Unassociated Document


    CHANGE
      IN CONTROL SEVERANCE AGREEMENT

    COMMONWEALTH
      NATIONAL BANK

    


    


     

    This
      Agreement is made and entered into, effective as of the 18th day of May, 2006,
      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
      Thompson, Connecticut (“Executive”). 

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      Executive is employed by Bank 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 Bank to foster the continued employment of Executive in
      the
      event of a Potential Change-in-Control (as hereinafter defined), although no
      such event is now contemplated or foreseen;

     

    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.

     

    (a)  Generally.
      Except
      as provided in Section 1(b) hereof, (i) 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, the Bank shall give notice to the 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.

     

    (b)  Upon
      a
      Change in Control. Notwithstanding Section 1(a) above, if a Change in Control
      shall have occurred at any time during the period in which this Agreement is
      effective, this Agreement shall continue in effect for (i) the remainder of
      the
      month in which the Change in Control occurred and (ii) a term of 24 months
      beyond the month in which such Change in Control occurred (such entire period
      hereinafter referred to as the "Protected Period"). A “Protected Period” can
      only occur if there is, in fact, a “Change in Control”.

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.


     

    (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
      

     

     

    
      
         

      

      
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    (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 Bank 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)  “Protected
      Period” shall have the meaning specified in Section 1(b) hereof. 

     

    (e)  A
      “Controlling Person” shall mean a Person who directly or indirectly or acting
      through one or more other Persons 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.

     

    (f)  Notwithstanding
      the definitions contained in Section 2 hereof, the formation by Bank of a bank
      holding company that is approved by the Board of Directors and the shareholders
      of Bank shall not constitute either a Change in Control or a Potential Change
      in
      Control.

     

    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 Bank
      and in order to explore and pursue fully the Potential Change-in-Control.


     

    4.  Termination.
      For purposes of this Section 4, certain capitalized terms used herein and not
      defined in Section 2 above shall have the meanings set forth in Section 4(f)
      below. 

     

    (a)  Termination
      by Bank
      for
      Cause, by Executive Without Good Reason, or by Reason of Death, Disability
      or
      Retirement. If during the Protected Period Executive’s employment by Bank is
      terminated by Bank for Cause, by Executive without Good Reason, or because
      of
      Executive’s death, Disability or Retirement, Bank shall not be obligated to make
      any payments to Executive by reason of this Agreement other than (i) payment
      of
      amounts otherwise accrued and owing but not yet paid and (ii) any amounts
      payable under then-existing employee benefit programs, subject to the
      requirements thereof and at the time such amounts are due
      thereunder.

     

    (b)  Termination
      by Bank Without Cause or by Executive for Good Reason. If during the Protected
      Period Executive’s employment by Bank is terminated by Bank without Cause or by
      Executive for Good Reason, subject to the provisions of Section 6 hereof,
      Executive shall be entitled to the compensation and benefits described in this
      Section 4(b). If Executive’s employment by Bank is terminated prior to a Change
      in Control at the request of a Person engaging in a transaction or series of
      transactions that would result in a Change in Control, the Protected Period
      shall commence upon the subsequent occurrence of a Change in Control,
      Executive’s actual termination shall be deemed a termination occurring during
      the Protected Period and covered by this Section 4(b), Executive’s Date of
      Termination shall be deemed to have occurred immediately following the Change
      in
      Control, and Notice of Termination shall be deemed to have been given by Bank
      immediately prior to Executive’s actual termination. Executive’s continued
      employment shall not constitute consent to, or a waiver of rights with respect
      to, any circumstances constituting Good Reason hereunder. The compensation
      and
      benefits provided under this Section 4(b) are as follows:

     

     

    
      
         

      

      
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    (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)  At
      the
      time specified in Section 4(d) hereof, Bank shall pay Executive, in lieu of
      amounts which may otherwise be payable to Executive under any bonus plan for
      the
      year in which the Date of Termination occurs, 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)  At
      the
      time specified in Section 4(d) hereof, Bank shall pay Executive, in lieu of
      any
      further salary, bonus or severance payments for periods subsequent to the Date
      of Termination, a lump sum amount in cash equal to two and one-half times the
      sum of:

     

    (A)  the
      greater of (I) Executive’s
      annual base salary in effect immediately prior to the Change in Control of
      Bank
      or (II) Executive’s annual base salary in effect at the time Notice of
      Termination is given; and

     

    (B)  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.

