EXHIBIT 10.2

 

CHANGE IN CONTROL AGREEMENT WITH

MICHAEL O. GILLES DATED AUGUST 29, 2005

 

August 29, 2005

 

Mr. Michael O. Gilles

74 Oak Trail

Bolton, MA 01740

 

Dear Mr. Gilles:

 

Beverly National Corporation, a Massachusetts corporation (“Corporation”),
expects that during your tenure as an officer of Beverly National Bank, a
wholly-owned subsidiary of the Corporation (the “Bank”), you will contribute to
the growth and success of the Bank in significant ways, and that you will
develop an intimate knowledge of the business and affairs of the Bank and of its
policies, methods, personnel and problems. The Corporation also recognizes that
such contributions and knowledge are expected to be of significant benefit to
the future growth and success of the Bank and the Corporation.

 

The Board of Directors of the Corporation (the “Board”) recognizes that a change
in control of the Corporation may occur and that the threat of such a change in
control may result in the departure of management personnel to the detriment of
the Corporation and its stockholders. The Board has determined that appropriate
steps should be taken to reinforce and encourage the continued dedication of
members of the Bank’s management, including yourself, to their assigned duties
in the face of the potentially disturbing circumstances arising from the
possibility of such a change in control.

 

The continued performance of your duties as an officer of the Bank may require
your strenuous opposition to such a threatened change in control which, in the
judgment of the Board, may not be in the best interests of the Corporation and
its stockholders, and your opposition to such a threatened change in control of
the Corporation could prevent or inhibit you from effectively continuing your
duties as an officer of the Bank should such a change in control occur.

 

In order to induce you to remain in the employ of the Bank under such
circumstances and then to continue to perform your duties as an officer of the
Bank in a manner which is, in your judgment, in the best interests of the Bank
and the Corporation, the Corporation hereby agrees to provide you with certain
severance benefits in the event your employment with the Bank is terminated
subsequent to a change in control (as defined in Section 1 hereof) under the
circumstances described below.

 

1. Change in Control. No benefits shall be payable hereunder unless during the
term of your Employment Agreement with Beverly National Corporation, of even
date, or an extension thereof there shall have been a change in control as set
forth below, and your employment by the

--------------------------------------------------------------------------------

Bank shall thereafter have been terminated in accordance with Section 2 below.
For purposes of this Agreement, a “Change in Control” of the Corporation shall
mean any of the following:

 

(a) The acquisition of “control” (within the meaning of Section 2(a)(2) of the
Bank Holding Company Act of 1956, as amended, or Section 602 of the Change in
Bank Control Act of 1978) of the Corporation by any person, company or other
entity;

 

(b) Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 thereunder), directly or indirectly, of
securities of the Corporation representing 20% or more of the combined voting
power of the Corporation’s then-outstanding securities.

 

(c) Any such person becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing less than 20% of the Corporation’s
then-outstanding securities, but is determined by a court or regulatory agency
with jurisdiction over the matter to possess or to have exercised control over
the Corporation;

 

(d) During any period of two consecutive years, individuals who at the beginning
of such period constitute the Board cease for any reason to constitute at least
a majority thereof unless the election or the nomination for election by the
Corporation’s stockholders of each new director was approved by a vote of at
least three-fourths of the directors of the Corporation then still in office who
were directors at the beginning of the period; or

 

(e) The Corporation sells a majority of its assets, or enters into any
transaction in which another entity (other than an insurer of the deposit
liabilities of a subsidiary of the Corporation) assumes a majority of the
deposit liabilities of any subsidiary of the Corporation.

