EX: 10.18

 

EXECUTION VERSION

 

Cambridge Bancorp 1336 Massachusetts Avenue

Cambridge, Massachusetts 02138

 

December 5, 2018

 

 

Daniel R. Morrison

Optima Bank & Trust Company Two Harbour Place Portsmouth, NH 03801

 

Dear Dan:

 

Cambridge Bancorp (the “Company”) considers it essential to the best interest of
its stockholders to foster the continuous employment of key management personnel
of the Company and its subsidiary, Cambridge Trust Company (the “Bank”). The
Board of Directors of the Company (the “Board”) recognizes that, as is the case
with many publicly held corporations, the possibility of a change in control of
the Company may exist and that such possibility, and the uncertainty and
questions that it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders.

 

The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s and
the Bank’s management, including yourself, to their assigned duties in the face
of the potentially disturbing circumstances arising from the possibility of a
change in control of the Company.

 

In order to induce you to remain in the employ of the Bank and in consideration
of your agreement set forth in Section 2 hereof, this letter agreement (the
“Agreement”) sets forth the severance benefits that the Company agrees will be
provided to you in the event your employment with the Bank is terminated under
the circumstances described below.

 

Whenever used in this Agreement, additional capitalized words and phrases have
the meanings set forth in Section 15 below.

 

1.

Term of Agreement. This Agreement shall commence as of the “Effective Date” (as
defined in that certain Agreement and Plan of Merger, dated as of December 5,
2018, by and among the Company, the Bank, and Optima Bank & Trust Company), and
each January 1 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless not later than September 30 of the
preceding year the Company shall have given notice that it does not wish to
extend this Agreement. However, if a Change in Control or Potential Change in
Control of the Company, as applicable, shall have occurred during the original
or any extended term of this Agreement, this Agreement shall continue in effect
for a period of twelve

 

(12) months beyond the month in which the Change in Control or Potential Change
in Control, as applicable, occurred notwithstanding notice from the Company that
it does not wish to extend the Agreement.

 

 

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Daniel R. Morrison December 5, 2018

Page 2

 

 

2.

Potential Change in Control. You agree that, subject to the terms and conditions
of this Agreement, in the event of a Potential Change in Control you will not
voluntarily terminate your employment with the Bank until the earliest of:

 

 

 

(i)

The date that is twelve (12) months from the occurrence of the Potential Change
in Control;

 

 

 

(ii)

The termination by you of your employment by reason of death, Disability or
Retirement;

 

 

 

(iii)

The occurrence of a Change in Control; or

 

 

(iv)

The date the Board adopts a resolution to the effect that, for purposes of this
Agreement, the basis upon which the Board concluded that a Potential Change in
Control had occurred no longer exists.

 

 

3.

Termination Following a Change in Control or a Potential Change in Control. If a
Change in Control or a Potential Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 4 hereof upon your
Separation from Service within twelve (12) months after a Change in Control, or
within the period described in Section 2 hereof after a Potential Change in
Control, unless such Separation from Service is (i) because of your death,

 

(ii) by the Bank for Cause or Disability or (iii) by you other than for Good
Reason.

 

4.

Compensation Upon Termination. Following a Change in Control or a Potential
Change in Control, upon Separation from Service you shall be entitled to the
following benefits.

 

 

 

(i)

If your employment shall be terminated for Cause or your death, the Company
shall pay you (or if applicable, your estate) your full Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any compensation
plan at the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.

 

 

 

(ii)

If your employment by the Bank shall be terminated (1) by the Bank other than
for Cause or Disability or (2) by you for Good Reason, then you shall be
entitled to the benefits provided below:

 

 

(A)The Company shall pay you your full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts to which you are entitled under any compensation plan at
the time such payments are due.

 

(B)The Company shall pay you, in lieu of any further salary or bonus payments to
you for periods subsequent to the Date of Termination, a lump sum severance
payment (the “Severance Payment”) equal to the product of (I) your Final Average
Compensation multiplied by (II) two (2).

