CHANGE IN CONTROL SEVERANCE AGREEMENT COMMONWEALTH NATIONAL BANK
COMMONWEALTH
NATIONAL BANK
This
Agreement is made and entered into, effective as of the 18th day of May, 2006,
by and between Commonwealth
National Bank,
a
national bank with its principal office and place of business at 00 Xxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx (“Bank”) and Xxxxxx X. Xxxx, a resident of
Northbridge, Massachusetts (“Executive”).
W
I T N E S S E T H:
WHEREAS,
Executive is employed by Bank as Senior Vice President and Chief Operations
Officer;
WHEREAS,
the
Board of Directors of Bank considers it to be in the best interests of Bank
and
the stockholders of Bank to xxxxxx the continued employment of Executive in
the
event of a Potential Change-in-Control (as hereinafter defined), although no
such event is now contemplated or foreseen;
WHEREAS,
Bank
desires to assure Executive of what it considers to be fair and reasonable
terms
in the event of a Change-in-Control (as hereinafter defined);
NOW
THEREFORE,
in
consideration of the promises and mutual covenants herein contained, the parties
hereto, intending to be legally bound, do hereby mutually covenant and agree
as
follows:
1. Term
of
Agreement.
(a) Generally.
Except
as provided in Section 1(b) hereof, (i) this Agreement shall be effective as
of
the date and year first above written (the “Commencement Date”), and shall
continue in effect through the date ending on the second anniversary of the
Commencement Date (the “Term”); provided, however, that commencing on the date
two years after the Commencement Date (the “Initial Renewal Date”), and on the
first day of each calendar month following the calendar month in which falls
the
Initial Renewal Date (each such date and the Initial Renewal Date shall be
hereinafter referred to as the “Renewal Date”), unless previously terminated,
the Term shall be automatically extended so as to terminate twenty-five (25)
calendar months from such Renewal Date, unless at least 60 days prior to the
Renewal Date, the Bank shall give notice to the Executive that the Term shall
not be so extended; provided, however, that no such notice by Bank shall be
effective if prior to the date of such notice (i) a “Potential Change in
Control” shall have occurred and the event giving rise thereto has not been
terminated, abandoned or rescinded or (ii) a “Change in Control” shall have
occurred.
(b) Upon
a
Change in Control. Notwithstanding Section 1(a) above, if a Change in
Control shall have occurred at any time during the period in which this
Agreement is effective, this Agreement shall continue in effect for (i) the
remainder of the month in which the Change in Control occurred and (ii) a term
of 24 months beyond the month in which such Change in Control occurred (such
entire period hereinafter referred to as the "Protected Period"). A “Protected
Period” can only occur if there is, in fact, a “Change in Control”.
2. Definitions.
For
purposes of this Agreement, the following terms shall have the following
meanings:
(a) A
"Change
in Control" shall be deemed to have occurred if, during the term of this
Agreement:
(i) any
Person
directly or indirectly or acting through one or more other Persons owns,
controls, or has power to vote more than 50% of the voting common stock of
Bank
or a Controlling Person; or
(ii) any
Person acquires or agrees to acquire all or substantially all of the assets
and
business of Bank or a Controlling Person; or
(iii) any
Person (A) is a party to a merger, consolidation or any other form of
reorganization having substantially the same effect as a merger or
consolidation, with Bank or a Controlling Person and (B) immediately prior
to
such transaction the Person had total assets as of the end of its most recent
fiscal year equal to or greater than 100% of the total assets of Bank or the
Controlling Person, as applicable, as of the end of its most recent fiscal
year.
(iv) during
any period of twenty-four (24) consecutive months, individuals who at the
beginning of such period constitute the Board of Directors of Bank 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
a
majority of the Directors then still in office who were Directors at the
beginning of such period; or
(v) the
Board
of Directors of Bank, by vote of two-thirds (2/3) of all the Directors
(excluding Executive if Executive is a Director), adopts a resolution to the
effect that a “Change in Control” has occurred for purposes of this
Agreement.
(b) A
"Potential Change in Control" shall be deemed to have occurred if:
(i) Bank
or any
Controlling Person enters into a letter of intent, memorandum of understanding,
or definitive agreement providing for, or publicly announces that it is
considering, one or more transactions, the consummation of which would result
in
the occurrence of a Change in Control;
(ii) any
Person (including Bank) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in Control; or
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(iii) the
Board
of Directors of Bank, by vote of two-thirds (2/3) of all the Directors
(excluding Executive if Executive is a Director) adopts a resolution to the
effect that a “Potential Change in Control” has occurred for purposes of this
Agreement.