     

    (iv)  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. 

     

     

    
      
         

      

      
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    (v)  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. 

     

    (vi)  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 the 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.

     

    (vii)  At
      the
      time specified in Section 4(d) hereof, Bank shall contribute an amount equal
      to
      the aggregate amounts that Bank would have contributed on behalf of Executive
      under Bank’s 401(k) Plan, or similar qualified plan if any such plan shall be in
      effect, for a 30-month period following Executive’s Date of Termination (plus
      estimated earnings thereon) had Executive continued in the employ of Bank until
      the end of said period 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.

     

    (viii)  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 (b)(iii)(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 the date 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.

     

    (ix)  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 coverage thereunder for a period of up to eighteen (18)
      months.

     

     

    
      
         

      

      
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    (x)  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.

     

    (xi)  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.

     

    (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 Protected Period.


     

    (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. 

     

    (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 the Tax Advisor
      described in Section 4(e) below a determination of tax deductibility pursuant
      to
      said 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 the final paragraph of this subsection (d) and to the
      provisions of subsection (e) hereof, the payments provided for in the second
      sentence of clause (i) and in clauses (ii), (iii), (vii) and (viii) of Section
      4(b) hereof, excluding, however, Bank’s reasonable estimate of any amounts that
      are in dispute, shall be made not later than the five (5) business days
      following the date specified in whichever of the following clauses shall be
      applicable:

     

     

    
      
         

      

      
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    (i)  the
      date on which a Tax Determination Statement described in Section 4(e) below
      is
      communicated in writing to Bank as provided therein, if Bank shall request
      that
      a tax determination under Section 4(e) be made; or

     

    (ii)  if
      Bank shall not request that a tax determination under Section 4(e) be made,
      either (x) the date on which Executive’s right to invoke the dispute resolution
      provisions of Section 13 shall have been waived (or deemed waived) under Section
      4(c)(iii) or (y) if the aforementioned dispute resolution provision shall have
      been invoked, the payment of any amounts in dispute shall not be paid (or not
      paid) until the date of final resolution of the dispute submitted thereto.
      Any
      delay in the payment of such disputed amounts shall not cause Executive to
      violate Section 409A of the Internal Revenue Code of 1986, as amended (the
      “Code”) to the extent that such delay satisfies the conditions set forth in
      Section 409A of the Code and applicable regulations thereunder.

     

    Notwithstanding
      any other provision of this Agreement, if Bank and Executive determine that
      Executive is a “key employee” within the meaning of Section 409A of the Code and
      that, as a result of such status, any portion of the payments under this
      Agreement would be subject to additional taxation, Bank will delay paying all
      or
      any portion of such amount until the earliest permissible date on which payments
      may commence without triggering such additional taxation (with such delay not
      to
      exceed six months), with the first such payment to include any amounts that
      would have been paid earlier but for the above delay. At the request of
      Executive, Bank shall set aside those payments that would be subject to the
      Section 409A additional tax in a trust that is in compliance with Rev. Proc.
      92-64.

     

    (e)  Section
      280G Limit. 

     

    (i)  Notwithstanding
      any other provision of this Agreement, in the event that any payment or benefit
      received or to be received by Executive, whether payable pursuant to the terms
      of this Agreement or any other plan, arrangement or agreement with Bank, its
      successors, or any person affiliated with Bank (“Affiliate”) within the meaning
      of Section 1504 of the Code
      (collectively “Total Payments”) would, in the determination of the independent
      certified public accounting firm then retained by Bank (the “Tax Advisor”), not
      be deductible (in whole or in part) by Bank, an affiliate of Bank or other
      person making such payment or providing such benefit as a result of Section
      280G
      of the Code, or any successor to such Section, payments and benefits pursuant
      to
      this Agreement shall be reduced until no portion of the Total Payments is not
      deductible as a result of Section 280G of the Code, or payments and benefits
      pursuant to this Agreement are reduced to zero. 