 

 

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Daniel R. Morrison December 5, 2018

Page 3

 

 

(C)Any Severance Payment shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that notwithstanding
anything contained herein to the contrary, if you are a Specified Employee at
the time of your Separation from Service, the Bank shall pay you the Severance
Payment in a lump sum on the earlier of (I) the first (1st) business day that is
six

(6) months and one (1) day following the date of your Separation from Service or

(II) the date of your death, but only to the extent such delayed commencement is
otherwise required in order to avoid a prohibited distribution under Code
Section 409A(a)(2).

 

 

(iii)

Unless you are terminated for Cause or you terminate your employment other than
for Good Reason, the Company shall cause the Bank to maintain in full force and
effect for your continued benefit for a period of up to one (1) year all
employee welfare benefit plans and programs or arrangements in which you are
entitled to participate at any time within the six (6) months immediately prior
to the Notice of Termination, provided that your continued participation is
possible under the general terms and provisions of such plans and programs and
that such continuation does not cause the Bank’s group health or dental coverage
to violate any applicable non- discrimination laws. Benefits continued under
this Section 4(iii) shall be paid by you. Benefits otherwise receivable by you
pursuant to this Section 4(iii) shall be reduced to the extent comparable
benefits are actually received by you from sources other than the Company or the
Bank during the one (1)-year period following your termination, and any such
benefits actually received by you shall be reported to the Company.

 

 

 

(iv)

You shall not be required to mitigate the amount of any payment provided for in
this Section 4 by seeking other employment or otherwise, nor shall the amount of
any payment provided for in this Section 4 be reduced by any compensation earned
by you as the result of employment by another employer after the Date of
Termination, or otherwise except as specifically provided in this Section 4.

 

 

5.

Golden Parachute. If any of the payments provided for in this Agreement,
together with any other payments or benefits that you have the right to receive
from the Company, Bank or any member of an affiliated group of corporations (as
defined in Code Section 1504, without regard to Code Section 1504(b)) of which
either Company or Bank is a member (together, the “Payments”) would constitute a
parachute payment (as defined in Code Section 280G(b)(2)) that is subject to the
excise tax imposed by Code Section 4999 (the “Excise Tax”), the Company will
cause to be determined, before any Payments are made, which of the following two
(2) alternatives would maximize your after-tax proceeds: (i) payment in full of

 

the entire amount of the Payments; or (ii) payment of only a part of the
Payments, reduced to the minimum extent necessary so that you receive the
largest Payments possible without the

imposition of the Excise Tax (“Reduced Payments”). If it is determined that
Reduced Payments will maximize your after-tax benefit, then (1) cash
compensation subject to the six (6)-month delay rule in Code Section
409A(a)(2)(B)(i) shall be reduced first, then cash payments that are not so
subject shall be reduced, (2) the Payments shall be paid only to the extent
permitted under the Reduced Payments alternative, and (3) you will have no
rights to any additional payments and/or benefits constituting the Payments.
Unless you and the Company otherwise agree in writing, any determination
required under this Section 5 shall be made in writing by independent

 

 

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Daniel R. Morrison December 5, 2018

Page 4

 

 

public accountants agreed to by you and the Company (the “Accountants”), who
shall be paid solely by the Company and whose determination shall be conclusive
and binding upon you and the Company for all purposes. For purposes of making
the calculations required by this Section 5, the Accountants may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. You and the Company shall furnish to the Accountants
such information and documents as the Accountants may reasonably request in
order to make the required determinations.

 

6.

