Exhibit 10.6
CHANGE IN CONTROL SEVERANCE
AGREEMENT
COMMONWEALTH NATIONAL
BANK
This Agreement is made and entered into,
effective as of May 30, 2008, by and between Commonwealth
National Bank , a national bank with its principal office and
place of business at 33 Waldo Street, Worcester, Massachusetts
(“Bank”) and Charles R. Valade, a resident of Sutton,
Massachusetts (“Executive”). This Agreement
constitutes a restatement, in its entirety, of the agreement
entered into by and between the parties effective as of May 18,
2006.
WITNESSETH:
WHEREAS, Executive is employed by Bank and its parent,
CNB Financial Corp. (the “Company”), as President and
Chief Executive Officer;
WHEREAS, the Board of Directors of Bank considers it to
be in the best interests of Bank and the stockholders of Company to
foster the continued employment of Executive in the event of a
Potential Change-in-Control (as hereinafter defined);
WHEREAS, Bank desires to assure Executive of what it
considers to be fair and reasonable terms in the event of a
Change-in-Control (as hereinafter defined);
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, the parties hereto, intending to be
legally bound, do hereby mutually covenant and agree as
follows:
1. Term
of Agreement.
This Agreement shall be effective as of the date
and year first above written (the “Commencement Date”),
and shall continue in effect through the date ending on the second
anniversary of the Commencement Date (the “Term”);
provided, however, that commencing on the date two years after the
Commencement Date (the “Initial Renewal Date”), and on
the first day of each calendar month following the calendar month
in which falls the Initial Renewal Date (each such date and the
Initial Renewal Date shall be hereinafter referred to as the
“Renewal Date”), unless previously terminated, the Term
shall be automatically extended so as to terminate twenty-five (25)
calendar months from such Renewal Date, unless at least 60 days
prior to the Renewal Date, Bank shall give notice to Executive that
the Term shall not be so extended; provided, however, that no such
notice by Bank shall be effective if prior to the date of such
notice (i) a “Potential Change in Control” shall have
occurred and the event giving rise thereto has not been terminated,
abandoned or rescinded or (ii) a “Change in Control”
shall have occurred.
2. Definitions.
For purposes of this Agreement, the following
terms shall have the following meanings:
(a) A
“Change in Control” shall be deemed to have occurred
if, during the term of this Agreement:
(i) any
Person directly or indirectly or acting through one or more other
Persons owns, controls or has power to vote more than 50% of the
voting common stock of Bank or a Controlling Person; or
(ii) any
Person acquires or agrees to acquire all or substantially all of
the assets and business of Bank or a Controlling Person;
or
(iii) any
Person (A) is a party to a merger, consolidation or any other form
of reorganization having substantially the same effect as a merger
or consolidation, with Bank or a Controlling Person and (B)
immediately prior to such transaction the Person had total assets
as of the end of its most recent fiscal year equal to or greater
than 100% of the total assets of Bank or the Controlling Person, as
applicable, as of the end of its most recent fiscal year;
or
(iv) during
any period of twenty-four (24) consecutive months, individuals who
at the beginning of such period constitute the Board of Directors
of Bank cease for any reason to constitute a majority of such
Board, unless the election, or the nomination for election of each
new Director was approved by a vote of a majority of the Directors
then still in office who were Directors at the beginning of such
period; or
(v) the
Board of Directors of Bank, by vote of two-thirds (2/3) of all the
Directors (excluding Executive if Executive is a Director), adopts
a resolution to the effect that a “Change in Control”
has occurred for purposes of this Agreement.
(b) A
“Potential Change in Control” shall be deemed to have
occurred if:
(i) Bank
or any Controlling Person enters into a letter of intent,
memorandum of understanding, or definitive agreement providing for,
or publicly announces that it is considering, one or more
transactions, the consummation of which would result in the
occurrence of a Change in Control;
(ii) any
Person (including Bank) publicly announces an intention to take or
to consider taking actions which if consummated would constitute a
Change in Control; or
(iii) the
Board of Directors of Bank, by vote of two-thirds (2/3) of all the
Directors (excluding Executive if Executive is a Director) adopts a
resolution to the effect that a “Potential Change in
Control” has occurred for purposes of this
Agreement.
(c) A
“Person” shall include a natural person, corporation,
or other entity. When two or more persons act as a partnership,
limited partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of Beneficial Ownership of Company
common stock, such partnership, syndicate, or group shall be
considered a Person. Beneficial Ownership shall be determined under
the then current provisions of Securities Exchange Act Rule
13d-3;17 C.F.R. § 240.13d-3.
