Exhibit 10.3
Employment Agreement
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as
of ______________, 1999, by and between WESTBOROUGH FINANCIAL SERVICES, INC., a
publicly-held business corporation organized and operating under the laws of the
Commonwealth of Massachusetts and having an office at 100 E. Main Street,
Westborough, Massachusetts 07581 ("Company") and JOSEPH F. MACDONOUGH, an
individual residing at 14 Pinecrest Dr., Westborough, Massachusetts 01581
("Executive"). Any reference to "Bank" herein shall mean The Westborough Bank, a
wholly-owned subsidiary of the Company, or any successor thereto.
W I T N E S S E T H :
WHEREAS, Executive currently serves the Company in the capacity of
President and Chief Executive Officer and also serves as President and Chief
Executive Officer of the Bank; and
WHEREAS, Executive also currently serves as a member of the Board of
Directors of the Company ("Board") and as a member of the Board of Directors of
the Bank ("Bank Board"); and
WHEREAS, effective as of the date of this Agreement (the "Effective
Date"), the Bank has converted from a state chartered mutual savings bank to a
state chartered capital stock savings bank and has become the wholly-owned
subsidiary of the Company; and
WHEREAS, the Company desires to assure for itself and for the Bank
the continued availability of Executive's services and the ability of Executive
to perform such services with a minimum of personal distraction in the event of
a pending or threatened Change of Control (as hereinafter defined); and
WHEREAS, Executive is willing to continue to serve the Company and
the Bank on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and Executive hereby
agree as follows:
SECTION 1. EMPLOYMENT.
The Company agrees to continue to employ Executive, and Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.
(a) The terms and conditions of this Agreement shall be and remain
in effect during the period of employment established under this section 2
("Employment Period"). The Employment Period shall be for an initial term of
three (3) years beginning on the date of this Agreement and ending on the third
(3rd) anniversary date of this Agreement (each, an "Anniversary Date"), plus
such extensions, if any, as are provided pursuant to section 2(b).
(b) Prior to the first anniversary of the Effective Date of this
Agreement and prior to each anniversary date thereafter (each, an "Anniversary
Date"), the Board shall review the terms of this Agreement and Executive's
performance of services hereunder and may, in the absence of objection from
Executive, approve an extension of the Employment Period. In such event, the
Employment Period shall be extended to the third anniversary of the relevant
Anniversary Date. For all purposes of this Agreement, the term "Remaining
Unexpired Employment Period" as of any date shall mean the period beginning on
such date and ending on the Anniversary Date on which the Employment Period (as
extended pursuant to this section 2(b) of this Agreement) is then scheduled to
expire.
(c) Nothing in this Agreement shall be deemed to prohibit the
Company at any time from terminating Executive's employment during the
Employment Period with or without notice for any reason; PROVIDED, HOWEVER, that
the relative rights and obligations of the Company and Executive in the event of
any such termination shall be determined under this Agreement.
(d) Nothing in this Agreement shall be deemed to prohibit Executive
from terminating his employment during the Employment Period after providing the
Board with written notice of his intention to terminate his employment the not
less than 30 days prior to his termination date; PROVIDED, HOWEVER, that the
relative rights and obligations of the Company and Executive in the event of any
such termination shall be determined under this Agreement and that the Executive
shall be required to fully cooperate with the Company with the transition of his
duties.
SECTION 3. DUTIES.
Executive shall serve as President and Chief Executive Officer of
the Company and as President and Chief Executive Officer of the Bank, having
such power, authority and responsibility and performing such duties as are
prescribed by or under the By-Laws of the Company and the Bank and as are
customarily associated with such positions. Executive shall devote his full
business time and attention (other than during weekends, holidays, approved
vacation periods, and periods of illness or approved leaves of absence) to the
business and affairs of the Company and the Bank and shall use his best efforts
to advance the interests of the Company and the Bank.
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SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by Executive
hereunder, the Company shall pay (or shall cause the Bank to pay) to him a
salary at an initial annual rate of $___________, payable in approximately equal
installments in accordance with the Company's or Bank's customary payroll
practices for senior officers. The Board shall review Executive's annual rate of
salary at such times during the Employment Period as it deems appropriate, but
not less frequently than once every twelve months, and may, in its discretion,
approve an increase in the Executive's annual rate of salary. In addition to
salary, Executive may receive other cash compensation from the Company or the
Bank for services hereunder at such times, in such amounts and on such terms and
conditions as the Board, or the Bank Board, as applicable, may determine from
time to time.