     

    (ii)  Except
      as
      provided in the last sentence of Section 4(c)(iii), Bank may at any time request
      that the Tax Advisor make a determination described in (i) above with respect
      to
      payments and benefits reflected on a Benefits Statement delivered to
      Executive

     

     

    
      
         

      

      
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    pursuant
      to Section 4(c) above, as such statement may be modified by mutual agreement
      of
      Bank and Executive. In making its determination of deductibility in accordance
      with (i) above, the Tax Adviser shall, if and as deemed necessary or advisable
      by the Tax Advisor in order to avoid or minimize any reduction of payments
      or
      benefits to Executive pursuant to (i) above, Bank shall obtain from the Tax
      Advisor an appraisal of the then current present value of the covenants by
      Executive set forth in Sections 7 and 8 of this Agreement and an amount of
      the
      total payments to be made to Executive under clause (ii) of Section 4(b) equal
      to said amount shall be for all purposes treated as a payment to Executive
      in
      consideration of such covenants and the remainder, if any, shall be treated
      as
      supplemental wage payments to Executive. For purposes of the limitation
      contained in this Section 4(c), (i) no portion of the Total Payments the receipt
      of which Executive, in the determination of the Tax Advisor, shall have
      effectively waived prior to the date which is fifteen (15) days following
      Executive’s Date of Termination and prior to the earlier of the date of
      constructive receipt and the date of payment thereof shall be taken into
      account; and (ii) any reduction hereunder in the payments and benefits pursuant
      to Section 4(b) above shall be made from the payments and benefits to be made
      pursuant to clauses (i) through (xi) of said Section 4(b) in such order as
      may
      be determined by Executive, except to the extent that such payments and
      benefits, in the determination of the Tax Advisor, are reasonable compensation
      within the meaning of Section 280G of the Code. The determination of the Tax
      Advisor as to the deductibility of the Total Payments shall be completed not
      later than forty-five (45) days following the date on which Bank requests that
      a
      tax determination be made hereunder, and such determination, together with
      a
      detailed explanation thereof (together the “Tax Determination Statement”) shall
      be communicated in writing to Bank, with a copy to Executive, within said
      forty-five (45) day period. The determination of the Tax Advisor as to the
      deductibility of the Total Payments shall be deemed conclusive and binding
      on
      Bank and Executive and shall not be subject to the arbitration provisions of
      this Agreement. Bank shall pay the fees and other costs of the Tax Advisor
      hereunder. In the event that the independent certified public accounting firm
      then retained by Bank is unable or declines to serve as Tax Advisor for purposes
      of making the foregoing determinations, Bank shall appoint another accounting
      firm of national reputation to serve as Tax Advisor.

     

    (f)  Certain
      Definitions. Except as otherwise indicated in this Agreement, the
      following definitions shall be applicable under this Section 4.

     

    (i)  Disability.
      "Disability" shall mean Executive’s
      absence from the full-time performance of Executive’s duties with Bank for six
      consecutive months as a result of Executive’s incapacity due to physical or
      mental illness or disability, and within 15 days after written Notice of
      Termination is thereafter given Executive shall not have returned to the
      full-time performance of Executive’s duties.

