TERMINATION AND RELEASE AGREEMENT
Exhibit
10.4
This
Termination and Release Agreement (the “Agreement”) is entered into as of
July 18, 2006 by and among Xxxxxxxx X. Xxxxxxx (the “Executive”), Westbank
Corporation (“WBC”), a Massachusetts corporation, Westbank, a Massachusetts
chartered bank and trust company and a wholly-owned subsidiary of WBC, and
NewAlliance Bancshares, Inc. (“NewAlliance”), a Delaware
corporation.
RECITALS:
WHEREAS,
NewAlliance, NewAlliance Bank, WBC and Westbank are entering into an Agreement
and Plan of Merger, dated as of July 18, 2006 (the “Merger Agreement”);
and
WHEREAS,
Section 7.5.7 of the Merger Agreement provides that NewAlliance, WBC, Westbank
and the Executive shall enter into this Agreement, which shall terminate the
change of control agreement between WBC, Westbank and the Executive dated
December 17, 2003 (the “Change of Control Agreement”) as of the Effective Time
of the Merger, and in lieu of any rights and payments under the Change of
Control Agreement, the Executive shall be entitled to the rights and payments
set forth herein;
NOW
THEREFORE, in consideration of the foregoing and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged,
the
Executive, WBC, Westbank and NewAlliance agree as follows:
1. Actions
to be Taken in 2006.
(a) The
Executive hereby agrees to take the following actions between the date hereof
and December 29, 2006, it being the intention of the parties hereto that all
of
such actions shall be fully effective and consummated no later than December
29,
2006 (or such other date as may be specified below):
(i) consent,
to the extent any such consent is required by the Executive, to the accelerated
vesting as of the date the shareholders of WBC approve the Merger Agreement
of
all unvested restricted stock awards granted to the Executive with respect
to
the common stock of WBC, provided that any unvested restricted stock awards
scheduled to vest prior to such date shall vest on their originally scheduled
vesting date;
(ii) accept
a
lump sum cash payment from WBC or Westbank on December 22, 2006 in the amount
of
$250,000 (with applicable withholding taxes to be subtracted from such amount),
representing a partial prepayment of the cash severance the Executive is
entitled to under Section 6(b) of the Change of Control Agreement;
(iii) accept
on
or before December 29, 2006 such prepayment, if any, of the dollar amount
specified in Section 2(a) below that may be mutually agreed to by WBC and
NewAlliance in order to avoid the potential reduction in payments under Section
2(c) below; and
(iv) cooperate
with NewAlliance and WBC and take such other steps as may in good faith be
requested of the Executive by NewAlliance in order to avoid the potential
reduction in payments under Section 2(c) below.
(b) WBC
shall
take all steps necessary to accelerate as of the date the shareholders of WBC
approve the Merger Agreement the vesting of all of the unvested restricted
stock
awards granted to the Executive, and WBC or Westbank shall pay to the Executive
on December 22, 2006 the amount specified in Section 1(a)(ii)
above.
(c) In
the
event the above actions are taken but are insufficient to avoid the potential
reduction in payments under Section 2(c) below, then WBC or Westbank shall
prepay to the Executive on or before December 29, 2006 such portion of the
dollar amount specified in Section 2(a) below as shall be mutually agreed to
by
WBC and NewAlliance (which agreement shall not be unreasonably withheld or
delayed).
2. Payments
to Be Made as of the Effective Time of the Merger.
(a) As
of the
Effective Time of the Merger, provided the Executive is still employed by WBC
immediately prior to such date and provided that the Executive and WBC have
taken all of the actions required to be taken pursuant to Section 1 hereof,
WBC
or Westbank shall pay to the Executive a lump sum cash amount equal to $97,576,
subject to adjustment as set forth in Section 2(c) below (the “Maximum Amount”),
less applicable tax withholdings and less any portion thereof that is prepaid
in
December 2006 pursuant to Sections 1(a)(iii) and 1(c) above. In consideration
of
such payment and the other provisions of this Agreement, the Executive, WBC,
Westbank and NewAlliance hereby agree that the Change of Control Agreement
and
the Executive’s employment with WBC shall be terminated without any further
action of any of the parties hereto, effective immediately prior to the
Effective Time of the Merger, except as set forth in Section 4 hereof. The
Executive agrees that the above payment shall be in complete satisfaction of
all
of her rights to payments or benefits under the Change of Control Agreement,
except as set forth in Section 4 hereof.
(b) WBC
and
the Executive represent and warrant that the information with respect to the
Executive contained in Section 4.14.8 of the WBC Disclosure Schedule to the
Merger Agreement accurately reflects the Executive’s taxable Form W-2 income for
each of the four years ended December 31, 2005 and contains a complete listing
of all payments or benefits to the Executive that could be deemed to be a
parachute payment under Section 280G of the Internal Revenue Code of 1986,
as
amended (the “Code”), based on the assumptions set forth in such
schedule.
