Document:

ex101to8k07601_12092009.htm

    Exhibit 10.1

     

     

    EIGHTEENTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT

    

    

    This
EIGHTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as
of this 14th day
of December, 2009 by and among BANK OF AMERICA, N.A., as successor by merger to
LaSalle Business Credit, LLC, as administrative agent and collateral agent (in
such agent capacities, “Agent”) for itself and all
other lenders from time to time a party hereto (“Lenders”), located at
135 South LaSalle Street, Chicago, Illinois 60603-4105, PROTECTIVE APPAREL
CORPORATION OF AMERICA, a New York corporation (“PACA”), POINT BLANK BODY ARMOR
INC., a Delaware corporation (“Point Blank”) and LIFE WEAR
TECHNOLOGIES, INC., a Florida corporation (“Life Wear”, and together with
PACA and Point Blank, collectively, the “Borrowers” and each,
individually, a “Borrower”) and POINT BLANK
SOLUTIONS, INC., a Delaware corporation (the “Parent” and a “Guarantor”).  Unless
otherwise specified herein, capitalized terms used in this Amendment shall have
the meanings ascribed to them by the Loan Agreement (as hereinafter
defined).

     

    RECITALS

     

    WHEREAS,
Borrowers, Parent, Agent and Lenders have entered into that certain Amended and
Restated Loan and Security Agreement dated as of April 3, 2007 (as amended,
supplemented, restated or otherwise modified from time to time, the “Loan Agreement”);

     

    WHEREAS,
Borrowers, Parent, Agent and Lenders have agreed to the amendments set forth
herein;

     

    NOW
THEREFORE, in consideration of the foregoing recitals, mutual agreements
contained herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrowers, Parent, Agent and
Lenders hereby agree as follows:

     

    SECTION
1.          Amendments.

     

    (a)           The
definition of “Applicable Margin” set forth in Section 1 of the Loan Agreement
is hereby amended and restated in its entirety to read as follows:

     

    “Applicable Margin” means (a)
4.00% for all Term Loans that are Base Rate Loans and (b) 6.00% for all
Revolving Loans that are Base Rate Loans.

     

    (b)           The
definition of “Sixteenth Amendment Reserve” set forth in Section 1 of the Loan
Agreement is hereby amended and restated to read as follows:

     

    “Sixteenth Amendment
Reserve” means, for the relevant period, (x) the dollar amount of the
“Availability Block” set forth below for such period minus (y) settlement
costs in respect of the Department of Justice matters regarding Zylon and the
investigation commenced by the Securities and Exchange Commission involving
Parent and Borrowers (the “Specific Settlement
Costs”) paid in cash after the Sixteenth Amendment Effective Date in an
aggregate amount not to exceed $1,000,000:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              START
      DATE

            	
              END
      DATE

            	
              AVAILABILITY
      BLOCK

            
	
              Sixteenth
      Amendment Effective Date

            	
              November  6,
      2009

            	
              $7,500,000

            
	
              November
      7, 2009

            	
              November
      13, 2009

            	
              $9,000,000

            
	
              November
      14, 2009

            	
              November
      20, 2009

            	
              $10,500,000

            
	
              November
      21, 2009

            	
              December
      4, 2009

            	
              $11,500,000

            
	
              December
      5, 2009

            	
              December
      18, 2009

            	
              $7,750,000

            
	
              December
      19, 2009

            	
              January
      8, 2010

            	
              $12,750,000

            
	
              January
      9, 2010

            	
              April
      4, 2010

            	
              $10,750,000

            

    

    

    (c)           The
definition of “Maximum Revolving Loan Limit” set forth in Section 2(a) of the
Loan Agreement is hereby amended by deleting the language reading “(A) during
the period from the Sixteenth Amendment Effective Date through January 29, 2010,
Fifteen Million and No/100 Dollars ($15,000,000), (B) during the period from
January 30, 2010 through February 11, 2010, Ten Million and No/100 Dollars
($10,000,000) and (C) from and after February 12, 2010, Five Million and No/100
Dollars ($5,000,000)” and replacing it with language reading “(A) during the
period from the Sixteenth Amendment Effective Date through December 18, 2009,
Fifteen Million and No/100 Dollars ($15,000,000), (B) during the period from
December 19, 2009 through January 22, 2010, Twenty Million and No/100 Dollars
($20,000,000), (C) during the period from January 23, 2010 through February 12,
2010, Fifteen Million and No/100 Dollars ($15,000,000), (D) during the period
from February 13, 2010 through February 26, 2010, Ten Million and No/100 Dollars
($10,000,000) and (E) from and after February 27, 2010, Five Million and No/100
Dollars ($5,000,000)”.