     

    (ii)  Cause.
      "Cause" shall mean termination on account of (A) the willful and continued
      failure by Executive to substantially perform Executive's duties with Bank
      (other than any such failure resulting from Executive's incapacity due to
      physical or mental illness or Disability or any failure after the issuance
      of a
      Notice of Termination by Executive for Good Reason) which failure is
      demonstrably and materially damaging to the financial condition or reputation
      of
      Bank and/or its affiliates, and which failure continues more than three (3)
      business days after a written demand for substantial performance is delivered
      to
      Executive by the Board, which demand specifically identifies the manner in
      which
      the Board believes that Executive has not substantially performed Executive’s
      duties or (B) the willful engaging by Executive in conduct which is demonstrably
      and materially injurious to Bank or its affiliates, monetarily or otherwise.
      Notwithstanding the foregoing, Executive shall not be deemed to have been
      terminated for Cause unless and until there shall have been delivered to
      Executive a copy of the resolution duly adopted by the affirmative vote of
      not
      less than a majority in number of the entire membership of the Board of
      Directors (excluding Executive if Executive is then a Director) at a meeting
      of
      the Board (after reasonable notice to Executive and an opportunity for
      Executive, together with Executive’s counsel, to be heard before the Board)
      finding that, in the good faith opinion of the Board, Executive was guilty
      of
      conduct set forth above in this Section 4(f)(ii) and specifying the particulars
      thereof in detail. For purposes of this Section, no act or failure to act by
      Executive shall be considered “willful” unless it is done, or omitted to be
      done, in bad faith and without reasonable belief that Executive’s action or
      omission was in the best interests of the Bank. Any act, or failure to act,
      based upon the advice of counsel for the Bank shall be conclusively presumed
      to
      be done, or omitted to be done, by Executive in good faith and in the best
      interests of the Bank. 

     

     

    
      
         

      

      
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    (iii)  Good
      Reason. "Good Reason" shall mean, without Executive's express written consent,
      the occurrence upon or after a Change in Control of any of the following
      circumstances unless, in the case of subsections (A), (C), (F), (G) and (H)
      hereof, such circumstances are fully corrected prior to the Date of Termination
      specified in the Notice of Termination given in respect thereof (provided,
      however, Bank will not be provided an opportunity to cure hereunder more than
      once):

     

    (A)  a
      material and substantial reduction or other material and adverse change by
      the
      Bank in Executive’s position, authorities, or level of responsibilities as in
      effect immediately prior to the Change in Control;
      

     

    (B)  a
      reduction in Executive’s annual base salary as in effect immediately prior to
      the Change in Control;

     

    (C)  a
      reduction in Executive’s perquisites as in effect immediately prior to the
      Change in Control as the same may be increased from time to time except for
      across-the-board perquisite reductions similarly affecting all senior executives
      of Bank and all senior executives of any Person in control of Bank;

     

    (D)  the
      relocation of the principal place of Executive’s employment to a location more
      than 35 miles from Executive’s principal place of employment immediately prior
      to the Change in Control;

     

    (E)  the
      failure by Bank to pay to Executive any portion of Executive’s compensation or
      to pay to Executive any portion of an installment of deferred compensation
      under
      any deferred compensation program of Bank within seven days of the date such
      compensation is due;

     

     

    
      
         

      

      
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    (F)  the
      failure by Bank to continue in effect any material compensation or benefit
      plan
      in which Executive participated immediately prior to the Change in Control,
      unless an equitable arrangement (embodied in an ongoing substitute or
      alternative plan) has been made with respect to such plan, or the failure by
      Bank to continue Executive’s participation therein (or in such substitute or
      alternative plan) on a basis not materially less favorable, both in terms of
      the
      amounts of benefits provided and the level of Executive’s participation relative
      to other participants, as existed at the time of the Change in
      Control;

     

    (G)  the
      failure of Bank to obtain a satisfactory agreement from any successor to assume
      and agree to perform this Agreement, as contemplated in Section 11 hereof;
      or

     

    (H)  any
      purported termination of Executive's employment that is not effected pursuant
      to
      a Notice of Termination satisfying the requirements of Section 4(f)(v) hereof,
      which purported termination shall not be effective for purposes of this
      Agreement.

     

    (iv)  Retirement.
      “Retirement” shall mean Executive’s retirement from Bank in accordance with the
      retirement policy of Bank, including early retirement, generally applicable
      to
      its executives or in accordance with any retirement arrangement with respect
      to
      Executive established by the Board with the consent of Executive.