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
During the Employment Period, Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long-term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company or the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and programs and
consistent with the Company's and Bank's customary practices. Nothing paid to
the Executive under any such plan or arrangement will be deemed to be in lieu of
other compensation to which the Executive is entitled under this Agreement.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) The Company shall cause Executive to be covered by and named as
an insured under any policy or contract of insurance obtained by it or the Bank
to insure its current or former directors and officers against personal
liability for acts or omissions in connection with service as an officer or
director of the Company or the Bank or service in other capacities at the
request of the Company or the Bank. The coverage provided to Executive pursuant
to this section 6 shall be of the same scope and on the same terms and
conditions as the coverage (if any) provided to other current or former officers
or directors of the Company and the Bank.
(b) To the maximum extent permitted under applicable law, the
Company shall indemnify Executive against and hold him harmless from any costs,
liabilities, losses and exposures to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
current or former director or officer of the Company, the Bank, or any
subsidiary or affiliate thereof.
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SECTION 7. OUTSIDE ACTIVITIES.
Executive may serve as a member of the boards of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Board (which approval shall not be unreasonably
withheld); PROVIDED, HOWEVER, that such service shall not materially interfere
with the performance of his duties under this Agreement. Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company and generally applicable to
all similarly situated executives. Executive may also serve as an officer or
director of the Bank on such terms and conditions as the Company and the Bank
may mutually agree upon, and such service shall not be deemed to materially
interfere with Executive's performance of his duties hereunder or otherwise
result in a material breach of this Agreement. If Executive is discharged or
suspended, or is subject to any regulatory prohibition or restriction including
but not limited to those set forth in section 28(b)(iii) hereof, with respect to
participation in the affairs of the Bank, he shall continue to perform services
for the Company in accordance with this Agreement but shall not directly or
indirectly provide services to or participate in the affairs of the Bank in a
manner inconsistent with the terms of such discharge or suspension or any
applicable regulatory order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
within Worcester County at which the Company shall maintain its principal
executive offices, or at such other location as the Company and Executive may
mutually agree upon. The Company shall provide or cause the Bank to provide the
Executive at his principal place of employment with a private office,
secretarial services, and other support services and facilities suitable to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Company shall
reimburse Executive for his ordinary and necessary business expenses, including,
without limitation, all expenses associated with his business use of an
automobile, fees for memberships in such clubs and organizations as Executive
and the Company shall mutually agree are necessary and appropriate for business
purposes, and his travel and entertainment expenses incurred in connection with
the performance of his duties under this Agree ment, in each case upon
presentation to the Company of an itemized account of such expenses in such form
as the Company may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
(a) Executive shall be entitled to the severance benefits described
in section 9(b) herein in the event that his employment with the Company
terminates during the Employment Period under any of the following
circumstances:
(i) Executive's voluntary resignation from employment with the
Company within ninety (90) days following:
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(A) the failure of the Board to appoint or re-appoint or elect
or re-elect Executive to the position stated in section 3 of this
Agreement (or a more senior office of the Company) or the failure of
the Bank Board to appoint or re-appoint or elect or re-elect
Executive to the position stated in section 3 of this Agreement (or
a more senior position of the Bank); or
(B) the expiration of a thirty (30) day period following the
date on which Executive gives written notice to the Company or the
Bank, as the case may be, of its material failure, whether by
amendment of the Company's organization certificate or By-Laws, or
the Bank's state charter or By-Laws, action of the Board or the Bank
Board or otherwise, to vest in Executive the functions, duties, or
responsibilities prescribed in section 3 of this Agreement, unless,
during such thirty (30) day period, such failure is cured in a
manner determined by Executive, in his discretion, to be
satisfactory; or
(C) the expiration of a thirty (30) day period following the
date on which Executive gives written notice to the Company or the
Bank, as the case may be, of its material breach of any term,
condition or covenant contained in this Agreement (including,
without limitation any reduction of Executive's rate of base salary
in effect from time to time and any change in the terms and
conditions of any compensation or benefit program in which Executive
participates which, either individually or together with other
changes, has a material adverse effect on the aggregate value of his
total compensation package), unless, during such thirty (30) day
period, such failure is cured in a manner determined by Executive,
in his discretion, to be satisfactory; or
(ii) subject to the provisions of section 11, the termination of
Executive's employment with the Company for any other reason not described
in section 9(a) other than a termination of the Executive's employment for
"cause";
then, the Company shall provide (or cause the Bank to provide) to Executive the
amounts and benefits described in section 9(b).
