CHANGE IN CONTROL AGREEMENT
This
AGREEMENT
(“Agreement”) is hereby entered into as of September
30, 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, Xxx
X. Xxxxxxxxxxx (“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:
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1.
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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 second 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.
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2.
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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:
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i.
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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;
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ii.
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a
reduction by the Bank or Executive’s employer of Executive’s base salary
in effect immediately prior to the Change in
Control;
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iii.
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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;
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iv.
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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
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v.
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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.
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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), 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.
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3.
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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 two (2) years of a Change in
Control, Executive shall receive:
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i.
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a
lump sum cash payment equal to two (2) 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.
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ii.
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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
twenty-four (24) 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.
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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.
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4.
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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).
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5.
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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.
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6.
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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.
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7.
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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.
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8.
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Modification
and Waiver.
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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.
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9.
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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.
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10.
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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.
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11.
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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.
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12.
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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.
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13.
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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.
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14.
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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.
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15.
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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 30th day of September, 2004.
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ATTEST:
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NAUGATUCK
VALLEY SAVINGS AND LOAN
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/s/
Xxxxxxxxxx X. Mole
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By:
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/s/
Xxxx X. Xxxxx
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Corporate
Secretary
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For
the Entire Board of Directors
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ATTEST:
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(Guarantor)
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/s/
Xxxxxxxxxx X. Mole
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By:
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/s/
Xxxx X. Xxxxx
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Corporate
Secretary
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For
the Entire Board of Directors
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[SEAL]
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WITNESS:
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EXECUTIVE
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/s/
Xxxxxxxxxx X. Mole
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/s/
Xxx X. Xxxxxxxxxxx
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Corporate
Secretary
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Xxx
X. Xxxxxxxxxxx
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