     

    (v)  Notice
      of
      Termination. "Notice of Termination" shall mean notice indicating the specific
      termination provision in this Agreement relied upon and setting forth in
      reasonable detail the facts and circumstances claimed to provide a basis for
      termination of Executive’s employment under the provision so
      indicated.

     

    (vi)  Date
      of
      Termination. "Date of Termination" shall mean (A) if Executive’s employment is
      terminated for Disability, 15 days after Notice of Termination is given
      (provided that Executive shall not have returned to the full-time performance
      of
      Executive’s duties during such 15-day period) or (B) if Executive’s employment
      is terminated for any other reason, the date specified in the Notice of
      Termination (which, in the case of a termination for Cause, shall not be less
      than 30 days from the date such Notice of Termination is given and, in the
      case
      of a termination for Good Reason, shall not be less than 15 nor more than 60
      days from the date such Notice of Termination is given).

     

    (vii)  Benefit
      Statement. “Benefit Statement” shall mean a written statement showing in a clear
      and understandable presentation all payments and benefits and the amounts and
      methods of calculation thereof owed by Bank to Executive upon Executive’s
      termination of employment with Bank as prepared by or under the direction of
      Bank. 

     

    (viii)  “Tax
      Determination Statement” shall mean the written determination of the Tax Advisor
      as to the deductibility of the Total Payments as described in Section 4(e)
      above. 

     

    5.  Mitigation.
      

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    


     

    So
      long
      as Executive shall not be in breach of any provisions of Sections 7 or 8,
      Executive shall not be required to mitigate the amount of payment provided
      for
      under this Agreement by seeking other employment or otherwise, nor shall the
      amount of payment or benefit provided for under this Agreement be reduced by
      any
      compensation earned by Executive as the result of employment by another employer
      permitted by this Agreement. 

     

    6.  Release.

     

    As
      a
      condition of receiving payments or benefits provided for in this Agreement,
      at
      the request of Bank, or its successor, Executive shall execute and deliver
      for
      the benefit of Bank and any Controlling Person, a general release in
      substantially the form set forth in Attachment A hereto, and such release shall
      become effective in accordance with its terms. The failure or refusal of
      Executive to sign such a release or the revocation of such a release shall
      cause
      the termination of any and all obligations of Bank to make payments or provide
      benefits hereunder, and the forfeiture of Executive's right to receive any
      such
      payments and benefits. Executive acknowledges that Bank has advised Executive
      to
      consult with an attorney prior to signing this Agreement and that Executive
      has
      had an opportunity to do so. 

     

    7.  Confidential
      Information. 

     

    Executive
      understands that in the course of Executive's employment by Bank, Executive
      will
      receive or have access to, or has received or had access to, confidential
      information concerning the business or purposes of Bank which Bank desires
      to
      protect. Such confidential information shall be deemed to include, but not
      be
      limited to, Bank’s customer lists and information, and employee lists,
      including, if known, personnel information and data. Executive agrees that
      Executive will not at any time reveal to anyone outside Bank or use for
      Executive's own benefit any such information without specific written
      authorization by Bank, which may be withheld by Bank in its sole discretion.
      Executive further agrees not to use any such confidential information or trade
      secrets in competing with Bank at any time. 

     

    8.  Non-Competition
      and Non-Disclosure; Non-Disparagement; Certain Forfeitures.

     