     

    (d)           Section
14(b) of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

     

    “(b)  Minimum
EBITDA.  Parent and Borrowers on a consolidated basis shall
have, at the end of each period set forth below, EBITDA for such period of not
less than the following:

     

    
      	
              Period

            	
              Amount

            
	
              One
      month ending October 31, 2009

            	
              ($1,750,000)

            
	
              Two
      months ending November 30, 2009

            	
              ($2,050,000)

            
	
              Three
      months ending December 31, 2009

            	
              ($1,300,000)

            
	
              Four
      months ending January 31, 2010

            	
              ($550,000)

            
	
              Five
      months ending February 28, 2010

            	
              $200,000”

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (e)           Section
14(e) of the Loan Agreement is hereby amended and restated to read as
follows:

     

     “(e)  [Intentionally
Deleted].”

     

    SECTION
2.        Limited
Consent.  Agent and Lenders hereby consent to the sale by
Parent of all the capital stock of Life Wear Technologies, Inc. so long as (i)
such sale is consummated in accordance with the terms of a stock purchase
agreement that is on terms and conditions satisfactory to Agent, (ii) the net
proceeds from such sale shall be at least $400,000 in cash and shall be
immediately applied to repay the Revolving Loans then outstanding and (iii) no
Event of Default has occurred and is continuing at the time, and after giving
effect to, such sale.   In accordance with such consent, Agent
and Lenders hereby waive any Event of Default arising under Section 15(e) of the
Loan Agreement solely to permit the sale described in this Section
2.

     

    SECTION
3.         Effectiveness.  The
effectiveness of this Amendment is subject to the satisfaction of each of the
following conditions precedent:

     

    (a)           This
Amendment shall have been duly executed and delivered by Borrowers and Parent
(collectively, “Amendment
Parties”), Agent and each Lender;

     

    (b)           No
Default or Event of Default shall have occurred and be continuing after giving
effect to this Amendment;

     

    (c)           The
representations and warranties contained herein shall be true and correct in all
material respects; and

     

    (d)           Agent
shall have received, for the ratable benefit of the Lenders, an amendment fee in
the amount of $250,000 which shall be fully earned and payable on the date
hereof.

     

    SECTION
4.        Representations
and Warranties.  In order to induce Agent and each Lender to
enter into this Amendment, each Amendment Party hereby represents and warrants
to Agent and each Lender, which representations and warranties shall survive the
execution and delivery of this Amendment, that:

     

    (a)           all
of the representations and warranties contained in the Loan Agreement and in
each of the Other Agreements are true and correct in all material respects as of
the date hereof after giving effect to this Amendment, except to the extent that
any such representations and warranties expressly relate to an earlier
date;

     

    (b)           the
execution, delivery and performance by Amendment Parties of this Amendment has
been duly authorized by all necessary corporate action required on their part
and this Amendment, the Loan Agreement and the Other Agreements are the legal,
valid and binding obligation of Amendment Parties enforceable against Amendment
Parties in accordance with their terms, except as their enforceability may be
affected by the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors generally, and by
general limitations on the availability of equitable remedies;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (c)           neither
the execution, delivery and performance of this Amendment by Amendment Parties,
the performance by Amendment Parties of the Loan Agreement nor the consummation
of the transactions contemplated hereby does or shall contravene, result in a
breach of, or violate (i) any provision of any Amendment Party’s certificate or
articles of incorporation or bylaws or other similar documents, or agreements,
(iii) any law or regulation, or any order or decree of any court or government
instrumentality, or (iii) any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any Amendment Party or any of its
Subsidiaries is a party or by which any Amendment Party or any of its
Subsidiaries or any of their property is bound, except in any such case to the
extent such conflict or breach has been waived or consented to herein or by a
written waiver document, a copy of which has been delivered to Agent on or
before the date hereof; and

     

    (d)           no
Default or Event of Default has occurred and is continuing after giving effect
to this Amendment.

