Exhibit 10.2

 

EXECUTION COPY

 

settlement, Consulting and non-competition AGREEMENT

 

THIS SETTLEMENT, CONSULTING AND NON-COMPETITION AGREEMENT, dated as of July 25,
2018 (this “Agreement”), is made and entered into by and among Pilgrim Bank (the
“Bank”), a Massachusetts-chartered co-operative bank, Pilgrim Bancshares, Inc.,
a Maryland corporation and stock holding company of the Bank (“Pilgrim”),
Hometown Financial Group, Inc., a Massachusetts Corporation (“Hometown”) and
Francis E. Campbell (“Executive”). References to the Bank, Pilgrim and Hometown
collectively shall be the “Banking Entities” or individually, a “Banking
Entity.”

 

WHEREAS, as of the date of this Agreement, Executive is the President and Chief
Executive Officer of Pilgrim and the Bank and is a party to an employment
agreement with the Bank dated October 10, 2014 (the “Employment Agreement”); and

 

WHEREAS, concurrently herewith, Hometown and Pilgrim have entered into an
Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which: (i)
Hometown shall form a Maryland corporation (“Merger Sub”) as a wholly-owned
subsidiary of Hometown; and (ii) Merger Sub shall merge with and into Pilgrim,
with Pilgrim as the surviving corporation (the “Merger”); and

 

WHEREAS, as an inducement and a condition to enter into the Merger Agreement and
as part of the transactions contemplated by the Merger Agreement, Executive has
agreed to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:

 

Section 1.      Retirement from Employment. Unless the parties hereto agree
otherwise, Executive shall retire as an employee of Pilgrim and the Bank as of
the Effective Time (the “Retirement Date”).

 

Section 2.      Employment Agreement. As of the Effective Time, the Employment
Agreement shall terminate and shall have no further force or effect, provided,
however, that Executive shall be entitled to the following benefits in lieu of
any rights to any payments or benefits under the Employment Agreements:

 

(a)           Severance Benefits. In full satisfaction of the Bank’s obligations
under Section 5 of the Employment Agreement, Executive shall be entitled to:

 

(i)a cash lump sum payment equal to $587,746, payable by the Bank to Executive
on the Retirement Date; and

 

 

 

 

(ii)continued participation (including the continued participation of
Executive’s spouse) in the Bank’s group medical and dental insurance plans in
effect as of the Effective Time, at no cost to Executive, for three years (or,
if earlier, until Executive receives substantially similar coverage from another
employer), commencing immediately following Executive’s Retirement Date.
Notwithstanding the foregoing, if the Bank (or any affiliate of, or successor
to, the Bank) cannot provide such continued coverage set forth in this
subparagraph (ii) because Executive is no longer an employee of the Bank,
applicable rules and regulations prohibit such benefits or the payment of such
benefits in the manner contemplated, or it would subject the Bank to penalties,
then the Bank shall pay Executive a cash lump sum payment reasonably estimated
to be equal to the value of such benefits or the value of the remaining benefits
at the time of such determination. Such cash payment shall be made in a lump sum
within thirty (30) days after the later of Executive’s Retirement Date or the
effective date of the rules or regulations prohibiting such benefits or
subjecting the Bank to penalties. In addition, if such cash payment would
violate the requirements of Treasury Regulation Section 1.409A-3(j), Executive’s
cash payment in lieu of the continued health and dental coverage as required by
this Agreement shall be payable at the same time the related premium payments
would have been paid by the Bank and will be payable for the duration of the
applicable coverage period.

 

(b)       Accrued Obligations. For the avoidance of doubt, the payment of the
severance benefits set forth in Section 2(a) shall not release any Banking
Entity, as applicable, to pay or provide Executive with his Accrued Obligations.
“Accrued Obligations” means: (i) any accrued but unpaid wages earned up to
Executive’s Retirement Date; (ii) payment of any vested benefits under
tax-qualified and non-qualified plans of Pilgrim or the Bank, including any
benefits that become vested or payable as a result of the Merger; (iii)
obligations regarding accelerated vesting and/or the cash payment in lieu of
equity awards under any equity awards granted by Pilgrim to Executive and that
are outstanding immediately prior to the Effective Time; (iv) the payment of the
Merger Consideration with respect to Executive’s common stock of Pilgrim as
contemplated by the Merger Agreement; and (v) rights to indemnification under
applicable corporate law, the organization documents of Pilgrim or the Bank, as
an insured under any director’s and officer’s liability policy or pursuant to
the Merger Agreement.

