Exhibit 10.7
CHANGE IN CONTROL AGREEMENT
AGREEMENT, made as of October 1, 2004, by and between VALLEY BANK, a banking
corporation organized and existing by virtue of the laws of the State of
Connecticut (the "Bank") and XXXXXXX X. XXXXXXXX (the "Employee").
WHEREAS, Employee is currently rendering services to the Bank as its Senior Vice
President and Chief Lending Officer; and
WHEREAS, the Bank considers the performance and dedication of its management
team to be significant for its overall corporate strategy and to be essential to
protecting and enhancing the best interests of the Bank; and
WHEREAS, the banking industry is a dynamic one with independent public
institutions like the Bank subject to unexpected changes in ownership; and
WHEREAS, the performance by Employee of services to the Bank may be negatively
affected by his uncertainty over the possibility of a change in ownership of the
Bank and possible affect thereof on his employment with the Bank; and
WHEREAS, the Bank wishes to mitigate the fears of Employee regarding a potential
Bank ownership change, so as to avoid a negative effect on his performance of
services to the Bank, and in that interest the Bank desires to afford certain
protection to Employee in the event of dismissal or substantial change in duties
or compensation upon the occurrence of certain events as specified herein.
NOW, THEREFORE, to further the above recited corporate objective, and for other
good and valuable consideration, the receipt and adequacy of which each party
hereby acknowledges, the Bank and the Employee agree as follows:
1. (a) The term of this Agreement shall be from October 1, 2002 until
December 31, 2004, subject to renewal and extension as provided for
in subparagraph (1) (b) hereof. Such period, as from time to time
renewed, is referred to herein as the "term hereof".
(b) On each December 31st commencing in 2002 (a "Renewal Date"), this
Agreement shall be automatically renewed for an additional year, so
that after such extension,
this Agreement shall have a term ending three (3) years after such
Renewal Date, unless prior to such Renewal Date either party hereto
shall have given notice to the other that such renewal shall not
take place (but no such notice shall have the effect of terminating
this Agreement prior to the expiration of three (3) years from and
after the Effective Date hereof); provided, however, that upon the
occurrence of any Change in Control Event (as defined in paragraph 2
hereof) during the term hereof, this Agreement shall be
automatically extended for the three year period following the date
of Change of Control.
2. Should at any time there occur any one of the following events (any one
of which shall be referred to as a "Change in Control Event):
(a) Any person shall become the beneficial owner, directly or
indirectly, of securities representing 20 percent or more of the
combined voting power of the then outstanding securities of the Bank
(as used in this subparagraph (a) , the term "beneficial ownership"
shall have the meaning ascribed to that term from time to time under
the rules and regulations promulgated by the Federal Deposit
Insurance Corporation ("FDIC") (currently codified at 12 C.F.R.
Section 335.403 or any similar, successor statute and rules); a
"person" shall include any natural person, corporation, partnership,
trust, association, or any group of persons, whose ownership of the
Bank's securities would be required to be reported collectively
pursuant to rules and regulations of the FDIC; and "affiliate" shall
mean a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the person specified, pursuant to the rules and
regulations of the FDIC;
(b) The Bank shall be a party to any merger or consolidation with
another corporation, association or business entity, which merger or
consolidation shall be consummated or shall sell, exchange or
transfer all or substantially all of its respective assets to some
other person (as "person" is defined in subparagraph (a), above) ,
except in any such case in a transaction in which immediately after
such merger or consolidation or such sale, exchange or transfer, the
shareholders of the Bank, in their capacities as such and as a
result thereof, shall own at least 50 percent in voting power of the
then outstanding securities of the Bank or of any surviving
corporation or business entity pursuant to any such merger (or of
its parent), the consolidated corporation or business entity in any
such consolidation or of all the persons or their parents to which
such sale, exchange or transfer of assets is made; or
(c) The Bank shall cease to be a publicly owned corporation; or
(d) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the Directors of the Bank
shall have ceased for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the
Bank's shareholders, of each new director of the Bank was approved
by a vote of at least two-thirds of the Directors of the Bank
then still in office who were Directors of the Bank at the beginning
of such period, provided, that a majority of the Directors of the
Bank, which majority is composed of Directors who were Directors
before the occurrence of an event which would otherwise constitute a
Change in Control Event (the "Continuing Directors"), together with
any Directors whose election was approved by a majority of the
Continuing Directors in office at that time, may specifically