(c) Each
of
the parties hereto agrees that if the actions specified in Section 1 above
are
taken as required, then based on Section 2(b) above the payments and benefits
to
be provided to the Executive should not trigger any tax reimbursement payments
pursuant to Section 13 of the Change of Control Agreement. In the event any
of
the actions specified in Section 1 above is not taken as required, or if any
of
the representations in Section 2(b) is not correct, and if such failure results
in the Maximum Amount, either alone or together with other payments and benefits
which the Executive has the right to receive from NewAlliance, WBC or Westbank,
whether pursuant to this Agreement or otherwise, being a “parachute payment”
under Section
2
280G
of
the Code, then the Maximum Amount payable by WBC or Westbank pursuant to Section
2(a) hereof shall be reduced by the amount which is the minimum necessary to
result in no portion of the payment payable by WBC or Westbank under Section
2(a) being non-deductible to WBC, Westbank or NewAlliance (or any successors
thereto) pursuant to Section 280G of the Code and subject to the excise tax
imposed under Section 4999 of the Code. If any of the payments or benefits
to be
provided by WBC, Westbank or NewAlliance are subject to the excise tax imposed
by Section 4999 of the Code but are not required to be reduced by this Section
2(c), then the indemnity under Section 13 of the Change of Control Agreement
(which section remains in full force and effect pursuant to Section 4 of this
Agreement) shall be provided to the Executive by NewAlliance; provided, however,
that if the amount of the indemnity is known as of the Effective Time of the
Merger, then such indemnity shall be provided by either WBC or Westbank at
the
request of NewAlliance.
(d) As
of the
Business Day immediately prior to the Effective Date of the Merger, provided
the
Executive is still employed by WBC immediately prior to such date, WBC or
Westbank shall pay to the Executive an additional lump sum cash amount equal
to
$115,218, less applicable tax withholdings, in complete satisfaction of all
of
the Executive’s rights to payments or benefits under the Executive Supplemental
Retirement Plan Agreement between the Executive and Westbank (formerly Park
West
Bank and Trust Company) dated July 2, 2001 (the “SERP Agreement”). In
consideration of such payment, the parties hereto agree that the SERP Agreement
shall be terminated without any further action of any of the parties hereto
on
or before the date of such payment in accordance with the terms of the Merger
Agreement.
(e) The
parties hereto agree that the payments pursuant to Sections 1(a)(ii) and (iii)
above should not trigger any of the excise taxes or interest penalties under
Section 409A of the Code based on the current provisions of such section and
the
proposed regulations issued under Section 409A of the Code. However, in the
event the final regulations issued under Section 409A are construed so as to
impose the excise tax and interest penalties specified under Section 409A of
the
Code on any of the payments under Sections 1(a)(ii) or (iii) of this Agreement,
then NewAlliance shall provide a tax indemnification to the Executive so that
the Executive is in the same after-tax position she would have been in if the
excise tax and interest penalties under Section 409A of the Code had not been
imposed on such payments; provided, however, that if the amount of the indemnity
is known as of the Effective Time of the Merger, then such indemnity shall
be
provided by either WBC or Westbank at the request of NewAlliance.
3. Payment
of Fringe Benefits.
(a) NewAlliance
agrees to provide the Executive with continued health, dental, life and
disability coverage, pursuant to either the policies currently offered by WBC
and Westbank or the policies to be offered by NewAlliance to the Continuing
Employees of WBC, until the earlier of thirty (30) calendar months following
the
Effective Time of the Merger or the Executive’s commencement of full-time
employment with a new employer, subject to the terms and conditions of such
policies, with the Executive responsible for paying the same share of any
premiums, copayments or deductibles as if she was an employee and with the
disability and life insurance coverage subject to the maximum coverage limits
in
the current policies of WBC or Westbank, except as set forth below in this
Section 3(a). The health and dental coverage shall include any dependents of
the
Executive who are covered by WBC or Westbank as of the date of
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this
Agreement and who remain covered by WBC or Westbank as of the Effective Time
of
the Merger. In the event the Executive’s participation in any such plan is
barred, NewAlliance shall arrange to provide the Executive with benefits
substantially similar to those which the Executive would otherwise have received
under such plans from which her continued participation is barred or pay to
the
Executive a cash amount equal to the amount NewAlliance would have paid for
such
coverage if the Executive was still an employee. In addition, notwithstanding
the foregoing, if the provision of any of the benefits covered by this Section
3(a) would trigger the 20% tax and interest penalties under Section 409A of
the
Code either due to the nature of such benefit or the length of time it is being
provided, then the benefit(s) that would trigger such tax and interest penalties
due to the nature of the benefit shall not be provided at all and the benefit(s)
that would trigger the tax and interest penalties if provided beyond the
“limited period of time” set forth in the regulations under Section 409A shall
not be provided beyond such limited period of time (collectively, the “Excluded
Benefits”), and in lieu of the Excluded Benefits NewAlliance shall pay to the
Executive, in a lump sum within 30 days following termination of employment
or
within 30 days after such determination should it occur after termination of
employment, a cash amount equal to the amount NewAlliance would have paid for
such Excluded Benefits in the absence of Section 409A of the Code.