Non-Competition. In the event your employment terminates and you are entitled to
receive a Severance Payment hereunder, for a period of one (1) year following
the Date of

 

Termination (the “Non-Compete Term”) you shall not, directly or indirectly, as
an executive of any person or entity (whether or not engaged in business for
profit), individual proprietor, partner, stockholder, director, officer, joint
venturer, investor, lender or in any other capacity whatever (otherwise than as
holder of less than ten percent (10%) of any securities publicly traded in the
market) compete with the Company and any subsidiary or affiliate of the Company
in any city or town in which the Company or such subsidiary or affiliate
operates at any time during the term of this Agreement, and any contiguous city
or town.

 

 

7.

Successors; Binding Agreement.

 

 

(i)

The Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance satisfactory to
you, to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled hereunder if you
terminated your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the “Company” shall mean the Company as hereinbefore defined and any successor
to its business, and/or assets, as aforesaid that executes and delivers the
agreement provided for in this Section 7 or that otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.

 

 

 

(ii)

This Agreement shall inure to the benefit of and be enforceable by your personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.

 

 

8.

Notices. All notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first page of
this Agreement; provided, however, that all notices to the

 

 

 

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Daniel R. Morrison December 5, 2018

Page 5

 

 

Company shall be directed to the attention of the Board with a copy to the Clerk
of the Company, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.

 

9.

Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officers as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto, or of failure to comply with any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party that are not expressly set forth in this Agreement. The obligations of the
Company under Section 4 shall survive the expiration of the term of this
Agreement. All reference to sections of any statute, including the Code, shall
be deemed also to refer to any successor provisions thereof. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts. This Agreement is made under
seal.

 

 

10.

Tax Withholding. The Bank shall withhold any taxes that are required to be
withheld from the benefits provided under this Agreement. You acknowledge that
the Bank’s sole liability regarding taxes is to forward any amounts withheld to
the appropriate taxing authority(ies) and to satisfy all applicable reporting
requirements.

 

 

11.

Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

 

 

12.

Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

 

 

13.

Section 409A. It is the intention of the Company and you that the Agreement and
all amounts payable to you under the Agreement that are subject thereto meet the
requirements of Code Section 409A, to the extent applicable to the Agreement and
such payments. To the extent applicable, this Agreement shall be interpreted in
accordance with Code Section 409A and regulations and other interpretive
guidance issued thereunder. If any compensation or benefits payable under this
Agreement do not comply with Code Section 409A and related guidance, the Company
and you agree to amend this Agreement or take such actions as the Company deems
necessary or appropriate to comply with the requirements of Code Section 409A
while preserving, as nearly as possible, the same economic effect as under this
Agreement.

 

 

14.

Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in respect of the subject matter hereof
and supersedes any prior or contemporaneous agreement or understanding between
the parties, written or oral, which relates to the subject matter hereof.

 

 

 

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Daniel R. Morrison December 5, 2018

Page 6

 

 

15.

Definitions. Capitalized terms not defined in this Agreement shall have the
meaning set forth in your Supplemental Executive Retirement Agreement (the
“SERP”), if any, or the Cambridge Trust Company Executive Deferred Compensation
Plan (the “EDCP”), as applicable.

 

 

 

(i)

“Base Salary” means the annual cash compensation from the Bank relating to
services performed (or to be performed) during any calendar year, excluding
distributions from nonqualified deferred compensation plans, bonuses,
commissions, overtime, fringe benefits, stock options, relocation expenses,
incentive payments, non- monetary awards and other fees, and automobile and
other allowances paid to you for services rendered (whether or not such
allowances are included in your gross income). Base Salary shall be calculated
before reduction for compensation voluntarily deferred or contributed by you
pursuant to all qualified or non-qualified plans of the Bank and shall be
calculated to include amounts not otherwise included in your gross income under
Code Sections 125, 132(f), 402(e)(3), 402(h) or 403(b) pursuant to plans
established by the Bank; provided, however, that all such amounts will be
included in compensation only to the extent that had there been no such plan,
the amount would have been payable in cash to you.

 

 

 

(ii)

“Bonus” means the short-term incentive cash bonus, if any, awarded to you
(generally during the first quarter of the Plan Year) for services performed
during the preceding Plan Year from the Bank.