 

Section 3.       Consultant.

 

(a)           Consulting Period. Executive shall be available to provide
Services (as defined below) for a period of up to six (6) months immediately
following Executive’s Retirement Date (the “Consulting Period”).

 

(b)          Services. During the Consulting Period, Executive shall provide
general advisory services if reasonably requested by the Chief Executive Officer
of Hometown in connection with the integration of Hometown and Pilgrim,
including transitioning client and customer relationships (the “Services”).
During the Consulting Period, Executive shall provide the Services at such times
and in such locations as shall be mutually agreed between the parties.

 

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(c)           Remuneration.

 

(i)       Consulting Fees. Executive shall be paid $150 per hour for Services
rendered during the Consulting Period (the “Consulting Fees”). The Consulting
Fees shall be payable monthly in arrears over the Consulting Period. Executive
shall be responsible for substantiating the number of hours worked each month in
accordance with the applicable policies and procedures of the Bank or Hometown,
as applicable.

 

(ii)       Expenses. The Bank shall reimburse Executive pursuant to the Bank’s
reimbursement policies as in effect from time to time for senior executives for
reasonable business expenses incurred by Executive in connection with the
performance of the Services.

 

(d)           Sole Consideration. Except as specifically provided in this
Agreement, Executive shall be entitled to no compensation or benefits from the
Bank or its affiliates with respect to the Services, and shall not be credited
with any service, age, or other credit for purposes of eligibility, vesting, or
benefit accrual under any employee benefit plan of the Bank or its affiliates.

 

(e)           Status as a Non-Employee. The Bank and Executive acknowledge and
agree that, in performing the Services pursuant to this Agreement, Executive
shall be acting and shall act at all times as an independent contractor only and
not as an employee, agent, partner, or joint venturer of the Bank or its
affiliates. Executive acknowledges that he is and shall be solely responsible
for the payment of all federal, state, and local taxes that are required by
applicable laws or regulations to be paid with respect to his Consulting Fees.

 

(f)            Termination of Consulting Period. Either the Bank or Executive
may terminate the Consulting Period at any time and for any reason (or no
reason) by providing the other party with 10  days’ advance written notice of
such termination. In the event of such termination, the Bank shall be obligated
to pay Executive any unpaid Consulting Fees for Services rendered through the
date of termination, with such payment to be made no later than 30 days
thereafter.

 

Section 4.      Restrictive Covenants.

 

(a)           Noncompetition. For a period of 12 months following Executive’s
Retirement Date (the “Restricted Period”), Executive shall not, without the
prior written consent of the Bank, either directly or indirectly in any
capacity, including but not limited to, as an owner, employee, employer,
operator, investor, independent contractor, agent, stockholder, partner (general
or limited), joint venturer, member, manager, officer, director, consultant,
franchisee, franchiser, adviser, or co-worker, whether or not for compensation,
enter into, conduct, participate or engage in a Competing Business (as defined
below) within 25 miles of any location in which the Bank has a branch or
business office immediately prior to the Effective Time. For purposes of this
Agreement, “Competing Business” shall mean any person, firm, corporation or
other entity, in whatever form, that engaged or engages in the businesses in
which the Bank engages, including, but not limited to, the sale or servicing of
banking and financial products and services, including business and consumer
lending, asset-based financing, residential mortgage warehouse funding,
factoring/accounts receivable management services, equipment financing,
commercial and residential mortgage lending and brokerage, deposit services
(including municipal deposit services) and trade financing, sale of annuities,
life and health insurance products, title insurance services, real estate
investment trusts and investment advisory services; provided that it shall not
be a violation of this provision for Executive to have a less than 2.5%
ownership interest in any such institution or holding company as a passive
investor.

 

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(b)          Nonsolicitation of Employees. During the Restricted Period,
Executive shall not either directly or indirectly, induce or attempt to induce
any employee or independent contractor of any Banking Entity or any of its
affiliates to terminate his or her employment or engagement with any Banking
Entity or its affiliates.

 

(c)           Nonsolicitation of Customers. During the Restricted Period,
Executive shall not solicit, provide any information, advice or recommendation
or take any other action intended (or that a reasonable person acting in like
circumstances would expect) to have the effect of causing any customer of any
Banking Entity or any affiliate to terminate an existing business or commercial
relationship with the Banking Entity or any affiliate.