(b) In
calculating the value of the benefits to be provided pursuant to Section 3(a)
above, the parties agree to assume that the premiums in effect as of August
31,
2006 will increase by 15% per year to cover anticipated premium increases over
the 30 month period specified in Section 3(a) above.
4. Releases.
Upon
payment of the amounts set forth in Section 2(a) hereof (as such amount may
be
adjusted pursuant to Section 2(c) hereof) and in Section 2(d) hereof, the
Executive, for herself and for her heirs, successors and assigns, does hereby
release completely and forever discharge WBC, Westbank and their successors
from
any obligation under the Change of Control Agreement, except for the provisions
of Section 13 of the Change of Control Agreement which shall remain in full
force and effect, and under the SERP Agreement. The obligations of NewAlliance
to provide benefits pursuant to Section 3 above shall continue for the period
specified therein. This Agreement shall not release WBC, Westbank or NewAlliance
from any of the following: (a) obligations to pay to the Executive wages earned
up to the Effective Time of the Merger; (b) the payment of any of the
Executive’s vested benefits, or honoring any of the Executive’s rights, under
the WBC Employee Plans, excluding any bonus plans, employment agreement, change
of control agreement or other severance agreement or plan, (c) the payment
of
the Merger Consideration with respect to the Executive’s common stock of WBC or
stock options or restricted stock awards with respect to the common stock of
WBC, or (d) the obligations of NewAlliance under Section 7.6 of the Merger
Agreement.
5. General.
(a) Heirs,
Successors and Assigns.
The
terms
of this Agreement shall be binding upon the parties hereto and their respective
heirs, successors and assigns.
(b) Final
Agreement. This
Agreement represents the entire understanding of the parties with respect to
the
subject matter hereof and supersedes all prior understandings, written or oral.
The terms of this Agreement may be changed, modified or discharged only by an
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instrument
in writing signed by each of the parties hereto. In the event the Internal
Revenue Service issues final regulations under Section 409A of the Code prior
to
the Effective Time of the Merger and such regulations are deemed to result
in
the imposition of the excise taxes and/or interest penalties under Section
409A
of the Code on any of the payments or benefits to be provided under this
Agreement, then the parties hereto agree to negotiate in good faith an amendment
to this Agreement to avoid such excise taxes and/or interest penalties to the
extent possible, provided that the amounts payable to the Executive under
Sections 1, 2(a) and 2(d) of this Agreement shall not be delayed beyond the
Effective Time of the Merger or reduced in the aggregate.
(c) Withholdings.
WBC,
Westbank and NewAlliance may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as may be required to
be
withheld pursuant to applicable law or regulation.
(d) Governing
Law. This
Agreement shall be construed, enforced and interpreted in accordance with and
governed by the laws of the State of Connecticut, without reference to its
principles of conflicts of law, except to the extent that federal law shall
be
deemed to preempt such state laws.
(e) Defined
Terms. Any
capitalized terms not defined in this Agreement shall have as their meaning
the
definitions contained in the Merger Agreement.
(f) Voluntary
Action and Waiver. The
Executive acknowledges that by her free and voluntary act of signing below,
the
Executive agrees to all of the terms of this Agreement and intends to be legally
bound thereby. The Executive acknowledges that she has been advised to consult
with an attorney prior to executing this Agreement.
(g) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument.
6. Effectiveness.
Notwithstanding anything to the contrary contained herein, this Agreement shall
be subject to consummation of the Merger in accordance with the terms of the
Merger Agreement, as the same may be amended by the parties thereto in
accordance with its terms. In the event the Merger Agreement is terminated
for
any reason, this Agreement shall be deemed null and void with respect to all
actions not yet taken pursuant to this Agreement.
[Signature
page follows]
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IN
WITNESS WHEREOF, NewAlliance, WBC and Westbank have each caused this Agreement
to be executed by their duly authorized officers, and the Executive has signed
this Agreement, effective as of the date first above written.
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WITNESS:
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EXECUTIVE:
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/s/
Xxxxxx X. Xxxxxx
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/s/ Xxxxxxxx X. Xxxxxxx |
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Name:
Xxxxxx X. Xxxxxx
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Name:
Xxxxxxxx X. Xxxxxxx
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ATTEST:
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WESTBANK
CORPORATION
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/s/
Xxxxxx X. Xxxxxx
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By:
/s/ Xxxxxx X. Xxxxx
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Name:
Xxxxxx X. Xxxxxx
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Name:
Xxxxxx X. Xxxxx
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Title:
President and Chief Executive Officer
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ATTEST:
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WESTBANK
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/s/
Xxxxxx X. Xxxxxx
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By:
/s/ Xxxxxx X. Xxxxx
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Name:
Xxxxxx X. Xxxxxx
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Name:
Xxxxxx X. Xxxxx
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Title:
President and Chief Executive Officer
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ATTEST:
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NEWALLIANCE
BANCSHARES, INC.
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/s/
Xxxxx Xxxxxxxxx
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By:
/s/ Xxxxxxx X. Xxxxxxxxxx
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Name:
Xxxxx Xxxxxxxxx
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Name:
Xxxxxxx X. Xxxxxxxxxx
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Title:
Executive Vice President and Chief
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Financial
Officer
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