(c) A
“Person” shall include a natural person, corporation, or other entity. When two
or more persons act as a partnership, limited partnership, syndicate, or other
group for the purpose of acquiring, holding, or disposing of beneficial
ownership of Bank common stock, such partnership, syndicate, or group shall
be
considered a Person. Beneficial ownership shall be determined under the then
current provisions of Securities Exchange Act Rule 13d-3; 17 C.F.R. §
240.13d-3.
(d) “Protected
Period” shall have the meaning specified in Section 1(b) hereof.
(e) A
“Controlling Person” shall mean a Person who directly or indirectly or acting
through one or more other Persons owns, controls or has power to vote 50% or
more of the voting common stock of Bank, including without limitation, any
holding company of Bank.
(f) Notwithstanding
the definitions contained in Section 2 hereof, the formation by Bank of a bank
holding company that is approved by the Board of Directors and the shareholders
of Bank shall not constitute either a Change in Control or a Potential Change
in
Control.
3. Duties
Upon Potential Change-in-Control.
In
the
event that a Potential Change-in-Control shall occur while Executive is employed
by Bank, Executive shall use his reasonable best efforts to fulfill Executive’s
responsibilities to Bank in the interests of Bank and the shareholders of Bank
and in order to explore and pursue fully the Potential Change-in-Control.
4. Termination.
For purposes of this Section 4, certain capitalized terms used herein and not
defined in Section 2 above shall have the meanings set forth in Section 4(f)
below.
(a) Termination
by Bank
for Cause, by Executive Without Good Reason, or by Reason of Death, Disability
or Retirement. If during the Protected Period Executive’s employment by Bank
is terminated by Bank for Cause, by Executive without Good Reason, or because
of
Executive’s death, Disability or Retirement, Bank shall not be obligated to make
any payments to Executive by reason of this Agreement other than (i) payment
of
amounts otherwise accrued and owing but not yet paid and (ii) any amounts
payable under then-existing employee benefit programs, subject to the
requirements thereof and at the time such amounts are due
thereunder.
(b) Termination
by Bank Without Cause or by Executive for Good Reason. If during the
Protected Period Executive’s employment by Bank is terminated by Bank without
Cause or by Executive for Good Reason, subject to the provisions of Section
6
hereof, Executive shall be entitled to the compensation and benefits described
in this Section 4(b). If Executive’s employment by Bank is terminated prior to a
Change in Control at the request of a Person engaging in a transaction or series
of transactions that would result in a Change in Control, the Protected Period
shall commence upon the subsequent occurrence of a Change in Control,
Executive’s actual termination shall be deemed a termination occurring during
the Protected Period and covered by this Section 4(b), Executive’s Date of
Termination shall be deemed to have occurred immediately following the Change
in
Control, and Notice of Termination shall be deemed to have been given by Bank
immediately prior to Executive’s actual termination. Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstances constituting Good Reason hereunder. The compensation
and
benefits provided under this Section 4(b) are as follows:
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(i) Bank
shall
pay Executive’s full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, no later than the fifth
day
following the Date of Termination. Executive shall also receive all other
amounts to which Executive is entitled under any benefit plan of Bank at the
time such payments are due thereunder, subject, however, to the provisions
of
Section 4(d) hereof.
(ii) At
the
time specified in Section 4(d) hereof, Bank shall pay Executive, in lieu of
amounts which may otherwise be payable to Executive under any bonus plan for
the
year in which the Date of Termination occurs, an amount in cash equal to
Executive’s annual incentive bonus that would be payable in cash for such year
multiplied by a fraction, (A) the numerator of which equals the number of full
or partial days in such annual performance period during which Executive was
employed by Bank and (B) the denominator of which is 365.
(iii) At
the
time specified in Section 4(d) hereof, Bank shall pay Executive, in lieu of
any
further salary, bonus or severance payments for periods subsequent to the Date
of Termination, a lump sum amount in cash equal to one and one-half times the
sum of:
(A) the
greater of (I) Executive’s
annual base salary in effect immediately prior to the Change in Control of
Bank
or (II) Executive’s annual base salary in effect at the time Notice of
Termination is given; and
(B) the
greater of (I) Executive’s annual incentive bonus for the year in which the
Change in Control occurs or, (II) if no such incentive bonus has yet been
determined for such year, the greater of the Executive’s annual incentive bonus
actually earned by Executive in the year immediately preceding the year in
which
the Change in Control occurs or the target annual incentive bonus for the year
in which the Change in Control occurs.
(iv) Stock
options, restricted stock or other stock awards held by Executive at Executive’s
Date of Termination, the vesting of which is service based, if not then vested
and exercisable, will become fully vested and become exercisable at Executive’s
Date of Termination, and, in other respects (including the period following
termination during which such options may be exercised) such options, restricted
stock or other stock awards shall be governed by the plans and programs and
the
agreements and other documents pursuant to which such options, restricted stock
or other stock awards were granted.