    (a)  Non-Competition.
      In consideration for the compensation and benefits provided for
      by
      this Agreement, as affected by the provisions of Section 4(e) above, without
      the
      consent in writing of the Board of Directors of Bank, which may be withheld
      by
      Bank for any reason or no reason in Bank’s sole discretion, Executive will not,
      at any time that Executive shall be employed by Bank, or at any time during
      the
      period of eighteen (18) months following Executive’s Date of Termination during
      the Protected Period, acting alone or in conjunction with others, directly
      or
      indirectly (i) engage (either as owner, investor, partner, stockholder,
      employer, employee, consultant, advisor, or director) in any business of any
      bank, bank holding company, savings bank, savings and loan association, savings
      and loan holding company, or other institution engaged in the business of
      accepting deposits and/or making loans, or any direct or indirect subsidiary
      or
      affiliate of any such entity, that conducts business or maintains an office
      within a thirty (30) mile radius of the Bank’s headquarters at 33 Waldo Street,
      Worcester, MA; (ii) solicit or otherwise induce any customer of Bank or any
      of
      its affiliates to curtail or cancel their business with Bank or any such
      affiliate; (iii) solicit or otherwise induce or attempt to influence any
      employee of Bank or any affiliate to terminate employment; or (iv) solicit,
      hire
      or retain as an employee or independent contractor, or assist any third party
      in
      the solicitation, hire, or retention as an employee or independent contractor,
      any person who during the twelve months prior to the Date of Termination was
      an
      employee of Bank or any such affiliate; provided, however, that activities
      engaged in by Executive by or on behalf of Bank are not restricted by this
      covenant. The provisions of clauses (i), (ii), (iii), and (iv) above are
      separate and distinct commitments, each independent of the other subparagraphs.
      It is agreed that the ownership by Executive of not more than one percent (1%)
      of the equity securities of any company having securities listed on an exchange
      or regularly traded in the over-the-counter market shall not, of itself, be
      deemed inconsistent with clause (i) of this Section 8(a).

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (b)  Non-Disparagement.
      Executive shall not, at any time during the term of this Agreement or
      thereafter, willfully make statements or representations, or otherwise
      communicate, directly or indirectly, in writing, orally, or otherwise, or take
      any action which is intended to, directly or indirectly, disparage and cause
      financial harm to Bank or any of its affiliates or their respective officers,
      directors, employees, advisors, businesses or reputations. Notwithstanding
      the
      foregoing, nothing in this Agreement shall preclude Executive from making
      truthful statements that are required by applicable law, regulation or legal
      process.

     

    (c)  Injunction.
      Executive hereby acknowledges that Executive’s
      services are unique and extraordinary, and are not readily replaceable, and
      hereby expressly agrees that Bank, in enforcing the covenants contained in
      Sections 7 and 8 herein, in addition to any other remedies provided for herein
      or otherwise available at law, shall be entitled in any court of equity having
      jurisdiction to an injunction restraining him in the event of a breach, actual
      or threatened, of the agreements and covenants contained in such
      Sections.

     

    (d)  Scope.
      The parties hereto believe that the restrictive covenants contained in Sections
      7 and 8 hereof are reasonable. However, if at any time it shall be determined
      by
      any court of competent jurisdiction that these Sections or any portion of them
      as written, are unenforceable because the restrictions are unreasonable, the
      parties hereto agree that such portions as shall have been determined to be
      unreasonably restrictive shall thereupon be deemed so amended as to make such
      restrictions reasonable in the determination of such court, and the said
      covenants, as so modified, shall be enforceable between the parties to the
      same
      extent as if such amendments had been made prior to the date of any alleged
      breach of said covenants.

     

    9.  Right
      of Discharge.
      

     

    Subject
      to the obligations to make the payments specified in Section 4(b), it is
      expressly agreed that, except as set forth in Section 3 above, Bank shall have
      the right to discharge or terminate Executive at any time and for any reason,
      or
      no reason.

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    10.  Exclusivity.
      

     

    It
      is
      understood and agreed that if any payments are due and made to Executive under
      this Agreement then no payments will be due or required, and Bank shall not
      in
      any respect be obligated to Executive, under any other severance pay plan,
      agreement, or arrangement that might otherwise be applicable to Executive,
      or
      under or by reason of any employment severance pay or similar agreement between
      Bank and Executive. 

