Exhibit 10.3
 

BERKSHIRE BANK
THREE YEAR CHANGE IN CONTROL AGREEMENT

This AGREEMENT is made effective as of October 31, 2006, by and among Berkshire
Bank (the “Institution”), a state chartered savings institution with its
principal administrative offices at 24 North Street, Pittsfield, Massachusetts
01201, Berkshire Hills Bancorp, Inc. (the “Holding Company”), a corporation
organized under the laws of the state of Delaware, which is the stock holding
company of the Institution, and John J. Howard (“Executive”).

WHEREAS, the Institution recognizes the substantial contributions Executive has
made to the Institution and wishes to protect Executive’s position with the
Institution for the period provided in this Agreement; and

WHEREAS, Executive has agreed to serve in the employ of the Institution.

NOW, THEREFORE, in consideration of the contributions and responsibilities of
Executive, and upon the other terms and conditions hereinafter provided, the
parties hereto agree as follows:

1.
TERM OF AGREEMENT.

The period of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement, and continuing on each anniversary thereafter, the Board of Directors
(the “Board”) may act to extend the term of this Agreement for an additional
year, such that the remaining term of this Agreement would be three years,
unless Executive elects not to extend the term of this Agreement by giving
written notice to the Institution, in which case the term of this Agreement will
expire on the third anniversary of this Agreement.

2.
CHANGE IN CONTROL.

(a) Upon the occurrence of a Change in Control of the Institution or the Holding
Company (as herein defined) followed at any time during the term of this
Agreement by the involuntary termination of Executive’s employment or the
voluntary termination of Executive’s employment in accordance with the terms of
this Agreement, other than for Cause, as defined in Section 2(c) of this
Agreement, the provisions of Section 3 of this Agreement shall apply.

 
(i)
Upon the occurrence of a Change in Control, Executive shall have the right to
elect to voluntarily terminate his employment at any time during the term of
this Agreement following any demotion, loss of title, office or significant
authority, reduction in annual compensation or benefits, or relocation of his
principal place of employment by more than twenty-five (25) miles from its
location immediately prior to the Change in Control.

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(ii)
Notwithstanding the foregoing clause (i), in the event, however, that the Chief
Executive Officer of the Institution immediately prior to the Change in Control
is the Chief Executive Officer of the resulting entity with similar
responsibilities and duties and Executive’s position with the resulting entity
does not result in: (A) a reduction in annual compensation or benefits, (B) a
material change in work schedule, or (C) relocation of his principal place of
employment by more than fifty (50) miles, then Executive may not voluntarily
terminate his employment during the one-year period following the Change in
Control and receive any payments or benefits under this Agreement. For the
avoidance of doubt, with respect to the immediately foregoing limitation on
voluntary termination, Executive may voluntarily terminate employment in
accordance with this Section 2(a) effective upon the expiration of said one-year
period, and for a period of 30 days thereafter, if one of the events set forth
in clause (i) has occurred, either at the time of the Change in Control or
during the one-year period following the time of the Change in Control. If one
of the events described in clause (i) occurs more than one year following the
date of the Change in Control, but during the remaining term of the Agreement,
then Executive may terminate his employment in accordance with the provisions of
this Agreement, notwithstanding this clause (ii).

 
(iii)
Notwithstanding any other provision of this Agreement to the contrary, Executive
may consent in writing to any demotion, loss, reduction or relocation and waive
his ability to voluntarily terminate his employment under the terms of this
Agreement. The effect of any written consent of Executive under this Section
2(a) shall be strictly limited to the terms specified in such written consent.