(d) A
“Controlling Person” shall mean a Person who directly
or indirectly or acting through one or more other Persons
beneficially owns, controls or has power to vote 50% or more of the
voting common stock of Bank, including without limitation, any
holding company of Bank.
3. Duties
Upon Potential Change-in-Control.
In the event that a Potential Change-in-Control
shall occur while Executive is employed by Bank, Executive shall
use his reasonable best efforts to fulfill Executive’s
responsibilities to Bank in the interests of Bank and the
shareholders of Company and in order to explore and pursue fully
the Potential Change-in-Control.
4.
Change in Control Payments and Benefits.
(a)
Payment upon a Change in Control. Subject to
the provisions of Section 4(e), no later than ten (10) days
following a Change in Control, Bank shall make the following
payment to Executive:
(i) A
lump sum amount, in cash, equal to two and one-half times the sum
of:
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Executive’s annual base salary in effect
immediately prior to the Change in Control; and
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the greater of
(I) Executive’s annual incentive bonus for the year in which
the Change in Control occurs or, (II) if no such incentive bonus
has yet been determined for such year, the greater of the
Executive’s annual incentive bonus actually earned by
Executive in the year immediately preceding the year in which the
Change in Control occurs or the target annual incentive bonus for
the year in which the Change in Control occurs.
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(b)
Payments and Benefit upon Termination in Connection with a
Change in Control. If within twenty-four (24)
months following a Change in Control, Executive terminates
employment with Bank for Good Reason or Bank terminates
Executive’s employment without Cause, Bank shall provide the
following payments and benefits to Executive:
(i) Bank
shall pay Executive’s full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination
is given, no later than the fifth day following the Date of
Termination. Executive shall also receive all other amounts to
which Executive is entitled under any benefit plan of Bank at the
time such payments are due thereunder, subject, however, to the
provisions of Section 4(d) hereof.
(ii) An
amount in cash equal to Executive’s annual incentive bonus
that would be payable in cash for such year multiplied by a
fraction, (A) the numerator of which equals the number of full or
partial days in such annual performance period during which
Executive was employed by Bank and (B) the denominator of which is
365.
(iii) Stock
options, restricted stock or other stock awards held by Executive
at Executive’s Date of Termination, the vesting of which is
service based, if not then vested and exercisable, will become
fully vested and become exercisable at Executive’s Date of
Termination, and, in other respects (including the period following
termination during which such options may be exercised) such
options, restricted stock or other stock awards shall be governed
by the plans and programs and the agreements and other documents
pursuant to which such options, restricted stock or other stock
awards were granted.
(iv) Any
performance objectives upon which the earning of performance-based
restricted stock or deferred stock awards, including outstanding
stock plan awards and other long-term incentive awards, is
conditioned shall be deemed to have been met at target level at
Executive’s Date of Termination.
(v) Following
Executive’s Date of Termination, Bank shall arrange to
provide Executive with life and health insurance benefits no less
favorable than those which Executive was receiving immediately
prior to Notice of Termination, with Executive paying the same
portion of the cost of such coverage as existed at such time. If
Executive elects after Date of Termination continued coverage under
Bank’s health plan in accordance with the applicable
provisions of the Consolidated Omnibus Reconciliation Act of 1985
(“COBRA”), Executive shall continue to receive such
individual and/or family health benefits coverage as Executive was
receiving at Executive’s Date of Termination with Executive
paying the same portion of the cost of such coverage as existed at
such time, for so long during the continuation period as Executive
elects to continue coverage and pays Executive’s portion of
the costs of coverage. The foregoing coverages shall continue for a
maximum of 30 months following Executive’s Date of
Termination, provided that the coverages and reimbursement by the
Bank of any expense incurred by Executive for such coverages or
payment by the Bank directly to the person or entity providing such
coverages for Executive shall not extend or be made beyond December
31st of the second calendar year following the year in which the
Date of Termination occurs.
(vi) A
cash equivalent amount equal to the additional benefits under the
Bank’s 401(k) Plan or other similar qualified plan (plus
estimated earnings thereon) that Executive would have been entitled
to had Executive continued in the employ of Bank for a 30-month
period following Executive’s Date of Termination and made
contributions under said plan at a rate, as a percentage of salary,
equal to the rate at which Executive had made contributions to said
plan in the plan year immediately preceding Executive’s Date
of Termination.
(vii) Bank
shall reimburse Executive at least quarterly for amounts actually
expended by Executive for outplacement and job search activities
(including, but not limited to, reasonable office and secretarial
expenses) in amounts in the aggregate up to 20% of
Executive’s annual base salary and annual incentive
compensation taken into account under Section 4(a)(i)(A) and (B)
hereof, provided that such expenditures are actually incurred and
submitted for reimbursement by Executive within the 24-month period
following Executive’s Date of Termination and are
appropriately documented by invoices and proof of payment. Such
submitted expenses shall be reimbursed by Bank the earlier of 30
days after submission by the Executive of such expenses for
reimbursement or December 31st of the second calendar year
following the Date of Termination.
