Exhibit 10.4.1

 

LEGACY BANKS

EMPLOYMENT AGREEMENT

 

This AGREEMENT (“Agreement”) is made effective as of                     , 2005, by and among Legacy Banks (the “Bank”), a Massachusetts-chartered savings bank, with its principal administrative office at 99 North Street, Pittsfield, Massachusetts, 01202, Legacy Bancorp, Inc., a corporation organized under the laws of the State of Delaware, the holding company for the Bank (the “Holding Company”), and J. Williar Dunlaevy (“Executive”).

 

WHEREAS, the Bank wishes to assure itself of the services of Executive for the period provided in this Agreement; and

 

WHEREAS, Executive is willing to serve in the employ of the Bank on a full-time basis for said period.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

 

1.	POSITION AND RESPONSIBILITIES.

 

During the period of his employment hereunder, Executive agrees to serve as Chief Executive Officer and Chairman of the Board of Directors of the Bank. Executive shall render administrative and management services to the Bank such as are customarily performed by persons situated in a similar executive capacity. During said period, Executive also agrees to serve, if elected, as an officer and director of the Holding Company or any subsidiary of the Bank.

 

2.	TERMS AND DUTIES.

 

(a) The period of Executive’s employment under 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. Commencing on the first anniversary date of this Agreement, and continuing on each anniversary thereafter, the Agreement shall automatically renew for a successive term of three (3) years, unless either party gives notice to the other party at least sixty (60) days prior to the expiration of the initial or any renewal term that this Agreement shall not renew.

 

(b) During the period of Executive’s employment hereunder, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence, Executive shall devote substantially all his business time, attention, skill, and efforts to the faithful performance of his duties hereunder including activities and services related to the organization, operation and management of the Bank and participation in community and civic organizations; provided, however, that, with the approval of the board of directors of the Bank (“Board”), as evidenced by a resolution of such Board, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations, which, in such Board’s judgment, will not present any conflict of

 

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interest with the Bank, or materially affect the performance of Executive’s duties pursuant to this Agreement.

 

(c) Notwithstanding anything herein to the contrary, Executive’s employment with the Bank may be terminated by the Bank or Executive during the term of this Agreement, subject to the terms and conditions of this Agreement.

 

3.	COMPENSATION AND REIMBURSEMENT.

 

Executive shall receive compensation and reimbursement under this Agreement, as follows:

 

(a) The Bank shall pay Executive as compensation a salary of not less than $315,600 per year (“Base Salary”) payable in accordance with the normal payroll practices of the Bank. Base Salary shall include any amounts of compensation deferred by Executive under any tax-qualified retirement or welfare benefit plan or any other deferred compensation arrangement maintained by the Bank. During the period of this Agreement, Executive’s Base Salary shall be reviewed at least annually with the Board making its first review no later than one year from the date of this Agreement. Such review shall be conducted by the Board or by a committee of the Board, delegated such responsibility by the Board. The committee or the Board may increase Executive’s Base Salary at any time during this Agreement and the resulting annual salary attributable to such increase shall become the “Base Salary” for purposes of this Agreement. In addition to the Base Salary provided in this Section 3(a), the Bank shall also provide Executive, at no premium cost to Executive, with all such other benefits as are provided uniformly to permanent full-time employees of the Bank.

 

(b) Executive shall be entitled to participate in an equitable manner with all other executive officers of the Bank in discretionary bonuses as authorized and declared by the Board to executive employees. No other compensation provided for in this Agreement shall be deemed a substitute for Executive’s right to participate in such bonuses when and as declared by the Board.

 

(c) Executive shall be entitled to participate in any employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or otherwise deriving benefit from immediately prior to the beginning of the term of this Agreement, and the Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would materially adversely affect Executive’s rights or benefits thereunder; except to the extent such changes are made applicable to all participants on a non-discriminatory basis. Without limiting the generality of the foregoing provisions of this Subsection (d), Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards, stock purchases, pension, thrift, supplemental retirement, profit-sharing, employee stock ownership, group life insurance, medical and other health and welfare coverage, education, cash or stock bonuses that are now or hereafter made available by the Bank in the future to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.