 

2. Termination Following Change in Control.

 

(a) You shall be entitled to the benefits provided for in Section 3(b) hereof
upon:

 

  (i) the involuntary termination of your employment as an officer of the Bank
within twenty-four (24) months after a Change in Control, unless your employment
is terminated (x) because of your death or (y) by the Bank for Cause (as
hereinafter defined), or

 

  (ii) your termination of your employment as an officer of the Bank for Good
Reason (as hereinafter defined). In the event your employment with the Bank
shall be terminated and you shall be entitled to the benefits provided in
Section 3 hereof, you may thereafter terminate your employment with the
Corporation and continue to be entitled to the benefits provided in Section 3
hereof.

 

(b) Cause. Termination by the Bank of your employment for “Cause” shall mean
termination upon:

 

  (i) the willful and continued failure by you to substantially perform your
duties (other than any such failure resulting from your incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to you by the Board of Directors of the Bank which specifically
identifies the manner in which such board believes that you have not
substantially performed your duties, or

--------------------------------------------------------------------------------

  (ii) a conviction for criminal misconduct by you which is materially injurious
to the Bank or the Corporation monetarily or otherwise.

 

For purposes of this paragraph (b), 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 interests of the Bank or the Corporation.

 

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
of the entire membership of the Board of Directors of the Bank, at a meeting of
such board called and held for such purposes (after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before such
board), finding that in the good faith opinion of such board you were guilty of
conduct set forth above in clauses (i) or (ii) of the first sentence of this
paragraph and specifying the particulars thereof in detail.

 

(c) Good Reason. Termination by you for “Good Reason” shall mean you terminate
your employment due to:

 

  (i) a reduction of your salary,

 

  (ii) a significant change in your responsibilities and/or duties which
constitutes, when compared to your responsibilities and/or duties before the
Change In Control, a demotion,

 

  (iii) a material loss of title or office, or

 

  (iv) the relocation of the offices at which you are principally employed as of
the Change In Control to a location more than twenty-five (25) miles from such
offices, which relocation is not approved by you.

 

You shall provide the Corporation with a Notice of Termination and an
opportunity to cure any of the events listed in this Section 2(c) and shall not
be entitled to compensation pursuant to Section 3 unless the Bank fails to cure
within a reasonable period.

 

(d) Notice of Termination. The Corporation agrees that it will cause the Bank to
promptly furnish you with a written Notice of Termination. Any purported
termination by you shall be communicated by written Notice of Termination to the
Bank, with a copy to the

--------------------------------------------------------------------------------

Corporation. For purposes of this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate 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.

 

(e) Date of Termination. “Date of Termination” shall mean:

 

  (i) if your employment is terminated for disability, thirty (30) days after
Notice of Termination is given,

 

  (ii) if your employment is terminated by the Bank for Cause, the date
specified in the Notice of Termination, and

 

  (iii) if your employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within five (5) days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).

 

3. Compensation During Disability or Upon Termination.

 

(a) During any period that you fail to perform your duties as a result of
incapacity due to physical or mental illness, the Corporation shall pay you, to
the extent it is not paid by the Bank, an amount equal to your full base salary
at the rate then in effect until the Date of Termination. Thereafter, your
benefits shall be determined in accordance with the Bank’s long-term disability
plan then in effect.

 

(b) If, within twenty-four (24) months after a Change in Control shall have
occurred, you shall terminate your employment for Good Reason or your employment
by the Bank shall be involuntarily terminated other than for Cause, your death
or disability, then the Corporation shall pay you within five days after the
Date of Termination an amount equal to the sum of:

 

  (i) An amount equal to your full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination was given, to the extent
the Bank does not promptly pay such amount; plus

 

  (ii) A lump sum amount equal to the product of (A) the average sum of your
annual base compensation (salary plus bonus) paid to you by the Bank for the
five years (or the term of your employment, if less) preceding a Change in
Control multiplied by (B) the number two (2), less one hundred ($100) dollars;
plus

--------------------------------------------------------------------------------

  (iii) All legal fees and expenses incurred by you as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided for by this Agreement).

