BERKSHIRE HILLS BANCORP, INC. BERKSHIRE BANK THREE YEAR CHANGE IN CONTROL AGREEMENT
Exhibit 10.18
This Change in Control Agreement (the “Agreement”) is made effective as of October 1, 2009, by
and among Berkshire Hills Bancorp, Inc., (the “Company”), a corporation organized under the laws of
the State of Delaware, and its wholly-owned subsidiary, Berkshire Bank (the “Bank”), a state
chartered savings Bank with its principal administrative offices at 00 Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxxx 00000, and Xxxxx X. Xxxxxxx (“Executive”).
WHEREAS, the Company and the Bank recognize the substantial contributions Executive has made
to the Company and the Bank (collectively, the “Employers”) and wish to protect Executive’s
position with the Employers for the period provided in this Agreement; and
WHEREAS, Executive has agreed to serve in the employ of the Employers.
NOW, THEREFORE, in consideration of the contributions and responsibilities of Executive, and
upon the other terms and conditions hereinafter provided, the parties hereto agree as follows:
1. TERM OF AGREEMENT.
The period of this Agreement shall be deemed to have commenced as of the date first above
written and shall continue for a period of thirty-six (36) full calendar months thereafter until
September 30, 2012. Within sixty (60) days prior to the first anniversary date of this Agreement,
and continuing for each anniversary thereafter, the disinterested members of the Board of Directors
of the Employers the “Board,”) may act to extend the term of this Agreement for an additional year,
such that the remaining term of this Agreement will be three years, unless the Executive elects
not to extend the term of this Agreement by giving written notice to the Employers, in which case
the term of this Agreement will expire on the third anniversary of this Agreement.
2. CHANGE IN CONTROL.
(a) If the Executive’s employment by the Employers shall be terminated upon the occurrence of
or subsequent to a Change in Control (as defined in Section 2(e) of this Agreement) and during the
term of this Agreement by (i) the Employers for other than Cause (as defined in Section 2(f) of
this Agreement) or (ii) the Executive for Good Reason (as defined in Section 2(b) of this
Agreement), then the Employers shall pay to the Executive the cash severance and benefits provided
in Section 3 of this Agreement.
(b) Good Reason. Termination by the Executive of the Executive’s employment for “Good Reason”
shall mean termination by the Executive following a Change in Control based on the following:
(i) (1) a material diminution in the Executive’s annual compensation or benefits as in
effect immediately prior to the date of the Change in Control or as the same may be
increased from time to time thereafter, (2) a material diminution in the Executive’s
authority, duties or responsibilities as in effect immediately prior to the Change in
Control, or (3) a material diminution in the authority, duties or responsibilities of the
officer (as in effect immediately prior to the date of the Change in Control) to whom the
Executive is required to report,
(ii) any material breach of this Agreement by the Employer, or
(iii) any relocation of Executive’s principal place of employment by more than 25
miles from its location immediately prior to a Change in Control;
provided, however, that prior to any termination of employment for Good Reason, the
Executive must first provide written notice to the Employer within ninety (90) days of the
initial existence of the condition, describing the existence of such condition, and the
Employer shall thereafter have the right to remedy the condition within thirty (30) days of
the date the Employer received the written notice from the Executive. If the Employer
remedies the condition within such thirty (30) day cure period, then no Good Reason shall
be deemed to exist with respect to such condition.
(c) Superior Reason. Notwithstanding Section 2(b) of this Agreement, in the event, however,
that the Chief Executive Officer of the Employers immediately prior to the Change in Control is the
Chief Executive Officer of the resulting entity with similar responsibilities and duties and
Executive’s position with the resulting entity does not result in: (A) a material
diminution in Executive’s annual compensation or benefits as in effect immediately prior to the
Change in Control, (B) a material change in work schedule (e.g., from full time to part time or to
materially more than previously required without a commensurate increase in compensation) or (C) a
relocation of his principal place of employment by more than fifty (50) miles (a “Superior
Reason”), then Executive may not voluntarily terminate his employment for Good Reason during the
one-year period following the Change in Control and receive any payments or benefits under this
Agreement. For the avoidance of doubt, with respect to the immediately foregoing limitation on
voluntary termination, if the Executive’s reason to terminate is a Superior Reason, Executive may
follow the procedure in Section 2(b) and terminate immediately following the cure period (assuming
the Superior Reason has not been cured). However, if the reason to terminate, occurring at any
time during the one-year period set forth herein, is a Good Reason but not a Superior Reason, the
Executive may provide the notice of Good Reason within the time specified in Section 2(b) hereof,
and the Executive may voluntarily terminate employment in accordance with this Section 2(c)
effective upon the expiration of the remainder of said one-year period, and only during a period of
30 days thereafter (e.g., in the 13 month following a Change in Control) assuming the Good Reason
has not been cured by the Employers. If one of the events described in Section 2(b) occurs more
than one year following the date of the Change in Control, but during the remaining term of the
Agreement, then the Executive may terminate his employment in accordance with Section 2(b) of this
Agreement, notwithstanding this Section 2(c).