 

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(d) In addition to the Base Salary provided for by paragraph (a) of this Section 3 and other compensation and benefits provided for by paragraphs (b), (c) and (d) of this Section 3, the Bank shall pay or reimburse Executive for all reasonable travel and other reasonable expenses incurred by Executive performing his obligations under this Agreement and may provide such additional compensation in such form and such amounts as the Board may from time to time determine.

 

(e) Executive shall be provided an appropriate automobile owned or leased and insured by the Bank for his business use. The Executive’s annual dues and reasonable business expenses related to the Bank’s business at the Country Club of Pittsfield shall also be reimbursed by the Bank. Executive shall also be entitled to the benefits provided under the Supplemental Executive Retirement Agreement between the Bank and the Employee as of January 1, 2004, or any successor thereto, and such fringe benefits as the Bank may provide to other executives of the Bank. In addition, during the term of this Agreement the Bank shall reimburse the Executive for the premiums on Savings Bank Life Insurance Company of Massachusetts Policy Number 377283261 covering the life of Executive with a death benefit of $1,500,000 (the “Premium Reimbursement”), and the Bank shall pay to the Executive, on or prior to the date on which the Executive must pay income taxes on the Premium Reimbursement, an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of any Federal, state and local income and employment taxes upon the Premium Reimbursement and the Gross-Up Payment, shall be equal to the Premium Reimbursement.

 

4.	PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

 

(a) Upon the occurrence of an Event of Termination (as herein defined) during the Executive’s term of employment under this Agreement, the provisions of this Section shall apply. As used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following: (i) the termination by the Bank or the Holding Company of Executive’s full-time employment hereunder for any reason other than a termination governed by Section 5(a) hereof, or Termination for Cause, as defined in Section 7 hereof; (ii) Executive’s resignation from the Bank’s employ upon any (A) failure to elect or reelect or to appoint or reappoint Executive as Chairman of the Board of Directors and Chief Executive Officer of the Holding Company, unless consented to by Executive, (B) a material change in Executive’s function, duties, or responsibilities, which change would cause Executive’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1, above, unless consented to by Executive, (C) a relocation of Executive’s principal place of employment by more than 30 miles from its location at the effective date of this Agreement, unless consented to by Executive, (D) a material reduction in the benefits and perquisites to Executive from those being provided as of the effective date of this Agreement, unless consented to by Executive, (E) a liquidation or dissolution of the Bank or Holding Company, or (F) breach of this Agreement by the Bank. Upon the occurrence of any event described in clauses (A), (B), (C), (D), (E) or (F), above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than sixty (60) days prior written notice given within six full months after the event giving rise to said right to elect.

 

(b) Upon the occurrence of an Event of Termination, on the Date of Termination, as defined in Section 8, the Bank shall be obligated to pay Executive, or, in the event of his

 

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subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be an amount equal to the sum of:

 

(i) the Base Salary and bonuses, in accordance with Sections 3(a) and 3(b), respectively, that would have been paid to Executive for the remaining term of this Agreement had the Event of Termination not occurred; plus

 

(ii) the value, as calculated by a recognized firm customarily performing such valuation, of any stock options, which, as of the Date of Termination, have been granted to Executive but are not exercisable by Executive and the value of any restricted stock awards which have been granted to Executive, but in which Executive does not have a non-forfeitable or fully-vested interest as of the Date of Termination;

 

provided, however: that any payments pursuant to this subsection and subsection 4(c), below, shall not, in the aggregate, exceed three (3) times Executive’s average annual compensation (as defined in Section 5(a) of this Agreement) for the five (5) most recent taxable years that Executive has been employed by the Bank or such lesser number of years in the event that Executive shall have been employed by the Bank for less than five (5) years. In the event the Bank is not in compliance with its minimum capital requirements or if such payments pursuant to this subsection (b) would cause the Bank’s capital to be reduced below its minimum regulatory capital requirements, such payments shall be deferred until such time as the Bank or successor thereto is in capital compliance. At the election of Executive, which election is to be made prior to an Event of Termination, such payments shall be made in a lump sum as of Executive’s Date of Termination. In the event that no election is made, payment to Executive will be made on a monthly basis in approximately equal installments during the remaining term of the Agreement. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment.