 

(d)           Confidential Information. Executive covenants and agrees to keep
strictly confidential and not to reveal to any person any Confidential
Information of any nature concerning the Banking Entities, or any of their
affiliates. For this purpose, the term “Confidential Information” means any
information and data, including intangible, electronic or other form, of the
Banking Entities identified as confidential or proprietary or is or would be
understood to be confidential by the nature of the information, and includes,
but is not limited to, any information relating to the Banking Entities, and
their affiliates and/or any third party with which any Banking Entity is
engaging or has engaged in business transactions, all forms and types of
financial and business information, tax information and analyses, processes,
formulae, inventions, ideas, know-how, studies, findings, software, research and
development (in whatever stage), business plans or strategies, methods of doing
business, sales or marketing methods, customer information, including “Nonpublic
Personal Information” as that term is used in the Gramm-Leach-Bliley Act of 1999
and implementing regulations and guidelines issued thereunder, employee
information, loan and deposit information, financing plans, forecasts and
supplier information, as well as any and all reports, analyses, compilations,
memoranda, notes, studies or other documents or records or electronic media that
contain or otherwise reflect or are generated from Confidential Information.

 

Confidential Information does not include information that: (i) is in the public
domain or thereafter enters the public domain through no wrongful act or
omission of Executive or the Banking Entities; (ii) is already known by
Executive at the time of disclosure and such information is not otherwise
subject to confidentiality obligations; (iii) is received from a third party
who, to Executive’s knowledge, may disclose such information without violation
of any confidentiality obligation; or (iv) is independently developed by
Executive without reference to Confidential Information. This obligation shall
survive the expiration or termination of Executive’s obligations under this
Agreement.

 

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Notwithstanding the foregoing, Executive understands that nothing contained in
this Agreement limits Executive’s ability to file a charge or complaint with the
Securities and Exchange Commission or any other federal, state or local
governmental agency or commission (“Government Agencies”) about a possible
securities law violation without approval of any Banking Entity. Executive
further understands that this Agreement does not limit Executive’s ability to
communicate with any Government Agency or otherwise participate in any
investigation or proceeding that may be conducted by any Government Agency,
including providing documents or other information, without notice to any
Banking Entity related to the possible securities law violation. This Agreement
does not limit Executive’s right to receive any resulting monetary award for
information provided to any Government Agency.

 

(e)           Prior Notice Required. Executive hereby agrees that prior to
accepting employment or any other service engagement with any other person or
entity during the Restricted Period, Executive shall provide such prospective
employer with written notice of the provisions of this Agreement, with a copy of
such notice delivered simultaneously to the Chief Executive Officer of Hometown.

 

(f)           Cooperation. Executive shall: (i) furnish such information and
assistance to the Banking Entities and their affiliates, as may reasonably be
requested with respect to any matter, project, initiative, or effort for which
Executive is or was responsible or has relevant knowledge or has or had
substantial involvement in while employed by Pilgrim and the Bank;
(ii) cooperate with any Banking Entity and its affiliates during the course of
all third-party proceedings arising out of the businesses of Pilgrim and the
Bank about which Executive has knowledge or information; and (iii) cooperate
with the Banking Entities and their affiliates in connection with a valuation of
Executive’s agreement to refrain from taking certain actions as provided for
under this Agreement.

 

(g)           Consideration. In consideration of the covenants set forth in this
Section 4, the Bank shall pay Executive a cash lump sum payment of $300,000 (the
“Non-Compete Payment”), which shall be payable on Executive’s Retirement Date.

 

Section 5.      Acknowledgment. Executive agrees and acknowledges that: (i) 
this Agreement is ancillary to the Merger Agreement; (ii) the provisions hereof
are reasonable and necessary to protect the legitimate business interests of the
Banking Entities and their respective affiliates from and after the Effective
Time; (iii) the breach of this Agreement by Executive will result in irreparable
harm to Hometown; and (iv) Executive will not be subject to undue hardship by
reason of his full compliance with the terms and conditions of Section 4 or any
Banking Entity’s enforcement thereof.