(d) Notwithstanding any other provision of this Agreement to the contrary, the Executive may
consent in writing to any demotion, loss, reduction or relocation and waive his ability to
voluntarily terminate his employment for Good Reason. The effect of any written consent of the
Executive under this Section 2(d) shall be strictly limited to the terms specified in such written
consent.
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(e) For purposes of this Agreement, a “Change in Control” of the Bank or Company shall mean an
event of a nature that: (i) would be required to be reported in response to Item
5.01 of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change
in Control of the Bank or the Company within the meaning of the Bank Change in Control Act and the
Rules and Regulations promulgated by the Federal Deposit Insurance Corporation (“FDIC”) at 12
C.F.R. § 303.4(a) with respect to the Bank and the Board of Governors of the Federal Reserve System
(“FRB”) at 12 C.F.R. § 225.41(b) with respect to the Company, as in effect on the date hereof; or
(iii) results in a Change in Control of the Bank or Company within the meaning of the Home Owners
Loan Act, as amended (“HOLA”), and the applicable rules and regulations promulgated thereunder, as
in effect at the time of the Change in Control; or (iv) without limitation such a Change in Control
shall be deemed to have occurred at such time as (A) any “person” (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or the Company
representing 20% or more of the Bank’s or the Company’s outstanding securities except for any
securities of the Bank purchased by the Company in connection with the conversion of the Bank to
the stock form and any securities purchased by any tax-qualified employee benefit plan of the Bank;
or (B) individuals who constitute the Board of Directors on the date hereof (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of at least
three-quarters (3/4) of the directors comprising the Incumbent Board, or whose nomination for
election by the Company’s stockholders was approved by the same Nominating Committee serving under
an Incumbent Board, shall be, for purposes of this clause (B), considered as though he were a
member of the Incumbent Board; or (C) a plan of reorganization, merger, consolidation, sale of all
or substantially all the assets of the Bank or the Company or similar transaction occurs in which
the Bank or Company is not the resulting entity; or (D) solicitations of shareholders of the
Company, by someone other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or Bank or similar transaction
with one or more corporations as a result of which the outstanding shares of the class of
securities then subject to the plan or transaction are exchanged for or converted into cash or
property or securities not issued by the Bank or the Company shall be distributed; or (E) a tender
offer is made for 20% or more of the voting securities of the Bank or the Company.
(f) The Executive shall not have the right to receive termination benefits pursuant to Section
3 of this Agreement upon Termination for Cause. The term “Termination for Cause” shall mean
termination because of: (i) the Executive’s personal dishonesty, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, regulation (other than traffic violations or similar offenses), final
cease and desist order or material breach of any provision of this Agreement which results in a
material loss to the Employers, or (ii) the Executive’s conviction of a crime or act involving
moral turpitude or a final judgment rendered against the Executive based upon actions of the
Executive which involve moral turpitude. For the purposes of this Section, no act, or the failure
to act, on the Executive’s part shall be “willful” unless done, or omitted to be done, not in good
faith and without reasonable belief that the action or omission was in the best interests of the
Employers or their affiliates. Notwithstanding the foregoing, the Executive shall not be deemed to
have been Terminated for Cause unless and until there shall have been delivered to him a Notice of
Termination which shall include a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the members of the Board at a meeting of the Board called and held for that
purpose (after reasonable notice to the Executive and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the
Executive was guilty of conduct justifying Termination for Cause and specifying the particulars
thereof in detail. The Executive shall not have the right to receive compensation or other benefits
for any period after Termination for Cause. During the period beginning on the date of the
Notice of Termination for Cause pursuant to Section 4 of this Agreement through the Date of
Termination, stock options granted to the Executive under any stock option plan shall not be
exercisable nor shall any unvested stock awards granted to the Executive under any stock-based
incentive plan of the Employers or any subsidiary or affiliate thereof vest. At the Date of
Termination, such stock options and such unvested stock awards shall become null and void and shall
not be exercisable by or delivered to the Executive at any time subsequent to such Date of
Termination for Cause.
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3. TERMINATION BENEFITS.