     

    11.  Successors;
      Binding Agreement.

     

    (a)  This
      Agreement shall be binding upon and inure to the benefit of and be enforceable
      by any and all successors and assigns of Bank. Bank
      shall
      require any successor (whether direct or indirect, by purchase, merger,
      consolidation or otherwise) to all or substantially all of the business and/or
      assets of Bank, and in the case of an acquisition of Bank in which the corporate
      existence of Bank continues, the ultimate parent company following such
      acquisition, expressly to assume and agree to perform this Agreement in the
      same
      manner and to the same extent that Bank would be required to perform it if
      no
      such succession had taken place. As used in this Agreement, "Bank" shall mean
      Bank as hereinbefore defined and any successor to its business and/or assets
      as
      aforesaid which assumes and agrees to perform this Agreement by operation of
      law, or otherwise.

     

    (b)  This
      Agreement shall be binding upon and inure to the benefit of and be enforceable
      by Executive and Executive's personal or legal representatives, executors,
      administrators, successors, heirs, distributees, devisees and legatees. In
      the
      event of Executive's death following becoming entitled to payments hereunder
      but
      prior to completion of such payments, all amounts otherwise payable to Executive
      hereunder shall, unless otherwise provided herein, be paid in accordance with
      the terms of this Agreement to Executive's devisee, legatee or other designee
      specifically named in a writing signed by Executive and delivered to Bank or,
      if
      there is no such designee, to Executive's estate.

     

    12.  Notice.
      

     

    Notices
      and all other communications provided for in this Agreement shall be in writing
      and shall be deemed to have been duly given when (a) personally delivered,
      (b)
      sent by Federal Express or other similar overnight service or (c) mailed by
      United States certified or registered mail, return receipt requested, postage
      prepaid, addressed to the respective addresses set forth below, or to such
      other
      address as either party may have furnished to the other in writing in accordance
      herewith, except that notice of change of address shall be effective only upon
      receipt. In the case of Federal Express or other similar overnight service,
      such
      notice or advice shall be effective and deemed delivered when sent, and, in
      the
      cases of certified or registered mail, shall be effective and deemed delivered
      two days after deposit into the mail by delivery to the U.S. Post
      Office.

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

     

     

     

    
      	 	 If to Executive, to: 
	 	 
	 	
              Charles
                R. Valade

              267
                Sand Dam Road

              Thompson,
                CT 06277

            
	 	 
	 	
              If
                to Bank, to: 

            
	 	 
	 	
              Commonwealth National Bank

              33 Waldo Street

              Worcester, MA 01613-0830
                
                Attn:
                  Chairman, Board of
                  Directors

              

            


    

     

     

    13.  Dispute
      Resolution.
      

     

    (a)  Negotiation.
      Bank
      and
      Executive shall attempt in good faith to resolve any dispute arising out of
      or
      relating to this Agreement promptly by negotiation between the designated
      representative of the Board of Directors of Bank and Executive. Any party may
      give the other party written notice of any dispute in accordance with the notice
      procedures set forth in Section 12. Within 15 days after delivery of the notice,
      the receiving party shall submit to the other, in accordance with the notice
      procedures set forth in Section 12, a written response. The notice and response
      shall include a statement of that party’s position and summary of arguments
      supporting that position. Within 15 days after delivery of the initial notice,
      the parties shall meet at a mutually acceptable time and place, and thereafter
      as often as they reasonably deem necessary, to attempt to resolve the dispute.
      All negotiations pursuant to this clause are confidential and shall be treated
      as compromise and settlement negotiations for purposes of applicable rules
      of
      evidence.

     

    (b)  Mediation.
      If the dispute has not been resolved by negotiation as provided herein within
      30
      days after delivery of the initial notice of negotiation, or if the parties
      failed to meet within 30 days after delivery of such notice, the parties shall
      endeavor to settle the dispute by mediation; provided, however, that if one
      party fails to participate in the negotiation as provided herein, the other
      party may initiate mediation prior to the expiration of the 90 days.