 

Section 6.      Remedies. In the event of a breach or threatened breach by
Executive of Section 4, Executive hereby consents and agrees that the Banking
Entities shall be entitled to seek, in addition to other available remedies,
specific performance, a temporary or permanent injunction or other equitable
relief against such breach or threatened breach from any court of competent
jurisdiction in accordance with Section 7(d). The aforementioned equitable
relief shall be in addition to, not in lieu of, legal remedies, monetary damages
or other available forms of relief (including, without limitation, recoupment or
clawback of the Non-Compete Payment). If any of the covenants set forth in
Section 4 is finally held to be invalid, illegal or unenforceable (whether in
whole or in part), such covenant shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality, or unenforceability and the
remaining covenants shall not be affected thereby.

 

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Section 7.      Miscellaneous.

 

(a)           Non-Assignability. This Agreement may not be assigned by
Executive.

 

(b)           Binding on Successors and Assigns. This Agreement shall inure to
the benefit of and bind the respective successors of each Banking Entity and
permitted assigns of the parties hereto.

 

(c)           Entire Agreement. This Agreement, along with the Merger Agreement,
contains the entire and complete agreement among the parties with respect to the
subject matter hereof, and supersedes any prior or contemporaneous arrangements,
agreements or understandings among the parties, written or oral, express or
implied, that may have related to the subject matter hereof. This Agreement may
be amended only by a written instrument duly executed by the parties.

 

(d)           Governing Law. This Agreement shall in all respects be
interpreted, enforced, and governed under the laws of the Commonwealth of
Massachusetts, without regard to conflict of laws provisions. Each of the
parties hereto (i) consents to and submits itself to the exclusive jurisdiction
of the Business Litigation Session of the Superior Court of the Commonwealth of
Massachusetts, or in the event, but only in the event, that such court does not
have subject matter jurisdiction over such action or proceeding, the Superior
Court of the Commonwealth of Massachusetts or the United States District Court
for the District of Massachusetts in any action or proceeding arising out of or
relating to this Agreement or any of the Transactions, (ii) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (iii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
Each of the parties hereto waives any defense or inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other party with respect
thereto. To the extent permitted by applicable law, any party hereto may make
service on another party by sending or delivering a copy of the process to the
party to be served at the address and in the manner provided for the giving of
notices in Section 7(e). Nothing in this Section 7(d), however, shall affect the
right of any party to serve legal process in any other manner permitted by law.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(e)          Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, or by overnight carrier
to the parties at the addresses set forth below (or such other addresses as
specified by the parties by like notice):

 

If to Banking Entities

 

Hometown Financial Group, Inc.

36 Main Street

P.O. Box 351

 

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Easthampton, Massachusetts 01027

Attention:        Matthew S. Sosik, President and CEO

 

If to Executive:    At the most recent address listed in the Bank’s records.

 

(f)           Severability. Any term or provision of this Agreement which is
held to be invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement.

 

(g)          Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which together will be deemed to constitute one and the
same agreement.

 

(h)          Tax Withholding. The Bank may withhold from any amounts payable
under this Agreement such federal, state, or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

 

(i)           Legal Fees. All reasonable costs and legal fees paid or incurred
by Executive pursuant to any dispute or question of interpretation relating to
this Agreement shall be paid or reimbursed by the Bank, if Executive is
successful with respect to such dispute or question of interpretation pursuant
to a legal judgment, arbitration or settlement. Such reimbursements shall be
paid to Executive within two months after the dispute is settled or resolved in
Executive’s favor.

 

(j)            409A. The intent of the parties hereto is that payments and
benefits provided to Executive under this Agreement are exempt from the
requirements of Section 409A of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder (“409A”), as this Agreement does not
provide for the deferral of any compensation as determined pursuant to 409A.

 

(k)           Capitalized Terms. Capitalized terms herein shall have the
meanings ascribed to them in the Merger Agreement except as otherwise expressly
provided in this Agreement.

 

Section 8.      Effective Date. This Agreement shall be effective as of the
Effective Time. In the event the Merger Agreement is terminated by the parties
thereto without the transactions contemplated thereby having been consummated,
this Agreement shall be deemed null and void ab initio.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

  PILGRIM BANK       By: /s/ Steven T. Golden   Name: Steven T. Golden   Title:
Vice Chairman         PILGRIM BANCSHARES, INC.       By: /s/ Steven T. Golden  
Name: Steven T. Golden   Title: Vice Chairman         HOMETOWN FINANCIAL GROUP,
INC.       By: /s/ Matthew S. Sosik   Name: Matthew S. Sosik   Title: President
and Chief Executive Officer         EXECUTIVE       /s/ Francis E. Campbell  
Francis E. Campbell

 

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