(a) Upon the occurrence of a Change in Control, followed at any time during the term of this
Agreement by the involuntary termination of the Executive’s employment (other than for Termination
for Cause or death), or by the Executive for Good Reason, the Employers shall:
(i) pay the Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, a lump sum payment within thirty (30)
days of the Date of Termination an amount equal to three (3) times the Executive’s average
annual compensation for the five most recent taxable years that the Executive has been
employed by the Employers or such lesser number of years in the event that the Executive
shall have been employed by the Employers for less than five years. For this purpose,
annual compensation shall include base salary and any other taxable income, including, but
not limited to, amounts related to the granting, vesting or exercise of restricted stock or
stock option awards, commissions, bonuses, pension and profit sharing plan contributions or
benefits (whether or not taxable), severance payments, retirement benefits, and fringe
benefits paid or to be paid to the Executive or paid for the Executive’s benefit during any
such year; and
(ii) cause to be continued life insurance and non-taxable medical, dental and
disability coverage substantially identical to the coverage maintained by the Employers for
the Executive prior to his Date of Termination, except to the extent such coverage may be
changed in its application to all employees on a nondiscriminatory basis. Such coverage and
payments shall cease upon the expiration of thirty-six (36) full calendar months from the
Date of Termination.
(b) Notwithstanding the foregoing, to the extent required to avoid penalties under Section
409A of the Code, the cash severance payable under Section 3 of this Agreement shall be delayed
until the first day of the seventh month following the Executive’s Date of Termination.
(c) For purposes of this Agreement, a “termination of employment” shall mean a “Separation
from Service” as defined in Section 409A of the Code and the regulations promulgated thereunder,
such that the Employers and the Executive reasonably anticipate that the level of bona fide
services the Executive would perform after a termination of employment would permanently decrease
to a level that is less than 50% of the average level of bona fide services performed (whether as
an employee or as an independent contractor) over the immediately preceding thirty-six (36) month
period.
(d) Notwithstanding the provisions of this Section 3, in no event shall the aggregate payments
or benefits to be made or afforded to Executive under said paragraphs (the “Termination Benefits”)
constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986,
as amended, or any successor thereto, and in order to avoid such
a result, Termination Benefits will be reduced, if necessary, to an amount (the
“Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to
three (3) times Executive’s “base amount,” as determined in accordance with said Section 280G. The
allocation of the reduction required hereby among the Termination Benefits shall be determined by
Executive.
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4. NOTICE OF TERMINATION.
(a) Any purported termination by the Employers or by Executive in connection with a Change in
Control shall be communicated by a Notice of Termination to the other party. For purposes of this
Agreement, a “Notice of Termination” shall mean a written notice which indicates the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Executive’s employment under
the provision so indicated.
(b) “Date of Termination” shall mean the date specified in the Notice of Termination (which,
in the instance of Termination for Cause, shall not be less than thirty (30) days from the date
such Notice of Termination is given); provided, however, that if a dispute regarding the
Executive’s termination exists, the “Date of Termination” shall be determined in accordance with
Section 4(c) of this Agreement.
(c) If, within thirty (30) days after any Notice of Termination is given, the party receiving
such Notice of Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected) and provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute in connection with a Change in Control, in the
event that the Executive is terminated for reasons other than Termination for Cause, the Employers
will continue to pay Executive the payments and benefits due under this Agreement in effect when
the notice giving rise to the dispute was given (including, but not limited to, his annual salary)
until the earlier of: (i) the resolution of the dispute in accordance with this Agreement; or (ii)
the expiration of the remaining term of this Agreement as determined as of the Date of Termination.
5. SOURCE OF PAYMENTS.
It is intended by the parties hereto that all payments provided in this Agreement shall be
paid in cash or check from the general funds of the Bank or the Company, as appropriate, and there
shall be no duplication of payments. Further, the Company guarantees such payments and provision
of all amounts and benefits due hereunder to Executive and, if such amounts and benefits due from
the Bank are not timely paid or provided by the Bank, such amounts and benefits shall be paid or
provided by the Company.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
This Agreement contains the entire understanding between the parties hereto and supersedes any
prior agreement between the Employers and Executive, except that this Agreement shall not affect or
operate to reduce any benefit or compensation inuring to Executive
of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him without reference to
this Agreement.
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Nothing in this Agreement shall confer upon Executive the right to continue in the employ of
the Employers or shall impose on the Employers any obligation to employ or retain Executive in its
employ for any period.
7. NON-COMPETITION AND NON-DISCLOSURE.
(a) For a period of one (1) year following the payment of termination benefits to Executive
under this agreement, Executive agrees not to compete with the Employers or their affiliates in any
city, town or county in which Executive’s normal business office is located and the Employers or
their affiliates have an office or has filed an application for regulatory approval to establish an
office, determined as of the effective date of such termination, except as agreed to pursuant to a
resolution duly adopted by the Board of Directors. Executive agrees that during such one (1) year
period and within said cities, towns and counties, Executive shall not work for or advise, consult
or otherwise serve with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Employers. The parties hereto,
recognizing that irreparable injury will result to the Employers, their business and property in
the event of Executive’s breach of this Section 7(a), agree that in the event of any such breach by
Executive, the Employers will be entitled, in addition to any other remedies and damages available,
to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents,
servants, employees and all persons acting for or under the direction of Executive. Executive
represents and admits that, in the event of the termination of his employment following a Change in
Control, Executive’s experience and capabilities are such that Executive can obtain employment in a
business engaged in other lines and/or of a different nature than the Employers, and that the
enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood.