(b) Upon the termination of Executive's employment with the Company
under circumstances described in section 9(a) of this Agreement, the Company
shall pay and provide (or cause the Bank to pay and provide) to Executive (or,
in the event of his death prior to such payment, to his estate):
(i) the portion, if any, of the compensation earned by the Executive
through the date of the termination of his employment with the Company
which remains unpaid as of such date, such payment to be made at the time
and in the manner prescribed by law applicable to the payment of wages but
in no event later than thirty (30) days after the Executive's termination
of employment;
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(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and pro grams maintained by the Company and the Bank for their
officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long-term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for
Executive, for the Remaining Unexpired Employment Period, coverage
equivalent to the coverage to which he would have been entitled under such
plans (as in effect on the date of his termination of employment, or, if
his termination of employment occurs after a Change of Control, on the
date of such Change of Control, whichever benefits are greater), if he had
continued working for the Company during the Remaining Unexpired
Employment Period at the highest annual rate of compensation achieved
during that portion of the Employ ment Period which is prior to
Executive's termination of employment with the Company;
(iv) within thirty (30) days following his termination of employment
with the Company, a lump sum payment, in an amount equal to the present
value of the sum of (i) the salary that Executive would have earned if he
had continued working for the Company during the Remaining Unexpired
Employment Period at the highest annual rate of salary achieved during
that portion of the Employment Period which is prior to Executive's
termination of employment with the Company; plus (ii) the bonuses the
Executive would have earned had he continued working for the Company
during the Remaining Unexpired Employment Period assuming Executive would
have earned the highest annual bonus paid to him during the three years
preceding the year in which his employment with the Company terminates;
where such present value is to be determined using a discount rate equal
to the applicable short-term federal rate prescribed under section 1274(d)
of the Internal Revenue Code of 1986 ("Code"), compounded using the
compounding period corresponding to the Company's regular payroll periods
for its officers, such lump sum to be paid in lieu of all other payments
of salary provided for under this Agreement in respect of the period
following any such termination.
The Company and Executive hereby stipulate that the damages which may be
incurred by Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 9(b) constitute reasonable
damages under the circumstances and shall be payable without any requirement of
proof of actual damage and without regard to Executive's efforts, if any, to
mitigate damages. The Company and Executive further agree that the Company may
condition the payments and benefits (if any) due under sections 9(b) on the
receipt of Executive's resignation from any and all positions which he holds as
an officer, director or committee member with respect to the Company, the Bank
or any subsidiary or affiliate of either of them.
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SECTION 10. DEATH AND DISABILITY BENEFITS
(a) In the event Executive's employment with the Company terminates
during the Employment Period because of Executive's death, then the Company
shall pay to the Executive's designated beneficiary for the one year period
following Executive's death, periodic payments equal in the aggregate to the
Executive's annual base salary as in effect on the date of his death. For the
one year period following Executive's death, Executive's dependents, as defined
under the group health (including hospitalization, medical and major medical)
and dental plans sponsored by the Company or the Bank from time to time, shall
be provided continued coverage under such plans, provided that they continue to
remit to the Company or Bank, as the case may be, any premium payments Executive
was required to pay for such coverage prior to his death. The continued coverage
provided under this section 10 shall be in addition to, and shall not count as,
coverage required to be provided under any applicable law. For the purposes of
this Agreement, Executives designated beneficiary shall be the person designated
as such by Executive in a writing submitted to the Company. If no written
designation is made, Executive's designated beneficiary shall be his spouse or
in the event he has no spouse, his estate.