(b) For purposes of this Agreement, a “Change in Control” of the Institution or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change in
Control of the Institution or the Holding Company within the meaning of the Bank
Change in Control Act and the Rules and Regulations promulgated by the Federal
Deposit Insurance Corporation (“FDIC”) at 12 C.F.R. § 303.4(a) with respect to
the Bank and the Board of Governors of the Federal Reserve System (“FRB”) at 12
C.F.R. § 225.41(b) with respect to the Holding Company, as in effect on the date
hereof; or (iii) results in a transaction requiring prior FRB approval under the
Bank Holding Company Act of 1956 and the regulations promulgated thereunder by
the FRB at 12 C.F.R. § 225.11, as in effect on the date hereof except for the
Holding Company’s acquisition of the Institution; or (iv) without limitation
such a Change in Control shall be deemed to have occurred at such time as (A)
any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Institution or the
Holding Company representing 20% or more of the Institution’s or the Holding
Company’s outstanding securities except for any securities of the Institution
purchased by the Holding Company in connection with the conversion of the
Institution to the stock form and any securities purchased by any tax-qualified
employee benefit plan of the Institution; or (B) individuals who constitute the
Board of Directors on the date hereof (the “Incumbent Board”)

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cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three quarters (3/4) of the directors comprising
the Incumbent Board, or whose nomination for election by the Holding Company’s
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as though
he were a member of the Incumbent Board; or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the
Institution or the Holding Company or similar transaction occurs in which the
Institution or Holding Company is not the resulting entity; or (D) solicitations
of shareholders of the Holding Company, by someone other than the current
management of the Holding Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Holding Company or Institution or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Institution or the Holding Company shall be distributed; or
(E) a tender offer is made for 20% or more of the voting securities of the
Institution or the Institution.

(c) Executive shall not have the right to receive termination benefits pursuant
to Section 3 of this Agreement upon Termination for Cause. The term “Termination
for Cause” shall mean termination because of: (i) Executive’s personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses), final
cease and desist order or material breach of any provision of this Agreement
which results in a material loss to the Institution or the Holding Company, or
(ii) Executive’s conviction of a crime or act involving moral turpitude or a
final judgment rendered against Executive based upon actions of Executive which
involve moral turpitude. For the purposes of this Section, no act, or the
failure to act, on Executive’s part shall be “willful” unless done, or omitted
to be done, not in good faith and without reasonable belief that the action or
omission was in the best interests of the Institution or its affiliates.
Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the members of the Board at
a meeting of the Board called and held for that purpose (after reasonable notice
to Executive and an opportunity for him, together with counsel, to be heard
before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying Termination for Cause and specifying
the particulars thereof in detail. Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
During the period beginning on the date of the Notice of Termination for Cause
pursuant to Section 4 of this Agreement through the Date of Termination, stock
options granted to Executive under any stock option plan shall not be
exercisable nor shall any unvested stock awards granted to Executive under any
stock-based incentive plan of the Institution, the Holding Company or any
subsidiary or affiliate thereof vest. At the Date of Termination, such stock
options and such unvested stock awards shall become null and void and shall not
be exercisable by or delivered to Executive at any time subsequent to such Date
of Termination for Cause.

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3.
TERMINATION BENEFITS.

(a) Upon the occurrence of a Change in Control, followed at any time during the
term of this Agreement by the involuntary termination of Executive’s employment
(other than for Termination for Cause), or voluntary termination during the term
of this Agreement as provided by Section 2(a) of this Agreement, the Institution
shall be obligated to pay Executive, or in the event of his subsequent death,
his beneficiary or beneficiaries, or his estate, as the case may be, a sum equal
to three (3) times Executive’s average annual compensation for the five most
recent taxable years that Executive has been employed by the Institution or such
lesser number of years in the event that Executive shall have been employed by
the Institution for less than five years. For this purpose, such annual
compensation shall include base salary and any other taxable income, including,
but not limited to, amounts related to the granting, vesting or exercise of
restricted stock or stock option awards, commissions, bonuses, pension and
profit sharing plan contributions or benefits (whether or not taxable),
severance payments, retirement benefits, and fringe benefits paid or to be paid
to Executive or paid for Executive’s benefit during any such year. At the
election of Executive, which election is to be made prior to a Change in
Control, such payment shall be made in a lump sum or on an annual basis in
approximately equal installments over a three (3) year period.

