Exhibit 10.2

 

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 333 Church Street,
Naugatuck, Connecticut 06770, Jane H. Walsh (“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 her 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.

 

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 her 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.

 

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 her
employment at any time during the term of this Agreement following an event
constituting “Good Reason.”

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“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), 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 her 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 her, 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.

 

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.

 

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 provide a basis
for termination of Executive’s employment under the provision so indicated.

 

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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.

 

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.

 

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 her 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.

 

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 such term
or condition for the future or as to any act other than that specifically
waived.

 

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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. In addition, references herein to the
masculine shall apply to both the masculine and the feminine.

 

11. Governing Law.

 

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.

 

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 her 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.

 

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.

 

The Company or the Bank shall provide Executive (including her heirs, executors
and administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense and shall indemnify Executive (and her
heirs, executors and administrators) to the fullest extent permitted under
applicable law against all expenses and liabilities reasonably incurred by her
in connection with or arising out of any action, suit or proceeding in which she

 

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may be involved by reason of having been a director or officer of the Company or
the Bank (whether or not she 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.

 

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.

 

ATTEST:

  NAUGATUCK VALLEY SAVINGS AND LOAN

/s/ Bernadette A. Mole

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  By:  

/s/ John C. Roman

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Corporate Secretary

      For the Entire Board of Directors

ATTEST:

  NAUGATUCK VALLEY FINANCIAL CORPORATION     (Guarantor)

/s/ Bernadette A. Mole

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  By:  

/s/ John C. Roman

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Corporate Secretary

      For the Entire Board of Directors

[SEAL]

       

WITNESS:

  EXECUTIVE

/s/ Bernadette A. Mole

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/s/ Jane H. Walsh

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Corporate Secretary

  Jane H. Walsh

 

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