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Special Termination Agreement

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SPECIAL TERMINATION AGREEMENT


AGREEMENT dated as of December 21, 1995, by and between ANDOVER BANK, a Massachusetts savings bank (the "Bank" or the "Employer"), with its main office in Andover, Massachusetts, and Raymond P. Smith (the "Executive"), an individual presently employed by the Bank.


1. Purpose. In order to allow the Executive to consider the prospect of a Change in Control (as defined in Section 2) in an objective manner and in consideration of the services rendered and 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 Employer, the Employer 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 3) occurring subsequent to a Change in Control.


2. Change in Control. A "Change in Control" shall be deemed to have occurred when any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "1934 Act") becomes a "beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of securities of Andover Bancorp, Inc. (the "Company"), a Delaware corporation and the indirect parent holding company of the Bank, representing twenty-five percent (25%) or more of the total number of votes that may be cast for the election of directors of the Company, and the Board of Directors of the Company has not consented to such event by a two-thirds vote of all of the members of the Board of Directors of the Company adopted either prior to such event or within sixty (60) days thereafter, provided that if at the time such a consent vote is adopted after such event, the persons who were directors of the Company immediately prior to such event do not constitute a majority of the Board of Directors of the Company, or of any successor institution, such vote shall not be deemed to constitute consent for the purposes of this provision. In addition, a Change in Control shall be deemed to have occurred if any tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions has occurred and as the result of, or in connection with, such transaction the persons who were directors of the Company before such transaction cease to constitute a majority of the Board of Directors of the Company or of any successor institution.


3. Terminating Event. A "Terminating Event" shall mean (a) termination by the Employer of the employment of the Executive with the Employer for any reason other than (i) death, (ii) deliberate dishonesty of the Executive with respect to the Employer or any its subsidiaries or affiliates, (iii) conviction of the Executive of a crime involving moral turpitude, (iv) removal, suspension or prohibition of the Executive from participating in the conduct of the Employer's affairs by order issued under applicable laws and regulations by a federal or state banking agency having authority over the Employer, or (v) by reason of the FDIC's appointment as a conservator or receiver of the Bank pursuant to applicable laws and regulations or of the Massachusetts Commissioner's taking possession of the Bank pursuant to applicable laws and regulations, or (b) resignation of the Executive from the employ of the Employer, while the 2 Executive is not receiving payments or benefits from the Employer by reason of the Executive's disability, subsequent to the occurrence of any of the following events:


(i) A significant change in the nature or scope of the Executive's
responsibilities, authorities, powers, functions or duties
from the responsibilities, authorities, powers, functions or
duties exercised by the Executive immediately prior to the
Change in Control; or


(ii) A reasonable determination by the Executive that, as a result
of a Change in Control, the Executive is unable to exercise
the responsibilities, authorities, powers, functions or duties
exercised by the Executive immediately prior to such Change in
Control; or


(iii) A decrease in the total annual compensation payable by the
Employer to the Executive other than as a result of a decrease
in compensation payable to the Executive and to all other
executive officers of the Employer on a comparable basis as a
result of the Employer's financial performance; or


(iv) the Employer's requiring the Executive to be based anywhere
other than a location more than 35 miles from Andover,
Massachusetts except for required travel on the Employer's
business to an
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