(b) Upon the occurrence of a Change in Control of the Institution or the Holding
Company followed at any time during the term of this Agreement by Executive’s
voluntary or involuntary termination of employment in accordance with paragraph
(a) of this Section 3, other than for Termination for Cause, the Institution
shall cause to be continued life, medical and disability coverage substantially
identical to the coverage maintained by the Institution for Executive prior to
his severance, except to the extent such coverage may be changed in its
application to all employees on a nondiscriminatory basis. Such coverage and
payments shall cease upon the expiration of thirty-six (36) full calendar months
from the Date of Termination. 

(c) Notwithstanding the provisions of this Section 3, in no event shall the
aggregate payments or benefits to be made or afforded to Executive under said
paragraphs (the “Termination Benefits”) constitute an “excess parachute payment”
under Section 280G of the Internal Revenue Code of 1986, as amended, or any
successor thereto, and in order to avoid such a result, Termination Benefits
will be reduced, if necessary, to an amount (the “Non-Triggering Amount”), the
value of which is one dollar ($1.00) less than an amount equal to three (3)
times Executive’s “base amount,” as determined in accordance with said Section
280G. The allocation of the reduction required hereby among the Termination
Benefits shall be determined by Executive.

4.
NOTICE OF TERMINATION.

(a) Any purported termination by the Institution or by Executive in connection
with a Change in Control shall be communicated by a Notice of Termination to the
other party. For purposes of this Agreement, a “Notice of Termination” shall
mean a written notice which 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 Executive’s
employment under the provision so indicated.

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(b) “Date of Termination” shall mean the date specified in the Notice of
Termination (which, in the instance of Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given);
provided, however, that if a dispute regarding the Executive’s termination
exists, the “Date of Termination” shall be determined in accordance with Section
4(c) of this Agreement.

(c) If, within thirty (30) 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 arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute in connection with a Change in
Control, in the event that the Executive is terminated for reasons other than
Termination for Cause, the Institution will continue to pay Executive the
payments and benefits due under this Agreement in effect when the notice giving
rise to the dispute was given (including, but not limited to, his annual salary)
until the earlier of: (i) the resolution of the dispute in accordance with this
Agreement; or (ii) the expiration of the remaining term of this Agreement as
determined as of the Date of Termination.

5.
SOURCE OF PAYMENTS.

It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the
Institution. Further, the Holding Company guarantees such payments and provision
of all amounts and benefits due hereunder to Executive and, if such amounts and
benefits due from the Institution are not timely paid or provided by the
Institution, such amounts and benefits shall be paid or provided by the Holding
Company.

6.
EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.

This Agreement contains the entire understanding between the parties hereto and
supersedes any prior agreement between the Institution and Executive, except
that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.

Nothing in this Agreement shall confer upon Executive the right to continue in
the employ of the Institution or shall impose on the Institution any obligation
to employ or retain Executive in its employ for any period.

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7.
NON-COMPETITION AND NON-DISCLOSURE.

(a) For a period of one (1) year following the payment of termination benefits
to Executive under this agreement, Executive agrees not to compete with the
Institution or its affiliates in any city, town or county in which Executive’s
normal business office is located and the Institution or its affiliates has an
office or has filed an application for regulatory approval to establish an
office, determined as of the effective date of such termination, except as
agreed to pursuant to a resolution duly adopted by the Board of Directors.
Executive agrees that during such one (1) year period and within said cities,
towns and counties, Executive shall not work for or advise, consult or otherwise
serve with, directly or indirectly, any entity whose business materially
competes with the depository, lending or other business activities of the
Institution. The parties hereto, recognizing that irreparable injury will result
to the Institution, its business and property in the event of Executive’s breach
of this Section 7(a), agree that in the event of any such breach by Executive,
the Institution will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive,
Executive’s partners, agents, servants, employees and all persons acting for or
under the direction of Executive. Executive represents and admits that, in the
event of the termination of his employment following a Change in Control,
Executive’s experience and capabilities are such that Executive can obtain
employment in a business engaged in other lines and/or of a different nature
than the Institution, and that the enforcement of a remedy by way of injunction
will not prevent Executive from earning a livelihood. Nothing herein will be
construed as prohibiting the Institution from pursuing any other remedies
available for such breach or threatened breach, including the recovery of
damages from Executive.

