Exhibit 10.5

 

SETTLEMENT AGREEMENT

 

This Settlement Agreement (the “Agreement”) is entered into as of August 5, 2014
by and among James J. Gavin (“Executive”), Independent Bank Corp., a
Massachusetts corporation, and Rockland Trust Company, a wholly owned subsidiary
of Independent Bank Corp. (collectively, “Buyer”), Peoples Federal
Bancshares, Inc., a Maryland corporation (“Seller”) and Peoples Federal Savings
Bank, a wholly owned subsidiary of the Seller (“Seller Bank”).

 

WITNESSETH:

 

WHEREAS, Buyer, Seller and Seller Bank are entering into an Agreement and Plan
of Merger, dated as of August 5, 2014 (the “Merger Agreement”) pursuant to which
Buyer will acquire the Seller Bank through the transactions set forth in the
Merger Agreement (the “Merger”); and

 

WHEREAS, Buyer, Seller, Seller Bank, and Executive desire to enter into this
Agreement, which shall (i) terminate the Employment Agreement by and between
Seller and Executive dated September 21, 2010 (the “Seller Employment
Agreement”), (ii) amend the Amended and Restated Employment Agreement by and
between Seller Bank and Executive dated December 16, 2008 (the “Seller Bank
Employment Agreement”), and (iii) amend the Salary Continuation Agreement by and
between Seller Bank and Executive dated November 29, 2004, as amended (the
“Salary Continuation Agreement”), in each case effective immediately prior to
the Effective Time of the Merger, and in lieu of any rights, payments, and
benefits under the Seller Employment Agreement, Executive shall be entitled to
the rights, payments, and benefits set forth herein;

 

NOW THEREFORE, in consideration of the foregoing and other good and valuable
consideration the receipt and sufficiency of which is acknowledged, Executive,
Buyer, Seller, and Seller Bank agree as follows:

 

1.             Termination of Seller Employment Agreement.  Executive, Seller
and Buyer agree that the Seller Employment Agreement shall terminate without any
further action of any of the parties, effective immediately prior to the
Effective Time of the Merger.  Executive agrees that the satisfaction of the
obligations set forth in this Agreement shall be in complete satisfaction of all
of Executive’s rights, payments, and benefits under the Seller Employment
Agreement.

 

2.             Assumption and amendment of Seller Bank Employment Agreement. 
Rockland Trust Company shall assume the Seller Bank Employment Agreement,
subject to the following modifications:

 

2.1          Position and responsibilities.  Executive shall serve as a Senior
Vice President of Rockland Trust Company.  Executive shall have powers
consistent with other Senior Vice Presidents of Rockland Trust Company. 
Executive’s responsibilities will include oversight and maintenance of Seller
Bank’s commercial loan portfolio, origination of new loans and such

 

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other duties, responsibilities and powers as Rockland Trust Company may
reasonably assign to him.

 

2.2          Annual base salary.  Executive’s base salary shall be $235,000 per
year, payable no less than bi-weekly.  Executive shall be eligible for annual
merit-based increases to his base salary in accordance with Rockland Trust
Company’s customary practices.

 

2.3          Cash incentive.  Executive shall be eligible to participate in
Rockland Trust Company’s Officer Performance Incentive Plan (“OPIP”), with a
target payout at 20% of base salary, in accordance with the terms and conditions
of the OPIP as then in effect.  For informational purposes only, the Buyer
stipulates that if Executive were employed by Buyer during 2014 the Executive’s
target award would have been eligible for a potential increase by up to 1.7x
based upon personal performance and by up to an additional 1.25x based upon
company performance.  If the Effective Time of the Merger occurs in the first
quarter of 2015 Executive will be entitled to participate in the 2015 OPIP as if
he had been employed by Rockland Trust Company for all of 2015, without
pro-ration.  The specific details of the 2015 OPIP have not yet been approved by
the Board of Directors of the Buyer.  Buyer anticipates but does not guarantee
that the 2015 OPIP performance multipliers will be the same as the 2014 OPIP
performance multipliers.

 

2.4          Equity.  Executive will be eligible to receive equity awards from
Buyer at a level comparable to similarly situated executives.

 

2.5          Employee benefits.  Executive shall be eligible to participate in
Rockland Trust Company’s tax qualified defined contribution plan and other
employee benefit programs (including vacation and holidays) at the same level as
similarly situated executives, with credit given for Executive’s years of
service as provided in Article V of the Merger Agreement.

 

2.6          Lump-sum payment.  Rockland Trust Company shall make a lump sum
payment to Executive in the amount of $850,000 on the business day next
following the Effective Time of the Merger.