(b) In the event that Executive's employment with the Company is
terminated because of his inability to perform his duties under this Agreement
by reason of illness or other physical or mental disability determined in the
discretion of the Board to be permanent, based on medical evidence the Board
finds acceptable, the Company shall continue to pay Executive his base salary in
effect as of the date he is determined to be permanently disabled, for the
Remaining Unexpired Employment Period, but reduced by any payments Executive
receives during such period under or pursuant to any short or long term
disability plan or policy sponsored by the Company or the Bank.
SECTION 11. TERMINATION WITHOUT ADDITIONAL COMPANY LIABILITY.
In the event that Executive's employment with the Company shall
terminate during the Employment Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes
of this Agreement shall mean personal dishonesty, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease and desist order, or any material
breach of this Agreement, in each case as measured against standards generally
prevailing at the relevant time in the savings and community banking industry;
or
(b) Executive's voluntary resignation from employment with the
Company for reasons other than those specified in section 9(a) or section 12(b);
then the Company shall have no further obligations under this Agreement, other
than the payment to Executive (or, in the event of his death prior to such
payment, to his estate) of the portion, if any, of the salary earned by the
Executive through the date of his termination of employment with the Company
which remains unpaid as of such date and the provision of such other benefits,
if any, to which he is entitled as a former employee under the employee benefit
plans and programs
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and compensation plans and programs maintained by, or covering employees of, the
Company or the Bank.
(c) For purposes of section 11(a), no act or failure to act, on the
part of Executive, shall be considered "willful" unless it is done, or omitted
to be done, by Executive in bad faith or without reasonable belief that
Executive's action or omission was in the best interests of the Company and its
affiliates. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the written advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by Executive in good faith and in the best interests of the Company. The
cessation of employment of Executive shall not be deemed to be for "cause"
within the meaning of section 11(a) unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of three-fourths of the non-employee members of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to Executive and Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of the Board,
Executive is guilty of the conduct described in section 11(a) above, and
specifying the particulars thereof in detail.
SECTION 12. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL.
(a) A Change of Control of the Company ("Change of Control") shall
be deemed to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a transaction
that would result in the reorganization, merger or consolidation of the
Company, respectively, with one or more other persons, other than a
transaction following which:
(A) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended "Exchange Act") in substantially
the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least 51% of the
outstanding equity ownership interests in the Company; and
(B) at least 51% of the securities entitled to vote generally
in the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of the
Company;
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(ii) the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval
by the stockholders of the Company of any transaction which would result
in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation
or dissolution;
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of the Company do not
belong to any of the following groups:
(A) individuals who were members of the Board of the Company
on the date of this Agreement; or
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of
the Company by affirmative vote of three-quarters of the
members of such Board, or of a nominating committee thereof,
in office at the time of such first election; or
(II) upon election by the stockholders of the Company to
serve as a member of the Board of the Company, but only if
nominated for election by affirmative vote of three-quarters
of the members of the Board of the Company, or of a nominating
committee thereof, in office at the time of such first
nomination;
PROVIDED, HOWEVER, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of
the Board of the Company; or
(v) any event which would be described in section 12(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein or any event that results in a "Change of Control of the Bank"
within the meaning of the "Change in Bank Control Act" and the rules and
regulations promulgated by the Federal Deposit Insurance Agency ("FDIC")
or the Massachusetts Division of Banks as of the date hereof.
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In no event, however, shall a Change of Control be deemed to have occurred as a
result of: (i) any acquisition of securities or assets of the Company, the Bank,
or a subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them; or
(ii) the conversion of Westborough MHC to a stock form company and the issuance
of additional shares of the Company in connection therewith. For purposes of
this section 12(a), the term "person" shall have the meaning assigned to it
under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, Executive shall be entitled
to the payments and benefits contemplated by section 12(c) in the event of his
termination of employment with the Company under any of the following
circumstances:
(i) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following his demotion, loss of title, office
or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
(ii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal
place of employment which Executive, in his reasonable discretion,
determines to be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by Executive at any time
during the Employment Period following the failure of any successor to the
Company in the Change of Control to include Executive in any compensation
or benefit program maintained by it or covering any of its executive
officers, unless Executive is already covered by a substantially similar
plan of the Company which is at least as favorable to him;
(iv) resignation, voluntary or otherwise, for any reason whatsoever
following the effective date of the Change of Control; or
(v) termination by the Company for any reason other than "cause" as
defined under section 11.
