC, or any
and all past, present and future Directors, officers, fiduciaries
or employees of any of the foregoing (all parties referred to in
the foregoing are hereinafter referred to as the "Releasees")
before any agency, court or other forum, and you agree to release
the Releasees from all claims, known or unknown, arising in any
way from any actions taken by the Releasees up to the date of this
Release, including, without limiting the foregoing, any claim for
wrongful discharge or breach of contract or any claims arising
under the Age Discrimination in Employment Act of 1967, Title VII
of the Civil Rights Act of 1964, the Americans with Disabilities
Act of 1990, the Employee Retirement Income Security Act of 1974,
or any other federal, state or local statute or regulation and any
claim for attorneys' fees, expenses or costs of litigation, except
that this Release is not intended, and shall not be construed, to
release the Bank from any vested obligations it may have under its
employee pension benefit plans.
THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE
YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR
MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS
TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.
By signing this Release, you further agree as follows:
1. You have read this Release carefully and fully
understand its terms;
2. You have had at least twenty-one (21) days to consider
the terms of the Release;
3. You have seven (7) days from the date you sign this
Release to revoke it by written notification to the Bank. After
this seven (7) day period, this Release is final and binding and
may not be revoked;
4. You have been advised to seek legal counsel and have had
an opportunity to do so;
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5. You would not otherwise be entitled to the benefits
provided under your Amended and Restated Employment Agreement with
the Bank had you not agreed to waive any right you have to bring a
lawsuit or legal claim against the Releasees; and
6. Your agreement to the terms set forth above is
voluntary.
Name:________________________________
Signature:_____________________________ Date:____________________
Received by:___________________________ Date:____________________
EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION
TO REFLECT ALL BENEFITS AND PAYMENTS MADE UNDER AGREEMENT.
Acknowledged and Agreed:
NORWICH FINANCIAL CORP. AND
THE NORWICH SAVINGS SOCIETY EXECUTIVE
By____________________________ ____________________________
Their
Summary of The Norwich Savings Society 1987 and 1990
Deferred Compensation Agreements
Directors of The Norwich Savings Society could defer their
fees pursuant to deferred compensation agreements effective
in 1987 and 1990. Under the 1987 agreements, directors
deferred their fees over a four-year period. Deferred
amounts were invested in life insurance policies owned by
The Norwich Savings Society. Benefits under the 1987
agreements are payable upon retirement, termination,
disability or death in monthly installments over a period of
120 months. Under the 1990 agreements, deferred amounts are
credited with an assumed annual earnings rate of 11%. The
accumulated deferred amounts and the earnings thereon are
payable either in a lump sum or in 10 annual installments,
as determined by The Norwich Savings Society, upon
retirement, termination, disability or death. The Norwich
Savings Society invested the deferred amounts in life
insurance policies owned by The Norwich Savings Society. No
deferrals were made under the 1990 agreements after June 30,
1995. Five of the current members of the Board of Directors
of The Norwich Savings Society and Norwich Financial Corp.
have deferred fees under the 1990 agreements. Four current
directors have deferred fees under the 1987 agreements. The
1987 and 1990 agreements will be amended and restated in the
form of one consolidated 1997 agreement for each director
pursuant to resolutions adopted by the Board of Directors of
The Norwich Savings Society and Norwich Financial Corp.
effective September 3, 1997. The substantive amendments to
the agreements will be the substitution of an 8 1/2% assumed
earnings rate for amounts deferred under the 1990
agreements.