 

2.7          Performance-based cash incentive payments.  For achieving customer
retention goals, Rockland Trust Company shall pay to Executive up to $100,000
within thirty days after each of the first five anniversaries of the Effective
Time of the Merger (for a potential aggregate amount of $500,000) as follows:

 

Commercial Loan Growth

 

Performance-Based Cash Incentive Payment

Flat up to 2% commercial loan growth

 

$0 to $50,000

2-4% commercial loan growth

 

$50,000 to $100,000

4% or more commercial loan growth

 

$100,000 maximum

 

The baseline commercial loan amount will be the aggregate dollar amount of loans
in Seller Bank’s commercial loan portfolio at the Effective Time of the Merger,
as determined by Buyer after the Executive Vice President of the Commercial
Lending Division of Rockland Trust Company (currently Gerard Nadeau) consults
with Executive.  The baseline commercial loan

 

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amount in the second through fifth years will include all commercial loan
balances to customers who were in Seller Bank’s commercial loan portfolio at the
Effective Time of the Merger (including any additional borrowing by those
customers after the Effective Time of the Merger), plus any outstanding
commercial loan amounts for new customers which were originated by Executive
during the measurement period.  The degree of commercial loan growth will be
calculated each year by Buyer after the Executive Vice President of the
Commercial Lending Division of Rockland Trust Company (currently Gerard Nadeau)
consults with Executive and the amount of performance-based cash incentive to be
paid determined by linear interpolation within the ranges specified above.  No
cash incentive will be paid if commercial loan growth is not achieved, and no
more than $100,000 in performance-based cash incentive will be paid in any year
if more than 4% commercial loan growth is achieved.

 

2.8          Effect on prior compensation and benefits levels.  The payments and
benefits described in Sections 2 and 3 of this Agreement shall be in lieu of any
payments and benefits as described in Section 3 of the Seller Bank Employment
Agreement prior to modification by this Agreement, except that Executive shall
also retain (i) his right to payment of the Merger Consideration with respect to
Executive’s common stock of Seller (whether restricted or unrestricted) and
payment with respect to Seller’s stock options, in each case as provided in the
Merger Agreement, (ii) his right to any accrued and vested benefits under any
tax-qualified plan maintained or contributed to by Seller and/or Seller Bank
determined as of the Effective Time of the Merger, (iii) his right to any
accrued and vested benefits under the Voluntary Deferred Compensation and
Supplemental Employee Stock Ownership Plan maintained and contributed to by
Seller and Seller Bank determined as of the Effective Time of the Merger, and
(iv) the right of the Executive’s beneficiary (as designated by Executive) to a
$175,000 death benefit upon Executive’s death under the Seller Bank Split Dollar
Plan dated March 1, 2011, as in effect as of the Effective Time of the Merger.

 

2.9          Term.  The term of the Seller Bank Employment Agreement shall end
on the third anniversary of the Effective Time of the Merger.  Subject to
Executive’s continued employment with Buyer, upon the expiration of the Term of
this Agreement Buyer shall offer Executive the opportunity to enter into the
form of change of control agreement then offered to similarly-situated
executives of Buyer.

 

2.10        No “Good Reason”.  Executive agrees and acknowledges that,
notwithstanding any provision of the Seller Bank Employment Agreement or the
Salary Continuation Agreement to the contrary, the modification of the Seller
Bank Employment Agreement and the Salary Continuation Agreement in accordance
with the terms of this Agreement shall not constitute “Good Reason” under the
Seller Bank Employment Agreement.  Executive further agrees and acknowledges
that the compensation, benefits, and perquisites that Executive shall receive
from Buyer under the modified Seller Bank Employment Agreement are substantially
the same, in the aggregate, to the compensation, benefits and perquisites which
Executive received under the Seller Bank Employment Agreement prior to
modification by this Agreement.

 

2.11        Waiver of resignation right.  Executive agrees and acknowledges that
the consummation of the Merger (but, for the avoidance of doubt, not including
any subsequent

 

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Change in Control of Buyer) shall not constitute a Change in Control for
purposes of the Seller Bank Employment Agreement and Executive shall not receive
the payments or benefits described in Section 5 of the Seller Bank Employment
Agreement.

 

3.             Assumption and amendment of Salary Continuation Agreement. 
Rockland Trust Company shall assume the Salary Continuation Agreement, subject
to the following modifications:  (i) Executive agrees and acknowledges that,
notwithstanding any provision of the Salary Continuation Agreement to the
contrary, the Merger (but, for the avoidance of doubt, not including any
subsequent Change in Control of Buyer) shall not constitute a “Change in
Control” under the Salary Continuation Agreement, and Executive shall not
receive the Change in Control Benefit as a result of the Merger as described in
the Salary Continuation Agreement and (ii) Buyer agrees not to accelerate the
Salary Continuation Agreement payments under Treasury Regulation
Section 1.409A-3(j)(ix)(B) within the 12 months following the Merger.