(c) In the event Executive's employment with the Company terminates
after a Change in Control under any of the circumstances described in section
12(b), Executive shall be entitled to the payments and benefits described in
section 9(b), except that the lump sum payable under section 9(b)(iv) shall not
be less than an amount equal to 2.99 multiplied by Executive's "base amount" as
that term is defined under Section 280G of the Code.
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SECTION 13. TAX INDEMNIFICATION.
(a) This section 13 shall apply if Executive's employment is
terminated upon or following (i) a Change of Control (as defined in section 12
of this Agreement); or (ii) a change "in the ownership or effective control" of
the Company or the Bank or "in the ownership of a substantial portion of the
assets" of the Company or the Bank within the meaning of section 280G of the
Code. If this section 13 applies, then, if for any taxable year, Executive shall
be liable for the payment of an excise tax under section 4999 of the Code with
respect to any payment in the nature of compensation made by the Company, the
Bank or any direct or indirect subsidiary or affiliate of the Company or the
Bank to (or for the benefit of) Executive, it shall be the sole obligation and
responsibility of the Company to pay to Executive an amount equal to X, deter
mined under the following formula:
X = E x P
------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under section
4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this section 12;
FI = the highest marginal rate of income tax applicable to
Executive under the Code for the taxable year in question;
SLI = the sum of the highest marginal rates of income tax
applicable to Executive under all applicable state and local
laws for the taxable year in question; and
M = the highest marginal rate of Medicare tax applicable to
Executive under the Code for the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement, or otherwise,
and on which an excise tax under sec tion 4999 of the Code will be assessed, the
payment determined under this section 13(a) shall be made to Executive on the
earlier of (i) the date the Company, the Bank or any direct or indirect
subsidiary or affiliate of the Company or the Bank is required to withhold such
tax, or (ii) the date the tax is required to be paid by Executive.
(b) Notwithstanding anything in this section 13 to the contrary, in
the event that Executive's liability for the excise tax under section 4999 of
the Code for a taxable year is subse quently determined to be different than the
amount determined by the formula (X + P) x E, where X, P and E have the meanings
provided in section 13(a), Executive or the Company, as the case
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may be, shall pay to the other party at the time that the amount of such excise
tax is finally determined, an appropriate amount, plus interest, such that the
payment made under section 13(a), when increased by the amount of the payment
made to Executive under this section 13(b) by the Company, or when reduced by
the amount of the payment made to the Company under this section 13(b) by
Executive, equals the amount that should have properly been paid to Executive
under section 13(a). The interest paid under this section 13(b) shall be
determined at the rate provided under section 1274(b)(2)(B) of the Code. To
confirm that the proper amount, if any, was paid to Executive under this section
13, Executive shall furnish to the Company a copy of each tax return which
reflects a liability for an excise tax payment made by the Company, at least 20
days before the date on which such return is required to be filed with the
Internal Revenue Service.
SECTION 14. COVENANT NOT TO COMPETE.
In the event of Executive's termination of employment with the Company
prior to the expiration of the Employment Period, for a period of three (3)
years following the date of such termination, the Executive shall not, without
the written consent of the Bank, become an officer, employee, consultant,
director or trustee of any competitor (as herein defined) if in this capacity he
would be working for the competitor at an office or location that is within a
fifty (50) mile radius of the town where the headquarters of the Company or the
Bank is located on the date of the Executive's termination of employment. For
purpose of this Agreement, a "competitor" is any savings association, savings
and loan association, savings and loan holding company, bank, bank holding
company, credit union, cooperative bank, mortgage company, trust company or
other form of financial institution, or any direct or indirect subsidiary or
affiliate of any such entity. If the Executive's employment shall be terminated
on account of disability as provided in section 10 of this Agreement, this
section 14 shall not apply if (a) the Executive first offers, by written notice,
to accept a similar position with, or perform similar services for, the Bank on
substantially the same terms and conditions proposed by the competitor and (b)
the Bank declines to accept such offer within ten (10) days after such notice is
given.