determine in the good faith exercise of their judgment that such
event does not constitute a Change in Control Event because it is
not likely to change the existing management, personnel or
management policies of the Bank;
then (i) if in any such case within three (3) years thereafter there shall
be a termination of Employee's employment other than for Good Cause as
defined in paragraph 3, or (ii) if within three (3) years thereafter the
Employee terminates his employment for Good Reason as defined in paragraph
4, then in either such case the Bank shall, subject to the restriction
contained in paragraph 5 hereof:
(A) within fifteen (15) days of such termination, make a cash payment to the
Employee in an amount equal to three (3) times Employee's Annual
Compensation as defined below in this paragraph less one dollar and minus
any and all cash compensation that has actually been paid to Employee
following the Change in Control Event by the Bank or its successor; and
(B) maintain and provide for a period ending at the earlier of (i) one (1)
year after the date of termination of the Employee's employment, or (ii)
the date of Employee's full-time employment by another employer (provided
that Employee is entitled under the terms of such employment to benefits
substantially similar to those described in this subparagraph (B), at a
cost to Employee not greater than it would have been had he continued as
an employee at the Bank), Employee's continued participation in all group
insurance, life insurance, health and accident, disability and other
employee benefit plans, programs and arrangements (other than any
retirement benefit plan, program or arrangement) in which the Employee was
entitled to participate immediately prior to the date of termination,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans, programs and arrangements.
Unless otherwise prohibited under paragraph 5 hereof, in the event that the
Employee's participation in any plan, program or arrangement as provided in
subparagraph (B) above is barred, or any such plan, program or arrangement is
discontinued or the benefits thereunder are materially reduced, during such
period the Bank shall arrange to provide Employee with, or reimburse Employee
for his cost of obtaining, benefits substantially similar to those which the
Employee was entitled to receive under such plans, programs and arrangements
(other than any retirement benefit plan, program or arrangement) immediately
prior to the date of termination. At the end of the period of coverage
hereinabove provided for, the Employee shall have the option to have assigned to
him at no cost and with no apportionment of prepaid premiums, any assignable
insurance owned by the Bank and relating specifically to the Employee.
best interest of the Bank; provided that any act or omission to act on the
Employee's behalf in reliance upon an opinion of counsel to the Bank or
counsel to the Employee
received prior to such act or omission to act shall not be deemed to be
willful.
4. For purposes of this Agreement, termination by the Employee of his
employment for "Good Reason" shall mean:
(a) The assignment of duties to the Employee by the Bank or a Subsidiary
which (i) are materially inferior to the Employee's duties
immediately prior to a Change in Control Event, or (ii) result in
the Employee having significantly less authority and/or
responsibility than he had prior to a Change in Control Event,
without his express written consent; or
(b) The removal of the Employee from, or any failure to reelect him to,
the position(s) held by Employee immediately prior to a Change in
Control Event, except in connection with a termination of his
employment by the Bank or a Subsidiary for Good Cause; or
(c) A reduction by the Bank or a Subsidiary of the Employee's base
salary as in effect on the date of a Change in Control Event or as
the same may be increased from time to time thereafter; or
(d) The relocation of the Bank's principal executive offices to a
location outside of the Bristol, Connecticut area, or the Bank's or
a Subsidiary's requiring the Employee to be located anywhere other
than the Bank's principal executive offices except for required
travel on business to an extent substantially consistent with his
business travel obligations at the time this Agreement was entered
into, or, in the event the Employee consents to any such relocation
of the Bank's executive offices, the failure by the Bank or a
Subsidiary to pay (or reimburse him for) all reasonable moving
expenses incurred by him relating to a change in his principal
residence in connection with such relocation and to indemnify him
against any loss realized in the sale of his principal residence in
connection with any such change of residence; or
For purposes of this Agreement, Employee's "Annual Compensation" shall be
deemed to mean the greater of (i) the annual base salary and projected
bonus compensation of Employee as in effect on the date of the occurrence
of the Change in Control Event immediately preceding Employee's
termination, or (ii) the annual base salary and projected bonus
compensation of Employee as of the date of termination of Employee's
employment. Employee's annual base salary for purposes of calculating
Employee's Annual Compensation shall include any annual base salary paid
to Employee by any Subsidiary (as defined in subparagraph 9(d) hereof).
