Exhibit 10.12
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Execution Copy
SPECIAL TERMINATION AGREEMENT
AGREEMENT made as of the 30th day of December, 1996 and restated as of
October 9, 1997, by and between First Essex Bancorp, Inc., a Delaware
corporation (the "Holding Company" and the parent of First Essex Bank, FSB, a
federal savings bank (the "Bank")) (the Bank and the Holding Company shall be
hereinafter collectively referred to as the "Employers") and Xxxxx X. Xxxxxxxx
of Amherst, Massachusetts (the "Executive").
1. Purpose. In order to allow the Executive to consider the prospect of
a Change in Control (as defined in Section 2) in an objective manner and in
consideration of the execution of those certain Amended and Restated Employment
Agreements between the Executive and each of the Employers dated as of the date
hereof (the "Employment Agreements"), the services to be rendered by the
Executive to the Employers and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Holding Company,
the Holding Company is willing to provide, subject to the terms of this
Agreement, certain severance benefits to protect the Executive from the
consequences of a Terminating Event (as defined in Section 3) occurring
subsequent to a Change in Control.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in either of the following events:
2.1 If there has occurred a change in control which the Holding
Company would be required to report in response to Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or, if such regulation is no longer in effect, any
regulations promulgated by the Securities and Exchange Commission
pursuant to the 1934 Act which are intended to serve similar purposes;
2.2 When any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the 0000 Xxx) becomes a "beneficial owner" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Holding Company or the Bank
representing twenty-five percent (25%) or more of the total number of
votes that may be cast for the election of directors of the Holding
Company or the Bank, as the case may be;
2.3 During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Holding Company, and any new director (other than a director
designated by a person who has entered into an agreement with the
Holding Company to effect a transaction described in Section 2.2, 2.4,
or 2.5 of this Agreement) whose election by the Board or nomination for
election by the Holding Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board of Directors of
the Holding Company;
2.4 The stockholders of the Holding Company approve a merger,
share exchange or consolidation ("merger or consolidation") of the
Holding Company with any other corporation, other than (a) a merger or
consolidation which would result in the voting securities of the
Holding Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Holding Company
or such surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to implement a
recapitalization of the Holding Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 30% of
the combined voting power of the Holding Company's then outstanding
securities; or
2.5 The stockholders of the Holding Company or the Bank approve a
plan of complete liquidation of the Holding Company or the Bank or an
agreement for the sale or disposition by the Holding Company or the
Bank of all or substantially all of the Holding Company's or the Bank's
assets.
3. Terminating Event. A "Terminating Event" shall mean
3.1 Termination by either of the Employers of the employment of
the Executive with either of the Employers for any reason other than
(i) death or (ii) for Cause (as such term is defined in the Employment
Agreements), or
3.2 Resignation of the Executive from the employ of either of the
Employers, while the Executive is not receiving payments or benefits
from either of the Employers by reason of the Executive's disability,
subsequent to the occurrence of any of the following events:
(a) a significant change in the nature or scope of the
Executive's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions
or duties exercised by the Executive immediately prior to the
Change in Control; or
(b) a determination by the Executive that, as a result of a
Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the
Executive immediately prior to such Change in Control; or
(c) a reduction in the Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time; or
(d) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date
of the Change in Control to a location more than 25 miles from
Andover, Massachusetts, or either Employer's requiring the
Executive to be based anywhere other than the Employers' offices
at such location; or
(e) the failure by either Employer to pay to the Executive
any portion of his current compensation or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation under any deferred
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compensation program of the either Employer within seven (7)
days of the date such compensation is due; or
(f) the failure by either Employer to continue in effect any
material compensation, incentive, bonus or benefit plan in which
the Executive participates immediately prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by either Employer to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change in Control; or
(g) the failure by either Employer to continue to provide
the Executive with benefits substantially similar to those
available to the Executive under any of either Employer's life
insurance, medical, health and accident, or disability plans or
any other material benefit plans in which the Executive as
participating at the time of the Change in Control, the taking of
any action by either Employer which would directly or indirectly
materially reduce any such benefits, or the failure by either
Employer to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the
Employers' normal vacation policy in effect at the time of the
Change in Control; or
(h) the failure of either Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement.
4. Severance Payment. In the event a Terminating Event occurs within
three (3) years after a Change in Control, the Holding Company shall pay to the
Executive the following amounts, payable in one lump-sum payment on the date of
termination.
