Exhibit 10.3
CHANGE IN CONTROL
AGREEMENT
This CHANGE IN CONTROL
AGREEMENT (this “Agreement” ) is made as of
October 28, 2008 (the “ Effective Date” ),
by and between Strata Bank, a bank chartered under the laws of
Massachusetts with its headquarters located in Medway,
Massachusetts (the “Employer” ), Service
Bancorp, MHC, a mutual holding company chartered under the laws of
Massachusetts (the “MHC” ), Service Bancorp,
Inc., a corporation chartered under the laws of Massachusetts (the
“Company” and together with the MHC, the
“Holding Companies” ) and Randal D. Webber (the
“Executive” ). In consideration of the mutual
covenants contained in this Agreement, the Employer, the Holding
Companies and the Executive agree as follows:
RECITALS:
WHEREAS, the Executive is currently
employed as Executive Vice President & Senior Loan Officer
of the Employer; and
WHEREAS, the Employer is a
wholly-owned subsidiary of the Company, and the Company is a
majority owned subsidiary of the MHC; and
WHEREAS, in order to allow the
Executive to consider the prospect of a Change in Control (as
defined in Section 8 of this Agreement) in an objective manner
and in consideration of the services to be rendered by the
Executive to the Employer and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the Executive, the Employer and the Holding
Companies, the Employer (on behalf of the itself and the Holding
Companies) is willing to provide, subject to the terms of this
Agreement, certain severance benefits to protect the Executive from
the consequences of a Terminating Event (as defined in
Section 8 of this Agreement) occurring subsequent to a Change
in Control or while a Proposed Business Combination is
pending.
NOW, THEREFORE, the Employer, the
Holding Companies and the Executive hereby agree as
follows:
1. Termination of
Employment.
(a) Termination by Employer.
The Executive’s employment with the Employer may be
terminated by the Employer at any time with or without Cause (as
defined in Section 8 of this Agreement).
(b) Termination by Employee.
The Executive’s employment with the Employer may be
terminated by the Executive (i) for Good Reason (as defined in
Section 8 of this Agreement) within twelve (12) months
following the occurrence of a Change in Control or (ii) by
written notice to the Board of Directors of the Employer at least
thirty (30) days prior to the date of such termination.
Notwithstanding the foregoing, the Executive agrees not to leave
the employ of the Employer voluntarily, or resign any position with
the Holding Companies, without sixty (60) days prior written
notice, while there is a pending or overtly threatened
tender
or exchange offer or proxy contest, or while the
Employer is a party to a merger or similar agreement that, in each
case, if completed would result in a Change in Control, unless the
cessation of the Executive’s employment is due to the
Executive’s disability or an event that would constitute Good
Reason.
(c) Termination of Ancillary
Positions. Except as otherwise expressly provided in this
Agreement, the Executive’s engagement by the Employer in any
non-employee capacity and by the Holding Companies in all
capacities, if any, shall terminate as of the effective date of the
termination of the Executive’s employment with the
Employer.
2. Termination While Proposed
Business Combination is Pending or after a Change in Control by
Employer without Cause or by the Executive for Good Reason. In
the event that, while a Proposed Business Combination is pending or
within twelve (12) months following the occurrence of a Change
in Control, the Employer terminates the Executive’s
employment without Cause or the Executive terminates the
Executive’s employment for Good Reason, the Employer shall
provide to the Executive the following severance benefits (the
“Severance Benefits” ):
(a) Severance Payment. The
Employer shall pay to the Executive, as a lump sum payment, an
amount equal to one hundred percent (100%) of the
Executive’s annualized base salary as in effect at the time
of termination (the “Severance Payment” ). The
Executive’s annualized base salary (the “Annualized
Base Salary” ) shall be an amount equal to four times the
regular base salary paid to the Executive during the three-month
period ending on the effective date of the Executive’s
employment termination; without limiting the foregoing, the
Executive’s Annualized Base Salary shall not include any
bonus or incentive compensation. The Executive’s annualized
base salary as of the date of this Agreement is $165,994. The
Severance Payment shall be reduced by required deductions for
applicable taxes and other withholdings and for any and all
outstanding obligations owed by the Executive to the Employer or
the Holding Companies that are then due and payable, which
deductions and withholdings are hereby specifically authorized by
the Executive. The amount of the Severance Payment shall not be
reduced by any amount due or otherwise paid to the Executive
pursuant to any other severance pay, stay bonus or similar
arrangement of the Employer or either or both of the Holding
Companies. The Severance Payment shall be paid on the
Employer’s first regular payroll date following the date of
termination of the Executive’s employment, except as provided
under Section 5(e) of this Agreement relating to
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code” ).
(b) Benefit
Continuation.