     

    SECTION
5.        Reference to and Effect Upon
the Loan Agreement.

     

    (a)           Except
as specifically set forth above, the Loan Agreement and each of the Other
Agreements shall remain in full force and effect and are hereby ratified and
confirmed; and

     

    (b)           the
amendments set forth herein are effective solely for the purposes set forth
herein and shall be limited precisely as written, and shall not be deemed to (i)
be a consent to any amendment, waiver or modification of any other term or
condition of the Loan Agreement or any of the Other Agreements except as
specifically set forth herein, (ii) operate as a waiver or otherwise prejudice
any right, power or remedy that Agent or Lenders may now have or may have in the
future under or in connection with the Loan Agreement or any of the Other
Agreements except as specifically set forth herein, (iii) constitute a waiver of
any provision of the Loan Agreement or any of the Other Agreements, except as
specifically set forth herein, or (iv) constitute a waiver of any Event of
Default existing on the date hereof or arising after the date hereof except as
specifically set forth herein and Agent and Lenders hereby reserve all rights
and remedies under the Loan Agreement and the Other Agreements as a result of
such Events of Default.  Upon the effectiveness of this Amendment,
each reference in the Loan Agreement to “this Agreement”, “herein”, “hereof” and
words of like import and each reference in the Loan Agreement and the Other
Agreements to the Loan Agreement shall mean the Loan Agreement as amended
hereby.  This Amendment shall be construed in connection with and as
part of the Loan Agreement.  Each Amendment Party hereby acknowledges
and agrees that there is no defense, setoff or counterclaim of any kind, nature
or description to the Liabilities or the payment thereof when due.

     

    SECTION
6.        Costs And
Expenses.  To the extent provided in Section 4(c)(iv) of
the Loan Agreement, Borrowers agree to reimburse Agent for all fees, costs, and
expenses, including the reasonable fees, costs, and expenses of counsel or other
advisors for advice, assistance, or other representation in connection with this
Amendment.

     

    
      
        
        

      

      
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    SECTION
7.        GOVERNING
LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK.

     

    SECTION
8.        Headings.  Section
headings in this Amendment are included herein for convenience of reference only
and shall not constitute part of this Amendment for any other
purposes.

     

    SECTION
9.        Counterparts.  This
Amendment may be executed in any number of counterparts, each of which when so
executed shall be deemed an original, but all such counterparts shall constitute
one and the same instrument.

     

    [Signature
Pages Follow]

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment
as of the date first written above.

    
      

       

      
        	
                BORROWERS:

              
	 
      
	 
      
	
                PROTECTIVE
      APPAREL CORPORATION OF AMERICA

              
	 
      
	
                By:

              	
                
                  /s/
      Michelle Doery

                

              
	
                Name:

              	
                Michelle
      Doery

              
	
                Title:

              	
                Chief
      Financial Officer

              
	 
      
	
                POINT
      BLANK BODY ARMOR INC.

              
	 
      
	
                By:

              	
                
                  /s/
      Michelle Doery

                

              
	
                Name:

              	
                Michelle
      Doery

              
	
                Title:

              	
                Chief
      Financial Officer

              
	 
      
	 
      
	
                LIFE
      WEAR TECHNOLOGIES, INC.

              
	 
      
	
                By:

              	
                
                  /s/
      Michelle Doery

                

              
	
                Name:

              	
                Michelle
      Doery

              
	
                Title:

              	
                Chief
      Financial Officer

              
	 
      
	 
      
	 
      
	
                PARENT:

              
	 
      
	 
      
	
                POINT
      BLANK SOLUTIONS, INC.