4.1 An amount equal to the sum of (a) base salary or other
compensation earned through the date of termination, plus (b) the
Executive's pro rata share (based on the portion of the fiscal year
during which the Executive was employed) of the highest annual bonus
paid during the three fiscal years preceding the termination of
employment, plus (c) all accrued vacation and deferred compensation;
and
4.2 An aggregate amount equal to three times the Executive's
Highest Average Total Compensation. Highest Average Total Compensation
shall be determined by computing the Executive's Total Yearly
Compensation (as hereinafter defined) for each of the then-preceding
five calendar years and by averaging the three highest of the Total
Yearly Compensations thus calculated. Total Yearly Compensation shall
equal the aggregate of all base compensation and any commissions, or
bonuses paid, together with any contributions or accruals made on
behalf of Executive to any profit sharing plan or defined benefit
pension or retirement plan, by the Bank or the Holding Company (or any
predecessor in interest) for the benefit of the Executive for the
calendar year. If the Executive is a participant in a defined benefit
pension or retirement plan, the increase in the actuarial value of the
Executive's benefits under
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such plan between the start of the calendar year and the end of the
calendar year shall be deemed to have been "paid" by the Executive's
employer for the benefit of the Executive during such calendar year and
shall be included in the calculation of Total Yearly Compensation.
5. Benefit Continuation. In the event a Terminating Event occurs within
three (3) years after a Change in Control, the Holding Company shall continue to
pay to the Executive the disability and medical benefits existing on the date of
the Terminating Event at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of such Terminating Event, for a period of
three (3) years. Such medical benefits shall be deemed to have been provided
under the provisions of COBRA.
6. Employment Status. This Agreement is not an agreement for the
employment of the Executive and shall confer no rights on the Executive except
as herein expressly provided.
7. Term. This Agreement shall take effect on as of the date hereof and
shall terminate upon the earlier of (a) the resignation or termination of the
Executive for any reason prior to a Change in Control, or (b) the resignation of
the Executive after a Change in Control for any reason other than the occurrence
of any of the events enumerated in Section 3.2 of this Agreement.
8. Withholding. All payments made by the Holding Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Holding Company under applicable law.
9. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of The Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Holding Company, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 9. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any or all of the Executive's
rights under this Agreement, the Holding Company shall pay (or the Executive
shall be entitled to recover from the Holding Company, as the case may be) the
Executive's reasonable attorneys' fees and other reasonable costs and expenses
in connection with the enforcement of said rights (including the enforcement of
any arbitration award in court) regardless of the final outcome, unless and to
the extent the arbitrators shall determine that under the circumstances recovery
by the Executive of all or a part of any such fees and costs and expenses would
be unjust.
10. Assignment. Neither the Holding Company nor the Executive may make
any assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party and without such
consent any attempted transfer shall be null and void and of no effect. This
Agreement shall inure to the benefit of and be
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binding upon the Holding Company and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Holding Company of all payments
due him under this Agreement, the Holding Company shall continue such payments
to the Executive's beneficiary designated in writing to the Holding Company
prior to his death (or to his estate, if he fails to make such designation).
11. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
12. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
13. Prior Agreement. This Agreement restates and supersedes in its
entirety the Agreement dated December 30, 1996 among the Employers and the
Executive.
14. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Holding Company at its main office, attention of the Board of Directors.
15. Election of Remedies. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not constitute
a breach by the Executive of any employment agreement the Executive may have
with either Employer and shall not be deemed a voluntary termination of
employment by the Executive for the purpose of interpreting the provisions of
any of the Employers' benefit plans, programs or policies. Nothing in this
Agreement shall be construed to limit the rights of the Executive under any
employment agreement he may then have with either Employer, provided, however,
that if there is a Terminating Event under Section 3 hereof, the Executive may
elect either to receive the severance and other payments provided under Section
4 and Section 5 or such termination benefits as he may have under any such
employment agreement, but may not elect to receive both.
16. Excise Taxes. In the event that the Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or by any successor provision, by reason of any
payment or benefit which the Executive has received under this Agreement, the
Holding Company shall pay as additional compensation to the Executive that
amount which, after taking into account all taxes (including any tax which shall
be imposed by Code Section 4999) imposed upon such amount by any federal, state
or local government, shall be equal to the amount of said tax imposed by Code
Section 4999.
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17. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representatives of the Holding Company.
18. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Holding Company, by its duly authorized officer, and by the
Executive, as of the date first above written.
WITNESS: EXECUTIVE
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Xxxxx X. Xxxxxxxx
ATTEST: FIRST ESSEX BANCORP, INC.
By:
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Title:
[Seal]
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