(i) The Executive shall be permitted
to continue to participate for a period of twelve (12) months
following the date of termination of the Executive’s
employment (the “Continuation Period” ) in all
medical, dental and life insurance benefit plans sponsored by the
Employer in which the Executive participated immediately prior to
the termination of the Executive’s employment (the
“Employee Benefit Plans” ), in each case at the
level in effect, and at the same out-of-pocket cost to the
Executive, immediately prior to the Change in Control (or if
applicable, immediately
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prior to the commencement of the
Proposed Business Combination), except to the extent any benefit or
coverage under such plans may be changed in its application to all
of the employees of the Employer (or successors-in-interest) on a
nondiscriminatory basis; provided , however , that
such continued participation is permitted under the terms of such
Employee Benefit Plans and provided further that
nothing herein shall restrict or otherwise affect the
Employer’s rights with respect to the administration,
amendment or termination of any Employee Benefit Plan. Without
limiting the foregoing, in no event shall this Agreement require
the Employer to maintain any Employee Benefit Plan for the duration
of the Continuation Period, or to entitle the Executive to continue
participation in an Employee Benefit Plan beyond the termination of
such plan or the date the Executive would otherwise cease to be
eligible to participate in such plan. If the Employer is unable to
provide the benefits set forth in this Section 2(b),
including, without limitation, due to the change in
Executive’s status to that of a non-employee, the Employer
shall instead pay to the Executive a lump sum amount equal to the
present value of the applicable premiums that the Employer would
have to pay, or costs that the Employer would have to incur, to
provide the benefits required to be provided by this
Section 2(b) if the Executive had continued to be employed by
the Employer.
(ii) To the extent permitted by law,
the Employer may cease to provide the benefits set forth in this
Section 2(b) upon the Executive’s becoming eligible
(either as a participant or a dependent) to participate in a plan
providing comparable or superior benefits sponsored by another
employer (a “Comparable Plan” ). The Executive
shall provide prompt notice to the Employer of the date the
Executive becomes eligible (either as a participant or a dependent)
to participate in a Comparable Plan and shall respond promptly to
any reasonable inquiries from the Employer arising out of or
relating to the operation or enforcement of this
Section 2(b)(ii).
(iii) The Executive acknowledges
that the right under the Consolidated Omnibus Budget Reconciliation
Act (“ COBRA ”) to a temporary continuation of
health coverage on a self-pay basis at group rates under certain
circumstances begins upon the occurrence of a COBRA
“qualifying event,” which under current law includes a
voluntary or involuntary separation of employment for reasons other
than gross misconduct, and that in the case of a such separation of
employment, the COBRA right to a continuation of health coverage on
a self-pay basis at group rates generally continues for a period of
up to eighteen (18) months from the date of such separation.
Nothing in this Agreement shall be construed to affect the
Executive’s right to receive health care continuation under
COBRA entirely at the Executive’s own cost to the extent that
the Executive is entitled to COBRA continuation after the
Executive’s right to continuation of benefits under this
Section 2(b) ceases.
(c) Outplacement Benefit. The
Employer at its expense shall provide the Executive with
professional outplacement services of the Executive’s
choosing and shall reimburse the Executive for incidental
outplacement expenses (including resume mailing and clerical
support but not including travel expenses), provided that in no
event shall (i) the aggregate out-of-pocket costs of all such
outplacement benefits exceed $10,000, or (ii) any services,
reimbursements or other benefits be provided under this
Section 2(c) beyond December 31 of the second calendar
year following the calendar year in which the Executive’s
separation from service occurred.
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3. Termination For Other
Reasons. No Severance Benefits shall be provided to the
Executive under this Agreement if the Executive’s employment
is terminated (a) by reason of the Executive’s death,
(b) by the Employer after the Executive has satisfied the
conditions to qualify for long-term disability benefits under the
Employer’s applicable long-term disability policy,
(c) by the Employer for Cause, or (d) by the Executive
voluntarily and not for Good Reason while there is a Proposed
Business Combination pending or within twelve (12) months
following the occurrence of a Change in Control.
4. No Duty to Mitigate; No
Reduction in Severance Payment. The Executive shall not be
required to mitigate the amount of any Severance Benefit provided
for in this Agreement by seeking other employment or otherwise. The
amount of the Severance Payment provide for in this Agreement shall
not be reduced by any compensation earned by the Executive as a
result of any employment, consulting or other arrangement following
the termination of the Executive’s employment with the
Employer.
5. Additional Conditions and
Limitations.
(a) Requirements of Law.
Notwithstanding any other provision of this Agreement, the Employer
shall have no obligation to make the Severance Payment if such
Severance Payment is prohibited by applicable federal or state law,
including without limitation Part 359 of the regulations of the
Federal Deposit Insurance Corporation (12 CFR § 359 et seq.)
or any successor provision.
(b) Release of Employer and
Holding Companies. Notwithstanding any other provision of this
Agreement, the Executive shall not be entitled to the Severance
Payment or any other Severance Benefit under this Agreement unless
the Executive first (i) executes and delivers to the Employer
a valid and irrevocable release of all claims against each of the
Employer, the Holding Companies and all affiliates of any of them,
in a form then reasonably acceptable to the Employer and
(ii) resigns from any and all positions, including, without
limitation, as a director or officer, that the Executive then holds
with the Employer, either Holding Company, or any of their
respective affiliates, or any benefit plan of the Employer, either
Holding Company or any of their respective affiliates.