Nothing herein will be construed as prohibiting the Employers from pursuing any other remedies
available for such breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the business activities and
plans for business activities of the Employers, as it may exist from time to time, is a valuable,
special and unique asset of the business of the Employers. Executive will not, during or after the
term of his employment, disclose any knowledge of the past, present, planned or considered business
activities of the Employers or their affiliates to any person, firm, corporation, or other entity
for any reason or purpose whatsoever, unless expressly authorized by the Board of Directors or
required by law. Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of the Employers or their affiliates. In the event
of a breach or threatened breach by Executive of the provisions of this Section 7, the Employers
will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the Employers or their
affiliates or from rendering any services to any person, firm, corporation or other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing
herein will be construed as prohibiting the Employers from pursuing other remedies available for
such breach or threatened breach, including the recovery of damages from Executive.
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8. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and
of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, Executive, the
Employers and their respective successors and assigns.
9. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument in writing signed by
the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate
only as to the specific term or condition waived and shall not constitute a waiver of such term or
condition for the future or as to any act other than that specifically waived.
10. REQUIRED REGULATORY PROVISIONS.
Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and
conditioned upon compliance with 12 U.S.C. §1828(k) and any rules and regulations promulgated
thereunder, including 12 C.F.R. Part 359.
11. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any provision, is held
invalid, such invalidity shall not affect any other provision of this Agreement or any part of such
provision not held so invalid, and each such other provision and part thereof shall, to the full
extent consistent with law, continue in full force and effect.
12. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the provisions of this
Agreement.
13. GOVERNING LAW.
The validity, interpretation, performance, and enforcement of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts.
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14. ARBITRATION.
Any dispute or controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location
selected by Executive within fifty (50) miles from the location of the Employers’ main office,
in accordance with the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or in connection with
this Agreement.
15. PAYMENT OF COSTS AND LEGAL FEES.
All reasonable costs and legal fees paid or incurred by Executive pursuant to any dispute or
question of interpretation relating to this Agreement shall be paid or reimbursed by the Employers
if Executive is successful with respect to such dispute or question of interpretation pursuant to a
legal judgment, arbitration or settlement and such reimbursement shall occur as soon as practicable
but not later than two and one-half months after the dispute is settled or resolved in Executive’s
favor.
16. INDEMNIFICATION.
The Employers shall provide Executive (including his heirs, executors and administrators) with
coverage under a standard directors’ and officers’ liability insurance policy at its expense and
shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Massachusetts law against all expenses and liabilities reasonably incurred by him
in connection with or arising out of any action, suit or proceeding in which he may be involved by
reason of his having been a director or officer of the Employers (whether or not he continues to be
a director or officer at the time of incurring such expenses or liabilities); such expenses and
liabilities to include, but not to be limited to, judgments, court costs and attorneys’ fees and
the costs of reasonable settlements.
17. SUCCESSOR TO THE EMPLOYERS.
The Employers shall require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of
the Employers, to expressly and unconditionally assume and agree to perform the Employers’
obligations under this Agreement in the same manner and to the same extent that the Employers would
be required to perform such obligations if no such succession or assignment had taken place.
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SIGNATURES
IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to be executed by
their duly authorized officers, and Executive has signed this Agreement, on the 10th day of March,
2010.
| ATTEST: | BERKSHIRE HILLS BANCORP, INC. | |||||||
/s/ Wm. Xxxxxx Xxxxxxxx
|
By: | /s/ Xxxxxxx X. Xxxx
|
||||||
Xx. Xxxxxx Xxxxxxxx, VP/General Counsel
|
Xxxxxxx X. Xxxx, President and CEO | |||||||
| ATTEST: | BERKSHIRE BANK | |||||||
/s/ Wm. Xxxxxx Xxxxxxxx
|
By: | /s/ Xxxxxxx X. Xxxx
|
||||||
Xx. Xxxxxx Xxxxxxxx, VP/General Counsel
|
Xxxxxxx X. Xxxx, President and CEO | |||||||
| WITNESS: | EXECUTIVE | |||||||
/s/ Wm. Xxxxxx Xxxxxxxx
|
By: | /s/ Xxxxx X. Xxxxxxx
|
||||||
| Xxxxx X. Xxxxxxx | ||||||||
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