 

 

 

(iii)

“Cause” means termination by the Bank upon:

 

(A)The willful failure by you to substantially perform your duties with the Bank
(other than any such failure resulting from your incapacity due to physical or
mental illness or any such actual or anticipated failure resulting from your
resignation for Good Reason), within ten (10) days after a demand for
substantial performance is delivered to you by the Board that specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties;

 

(B)The willful engagement by you in misconduct that is or foreseeably will be
materially injurious to the Bank, monetarily or otherwise; or

 

(C)A breach of a fiduciary duty, fraud or dishonesty relating to the Bank, or
conviction of (or plea of nolo contendere to) a crime.

 

For purposes of this Section 15(iii), no act or failure to act, on your part
shall be considered “willful” unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was in the
best interest of the Bank.

 

Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(¾) of the entire membership of the Board (with you not voting if you are a
member)

 

 

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Daniel R. Morrison December 5, 2018

Page 7

 

 

at a meeting of the Board called and held for the purpose (after reasonable
notice to you and an opportunity for you, together with your counsel, to be
heard before the Board) finding that in the good faith opinion of the Board you
engaged in the conduct set forth above in this Section 15(iii) and specifying
the particulars thereof in detail.

 

 

(iv)

“Change in Control” means either of the following:

 

(A)A change in control of a nature that would be required to be reported by the
Company or the Bank in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as

amended (the “Exchange Act”), whether or not the Company or the Bank in fact is
required to comply with Regulation 14A thereunder; or

 

(B)The acquisition of “control” as defined in the Bank Holding Company Act of
1956, as amended, or the regulations thereunder, or as defined in the Change in
Bank Control Act of 1978, as amended, or the regulations or guidance thereunder,
of Company or Bank by any person, company or other entity other than Company;
provided that, without limitation, such a Change in Control shall be deemed to
have occurred if:

 

 

(1)

Any “person” (as that term is used in Section 13(d) and 14(d) of the Exchange
Act) other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or the Bank or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the Company’s then outstanding
securities; or

 

 

 

(2)

During any period of two (2) consecutive years (not including any period prior
to the execution of this Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in this Section 15(iv)(B)(1) or with the Company
or the Bank to effect a transaction described in Section 15(iv)(B)(3) whose
election by the Board or nomination for election by the Company’s or the Bank’s
stockholders was approved by a vote of at least two-thirds (⅔) of the directors
then still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or

 

 

 

(3)

The stockholders of the Company or the Bank approve a merger or consolidation of
the Company or the Bank with any other corporation, other than a merger or
consolidation that would result in the

 

 

 

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Daniel R. Morrison December 5, 2018

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voting securities of the Company or the Bank outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least two-thirds
(⅔) of the combined voting power of the voting securities of the Company or the
Bank or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company or the Bank approve a plan of
complete liquidation of the Company or the Bank or an agreement for the sale or
disposition by the Company or the Bank of all or substantially all the Company’s
or the Bank’s assets. Notwithstanding anything to the contrary contained in this
Agreement, the acquisition by a person (or persons acting in concert) of less
than twenty-five percent (25%) of the voting securities of the Company, under
circumstances where the Federal Reserve Board (under regulations or guidance
pursuant to the Change in Bank Control Act of 1978, as amended) presumes that
such acquisition constitutes the acquisition of control of the Company, shall
not be deemed a “Change in Control” for any purpose under this Agreement.

 

 

(v)

“Date of Termination” means:

 

(A)If your employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period);

 

(B)If your employment is terminated for Cause, the date specified in the Notice
of Termination; and

 

(C)If your employment is terminated by Bank for any other reason, or by you for
Good Reason, the date on which a Notice of Termination is given.

 

 

(vi)

“Disability” means termination because of your inability, as a result of
incapacity due to physical or mental illness, to perform the services required
of you as an employee for a period aggregating six (6) months or more within any
twelve (12) month period, unless within thirty (30) days after notice of
termination is given by the Bank you shall have returned to the full time
performance of you duties.