(b) Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Institution, as it may exist
from time to time, is a valuable, special and unique asset of the business of
the Institution. Executive will not, during or after the term of his employment,
disclose any knowledge of the past, present, planned or considered business
activities of the Institution or its affiliates to any person, firm,
corporation, or other entity for any reason or purpose whatsoever, unless
expressly authorized by the Board of Directors or required by law.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Institution or
its affiliates. In the event of a breach or threatened breach by Executive of
the provisions of this Section 7, the Institution will be entitled to an
injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Institution or its affiliates or from rendering any services to any person,
firm, corporation or other entity to whom such knowledge, in whole or in part,
has been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the Institution from pursuing other remedies available
for such breach or threatened breach, including the recovery of damages from
Executive.

8.
NO ATTACHMENT.

(a) Except as required by law, no right to receive payments under this Agreement
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge,

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pledge, or hypothecation, or to execution, attachment, levy, or similar process
or assignment by operation of law, and any attempt, voluntary or involuntary, to
affect any such action shall be null, void, and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Institution and their respective successors and assigns.

9.
MODIFICATION AND WAIVER.

(a) This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any act other than that specifically
waived.

10.
REQUIRED REGULATORY PROVISIONS.

Any payments made to Executive pursuant to this Agreement, or otherwise, are
subject to and conditioned upon compliance with 12 U.S.C. §1828(k) and any rules
and regulations promulgated thereunder, including 12 C.F.R. Part 359.

11.
SEVERABILITY.

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall, to the full extent consistent with
law, continue in full force and effect.

12.
HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

13.
GOVERNING LAW.

The validity, interpretation, performance, and enforcement of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts.

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14.
ARBITRATION.

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by Executive within fifty (50) miles
from the location of the Institution’s main office, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator’s award in any court having jurisdiction; provided, however,
that Executive shall be entitled to seek specific performance of his 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.

15.
PAYMENT OF COSTS AND 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 Institution if Executive is successful with respect to
such dispute or question of interpretation pursuant to a legal judgment,
arbitration or settlement.

16.
INDEMNIFICATION.

The Institution shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense and shall indemnify Executive (and his
heirs, executors and administrators) to the fullest extent permitted under
Massachusetts law against all expenses and liabilities reasonably incurred by
him in connection with or arising out of any action, suit or proceeding in which
he may be involved by reason of his having been a director or officer of the
Institution (whether or not he continues to be a director or officer at the time
of incurring such expenses or liabilities); such expenses and liabilities to
include, but not to be limited to, judgments, court costs and attorneys’ fees
and the costs of reasonable settlements.

17.
SUCCESSOR TO THE INSTITUTION.

The Institution shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Institution, to expressly and
unconditionally assume and agree to perform the Institution’s obligations under
this Agreement in the same manner and to the same extent that the Institution
would be required to perform such obligations if no such succession or
assignment had taken place.

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SIGNATURES

IN WITNESS WHEREOF, Berkshire Bank and Berkshire Hills Bancorp, Inc. have caused
this Agreement to be executed by their duly authorized officers, and Executive
has signed this Agreement, on the 31st day of October, 2006.

ATTEST:
 
BERKSHIRE BANK
                 /s/ Sally J. Chavarry  
By:
 /s/ Michael P. Daly      
Michael P. Daly, President and CEO
               
ATTEST:
 
BERKSHIRE HILLS BANCORP, INC.
   
(Guarantor)
                 /s/ Sally J. Chavarry  
By:
 /s/ Michael P. Daly      
Michael P. Daly, President and CEO
       
SEAL
                                     
WITNESS:
 
EXECUTIVE
                         /s/ Nicole M. Knight    /s/ John J. Howard    
John J. Howard

 
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