 

(c) If your employment shall be terminated for Cause, or for any reason other
than as specified in Sections 3(a) and (b) above, the Corporation shall pay you,
to the extent it is not paid by the Bank, an amount equal to your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination was given and the Corporation shall have no further obligations
to you under this Agreement.

 

(d) You shall not be required to mitigate the amount of any payment provided for
in this Section 3 by seeking other employment or otherwise, nor shall the amount
of any payment provided for in this Section 3 be reduced by any compensation
earned by you as the result of employment by another employer after the Date of
Termination, or otherwise.

 

(e) It is the intention of the parties to this Agreement that no payments by the
Corporation to you or for your benefit under this Agreement shall be
non-deductible to the Corporation by reason of the operation of Section 280G of
the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly,
notwithstanding any other provision hereof, if by reason of the operation of
said Section 280G, any such payments exceed the amount which can be deducted by
the Corporation, the amount of such payments shall be reduced to the maximum
which can be deducted by the Corporation. To the extent that payments in excess
of the amount which can be deducted by the Corporation have been made to you or
for your benefit, they shall be refunded with interest at the applicable rate
provided under Section 1274(d) of the Code, or at such other rate as may be
required in order that no such payment to you or for your benefit shall be
non-deductible pursuant to Section 280G of the Code. Any payments made hereunder
which are not deductible by the Corporation as a result of losses which have
been carried forward by the Corporation for Federal tax purposes shall not be
deemed a non-deductible amount of purposes of this Section 4(c).

 

(f) Notwithstanding any provision hereof to the contrary, no payment hereunder
shall be made if it would violate any applicable law, rule or regulation,
including without limitation, 12 C.F.R. Part 359, as promulgated by the Federal
Deposit Insurance Corporation.

 

4. Successors; Binding Agreement.

 

(a) The Corporation 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 Corporation, 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 Corporation would be required to
perform it if no such succession had taken place. Failure of the Corporation 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
Corporation in the same amount and on the same terms as you would be entitled to
hereunder if you had been involuntarily terminated other than for Cause, within
twenty-four (24) months after a Change in

--------------------------------------------------------------------------------

Control, 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, “Corporation” shall mean the Corporation
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
4 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

 

(b) 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.

 

5. Notices. All notices and 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 registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first page of
this Agreement, provided that all notices to the Corporation shall be directed
to the attention of the Board with a copy to the Chairman of the Board, 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.

 

6. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the other
or 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 which are
not expressly set forth in this Agreement. 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.

 

7. 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.

 

8. 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.

 

9. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Notwithstanding the pendency of any such dispute or
controversy, the Corporation will pay you promptly an amount equal to your full
compensation in effect when the notice giving rise to the dispute was given

--------------------------------------------------------------------------------

(including, but not limited to, base salary) and provide you with all
compensation, benefits and insurance plans in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with Section 2(d) hereof, to the extent the Bank does not
make such payments or continue such benefits. Amounts paid under this Section 9
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement. Judgment
may be entered on the arbitrator’s award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance of
your right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.

 

10. Election of Benefits. An election by you to resign after a Change in Control
pursuant to the terms of Section 2(a) will not constitute a breach by you of the
Employment Agreement dated the date hereof (or any other employment agreement)
between the Bank and you and will not be deemed a voluntary termination of
employment by you for the purpose of interpreting the provisions of any benefit
plans, programs or policies. Nothing in this Agreement will be construed to
limit your rights under any employment agreement you may then have with the
Corporation or the Bank, provided, however, that if you become entitled to
compensation under Section 3 hereof following a Change in Control, you may elect
either to receive the severance payment provided in Section 3 or such
termination benefits as you may have under any such employment agreement, but
may not elect to receive both.

 

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

 

BEVERLY NATIONAL CORPORATION

/s/ Donat A. Fournier

--------------------------------------------------------------------------------

By:

  Donat A. Fournier

Its:

  President

 

Agreed:

 

/s/ Michael O. Gilles

--------------------------------------------------------------------------------

Michael O. Gilles