              
	 
      
	
                By:

              	
                
                  /s/
      Michelle Doery

                

              
	
                Name:

              	
                Michelle
      Doery

              
	
                Title:

              	
                Chief
      Financial Officer

              
	 
      

      

       

       

       

      
        [Signature
Page to Eighteenth Amendment to Loan and Security Agreement]

      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	
                AGENT
      AND LENDER:

              
	 
      
	
                BANK
      OF AMERICA, N.A., as successor by merger to

              
	
                LaSalle
      Business Credit, LLC

              
	 
      
	 
      
	 
      
	
                By:

              	
                
                  /s/
      Patrick M. Cornell

                

              
	
                Name:

              	
                Patrick
      M. Cornell

              
	
                Title:

              	
                Senior
      Vice President

              

      

      
 

       

      
        [Signature
Page to Eighteenth Amendment to Loan and Security
Agreement]TWO-YEAR CHANGE IN CONTROL AGREEMENT

     This Change in Control  Agreement (the "Agreement") is made effective as of
the 4th day of January,  2010 (the "Effective Date"), by and between East Boston
Savings Bank (the "Bank"),  a bank organized under the laws of the  Commonwealth
of  Massachusetts  with its headquarters  located in East Boston,  Massachusetts
(the "Bank") and Mark Abbate ("Executive").

                                   WITNESSETH

     WHEREAS,  the Bank wishes to provide for the  employment by the Bank of the
Executive as of the Effective  Date, and the Executive  wishes to serve the Bank
as of the  Effective  Date,  on the  terms  and  conditions  set  forth  in this
Agreement; and

     WHEREAS,  in order to induce the  Executive to accept  employment  with the
Bank,  the parties  desire to specify the severance  benefits which shall be due
the  Executive  by the Bank in the event  that his  employment  with the Bank is
terminated under specified circumstances.

     NOW THEREFORE,  in consideration of the mutual agreements herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. TERM OF AGREEMENT

     (a) The term of this Agreement shall be (i) the initial term, consisting of
the period commencing on the Effective Date and ending on the second anniversary
date of the Effective Date, plus (ii) any and all extensions of the initial term
made pursuant to this Section 1.

     (b) The term of this  Agreement  shall be extended  for one day each day so
that a constant  twenty-four  (24)  calendar  month term shall remain in effect,
until such time as the board of directors of the Bank (the "Board") or Executive
elects not to extend the term of the Agreement by giving  written  notice to the
other party in accordance  with the terms of this  Agreement,  in which case the
term of this Agreement shall be fixed and shall end on the second anniversary of
the date of such written notice.

2. DEFINITIONS

     (a)  "Change  in  Control"  shall  mean a change in  control of the Bank or
Company as defined in Section  409A of the  Internal  Revenue  Code of 1986,  as
amended (the "Code"), and the regulations promulgated thereunder,  including the
following:

          (1)  Change in  ownership:  A change in  ownership  of the Bank or the
          Company  occurs  on the  date  any one  person  or  group  of  persons
          accumulates  ownership of more than 50% of the total fair market value
          or total voting power of the Bank or the Company; or
<PAGE>

          (2) Change in effective  control: A change in effective control occurs
          when  either (i) any one  person or more than one  person  acting as a
          group acquires within a twelve (12)-month period ownership of stock of
          the Bank or Company  possessing  35% or more of the total voting power
          of the Bank or Company;  or (ii) a majority of the Bank's or Company's
          Board of Directors is replaced during any 12-month period by Directors
          whose appointment or election is not endorsed in advance by a majority
          of the Bank's or Company's Board of Directors (as applicable), or

          (3) Change in ownership of a substantial  portion of assets:  A change
          in the ownership of a  substantial  portion of the Bank's or Company's
          assets  occurs if, in a twelve  (12)-month  period,  any one person or
          more than one person acting as a group  acquires  assets from the Bank
          or  Company  having  a total  gross  fair  market  value  equal  to or
          exceeding  40% of the total gross fair  market  value of the Bank's or
          Company's  entire  assets   immediately   before  the  acquisition  or
          acquisitions.  For this  purpose,  "gross fair market value" means the
          value of the Bank's or  Company's  assets,  or the value of the assets
          being  disposed  of,  determined  without  regard  to any  liabilities
          associated with the assets.

          (4) Notwithstanding  anything in this Agreement to the contrary, in no
          event  shall  a  reorganization   of  Meridian   Financial   Services,
          Incorporated,   the  Bank  or  Company  solely  within  its  corporate
          structure  constitute  a "Change  in  Control"  for  purposes  of this
          Agreement.