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(v) Any
performance objectives upon which the earning of performance-based restricted
stock or deferred stock awards, including outstanding stock plan awards and
other long-term incentive awards, is conditioned shall be deemed to have been
met at target level at Executive’s Date of Termination.
(vi) For
an
18-month period following Executive’s Date of Termination, Bank shall arrange to
provide Executive with life and health insurance benefits no less favorable
than
those which Executive was receiving immediately prior to the Notice of
Termination on the payment terms hereinafter provided. If Executive elects
after
Date of Termination continued coverage under Bank’s health plan in accordance
with the applicable provisions of the Consolidated Omnibus Reconciliation Act
of
1985 (“COBRA”), Executive shall continue to receive such individual and/or
family health benefits coverage as Executive was receiving at Executive’s Date
of Termination with Executive paying the same portion of the cost of such
coverage as existed at such time, for so long during the continuation period
as
Executive elects to continue coverage and pays Executive’s portion of the costs
of coverage.
(vii) At
the
time specified in Section 4(d) hereof, Bank shall contribute an amount equal
to
the aggregate amounts that Bank would have contributed on behalf of Executive
under Bank’s 401(k) Plan, or similar qualified plan if any such plan shall be in
effect, for an 18-month period following Executive’s Date of Termination (plus
estimated earnings thereon) had Executive continued in the employ of Bank until
the end of said period 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
Date of Termination.
(viii) Bank
shall reimburse Executive at least quarterly for amounts actually expended
by
Executive for outplacement and job search activities (including, but not limited
to, reasonable office and secretarial expenses) in amounts in the aggregate
up
to 20% of Executive’s annual base salary and annual incentive compensation taken
into account under Section 4 (b)(iii)(A) and (B) hereof, provided that such
expenditures are actually incurred and submitted for reimbursement by Executive
within the 24-month period following Executive’s Date of Termination and are
appropriately documented by invoices and proof of payment. Such submitted
expenses shall be reimbursed by Bank the earlier of the date 30 days after
submission by the Executive of such expenses for reimbursement or December
31st
of the second calendar year following the Date of Termination.
(ix) Bank
shall not be obligated to continue any disability or disability income insurance
on behalf of Executive following Executive’s Date of Termination. 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 Executive’s sole cost
and expense coverage thereunder for a period of up to eighteen (18)
months.
(x) Following
Executive’s Date of Termination, Executive shall continue to receive such
perquisites, other than those specified in the preceding subparagraphs above,
as
Executive was receiving immediately prior to Executive’s Date of Termination by
reimbursing Executive for the costs of such perquisites on the same cost sharing
with Bank as was in effect immediately prior to Executive’s Date of Termination
on or before the earlier of 30 days after submission of such costs for
reimbursement by Executive or December 31st of the second calendar year
following the year in which the Date of Termination occurs.
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(xi) 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.
(c) Termination
Process.
The
following process shall apply with respect to any purported termination of
Executive’s employment by Bank or by Executive during the Protected Period.
(i) Any
such
purported termination of Executive’s employment shall
be
communicated by the terminating party to the other party by written Notice
of
Termination.
(ii) Within
fifteen (15) days following communication of a Notice of Termination by Bank
or
Executive, Bank shall deliver to Executive a written statement of all payments
and benefits (“Benefit Statement”) pertaining to Executive to be made pursuant
to this Agreement and otherwise to Executive by Bank. Bank and Executive shall
endeavor in good faith to address and resolve as soon as possible any questions,
issues or disagreements relating to said Benefit Statement within fifteen (15)
days following delivery to Executive of said Benefit Statement.
(iii) Thereafter,
Executive shall have a period of fifteen (15) days either to invoke the dispute
resolution provisions of Section 13 hereof by notice to Bank or to provide
Bank
with a waiver in writing of his right to do so. Any failure by Executive to
do
either of the foregoing shall for all purposes of this Agreement be deemed
to
constitute a written waiver of Executive’s right to invoke the dispute
resolution provisions of Section 13 hereof, but shall not otherwise affect
or
impair Executive’s rights or claims under this Agreement. Within five (5)
business days thereafter, Bank shall either request from the Tax Advisor
described in Section 4(e) below a determination of tax deductibility pursuant
to
said Section 4(e) with respect to all payments and benefits reflected on the
Benefits Statement or deliver to Executive a waiver in writing of its right
to
do so. Any failure by Bank to do either of the foregoing shall for all purposes
of this Agreement be deemed to constitute a written waiver of Bank’s right to
invoke application of the provisions of Section 4(e).