 

4.             Releases.  Subject to Buyer’s performance of its obligations
under this Agreement, Executive, for himself and for his heirs, successors and
assigns, does release completely and forever discharge Buyer, Seller and Seller
Bank, their respective affiliates and successors and the current and former
directors, officers, employees and agents of each of them (any and all of which
are referred to below as the “Releasees”) from any obligations under the Seller
Employment Agreement, the Seller Bank Employment Agreement, and the Salary
Continuation Agreement and any and all other claims, demands, proceedings,
agreements (express or implied), obligations, liabilities and causes of action
whatsoever, whether known or unknown, whether arising under common law, in
equity or under statute, including all claims of discrimination, harassment and
retaliation prohibited by any federal, state, or local statute, regulation, or
ordinance, including without implication of limitation, Title VII of the Civil
Rights Act of 1964, the Americans With Disabilities Act, Massachusetts General
Laws chapter 151B, the Massachusetts Wage Act (including but not limited to paid
time off, overtime and other wages), the Family and Medical Leave Act, and the
Employee Retirement Income Security Act; and all other statutory and common law
claims which Executive or his heirs, successors or assigns now have, have ever
had or may hereafter have against the Releasees relating to or arising out of
any matter related solely to the period prior to the date of Executive’s
execution of this Agreement.

 

Notwithstanding the foregoing, Executive does not waive, release or discharge,
(i) any right to file an administrative charge or complaint with the Equal
Employment Opportunity Commission or other administrative agency, although the
Employee waives any right to monetary relief related to such a charge or
administrative complaint, (ii) claims which cannot be waived by law, such as
claims for workers’ compensation, (iii) any right to earned but unpaid wages,
(iv) any right to accrued but unused vacation time, (v) any right to accrued and
vested benefits under any tax-qualified plan maintained or contributed to by
Seller and/or Seller Bank determined as of the Effective Time of the Merger,
(vi) any right to accrued and vested benefits under the Voluntary Deferred
Compensation and Supplemental Employee Stock Ownership Plan maintained and
contributed to by Seller and Seller Bank determined as of the Effective Time of
the Merger, (vii) the right to designate a beneficiary for the $175,000 death
benefit under the Seller Bank’s Split Dollar Plan dated March 1, 2011, as in
effect as of the Effective Time of the

 

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Merger, (viii) the obligations of Rockland Trust described in Section 2 and
Section 3 of this Agreement, or (ix) the obligations of Buyer under the Merger
Agreement.

 

Executive agrees to execute an identical “bring-down” release immediately prior
to the Effective Time of the Merger in consideration of the payments described
above, except that it will cover any claims under the Age Discrimination in
Employment Act of 1967, as amended.

 

5.             General.

 

5.1          Heirs, successors and assigns.  The terms of this Agreement shall
be binding upon the parties and their respective heirs, successors and assigns.

 

5.2          Final agreement.  This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings, written or oral.  For avoidance of doubt,
the payments and benefits described in Section 2 of this Agreement shall not be
increased or decreased as a result of any compensation that Executive may
receive from Seller or Seller Bank through the vesting of restricted stock, the
exercise of stock options or otherwise.

 

5.3          Conflict.  In the event of any conflict between the terms and
conditions of this Agreement and any other agreement between the parties,
including the Seller Employment Agreement, the Seller Bank Employment Agreement
and the Salary Continuation Agreement, the terms and conditions of this
Agreement shall control.

 

5.4          Withholdings.  Seller, Seller Bank and Buyer may withhold from any
amounts payable under this Agreement such federal, state, or local taxes as may
be required to be withheld pursuant to applicable law or regulation.

 

5.5          Governing law.  This Agreement shall be construed, enforced and
interpreted in accordance with and governed by the laws of the Commonwealth of
Massachusetts, without reference to its principles of conflicts of law, except
to the extent that federal law shall be deemed to preempt such state laws.

 

5.6          Defined terms.  Any capitalized terms not defined in this Agreement
shall have as their meaning the definitions contained in the Merger Agreement.

 

5.7          Voluntary and knowing action of Executive.  Executive acknowledges
that, by his free and voluntary act of signing below, Executive agrees to all of
the terms of this Agreement and intends to be legally bound hereby.  This
Agreement will remain in effect despite the discovery or existence of any new,
additional fact or any fact different from that which Executive now knows or
believes to be true.  Executive acknowledges that he has read this Agreement,
that the payments Executive will receive under this Agreement are sufficient
consideration for Executive to enter into this Agreement, and that Executive
understands the terms and conditions of this Agreement.  Executive further
acknowledges and agrees that Executive’s decision to enter into this Agreement
is not made in reliance upon, in whole or in part, any representation,
inducement, promise or agreement, oral or otherwise, not embodied

 

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herein.  Executive represents to Buyer that he had adequate time and opportunity
to be represented by legal counsel in connection with the review and execution
of this Agreement, that execution of this Agreement is Executive’s free act and
deed, and that Executive was not compelled to sign this Agreement by economic
hardship or any other form of duress.