     (b) "Good  Reason" shall mean a  termination  by the Executive  following a
Change in Control based on the following:

          (1) a material  diminution in the Executive's base  compensation as in
          effect  immediately  prior to the date of the  Change in Control or as
          the same may be increased from time to time thereafter, (2) a material
          diminution in the Executive's authority, duties or responsibilities as
          in  effect  immediately  prior  to the  Change  in  Control,  or (3) a
          material  diminution in the authority,  duties or  responsibilities of
          the officer (as in effect  immediately prior to the date of the Change
          in Control) to whom the Executive is required to report,

          (2) any material breach of this Agreement by the Bank, or

          (3) an involuntary relocation of the Bank's offices in which Executive
          is principally employed by more than 10 miles;

          provided,  however,  that prior to any  termination  of employment for
          Good Reason,  the Executive  must first provide  written notice to the
          Bank  (or  its  successor)  within  sixty  (60)  days  of the  initial
          existence  of  the   condition,   describing  the  existence  of  such
          condition,  and the Bank shall thereafter have the right to remedy the
          condition  within  thirty (30) days of the date the Bank  received the

                                       2
<PAGE>

          written notice from the Executive.  If the Bank remedies the condition
          within such thirty (30) day cure period,  then no Good Reason shall be
          deemed to exist with respect to such  condition.  If the Bank does not
          remedy the condition within such thirty (30) day cure period, then the
          Executive may deliver a Notice of  Termination  for Good Reason at any
          time within  sixty (60) days  following  the  expiration  of such cure
          period.

     (c) Termination for Cause shall mean:

          (1) the  commission  by, or  indictment  of,  Executive for any felony
          involving moral turpitude, deceit, dishonesty, or fraud;

          (2) a  material  act or acts of  dishonesty  in  connection  with  the
          performance  of  Executive's  duties,  including  without  limitation,
          material misappropriation of funds or property;

          (3) an act or acts of gross misconduct by Executive; or

          (4) continued, willful, and deliberate non-performance by Executive of
          duties  (other  than by reason of  illness  or  disability)  which has
          continued for more than thirty (30) days  following  written notice of
          non-performance from the Board.

     A determination of whether  Executive's  employment shall be terminated for
Cause shall be made at a meeting of the Board called and held for such  purpose,
at which the Board  makes a finding  that in good faith  opinion of the Board an
event set forth in  clauses  (1),  (2),  (3),  or (4)  above  has  occurred  and
specifying the particulars thereof in detail.

     (d)  For  purposes  of  this  Agreement,  any  termination  of  Executive's
employment  shall be  construed  to  require  a  "Separation  from  Service"  in
accordance  with Code Section 409A and the regulations  promulgated  thereunder,
such that the Bank and Executive  reasonably  anticipate  that the level of bona
fide services  Executive  would perform after  termination  of employment  would
permanently  decrease to a level that is less than 20% of the  average  level of
bona  fide  services  performed  (whether  as  an  employee  or  an  independent
contractor) over the immediately preceding thirty-six (36)-month period.

3. BENEFITS UPON TERMINATION

     (a)  If  the  Executive's  employment  by  the  Bank  shall  be  terminated
subsequent  to a Change in Control and during the term of this  Agreement by (i)
the Bank for other than Cause,  or (ii) the Executive for Good Reason,  then the
Bank shall:

          (1) pay Executive,  or in the event of Executive's  subsequent  death,
          Executive's  beneficiary or beneficiaries or estate, as applicable,  a
          cash severance amount equal to:

                                       3
<PAGE>

               (i) two (2) times the Executive's base salary in effect as of the
          Date of Termination,

               (ii) the highest level of cash incentive  compensation  earned by
          the  Executive  from the Bank in any one of the three  calendar  years
          immediately preceding the year in which the termination occurs, and

               (iii)  payable by lump sum within ten (10)  business  days of the
          Date of Termination.

          (2) cause to be  continued  non-taxable  medical  and dental  coverage
          substantially  identical  to the coverage  maintained  by the Bank for
          Executive  prior  to  Executive's  termination,   with  the  Executive
          responsible for his share of employee  premiums,  for twenty-four (24)
          months.

     (b) In no event  shall the  payments  or benefits to be made or provided to
Executive  under  Section 3 hereof (the  "Termination  Benefits")  constitute an
"excess  parachute  payment"  under  Section  280G of the Code or any  successor
thereto,  and in order to avoid  such a  result,  Termination  Benefits  will be
reduced,  if  necessary,  to an 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 Section 280G of the Code. The reduction  required
among the  Termination  Benefits  provided by this Section 3 shall be applied to
the cash severance benefits otherwise payable under Section 3(a) hereof.