(d) Time
of Payment. Subject
to the provisions of the final paragraph of this subsection (d) and to the
provisions of subsection (e) hereof, the payments provided for in the second
sentence of clause (i) and in clauses (ii), (iii), (vii) and (viii) of Section
4(b) hereof, excluding, however, Bank’s reasonable estimate of any amounts that
are in dispute, shall be made not later than the five (5) business days
following the date specified in whichever of the following clauses shall be
applicable:
(i) the
date
on which a Tax Determination Statement described in Section 4(e) below is
communicated in writing to Bank as provided therein, if Bank shall request
that
a tax determination under Section 4(e) be made; or
6
(ii) if
Bank
shall not request that a tax determination under Section 4(e) be made, either
(x) the date on which Executive’s right to invoke the dispute resolution
provisions of Section 13 shall have been waived (or deemed waived) under Section
4(c)(iii) or (y) if the aforementioned dispute resolution provision shall have
been invoked, the date of final resolution of the dispute submitted
thereto.
Notwithstanding
any other provision of this Agreement, if Bank and Executive determine that
Executive is a “key employee” within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and that, as a result of such
status, any portion of the payments under this Agreement would be subject to
additional taxation, Bank will delay paying all or any portion of such amount
until the earliest permissible date on which payments may commence without
triggering such additional taxation (with such delay not to exceed six months),
with the first such payment to include any amounts that would have been paid
earlier but for the above delay. At the request of Executive, Bank shall set
aside those payments that would be subject to the Section 409A additional tax
in
a trust that is in compliance with Rev. Proc. 92-64.
(e) Section
280G Limit.
(i) 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 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 of Bank 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.
(ii) Except
as
provided in the last sentence of Section 4(c)(iii), Bank may at any time request
that the Tax Advisor make a determination described in (i) above with respect
to
payments and benefits reflected on a Benefits Statement delivered to Executive
pursuant to Section 4(c) above, as such statement may be modified by mutual
agreement of Bank and Executive. In making its determination of deductibility
in
accordance with (i) above, the Tax Adviser shall, if and as deemed necessary
or
advisable by the Tax Advisor in order to avoid or minimize any reduction of
payments or benefits to Executive pursuant to (i) above, Bank shall obtain
from
the Tax Advisor an appraisal of the then current present value of the covenants
by Executive set forth in Sections 7 and 8 of this Agreement and an amount
of
the total payments to be made to Executive under clause (ii) of Section 4(b)
equal to said amount shall be for all purposes treated as a payment to Executive
in consideration of such covenants and the remainder, if any, shall be treated
as supplemental wage payments to Executive. For purposes of the limitation
contained in this Section 4(c), (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
Executive’s Date of Termination 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 hereunder in the payments and benefits pursuant
to Section 4(b) above shall be made from the payments and benefits to be made
pursuant to clauses (i) through (xi) of said Section 4(b) 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 the date on which Bank requests that
a
tax determination be made hereunder, and such determination, together with
a
detailed explanation thereof (together the “Tax Determination Statement”) 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
on
Bank and Executive and shall not be subject to the arbitration provisions of
this Agreement. 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 determinations, Bank shall appoint another accounting
firm of national reputation to serve as Tax Advisor.
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(f) Certain
Definitions. Except as otherwise indicated in this Agreement, the
following definitions shall be applicable under this Section 4.
(i) Disability.
"Disability" shall mean Executive’s
absence from the full-time performance of Executive’s duties with Bank for six
consecutive months as a result of Executive’s incapacity due to physical or
mental illness or disability, and within 15 days after written Notice of
Termination is thereafter given Executive shall not have returned to the
full-time performance of Executive’s duties.
(ii) Cause.
"Cause" shall mean termination on account of (A) the willful and continued
failure by Executive to substantially perform Executive's duties with Bank
(other than any such failure resulting from Executive's incapacity due to
physical or mental illness or Disability or any failure after the issuance
of a
Notice of Termination by Executive for Good Reason) which failure is
demonstrably and materially damaging to the financial condition or reputation
of
Bank and/or its affiliates, and which failure continues more than three (3)
business days after a written demand for substantial performance is delivered
to
Executive by the Board, which demand specifically identifies the manner in
which
the Board believes that Executive has not substantially performed Executive’s
duties or (B) the willful engaging by Executive in conduct which is demonstrably
and materially injurious to Bank or its affiliates, monetarily or otherwise.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Executive a copy of the resolution duly adopted by the affirmative vote of
not
less than a majority in number of the entire membership of the Board of
Directors (excluding Executive if Executive is then a Director) at a meeting
of
the Board (after reasonable notice to Executive and an opportunity for
Executive, together with Executive’s counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, Executive was guilty
of
conduct set forth above in this Section 4(f)(ii) and specifying the particulars
thereof in detail. For purposes of this Section, no act or failure to act by
Executive shall be considered “willful” unless it is done, or omitted to be
done, in bad faith and without reasonable belief that Executive’s action or
omission was in the best interests of the Bank. Any act, or failure to act,
based upon the advice of counsel for the Bank shall be conclusively presumed
to
be done, or omitted to be done, by Executive in good faith and in the best
interests of the Bank.