SECTION 15. CONFIDENTIALITY.
Unless he obtains the prior written consent of the Company,
Executive shall keep confidential and shall refrain from using for the benefit
of himself, or any person or entity other than the Company or any entity which
is a subsidiary of the Company or of which the Company is a subsidiary, any
material document or information obtained from the Company, or from its parent
or subsidiaries, in the course of his employment with any of them concerning
their properties, operations or business (unless such document or information is
readily ascertainable from public or published information or trade sources or
has otherwise been made available to the public through no fault of his own)
until the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 15 shall prevent Executive, with
or without the Company's consent, from participating in or disclosing documents
or information in connection with any judicial or administrative investigation,
inquiry or proceed ing to the extent that such participation or disclosure is
required under applicable law.
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SECTION 16. SOLICITATION.
Executive hereby covenants and agrees that, for a period of two (2)
years following his termination of employment with the Company, he shall not,
without the written consent of the Company, either directly or indirectly:
(a) solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to have
the effect of causing any officer or employee of the Company, the Bank or any
affiliate, as of the date of this Agreement, of either of them, to terminate his
or her employment and accept employment or become affiliated with, or provide
services for compensation in any capacity whatsoever to, any "competitor" as
defined in section 14, having its principal place of business in Worcester or
Middlesex County, as of the date of this Agreement;
(b) provide any information, advice or recommendation with respect
to any such officer or employee of any "competitor" as defined in section 14,
having its principal place of business in Worcester or Middlesex County as of
the date of this Agreement, that is intended, or that a reasonable person acting
in like circumstances would expect, to have the effect of causing any officer or
employee of the Company, the Bank, or any affiliate, as of the date of this
Agreement, of either of them, to terminate his employment and accept employment
or become affiliated with, or provide services for compensation in any capacity
whatsoever to, any such competitor having its principal place of business in
Worcester or Middlesex County, as of the date of this Agreement; or
(c) solicit, provide any information, advice or recommendation or
take any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of the
Company, the Bank or any affiliate to terminate an existing business or
commercial relationship with the Company, the Bank or any affiliate.
SECTION 17. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of Executive's employment during the term of this
Agreement or thereafter, whether by the Company or by Executive, shall have no
effect on the rights and obliga tions of the parties hereto under the Company's
or Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company or the Bank from time to time.
SECTION 18. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding upon
Executive, his legal representatives and testate or intestate distributes, and
the Company and its successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the assets and business of the Company
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may be sold or otherwise transferred. Failure of the Company to obtain from any
successor its express written assumption of the Company's obligations hereunder
at least sixty (60) days in advance of the scheduled effective date of any such
succession shall be deemed a material breach of this Agreement.
SECTION 19. NOTICES.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to Executive:
Mr. Joseph F. MacDonough
14 Pinecrest Dr.
Westborough, Massachusetts 01581
If to the Company:
Westborough Financial Services, Inc.
100 E. Main Street
Westborough, Massachusetts 01581
Attention: Board of Directors -- Non-Employee Directors
with a copy to:
Thacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W., Suite 800
Washington, D.C. 20006
Attention: Richard A. Schaberg, Esq.
SECTION 20. INDEMNIFICATION FOR ATTORNEYS' FEES.
The Company shall indemnify, hold harmless and defend Executive
against rea sonable costs, including legal fees, incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be
involved, as a result of his efforts, in good faith following exhaustion of
other all remedies, to defend or enforce the terms of this Agreement; provided,
however, that Executive shall have substantially prevailed on the merits
pursuant to a judgment, decree or order of a court of competent jurisdiction or
of an arbitrator in an arbitration proceeding, or in a settlement. For purposes
of this Agreement, any settlement agreement which provides for payment of any
amounts in settlement of the Company's obligations hereunder shall be conclusive
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evidence of Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.
SECTION 21. SEVERABILITY.
A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.
SECTION 22. WAIVER.
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 23. COUNTERPARTS.
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Agreement.
SECTION 24. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and to be performed entirely
within the Commonwealth of Massachusetts.
SECTION 25. HEADINGS AND CONSTRUCTION.
The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.