4. NOTICE OF TERMINATION

     Any purported termination by the Bank or by Executive in connection with or
following a Change in Control shall be  communicated by Notice of Termination to
the  other  party  hereto.  For  purposes  of  this  Agreement,   a  "Notice  of
Termination"  shall  mean a written  notice  which  shall  indicate  the Date of
Termination  and,  in the  event  of  termination  by  Executive,  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. "Date of
Termination" shall mean the date specified in the Notice of Termination  (which,
in the case of a termination for Cause,  shall be immediate).  In no event shall
the Date of  Termination  exceed  thirty  (30) days from the date the  Notice of
Termination is given.

5. SOURCE OF PAYMENTS

     All  payments  provided in this  Agreement  shall be timely paid in cash or
check from the general funds of the Bank.

6. REQUIRED REGULATORY PROVISIONS

     Notwithstanding  anything herein contained to the contrary, any payments to
Executive by the Bank,  whether  pursuant to this  Agreement or  otherwise,  are
subject to and  conditioned  upon their  compliance  with  Section  18(k) of the
Federal Deposit  Insurance Act, 12 U.S.C.  Section 1828(k),  and the regulations
promulgated thereunder in 12 C.F.R. Part 359.

                                       4
<PAGE>

7. NO ATTACHMENT

     Except  as  required  by law,  no  right to  receive  payments  under  this
Agreement  shall be  subject to  anticipation,  commutation,  alienation,  sale,
assignment,  encumbrance,  charge,  pledge, or  hypothecation,  or to execution,
attachment,  levy, or similar process or assignment by operation of law, and any
attempt,  voluntary  or  involuntary,  to effect any such action  shall be null,
void, and of no effect.

8. ENTIRE AGREEMENT; MODIFICATION AND WAIVER

     (a) This Agreement  contains the entire  understanding  between the parties
hereto and supersedes any prior agreement between the Bank 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.

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

     (c) 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.

9. 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.

10. 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.

11. GOVERNING LAW

     This  Agreement  shall  be  governed  by the  laws of the  Commonwealth  of
Massachusetts but only to the extent not superseded by federal law.

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<PAGE>

12. ARBITRATION

     Any  dispute  or  controversy  arising  under or in  connection  with  this
Agreement shall be settled exclusively by binding arbitration, as an alternative
to civil  litigation  and  without  any trial by jury to  resolve  such  claims,
conducted by a single arbitrator, mutually acceptable to the Bank and Executive,
sitting in a location  selected by the Bank within  twenty-five  (25) miles from
the main  office  of the Bank,  in  accordance  with the  rules of the  American
Arbitration  Association's  National  Rules  for the  Resolution  of  Employment
Disputes then in effect.  Judgment may be entered on the  arbitrator's  award in
any court having jurisdiction.

13. PAYMENT OF LEGAL FEES

     To the extent that such payment(s) may be made without  triggering  penalty
under Code Section 409A, all reasonable 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,  provided  that  the  dispute  or
interpretation  has been resolved in Executive's  favor, and such  reimbursement
shall occur no later than sixty (60) days after the end of the year in which the
dispute is settled or resolved in Executive's favor.

14. OBLIGATIONS OF BANK

     The termination of Executive's employment, other than following a Change in
Control, shall not result in any obligation of the Bank under this Agreement.

15. SUCCESSORS AND ASSIGNS

     The Bank  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  Bank,   expressly   and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement,  in the same  manner  and to the same  extent  that the Bank would be
required to perform if no such succession or assignment had taken place.

                            [Signature Page Follows]

                                       6
<PAGE>

                                   SIGNATURES

     IN WITNESS  WHEREOF,  the Bank has caused this  Agreement to be executed by
its duly authorized officer, and Executive has signed this Agreement,  as of the
Effective Date.

                                               EAST BOSTON SAVINGS BANK

                                           By: /s/ Richard J. Gavegnano
                                               -------------------------------
                                               Richard J. Gavegnano

                                               EXECUTIVE

                                           By: /s/ Mark Abbate
                                               -------------------------------
                                               Mark Abbate

                                       7

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