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(iii) Good
Reason. "Good Reason" shall mean, without Executive's express written
consent, the occurrence upon or after a Change in Control of any of the
following circumstances unless, in the case of subsections (A), (C), (F), (G)
and (H) hereof, such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof
(provided, however, Bank will not be provided an opportunity to cure hereunder
more than once):
(A) a
material and substantial reduction or other material and adverse change by
the
Bank in Executive’s position, authorities, or level of responsibilities as in
effect immediately prior to the Change in Control;
(B) a
reduction in Executive’s annual base salary as in effect immediately prior to
the Change in Control;
(C) a
reduction in Executive’s perquisites as in effect immediately prior to the
Change in Control as the same may be increased from time to time except for
across-the-board perquisite reductions similarly affecting all senior executives
of Bank and all senior executives of any Person in control of Bank;
(D) the
relocation of the principal place of Executive’s employment to a location more
than 35 miles from Executive’s principal place of employment immediately prior
to the Change in Control;
(E) the
failure by Bank to pay to Executive any portion of Executive’s compensation or
to pay to Executive any portion of an installment of deferred compensation
under
any deferred compensation program of Bank within seven days of the date such
compensation is due;
(F) the
failure by Bank to continue in effect any material compensation or benefit
plan
in which Executive participated 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
Bank to continue Executive’s participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of
the
amounts of benefits provided and the level of Executive’s participation relative
to other participants, as existed at the time of the Change in
Control;
(G) the
failure of Bank to obtain a satisfactory agreement from any successor to assume
and agree to perform this Agreement, as contemplated in Section 11 hereof;
or
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(H) any
purported termination of Executive's employment that is not effected pursuant
to
a Notice of Termination satisfying the requirements of Section 4(f)(v) hereof,
which purported termination shall not be effective for purposes of this
Agreement.
(iv) Retirement.
“Retirement” shall mean Executive’s retirement from Bank in accordance with the
retirement policy of Bank, including early retirement, generally applicable
to
its executives or in accordance with any retirement arrangement with respect
to
Executive established by the Board with the consent of Executive.
(v) Notice
of Termination. "Notice of Termination" shall mean notice indicating the
specific termination provision in this Agreement relied upon and setting forth
in reasonable detail the facts and circumstances claimed to provide a basis
for
termination of Executive’s employment under the provision so
indicated.
(vi) Date
of Termination. "Date of Termination" shall mean (A) if Executive’s
employment is terminated for Disability, 15 days after Notice of Termination
is
given (provided that Executive shall not have returned to the full-time
performance of Executive’s duties during such 15-day period) or (B) if
Executive’s employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination for Cause, shall
not be less than 30 days from the date such Notice of Termination is given
and,
in the case of a termination for Good Reason, shall not be less than 15 nor
more
than 60 days from the date such Notice of Termination is given).
(vii) Benefit
Statement. “Benefit Statement” shall mean a written statement showing in a
clear and understandable presentation all payments and benefits and the amounts
and methods of calculation thereof owed by Bank to Executive upon Executive’s
termination of employment with Bank as prepared by or under the direction of
Bank.
(viii) “Tax
Determination Statement” shall mean the written determination of the Tax Advisor
as to the deductibility of the Total Payments as described in Section 4(e)
above.
5. Mitigation.
So
long
as Executive shall not be in breach of any provisions of Sections 7 or 8,
Executive shall not be required to mitigate the amount of payment provided
for
under this Agreement by seeking other employment or otherwise, nor shall the
amount of payment or benefit provided for under this Agreement be reduced by
any
compensation earned by Executive as the result of employment by another employer
permitted by this Agreement.
6. Release.
As
a
condition of receiving payments or benefits provided for in this Agreement,
at
the request of Bank, or its successor, Executive shall execute and deliver
for
the benefit of Bank and any Controlling Person, a general release in
substantially the form set forth in Attachment A hereto, 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 to make payments or provide
benefits hereunder, and the forfeiture of Executive's right to receive any
such
payments and benefits. Executive acknowledges that Bank has advised Executive
to
consult with an attorney prior to signing this Agreement and that Executive
has
had an opportunity to do so.
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7. Confidential
Information.
Executive
understands that in the course of Executive's employment by Bank, Executive
will
receive or have access to, or has received or had access to, confidential
information concerning the business or purposes of Bank which Bank desires
to
protect. Such confidential information shall be deemed to include, but not
be
limited to, Bank’s customer lists and information, and employee lists,
including, if known, personnel information and data. Executive agrees that
Executive will not at any time reveal to anyone outside Bank or use for
Executive's own benefit any such information without specific written
authorization by Bank, which may be withheld by Bank in its sole discretion.
Executive further agrees not to use any such confidential information or trade
secrets in competing with Bank at any time.