(c) Compliance with Employee
Covenants. Notwithstanding any other provision of this
Agreement, the Employer’s obligation to provide the Severance
Benefits under this Agreement shall be conditioned on the
Executive’s continued compliance in all material respects
with the covenants set forth in this Agreement. In the event
compliance is not continued within ten (10) days after notice
of such failure to comply has been given in writing to the
Executive, the Employer shall have the right to seek repayment of
all Severance Benefits paid up to the time compliance has
ceased.
(d) Excess Parachute Payment.
It is the intention of the Executive, the Employer and the Holding
Companies that no payment by the Employer to or for the benefit
of
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the Executive under this Agreement and/or any
other agreement or plan pursuant to which the Executive is entitled
to receive payments or benefits from the Employer or either of the
Holding Companies shall be non-deductible to the Employer or the
Holding Companies, as applicable, by reason of the operation of
Section 280G of the Code relating to parachute payments.
Accordingly, notwithstanding any other provision of this Agreement,
in the event that it is determined by the Employer in its
reasonable discretion that any payment made or to be made or other
benefit provided or to be provided to the Executive, whether under
this Agreement or otherwise, would constitute an “Excess
Parachute Payment” (as that term is defined in
Section 280G of the Code), then the aggregate amount or value
of any the Severance Benefits due to the Executive under this
Agreement shall be reduced to the minimum extent necessary so that
no portion of the Severance Benefits made or other benefits
provided to the Executive, as so reduced, constitutes an Excess
Parachute Payment. To the extent that an Excess Parachute Payment
has been made to or for the benefit of the Executive, such Excess
Parachute Payment shall be refunded to the Employer with interest
thereon at the applicable Federal Rate determined under
Section 1274(d) of the Code, compounded annually, or at such
other rate as may be required in order that no such payments shall
be non-deductible to the Employer or the Holding Companies, as
applicable, by reason of the operation of said Section 280G.
To the extent that there is more than one method of reducing the
payments to bring them within the limitations of said
Section 280G, the Executive shall determine which method shall
be followed, provided that if the Executive fails to make such
determination within forty-five days (45) after the Employer
has sent him written notice of the need for such reduction, the
Employer may determine the method of such reduction in its sole
discretion. If any dispute between the Employer and the Executive
as to any of the amounts to be determined under this
Section 5(d), or the method of calculating such amounts,
cannot be resolved by the Employer and the Executive, either the
Employer or the Executive after giving three (3) days written
notice to the other, may refer the dispute to a partner in the
Boston office of a firm of nationally recognized independent
certified public accountants selected jointly by the Employer, the
Holding Companies and the Executive, which firm shall not be the
independent registered public accounting firm of the Employer or
any its successors or affiliates. The determination of such partner
as to the amount to be determined under this Section 5(d) and
the method of calculating such amounts shall be final and binding
on the Employer, the Holding Companies and the Executive. The
Employer and the Holding Companies shall bear the costs of any such
determination.
(e) 409A. Notwithstanding the
provisions of Section 2(a) relating to the time at which the
Severance Payment is to be made, if the Executive is a
“specified employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code at the time his
employment terminates, and the Severance Payment to which the
Executive is entitled under Section 2(a) of this Agreement is
treated as being made on account of separation from service
pursuant to Section 409A(a)(2)(A)(i) of the Code, such
Severance Payment shall be paid to the Executive pursuant to
Section 2(a) of this Agreement on the first business day of
the seventh month commencing after the month during which the
Executive’s employment terminates; provided ,
however , that if such payment is due to involuntary
separation from service within the meaning of Treasury Regulation
Sections 1.409A-1(b)(9)(iii) and 1.409A-1(n):
(i) The Executive shall be entitled
to receive the Severance Payment provided for under
Section 2(a) of this Agreement, at the time such payment is
called for
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under Section 2(a), regardless
of his status as a “specified employee,” to the extent
the total amount of such Severance Payment does not exceed two
times the lesser of (x) the sum of the Executive’s
annualized compensation based on the annual rate of pay for
services provided to the Company for the taxable year of the
Executive preceding the taxable year of the Executive in which the
Executive’s employment terminates (adjusted for any increase
during that year that was expected to continue indefinitely if the
Executive’s employment had not been terminated), or
(y) the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) of the Code for
the year in which the Executive’s employment is terminated;
and
(ii) Any portion of the Severance
Payment benefit payable under Section 2(a) of this Agreement
that is in excess of the amount described in Section 5(e)(i)
of this Agreement shall be paid to the Executive on the first
business day of the seventh month commencing after the month during
which the Executive’s employment terminates.
6. Executive’s
Covenants.
(a) Confidential Information.
The Executive understands and agrees that the Executive’s
employment creates a relationship of confidence and trust between
the Executive, on the one hand, and the Employer and the Holding
Companies, on the other hand, with respect to all Confidential
Information (as defined in Section 8 below). At all times,
b