(viii) Bank
shall not be obligated to continue any disability or disability
income insurance on behalf of Executive following Executive’s
Date of Termination. To the extent permitted under any contracts,
programs or policies of such nature in effect at the time of such
termination, Executive may continue at Executive’s sole cost
and expense for a period of up to eighteen (18) months.
(ix) Following
Executive’s Date of Termination, Executive shall continue to
receive such perquisites, other than those specified in the
preceding subparagraphs above, as Executive was receiving
immediately prior to Executive’s Date of Termination by
reimbursing Executive for the costs of such perquisites on the same
cost sharing with Bank as was in effect immediately prior to
Executive’s Date of Termination on or before the earlier of
30 days after submission of such costs for reimbursement by
Executive or December 31st of the second calendar year following
the year in which the Date of Termination occurs.
(x) Bank
shall reimburse Executive for the amount of any reasonable legal
fees and expenses incurred by Executive in any successful action
(whether or not arbitration or litigation shall be involved) to
obtain or enforce any right or benefit provided to Executive by
Bank hereunder or as confirmed or acknowledged hereunder on or
before 30 days after submission of such costs for reimbursement by
Executive or December 31 st of
the second calendar year following the year in which the Date of
Termination occurs.
(c)
Termination Process. The following process
shall apply with respect to any purported termination of
Executive’s employment by Bank or by Executive during the
twenty-four (24) months following a Change in Control.
(i) Any
such purported termination of Executive’s employment shall be
communicated by the terminating party to the other party by written
Notice of Termination. Notwithstanding the foregoing, if
Executive terminates employment for “Good Reason,” the
written Notice of Termination must be provided within ninety (90)
days following the date on which occurs the initial existence of
any circumstance as provided in Section 4(g)(iii) hereof that
constitutes a Good Reason.
(ii) Within
fifteen (15) days following communication of a Notice of
Termination by Bank or Executive, Bank shall deliver to Executive a
written statement of all payments and benefits (“Benefit
Statement”) pertaining to Executive to be made pursuant to
this Agreement and otherwise to Executive by Bank. Bank and
Executive shall endeavor in good faith to address and resolve as
soon as possible any questions, issues or disagreements relating to
said Benefit Statement within fifteen (15) days following delivery
to Executive of said Benefit Statement.
(iii) Thereafter,
Executive shall have a period of fifteen (15) days either to invoke
the dispute resolution provisions of Section 13 hereof by notice to
Bank or to provide Bank with a waiver in writing of his right to do
so. Any failure by Executive to do either of the foregoing shall
for all purposes of this Agreement be deemed to constitute a
written waiver of Executive’s right to invoke the dispute
resolution provisions of Section 13 hereof, but shall not otherwise
affect or impair Executive’s rights or claims under this
Agreement. Within five (5) business days thereafter, Bank shall
either request from an independent tax advisor a determination of
tax deductibility pursuant to Section 4(e) with respect to all
payments and benefits reflected on the Benefits Statement or
deliver to Executive a waiver in writing of its right to do so. Any
failure by Bank to do either of the foregoing shall for all
purposes of this Agreement be deemed to constitute a written waiver
of Bank’s right to invoke application of the provisions of
Section 4(e).
(d)
Time of Payment. Subject to the provisions of
subsection (e) hereof, the payments provided for in the second
sentence of clause (i) and in clauses (ii), (vi) and (vii) of
Section 4(b) hereof, excluding, however, Bank’s reasonable
estimate of any amounts that are in dispute, shall be made not
later than thirty (30) business days following Executive’s
Date of Termination.
(e)
Limitation of Benefits Under Certain Circumstances.
If the payments and benefits pursuant to Section 4 of this
Agreement, either alone or together with other payments and
benefits Executive has the right to receive from Bank, would
constitute a “parachute payment” under Section 280G of
the Internal Revenue Code of 1986, as amended (the
“Code”), the payments and benefits pursuant to Section
4 shall be reduced or revised, in the manner determined by
Executive, by the amount, if any, which is the minimum necessary to
result in no portion of the payments and benefits under Section 4
being non-deductible to Bank pursuant to Section 280G of the Code
and subject to the excise tax imposed under Section 4999 of the
Code. Bank’s independent public accountants will
determine any reduction in the payments and benefits to be made
pursuant to Section 4; Bank will pay for the accountant’s
opinion. If Bank and/or Executive do not agree with the
accountant’s opinion, Bank will pay t