8. Non-Competition
and Non-Disclosure; Non-Disparagement; Certain Forfeitures.
(a) Non-Competition.
In consideration for the compensation and benefits provided for
by
this Agreement, as affected by the provisions of Section 4(e) above, without
the
consent in writing of the Board of Directors of Bank, which may be withheld
by
Bank for any reason or no reason in Bank’s sole discretion, Executive will not,
at any time that Executive shall be employed by Bank, or at any time during
the
period of twelve (12) months following Executive’s Date of Termination during
the Protected Period, acting alone or in conjunction with others, directly
or
indirectly (i) engage (either as owner, investor, partner, stockholder,
employer, employee, consultant, advisor, or director) in any business of any
bank, bank holding company, savings bank, savings and loan association, savings
and loan holding company, or other institution engaged in the business of
accepting deposits and/or making loans, or any direct or indirect subsidiary
or
affiliate of any such entity, that conducts business or maintains an office
within a thirty (30) mile radius of the Bank’s headquarters at 00 Xxxxx Xxxxxx,
Xxxxxxxxx, XX; (ii) solicit or otherwise induce any customer of Bank or any
of
its affiliates to curtail or cancel their business with Bank or any such
affiliate; (iii) solicit or otherwise induce or attempt to influence any
employee of Bank or any affiliate to terminate employment; or (iv) solicit,
hire
or retain as an employee or independent contractor, or assist any third party
in
the solicitation, hire, or retention as an employee or independent contractor,
any person who during the twelve months prior to the Date of Termination was
an
employee of Bank or any such affiliate; provided, however, that activities
engaged in by Executive by or on behalf of Bank are not restricted by this
covenant. The provisions of clauses (i), (ii), (iii), and (iv) above are
separate and distinct commitments, each independent of the other subparagraphs.
It is agreed that the ownership by Executive of not more than one percent (1%)
of the equity securities of any company having securities listed on an exchange
or regularly traded in the over-the-counter market shall not, of itself, be
deemed inconsistent with clause (i) of this Section 8(a).
(b) Non-Disparagement.
Executive shall not, at any time during the term of this Agreement or
thereafter, willfully make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take
any action which is intended to, directly or indirectly, disparage and cause
financial harm to Bank or any of its affiliates or their respective officers,
directors, employees, advisors, businesses or reputations. Notwithstanding
the
foregoing, nothing in this Agreement shall preclude Executive from making
truthful statements that are required by applicable law, regulation or legal
process.
11
(c) Injunction.
Executive hereby acknowledges that Executive’s
services are unique and extraordinary, and are not readily replaceable, and
hereby expressly agrees that Bank, in enforcing the covenants contained in
Sections 7 and 8 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 such
Sections.
(d) Scope.
The parties hereto believe that the restrictive covenants contained in Sections
7 and 8 hereof are reasonable. However, if at any time it shall be determined
by
any court of competent jurisdiction that these Sections 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.
9. Right
of Discharge.
Subject
to the obligations to make the payments specified in Section 4(b), it is
expressly agreed that, except as set forth in Section 3 above, Bank shall have
the right to discharge or terminate Executive at any time and for any reason,
or
no reason.
10. Exclusivity.
It
is
understood and agreed that if any payments are due and made to Executive under
this Agreement then no payments will be due or required, and Bank shall not
in
any respect be obligated to Executive, under any other severance pay plan,
agreement, or arrangement that might otherwise be applicable to Executive,
or
under or by reason of any employment severance pay or similar agreement between
Bank and Executive.
11. Successors;
Binding Agreement.
(a) This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by any and all successors and assigns of Bank. Bank
shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of Bank, and in the case of an acquisition of Bank in which the corporate
existence of Bank continues, the ultimate parent company following such
acquisition, expressly to assume and agree to perform this Agreement in the
same
manner and to the same extent that Bank would be required to perform it if
no
such succession had taken place. As used in this Agreement, "Bank" shall mean
Bank as hereinbefore defined and any successor to its business and/or assets
as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12
(b) This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by Executive and Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. In
the
event of Executive's death following becoming entitled to payments hereunder
but
prior to completion of such payments, all amounts otherwise payable to Executive
hereunder shall, unless otherwise provided herein, be paid in accordance with
the terms of this Agreement to Executive's devisee, legatee or other designee
specifically named in a writing signed by Executive and delivered to Bank or,
if
there is no such designee, to Executive's estate.
12. Notice.
Notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when (a) personally delivered,
(b)
sent by Federal Express or other similar overnight service or (c) mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt. In the case of Federal Express or other similar overnight service,
such
notice or advice shall be effective and deemed delivered when sent, and, in
the
cases of certified or registered mail, shall be effective and deemed delivered
two days after deposit into the mail by delivery to the U.S. Post
Office.
If
to
Executive, to:
Xxxxxx
X.