 

 

 

(vii)

“Final Average Compensation” means the average of your highest three

(3) consecutive calendar years of annual Base Salary and Bonus. For purposes of
calculating the average of your highest three (3) consecutive calendar years of
Base Salary and Bonus, (a) Base Salary and Bonus for the calendar year in which
you experience a Separation from Service shall be annualized, (b) Base Salary
and Bonus for other calendar years shall not be annualized, and (c) if you have
been employed less than three (3) full calendar years (counting the final year
of employment as an annualized full calendar year), your Final Average
Compensation shall be based on the number of full calendar years in which you
were an employee of the Bank (again counting the final year of employment as an
annualized full calendar year).

 

 

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Daniel R. Morrison December 5, 2018

Page 9

 

 

 

(viii)

“Good Reason” means:

 

(A)In the case of a Change in Control described in Section 15(iv)(B)(1) when
fifty percent (50%) is substituted for twenty-five percent (25%) or following
consummation of a Change in Control described in Section 15(iv)(B)(3) when
one-half (½) is substituted for two-thirds (⅔), termination by you for any
reason or for no reason during the period beginning six (6) months and ending
twelve (12) months following such event; or

 

(B)Without your prior consent, the occurrence after a Change in Control of any
of the following circumstances:

 

 

(1)

A material diminution in the nature or status of your responsibilities,
authority or duties (provided that your entitlement to terminate employment for
this reason following a Change in Control shall only be effective during the
period beginning six (6) months and ending twelve (12) months after the Change
in Control);

 

 

 

(2)

A material diminution in your base salary; or

 

 

(3)

A relocation of your principal place of employment to a location that is more
than forty (40) miles from the Bank’s current principal executive office;

 

 

; provided, however, that the Bank shall have a thirty (30) day period to cure
any such cause for “Good Reason” after being notified by you in writing.

 

Your right to terminate employment for Good Reason shall not be affected by your
incapacity due to physical or mental illness. Your continued employment shall
not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.

 

 

(ix)

“Notice of Termination” means a notice that 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 your
employment under the provision so indicated.

 

 

 

(x)

“Potential Change in Control” means:

 

(A)Company or Bank enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;

 

(B)Any person (including Company) publicly announces an intention to take or to
consider taking actions that if consummated, would constitute a Change in
Control;

 

 

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Daniel R. Morrison December 5, 2018

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(C)Any person, other than a trustee or other fiduciary holding securities under
an employee benefit plan of Company or Bank or a corporation owned, directly or
indirectly, by the stockholders of Company in substantially the same proportions
as their ownership of stock of Company, is or becomes the beneficial owner,
directly or indirectly, of securities of parent representing twenty percent
(20%) or more of the combined voting power of Company’s then outstanding
securities; or

 

(D)The Board of Directors of Company or Bank adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control of Company
has occurred.

 

 

(xi)

“Retirement” means the termination of your employment in accordance with the
Bank’s retirement policy, including (at your sole election, as set forth in
writing) early retirement, generally applicable to its salaried employees or in
accordance with any retirement arrangement established with your consent with
respect to you.

 

 

16.

Right to Consult with Counsel. You acknowledge that you have the right to
consult with counsel prior to executing the Agreement.

 

 

*   *   *   *   *

 

 

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If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.

CAMBRIDGE BANCORP

 

By:   /s/   Denis K. Sheahan                        

Name: Denis K. Sheahan

Title: Chairman and Chief Executive Officer

 

Agreed:

 

 

Daniel R. Morrison

 

 

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If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.

CAMBRIDGE BANCORP

 

 

 

 

 

By:                                                        

Name: Denis K. Sheahan

Title: Chairman and Chief Executive Officer

 

Agreed:

 

   /s/ Daniel R. Morrison

Daniel R. Morrison