3. For purposes of this Agreement, termination of the Employee by the Bank
for "Good Cause" shall mean termination only by reason of one or more of
the following occurrences:
(a) His conviction, by a court of competent jurisdiction, of a crime
involving moral
turpitude, whether or not committed during the term hereof; or
(b) His commission of an act of fraud upon, or materially evidencing bad
faith toward, the Bank; or
(c) A willful breach by him of any material duty or obligation imposed
upon him under the terms of his employment with the Bank, as to
which breach the Bank shall have given him thirty (30) days' notice,
and which breach shall not have been cured within such thirty-day
period; or
(d) His inability, by reason of physical or mental disability, to carry
out the normal and usual duties of his employment for six (6)
consecutive months. Such disability shall, in the event of a dispute
between Employee and the Bank concerning Employee's physical or
mental ability to perform his duties, be finally determined by a
competent physician mutually agreeable to both parties; or
(e) His breach of a fiduciary duty to the Bank or violation of any
banking law or regulation.
(f) For purposes of this paragraph 3, no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or
omitted to be done, by Employee not in good faith and without
reasonable belief that Employee's action or omission was in the best
interest of the Bank; provided that any act or omission to act on
the Employee's behalf in reliance upon an opinion of counsel to the
Bank or counsel to the Employee received prior to such act or
omission to act shall not be deemed to be willful.
4. For purposes of this Agreement, termination by the Employee of his
employment for "Good Reason" shall mean:
(a) The assignment of duties to the Employee by the Bank or a Subsidiary
which (i) are materially inferior to the Employee's duties
immediately prior to a Change in Control Event, or (ii) result in
the Employee having significantly less authority and/or
responsibility than he had prior to a Change in Control Event,
without his express written consent; or
(b) The removal of the Employee from, or any failure to reelect him to,
the position(s) held by Employee immediately prior to a Change in
Control Event, except in connection with a termination of his
employment by the Bank or a Subsidiary for Good Cause; or
(c) A reduction by the Bank or a Subsidiary of the Employee's base
salary as in effect on the date of a Change in Control Event or as
the same may be increased from time to time thereafter; or
(d) The relocation of the Bank's principal executive offices to a
location outside of the Bristol, Connecticut area, or the Bank's or
a Subsidiary's requiring the
Employee to be located anywhere other than the Bank's principal
executive offices except for required travel on business to an
extent substantially consistent with his business travel obligations
at the time this Agreement was entered into, or, in the event the
Employee consents to any such relocation of the Bank's executive
offices, the failure by the Bank or a Subsidiary to pay (or
reimburse him for) all reasonable moving expenses incurred by him
relating to a change in his principal residence in connection with
such relocation and to indemnify him against any loss realized in
the sale of his principal residence in connection with any such
change of residence; or
(e) The failure of the Bank of a Subsidiary to provide the Employer with
substantially the same fringe benefits (including paid vacations)
that were provided to him immediately prior to a Change in Control
Event, or with a package of fringe benefits that, though one or more
of such benefits may vary from those in effect immediately prior to
a Change in Control Event, is substantially comparable in all
material respects to such fringe benefits taken as a whole; or
(f) The failure of the Bank or a Subsidiary to obtain the assumption of
an agreement to perform this Agreement by any successor as
contemplated in subparagraph 9(b)(ii) hereof.
5. Nothing in this Agreement shall be interpreted as requiring the Bank to
make payments which would constitute a prohibited excess parachute payment
pursuant to Section 280G of the Internal Revenue Code or which would be in
violation of restrictions imposed, if any, pursuant to Section l8 of the
Federal Deposit Insurance Act. The Employee expressly disclaims any right
to a payment which would be so prohibited.