Xxxx
00
Xxxxx
Xxxxxx
Xxxxxxxxxxx,
XX 00000
If
to
Bank, to:
Commonwealth
National Bank
00
Xxxxx
Xxxxxx
Xxxxxxxxx,
XX 00000-0000
Attn:
Chairman, Board of Directors
13. Dispute
Resolution.
(a) Negotiation.
Bank
and
Executive shall attempt in good faith to resolve any dispute arising out of
or
relating to this Agreement promptly by negotiation between the designated
representative of the Board of Directors of Bank and Executive. Any party may
give the other party written notice of any dispute in accordance with the notice
procedures set forth in Section 12. Within 15 days after delivery of the notice,
the receiving party shall submit to the other, in accordance with the notice
procedures set forth in Section 12, a written response. The notice and response
shall include a statement of that party’s position and summary of arguments
supporting that position. Within 15 days after delivery of the initial notice,
the parties shall meet at a mutually acceptable time and place, and thereafter
as often as they reasonably deem necessary, to attempt to resolve the dispute.
All negotiations pursuant to this clause are confidential and shall be treated
as compromise and settlement negotiations for purposes of applicable rules
of
evidence.
13
(b) Mediation.
If the dispute has not been resolved by negotiation as provided herein within
30
days after delivery of the initial notice of negotiation, or if the parties
failed to meet within 30 days after delivery of such notice, the parties shall
endeavor to settle the dispute by mediation; provided, however, that if one
party fails to participate in the negotiation as provided herein, the other
party may initiate mediation prior to the expiration of the 90 days.
(c) Arbitration.
Any dispute arising under or in connection with this Agreement which has not
been resolved by mediation as provided herein within 30 days after initiation
of
the mediation procedure, shall be finally resolved by arbitration in accordance
with the rules of the American Arbitration Association then currently in effect.
The place of arbitration shall be Worcester or Boston, Massachusetts. For
purposes of entering any judgment upon an award rendered by the arbitrators,
Bank and Executive hereby consent to the jurisdiction of any or all of the
following courts: (i) the United States District Court for the District of
Massachusetts, (ii) any of the courts of the Commonwealth of Massachusetts,
or
(iii) any other court having jurisdiction. Venue shall be in Worcester,
Massachusetts. Bank and Executive hereby agree that a judgment upon an award
rendered by the arbitrators may be enforced in other jurisdictions by suit
on
the judgment or in any other manner provided by law. Subject to subsection
(e)
of this Section 13, Bank shall bear all costs and expenses arising in connection
with any arbitration proceeding pursuant to this Section 13(c). Notwithstanding
any provision in this Section 13(c), Bank shall be obligated to pay any and
all
undisputed amounts under this Agreement pursuant to Section 4 above, and
Executive shall be entitled to seek specific performance of Executive’s right to
be paid during the pendency of any dispute or controversy arising under or
in
connection with this Agreement.
(d) Interest
on Unpaid Amounts. Any amount which has become payable pursuant to the terms
of this Agreement or any decision by arbitrators or judgment by a court of
law
pursuant to this Section 13 but which has not been timely paid shall bear
interest at the prime rate as quoted by Bank at the time such amount first
becomes payable and remain fixed at that rate until such amounts are
paid.
(e) Costs
of Proceedings. Bank shall pay all costs and expenses, including all
attorneys' fees and disbursements, of Bank and, at least monthly, Executive,
in
connection with any proceedings undertaken pursuant to this Section 13, whether
or not instituted by Bank, or Executive, relating to the interpretation or
enforcement of any provision of this Agreement; provided that if Executive
instituted the proceeding and a finding is entered that Executive instituted
the
proceeding without a good faith belief that Executive would prevail on at least
one material issue, Executive shall pay all of Executive’s costs and expenses,
including attorneys' fees and disbursements and reimburse Bank for all of such
costs and expenses of Executive theretofore paid by Bank, within 60 days after
the final determination of all of such proceedings.
14
14. 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”). 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.
15. Miscellaneous.
Except
as
to a waiver described in Section 4(c) above, no provision of this Agreement
may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by Executive and such officer as may be
designated by the Board of Directors of Bank, acting upon the direction of
said
Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the time or at any prior
or
subsequent time. The validity, interpretation, construction and performance
of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without regard to its conflicts of law principles. All references
to sections of the Exchange Act, the Code or the United States Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law.
16. Validity.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
17. Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original but all of which together will constitute one and the same
instrument.
18. Entire
Agreement.
This
Agreement sets forth the entire agreement of the parties hereto in respect
of
the subject matter contained herein and during the term of this Agreement
supersedes the provisions of all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of either party hereof
with
respect to the subject matter contained herein. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set
forth in this Agreement. Notwithstanding anything to the contrary in this
Agreement, the procedural provisions of this Agreement shall apply to all
benefits payable as a result of a Change in Control (or other change in control)
under any employee benefit plan, agreement, program, policy or arrangement
of
Bank.
