EXHIBIT 10.3
CHANGE IN CONTROL AGREEMENT
This AGREEMENT ("Agreement") is hereby entered into as of November 24,
2004, by and between NAUGATUCK VALLEY SAVINGS AND LOAN (the "Bank"), a federally
chartered savings bank, with its principal offices at 000 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxx 00000, Xxxxxxx X. Xxxxx, Xx. ("Executive"), and NAUGATUCK
VALLEY FINANCIAL CORPORATION (the "Company"), a federally chartered corporation
and the holding company of the Bank, as guarantor.
WHEREAS, the Bank recognizes the importance of Executive to the Bank's
operations and wishes to protect his position with the Bank in the event of a
change in control of the Bank or the Company for the period provided for in this
Agreement; and
WHEREAS, Executive and the Board of Directors of the Bank desire to enter
into an agreement setting forth the terms and conditions of payments due to
Executive in the event of a change in control and the related rights and
obligations of each of the parties.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is hereby agreed as follows:
1. Term of Agreement.
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a. The term of this Agreement shall be (i) the initial term, consisting of
the period commencing on the date of this Agreement (the "Effective Date")
and ending on the third anniversary of the Effective Date, plus (ii) any
and all extensions of the initial term made pursuant to this Section 1.
b. Commencing on the first anniversary of the Effective Date and
continuing each anniversary date thereafter, the Board of Directors of the
Bank (the "Board of Directors") may extend the term of this Agreement for
an additional one (1) year period beyond the then effective expiration
date, provided that Executive shall not have given at least sixty (60)
days' written notice of his desire that the term not be extended.
c. Notwithstanding anything in this Section to the contrary, this
Agreement shall terminate if Executive or the Bank terminates Executive's
employment prior to a Change in Control.
2. Change in Control.
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a. Upon the occurrence of a Change in Control of the Bank or the Company
followed at any time during the term of this Agreement by the termination
of Executive's employment in accordance with the terms of this Agreement,
other than for Cause, as defined in Section 2c. of this Agreement, the
provisions of Section 3 of this Agreement shall apply. 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 an event constituting "Good Reason."
"Good Reason" means, unless Executive has consented in writing thereto,
the occurrence following a Change in Control, of any of the following:
i. the assignment to Executive of any duties materially
inconsistent with Executive's position, including any material
diminution in status, title, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith
and that is remedied by the Bank or Executive's employer
reasonably promptly after receipt of notice from Executive;
ii. a reduction by the Bank or Executive's employer of Executive's
base salary in effect immediately prior to the Change in
Control;
iii. the relocation of Executive's office to a location more than
twenty-five (25) miles from its location as of the date of
this Agreement;
iv. the taking of any action by the Bank or any of its affiliates
or successors that would materially adversely affect
Executive's overall compensation and benefits package, unless
such changes to the compensation and benefits package are made
on a non-discriminatory basis and affect substantially all
employees; or
v. the failure of the Bank or the affiliate of the Bank by which
Executive is employed, or any affiliate that directly or
indirectly owns or controls any affiliate by which Executive
is employed, to obtain the assumption in writing of the Bank's
obligation to perform this Agreement by any successor to all
or substantially all of the assets of the Bank or such
affiliate within thirty (30) days after a reorganization,
merger, consolidation, sale or other disposition of assets of
the Bank or such affiliate.
b. For purposes of this Agreement, a "Change in Control" shall be deemed
to occur on the earliest of any of the following events:
i. Merger: The Company merges into or consolidates with another
corporation, or merges another corporation into the Company, and as
a result less than a majority of the combined voting power of the
resulting corporation immediately after the merger or consolidation
is held by persons who were stockholders of the Company immediately
before the merger or consolidation.
ii. Acquisition of Significant Share Ownership: There is filed, or
is required to be filed, a report on Schedule 13D or another form or
schedule (other than Schedule 13G) required under Sections 13(d) or
14(d) of the Securities Exchange
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Act of 1934, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial owner of
25% or more of a class of the Company's voting securities, but this
clause (b) shall not apply to beneficial ownership of Company voting
shares held in a fiduciary capacity by an entity of which the
Company directly or indirectly beneficially owns 50% or more of its
outstanding voting securities.
iii. Change in Board Composition: During any period of two
consecutive years, individuals who constitute the Company's Board of
Directors at the beginning of the two-year period cease for any
reason to constitute at least a majority of the Company's Board of
Directors; provided, however, that for purposes of this clause
(iii), each director who is first elected by the board (or first
nominated by the board for election by the stockholders) by a vote
of at least two-thirds (2/3) of the directors who were directors at
the beginning of the two-year period shall be deemed to have also
been a director at the beginning of such period; or
iv. Sale of Assets: The Company sells to a third party all or
substantially all of its assets.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the reorganization of the Bank from the mutual holding company form of
organization to the full stock holding company form of organization (including
the elimination of the mutual holding company) constitute a "Change in Control"
for purposes of this Agreement.
c. Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon termination for "Cause." Termination for Cause
shall mean termination of employment because of Executive's personal dishonesty,
incompetence, willful misconduct, any 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), willful violation of any final cease and desist order, or any
material breach of any provision of this Agreement. 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 copy of a resolution
duly adopted by the affirmative vote of a majority of the entire membership of
the Board of Directors at a meeting of the Board of Directors 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 of Directors), finding
that, in the good faith opinion of the Board of Directors, 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 hereof through the Date of Termination (as defined in Section 4), 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 benefit plan of the Bank, the Company or any
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subsidiary or affiliate thereof, vest. At the Date of Termination, such stock
options and any 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
termination for Cause.