SECTION 26. ENTIRE AGREEMENT; MODIFICATIONS.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or rep resentations relating to the subject
matter hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
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SECTION 27. NON-DUPLICATION.
In the event that Executive shall perform services for the Bank or
any other direct or indirect subsidiary of the Company, any compensation or
benefits provided to Executive by such other employee shall be applied to offset
the obligations of the Company hereunder, it being intended that this Agreement
set forth the aggregate compensation and benefits payable to Executive for all
services to the Company and all of its direct or indirect subsidiaries,
including the Bank.
SECTION 28. REQUIRED REGULATORY PROVISIONS.
(a) Notwithstanding anything herein contained to the contrary, any
payments to Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with section
18(k) of the Federal Deposit Insurance Act, 12 U.S.C. ss.1828(k), and any
regulations promulgated thereunder.
(b) Notwithstanding anything herein to the contrary, any payments to
the Executive by the Bank, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with the following laws, rules
and regulations applicable to the Bank:
(i) In no event shall the aggregate amount of compensation payable
by the Bank to the Executive under section 9(b) hereof exceed 2.99 times
the Executive's average annual total compensation for the last five
consecutive calendar years to end prior to his termination of employment
with the Company and the Bank (or for his entire period of employment with
the Company and the Bank if less than five calendar years).
(ii) All payments to the Executive by the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act ("FDI
Act"), 12 U.S.C. ss.1828(k), and any regulations promulgated thereunder.
(iii) Notwithstanding anything herein contained to the contrary, if
the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Bank pursuant to a
notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
ss.1818(e)(3) or 1818(g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service of such notice, unless stayed
by appropriate proceedings. If the charges in such notice are dismissed,
the Bank, in its discretion, may (A) pay to the Executive all or part of
the compensation withheld while the Bank's obligations hereunder were
suspended and (B) reinstate, in whole or in part, any of the obligations
which were suspended.
(iv) Notwithstanding anything herein contained to the contrary, if
the Executive is removed and/or permanently prohibited from participating
in the conduct of the Bank's affairs by an order issued under section
8(e)(4) or 8(g)(1) of
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the FDI Act, 12 U.S.C. ss.1818(e)(4) or (g)(1), all prospective
obligations of the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights and obligations of the Bank
and the Executive shall not be affected.
(v) Notwithstanding anything herein contained to the contrary, if
the Bank is in default (within the meaning of section 3(x)(1) of the FDI
Act, 12 U.S.C. ss.1813(x)(1), all prospective obligations of the Bank
under this Agreement shall terminate as of the date of default, but vested
rights and obligations of the Bank and the Executive shall not be
affected.
(vi) Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Bank hereunder shall be terminated, except
to the extent that a continuation of this Agreement is necessary for the
continued operation of the Bank: (A) by the Commissioner of the
Massachusetts Division of Banks or his designee or the FDIC, at the time
the FDIC enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in section 13(c) of the FDI Act, 12
U.S.C. ss.1823(c); (B) by the Commissioner of the Massachusetts Division
of Banks or his designee at the time the Commissioner or his designee
approves a supervisory merger to resolve problems related to the operation
of the Bank or when the Bank is determined by the Commissioner to be in an
unsafe or unsound condition. The vested rights and obligations of the
parties shall not be affected.
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement. If, and
to the extent, the Bank is unable to satisfy payments due under this Agreement
as the result of compliance with any of the foregoing laws, rules and
regulations, the Company shall be responsible for satisfying all such
obligations.
SECTION 29. COMPANY AND AFFILIATES.
The Company may satisfy its obligations under this Agreement either
directly or indirectly through one or more direct or indirect subsidiaries or
affiliates. The Executive agrees that this Agreement requires that the Executive
make his services available to the Company, the Bank and their respective direct
or indirect subsidiaries or affiliates as determined by the respective Boards of
Directors of the Company and the Bank within the terms and conditions set forth
in this Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and Executive has hereunto set his hand, all as of the day and year
first above written.
--------------------------------------------
JOSEPH F. MACDONOUGH
ATTEST: WESTBOROUGH FINANCIAL SERVICES, INC.
By By
------------------------------- ------------------------------------------
Secretary Name:
Title:
[Seal]
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