15
IN
WITNESS WHEREOF,
Bank
has caused this Agreement under seal to be executed by a duly authorized
officer, and Executive has executed this Agreement, as of the 18th day of May,
2006.
|
COMMONWEALTH
NATIONAL BANK
By:
/s/ Xxxxxxxx X. Xxxxx
-----------------------------------------------
Name:
Xxxxxxxx X. Xxxxx
Its
Chairman of the Compensation Committee of the Board of
Directors
EXECUTIVE
By:
/s/ Xxxxxx X. Xxxx
-------------------------------------------
Name:
Xxxxxx X. Xxxx
|
|
16
ATTACHMENT
A
RELEASE
We
advise
Executive to consult an attorney before Executive signs this Release. Executive
has until the date which is seven (7) days after the Release is signed and
returned to Commonwealth National Bank (“Bank”) to change Executive’s mind and
revoke this Release. Executive’s Release shall not become effective or
enforceable until after that date.
In
consideration for the benefits provided under Executive’s Change in Control
Severance Agreement with Bank effective
[ ] (the “Agreement”), and more
specifically enumerated in Exhibit
1
hereto,
by Executive’s signature below, Executive, for and on behalf of Executive,
Executive’s heirs, executors, agents, representatives, successors and assigns,
hereby releases and forever discharges Bank, its past and present parent
corporations, subsidiaries, divisions, subdivisions, affiliates and related
companies (collectively, the “Company”) and the Company’s past, present and
future agents, directors, officers, employees, representatives, successors
and
assigns (hereinafter “those associated with the Company”) with respect to any
and all claims, demands, actions and liabilities, whether in law or equity,
which Executive may have against the Company or those associated with the
Company of whatever kind, including but not limited to those arising out of
Executive’s employment with the Company or the termination of that employment.
Executive agrees that this release covers, but is not limited to, claims arising
under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq.,
Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the
Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., the Fair
Labor Standards Act, 29 U.S.C. § 201 et seq., the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1001 et seq., the Massachusetts Fair
Employment Practices Act, M.G.L. c. 151B §1 et seq.; the Massachusetts Civil
Rights Act, M.G.L. c.12 §§11H and 11I; the Massachusetts Equal Rights Act,
M.G.L. c.93 §102 and M.G.L. c.214, §1C; the Massachusetts Labor and Industries
Act, M.G.L. c. 149, §1 et seq .; and the Massachusetts Privacy Act, M.G.L.
c.214, §1B, and any other local, state or federal law, regulation or order
dealing with discrimination in employment on the basis of sex, race, color,
national origin, veteran status, marital status, religion, disability, handicap,
or age. Executive also agrees that this release includes claims based on
wrongful termination of employment, breach of contract (express or implied),
tort, or claims otherwise related to Executive’s employment or termination of
employment with the Company and any claim for attorneys’ fees, expenses or costs
of litigation.
This
Release covers all claims based on any facts or events, whether known or unknown
by Executive, that occurred on or before the date of this Release. Except to
enforce this Release, Executive agrees that Executive will never commence,
prosecute, or cause to be commenced or prosecuted any lawsuit or proceeding
of
any kind against the Company or those associated with the Company in any forum
and agrees to withdraw with prejudice all complaints or charges, if any, that
Executive has filed against the Company or those associated with the
Company.
Anything
in this Release to the contrary notwithstanding, this Release does not include
a
release of: (i) Executive’s rights under the Agreement or Executive’s right to
enforce the Agreement, including but not limited to any benefit or payment
amount under Section 4; (ii) any rights Executive may have to indemnification
under any agreement, law, Company organizational document or policy, or
otherwise; (iii) except as expressly provided in the Agreement, any rights
Executive may have to benefits under the Company’s benefit plans; or (iv)
Executive’s right to enforce this Release.
By
signing this Release, Executive further agrees as follows:
i. Executive
has read this Release carefully and fully understands its terms;
ii. Executive
has had at least twenty-one (21) days to consider the terms of the
Release;
iii. Executive
has seven (7) days from the date Executive signs this Release to revoke it
by
written notification to the Company. After this seven (7) day period, this
Release is final and binding and may not be revoked;
iv. Executive
has been advised to seek legal counsel and has had an opportunity to do
so;
v. Executive
would not otherwise be entitled to the benefits provided under Executive’s
Agreement had Executive not agreed to execute and deliver this Release;
and
vi. Executive’s
agreement to the terms set forth above is voluntary.
IN
WITNESS WHEREOF, Executive has executed and delivered this release under seal
at
Worcester, Massachusetts on the date indicated below.
|
Witness:_______________________
|
Name:____________________________________
Signature:_________________________________
Date:_____________________________________
|
2