3. Termination Benefits.
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a. If Executive's employment is voluntarily (in accordance with Section
2a. of this Agreement) or involuntarily terminated within three (3) years of a
Change in Control, Executive shall receive:
i. a lump sum cash payment equal to three (3) times the
Executive's "base amount," within the meaning of Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"). Such payment shall be made not later than five
(5) days following Executive's termination of employment under
this Section 3.
ii. Continued benefit coverage under all Bank health and welfare
plans (as defined in accordance with Section (3)(1) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), 29
U.S.C. Sec. 1002(1), and applicable regulations thereunder)
which Executive participated in as of the date of the Change
in Control (collectively, the "Employee Benefit Plans") for a
period of thirty-six (36) months following Executive's
termination of employment. Said coverage shall be provided
under the same terms and conditions in effect on the date of
Executive's termination of employment. Solely for purposes of
benefits continuation under the Employee Benefit Plans,
Executive shall be deemed to be an active employee. To the
extent that benefits required under this Section 3a. cannot be
provided under the terms of any Employee Benefit Plan, the
Bank shall enter into alternative arrangements that will
provide Executive with comparable benefits.
b. Notwithstanding the preceding 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 Code or any successor thereto, and
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 provided by this
Section 3 shall be determined by Executive.
4. Notice of Termination.
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a. Any purported termination by the Bank or by Executive 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 specific termination provision in this Agreement relied upon
and shall set forth in detail the facts and circumstances claimed to
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provide a basis for termination of Executive's employment under the provision so
indicated.
b. "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).
5. Source of Payments.
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All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, unconditionally
guarantees payment and provision of all amounts and benefits due hereunder to
Executive and, if such amounts and benefits due from the Bank are not timely
paid or provided by the Bank, such amounts and benefits shall be paid or
provided by the Company.
6. Effect on Prior Agreements and Existing Benefit Plans.
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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. Nothing in this Agreement shall confer upon Executive the right to
continue in the employ of the Bank or shall impose on the Bank any obligation to
employ or retain Executive in its employ for any period.
7. No Attachment.
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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, 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 Bank and their respective successors and assigns.
8. 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
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such term or condition for the future or as to any act other than that
specifically waived.
9. Severability.
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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.
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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. In addition, references herein to the
masculine shall apply to both the masculine and the feminine.
11. Governing Law.
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Except to the extent preempted by federal law, the validity,
interpretation, performance, and enforcement of this Agreement shall be governed
by the laws of the State of Connecticut, without regard to principles of
conflicts of law of that State.
12. Arbitration.
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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 Bank, 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.
13. Payment of Legal Fees.
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All reasonable legal fees and expenses 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, only if Executive is successful
pursuant to a legal judgment, arbitration or settlement.
14. Indemnification.
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The Company or the Bank 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 applicable 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
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may be involved by reason of his having been a director or officer of the
Company or the Bank (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 be limited to, judgments, court costs,
attorneys' fees and the costs of reasonable settlements.
15. Successors to the Bank and the Company.
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The Bank and the Company shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all of the business or assets of the Bank or the Company,
expressly and unconditionally to assume and agree to perform the Bank's and the
Company's obligations under this Agreement, in the same manner and to the same
extent that the Bank and the Company would be required to perform if no such
succession or assignment had taken place.
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SIGNATURES
IN WITNESS WHEREOF, Naugatuck Valley Savings and Loan and Naugatuck Valley
Financial Corporation have caused this Agreement to be executed and their seals
to be affixed hereunto by their duly authorized officers, and Executive has
signed this Agreement, on the 24th day of November, 2004.
ATTEST: NAUGATUCK VALLEY SAVINGS AND LOAN
/s/ Xxxxxxxxxx X. Mole By: /s/ Xxxx X. Xxxxx
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Corporate Secretary For the Entire Board of Directors
ATTEST: NAUGATUCK VALLEY FINANCIAL CORPORATION
(Guarantor)
/s/ Xxxxxxxxxx X. Mole By: /s/ Xxxx X. Xxxxx
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Corporate Secretary For the Entire Board of Directors
[SEAL]
WITNESS: EXECUTIVE
/s/ Xxxxxxxxxx X. Mole /s/ Xxxxxxx X. Xxxxx, Xx.
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Corporate Secretary Xxxxxxx X. Xxxxx, Xx.
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