 

(c) Upon the occurrence of an Event of Termination, the Bank will cause to be continued life, medical, dental and disability coverage substantially identical to the coverage maintained by the Bank or the Holding Company for Executive prior to his termination at no premium cost to Executive, except to the extent such coverage may be changed in its application to all Bank or Holding Company employees. Such coverage shall cease upon the expiration of the remaining term of this Agreement.

 

5.	CHANGE IN CONTROL.

 

(a) For purposes of this Agreement, a “Change in Control” shall mean an event of a nature that: (i) would be required to be reported in response to Item 5.01(a) 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 Holding Company within the meaning of the Change in Bank Control Act and the Rules and Regulations promulgated by the Federal Deposit Insurance Corporation (“FDIC”) at 12 C.F.R. ss. 303.4(a) with respect to the Bank and the Rules and Regulations promulgated by the Office of Thrift Supervision (“OTS”) (or its predecessor agency), with respect to the Holding Company, as in effect on the date of this Agreement, or (iii) 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

 

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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 Holding Company representing 20% or more of the Bank’s or the Holding Company’s outstanding securities except for any securities of the Bank purchased by the Holding 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 of the directors comprising the Incumbent Board, or whose nomination for election by the Holding 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 Holding Company or similar transaction occurs in which the Bank or Holding Company is not the resulting entity; or (D) solicitations of shareholders of the Holding Company, by someone other than the current management of the Holding Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Holding 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 Holding Company shall be distributed; or (E) a tender offer is made for 20% or more of the voting securities of the Bank or the Holding Company.

 

(b) If a Change in Control has occurred pursuant to Section 5(a) or the Board has determined that a Change in Control has occurred, Executive shall be entitled to the benefits provided in paragraphs (c), and (d) of this Section 5 upon his subsequent termination of employment at any time during the term of this Agreement due to: (1) Executive’s dismissal or (2) Executive’s voluntary resignation following any demotion, loss of title, office or significant authority or responsibility, material reduction in annual compensation or benefits or relocation of his principal place of employment by more than 30 miles from its location immediately prior to the Change in Control, unless such termination is because of his death, disability, retirement or Termination for Cause.

 

(c) Upon Executive’s entitlement to benefits pursuant to Section 5(b), the Bank shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, an amount equal to the greater of: (1) the Base Salary and bonuses in accordance with Sections 3(a) and 3(b), respectively, that would have been paid to Executive for the payments due for the remaining term of the Agreement had the event described in Subsection (b) of this Section 5 not occurred, plus the value, as calculated by a recognized firm customarily performing such valuation, of any stock options, which, as of the Date of Termination, have been granted to Executive, but are not exercisable by Executive and the value of restricted stock awards or related rights which have been granted to Executive, but which Executive does not have a non-forfeitable or fully-vested interest as of the Date of Termination and all benefits, including health insurance, in accordance with Section 3(d) that would have been provided to Executive for the remaining term of this Agreement had the event described in Subsection (b) of this Section 5 not occurred; or (2) three (3) times Executive’s “Average Annual Compensation” (as defined herein) for the five (5) most recent taxable years that Executive has been employed

 

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by the Bank or such lesser number of years in the event that Executive shall have been employed by the Bank for less than five (5) years. In determining Executive’s “Average Annual Compensation” annual compensation shall include Base Salary and any other taxable income earned by Executive in connection with employment with the Bank or Holding Company, including but not limited to, amounts related to granting, vestin