 

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

 

5.9          Amendment.  This Agreement may be amended with the written consent
of each of the parties hereto.  The consent of Seller and Seller Bank shall not
be required to amend this Agreement after the Effective Time of the Merger.

 

6.             Section 409A of the Code.  It is the intention of the parties
that this Agreement comply with and be interpreted in accordance with
Section 409A of the Internal Revenue Code of 1986, as amended and the United
States Department of Treasury regulations and other guidance issued thereunder
(collectively, “Section 409A”).  Each payment in a series of payments provided
to the Executive pursuant to this Agreement will be deemed a separate payment
for purposes of Section 409A.  If any amount payable under this Agreement upon a
termination of employment is determined by the Company to constitute
nonqualified deferred compensation for purposes of Section 409A (after taking
into account the short-term deferral exception and the involuntary separation
pay exception of the regulations promulgated under Section 409A which are hereby
incorporated by reference), such amount shall not be paid unless and until the
Executive’s termination of employment also constitutes a “separation from
service” from the Company for purposes of Section 409A.  In the event that the
Executive is determined by the Company to be a “specified employee” for purposes
of Section 409A at the time of his separation from service with the Company, any
payments of nonqualified deferred compensation (after giving effect to any
exemptions available under Section 409A) otherwise payable to the Executive
during the first six (6) months following his separation from service shall be
delayed and paid in a lump sum upon the earlier of (x) the Executive’s date of
death, or (y) the first day of the seventh month following the Executive’s
separation from service, and the balance of the installments (if any) will be
payable in accordance with their original schedule.  To the extent any expense,
reimbursement or in-kind benefit provided to the Executive constitutes
nonqualified deferred compensation for purposes of Section 409A, (i) the amount
of any expense eligible for reimbursement or the provision of any in-kind
benefit with respect to any calendar year shall not affect the amount of expense
eligible for reimbursement or the amount of in-kind benefit provided to the
Executive in any other calendar year, (ii) the reimbursements for expenses for
which the Executive is entitled to be reimbursed shall be made on or before the
last day of the calendar year following the calendar year in which the
applicable expense is incurred, and (iii) the right to payment or reimbursement
or in-kind benefits hereunder may not be subject to liquidation for any other
benefit.

 

7.             Effectiveness.  Notwithstanding anything to the contrary
contained herein, this Agreement shall be subject to consummation of the Merger
in accordance with the terms of the Merger Agreement, as the same may be amended
by the parties in accordance with its terms.  In

 

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the event the Merger Agreement is terminated for any reason, this Agreement
shall be deemed null and void with respect to all actions not yet taken pursuant
to this Agreement.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, Buyer, Seller and Seller Bank have each caused this
Agreement to be executed by their duly authorized officers, and the Executive
has signed this Agreement, effective as of the date first above written.

 

WITNESS:

 

EXECUTIVE:

 

 

 

 

 

 

/s/ Christopher Lake

 

/s/ James J. Gavin

Name: Christopher Lake

 

Name: James J. Gavin

 

 

 

 

 

 

ATTEST:

 

INDEPENDENT BANK CORP.

 

 

 

 

 

 

 

/s/ Linda M. Campion

 

By:

/s/ Christopher Oddleifson

Name: Linda M. Campion

 

Name: Christopher Oddleifson

 

 

Title: Chief Executive Officer and President

 

 

 

 

 

 

ATTEST:

 

ROCKLAND TRUST COMPANY

 

 

 

 

 

 

/s/ Linda M. Campion

 

By:

/s/ Christopher Oddleifson

Name: Linda M. Campion

 

Name: Christopher Oddleifson

 

 

Title: Chief Executive Officer and President

 

 

 

 

 

 

ATTEST:

 

PEOPLES FEDERAL BANCSHARES, INC.

 

 

 

 

 

 

/s/ Christopher Lake

 

By:

/s/ Maurice H. Sullivan, Jr.

Name: Christopher Lake

 

Name: Maurice H. Sullivan, Jr.

 

 

Title: Chairman and Chief Executive Officer

 

 

 

 

 

 

ATTEST:

 

PEOPLES FEDERAL SAVINGS BANK

 

 

 

 

 

 

 

/s/ Christopher Lake

 

By:

/s/ Thomas J. Leetch, Jr.

Name: Christopher Lake

 

Name: Thomas J. Leetch, Jr.

 

 

Title: President and Chief Executive Officer

 

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