6. Employee acknowledges that he relies for the payments to be made to him
hereunder solely upon the contractual obligations herein undertaken by the
Bank and solely as a general creditor of the Bank. The parties acknowledge
that Employee shall have no right to receive any payments or benefits
except at the time, in the amounts, and in the manner herein provided, all
of which are essential terms of this Agreement and essential
considerations to the Bank in obligating itself to make the payments
herein provided.
7. A waiver by either party of any of the terms and conditions of this
Agreement in any instance shall not be deemed or construed to be a waiver
of such terms or conditions for the future, or of any subsequent breach
thereof.
8. Any and all notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been given when deposited in the
United States mails, certified or registered mail, postage prepaid and
addressed as follows:
To Employee: Xxxxxxx Xxxxxxxx
00 Xxxxxx Xxxxx Xx.
Xxxxxxx,XX 00000
To the Bank: Chairman Of The Board
Valley Bank
0 Xxxxxxxxx Xxx.
Xxxxxxx, XX 00000
Either party may change by notice the address to which notices to him or
it are to be addressed.
9. (a) Employee shall not have any right to commute, encumber or dispose
of the right to receive payment hereunder or of the right to
receive any of the benefits provided for hereunder.
(b) The Bank may: (i) remaining obligated with respect to this
Agreement, cause its obligations hereunder to be performed by a
Subsidiary or Subsidiaries, in whole or in part, and may, to the
extent provided herein, cause Employee to be assigned duties with
respect to any such Subsidiary or Subsidiaries; (ii) assign this
Agreement and its right hereunder in whole, but not in part, to any
bank, corporation or other entity with or into which it may
hereafter merge or consolidate or to which it may transfer all or
substantially all of its respective assets, if in any such case such
bank, corporation or other entity shall by operation of law or
expressly in writing assume all liabilities of the Bank hereunder as
fully as if it had been originally named the Bank herein; but may
not otherwise assign this Agreement or its rights hereunder.
(c) THIS AGREEMENT DOES NOT CONSTITUTE AN AGREEMENT FOR THE EMPLOYMENT
OF EMPLOYEE AND SHALL NOT GIVE EMPLOYEE ANY RIGHT TO BE RETAINED IN
THE SERVICE OR EMPLOY OF THE BANK OR ANY SUBSIDIARY. THE BANK AND
ITS SUBSIDIARIES RETAIN THE RIGHT TO DISCHARGE EMPLOYEE AT ANY TIME
(PROVIDED THAT EMPLOYEE IS AN EMPLOYEE OF SUCH INSTITUTION) AT WILL,
WITH OR WITHOUT CAUSE, AS IF THIS AGREEMENT HAD NEVER BEEN ENTERED
INTO; PROVIDED, HOWEVER, THAT UPON ANY SUCH TERMINATION AND
DISCHARGE FOLLOWING A CHANGE IN CONTROL EVENT EMPLOYEE SHALL BE
ENTITLED TO THE BENEFITS OF THIS AGREEMENT, IF ANY, PAYABLE OR TO BE
PROVIDED IN CONNECTION WITH SUCH TERMINATION.
(d) For purposes of this Agreement, the term "Subsidiary" means a bank,
corporation or other entity at least 50 percent of the total
combined voting power of all classes of stock of which is owned by
the Bank, either directly or through one or more subsidiaries.
(e) Nothing herein contained shall affect the terms and conditions of
any other written agreement between Employee and the Bank or any
Subsidiary.
10. If any provision of this Agreement, as applied to either party or to any
circumstances, shall be adjudged by a court to be void or unenforceable,
the same shall in no way affect any other provision of this Agreement or
the applicability of such provision to any other circumstance.
11. This Agreement may not be varied, altered, modified, changed, or in any
way amended except by an instrument in writing, executed by the parties
hereto or their legal representatives.
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE DAY AND
YEAR FIRST ABOVE WRITTEN.
EMPLOYEE
By: /s/ Xxxxxxx X. Xxxxxxxx
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XXXXXXX X. XXXXXXXX
VALLEY BANK
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
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XXXXXX X. XXXXXXX, XX., Its President