     

    (c)  Arbitration.
      Any dispute arising under or in connection with this Agreement which has not
      been resolved by mediation as provided herein within 30 days after initiation
      of
      the mediation procedure, shall be finally resolved by arbitration in accordance
      with the rules of the American Arbitration Association then currently in effect.
      The place of arbitration shall be Worcester or Boston, Massachusetts. For
      purposes of entering any judgment upon an award rendered by the arbitrators,
      Bank and Executive hereby consent to the jurisdiction of any or all of the
      following courts: (i) the United States District Court for the District of
      Massachusetts, (ii) any of the courts of the Commonwealth of Massachusetts,
      or
      (iii) any other court having jurisdiction. Venue shall be in Worcester,
      Massachusetts. Bank and Executive hereby agree that a judgment upon an award
      rendered by the arbitrators may be enforced in other jurisdictions by suit
      on
      the judgment or in any other manner provided by law. Subject to subsection
      (e)
      of this Section 13, Bank shall bear all costs and expenses arising in connection
      with any arbitration proceeding pursuant to this Section 13(c). Notwithstanding
      any provision in this Section 13(c), Bank shall be obligated to pay any and
      all
      undisputed amounts under this Agreement pursuant to Section 4 above, and
      Executive shall be entitled to seek specific performance of Executive’s right to
      be paid during the pendency of any dispute or controversy arising under or
      in
      connection with this Agreement.

     

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (d)  Interest
      on Unpaid Amounts. Any amount which has become payable pursuant to the terms
      of
      this Agreement or any decision by arbitrators or judgment by a court of law
      pursuant to this Section 13 but which has not been timely paid shall bear
      interest at the prime rate as quoted by Bank at the time such amount first
      becomes payable and remain fixed at that rate until such amounts are
      paid.

     

    (e)  Costs
      of
      Proceedings. Bank shall pay all costs and expenses, including all attorneys'
      fees and disbursements, of Bank and, at least monthly, Executive, in connection
      with any proceedings undertaken pursuant to this Section 13, whether or not
      instituted by Bank, or Executive, relating to the interpretation or enforcement
      of any provision of this Agreement; provided that if Executive instituted the
      proceeding and a finding is entered that Executive instituted the proceeding
      without a good faith belief that Executive would prevail on at least one
      material issue, Executive shall pay all of Executive’s costs and expenses,
      including attorneys' fees and disbursements and reimburse Bank for all of such
      costs and expenses of Executive theretofore paid by Bank, within 60 days after
      the final determination of all of such proceedings. 

     

    14.  Regulatory
      Limitation.  

     

    Notwithstanding
      any other provision of this Agreement, Bank shall not be obligated to make,
      and
      Executive shall have no right to receive, any payment, benefit or amount under
      this Agreement which would violate any law, regulation or regulatory order
      applicable to Bank or its parent at the time such payment, benefit or amount
      is
      due, including, without limitation, Section 1828(k)(1) of Title 12 of the United
      States Code and any regulation or order thereunder of the Federal Deposit
      Insurance Corporation (“Prohibited Payment”). If and to the extent Bank shall at
      a later date be relieved of the restriction on its ability to make any
      Prohibited Payment, then at such time Bank shall promptly make payment of any
      such amounts to Executive.

     

    15.  Miscellaneous.
      

     

    Except
      as
      to a waiver described in Section 4(c) above, no provision of this Agreement
      may
      be modified, waived or discharged unless such waiver, modification or discharge
      is agreed to in writing and signed by Executive and such officer as may be
      designated by the Board of Directors of Bank, acting upon the direction of
      said
      Board. No waiver by either party hereto at any time of any breach by the other
      party hereto of, or compliance with, any condition or provision of this
      Agreement to be performed by such other party shall be deemed a waiver of
      similar or dissimilar provisions or conditions at the time or at any prior
      or
      subsequent time. The validity, interpretation, construction and performance
      of
      this Agreement shall be governed by the laws of the Commonwealth of
      Massachusetts without regard to its conflicts of law principles. All references
      to sections of the Exchange Act, the Code or the United States Code shall be
      deemed also to refer to any successor provisions to such sections. Any payments
      provided for hereunder shall be paid net of any applicable withholding required
      under federal, state or local law. 

     

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    


    16.  Validity.
      

     

    The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this Agreement,
      which shall remain in full force and effect.

    


    17.  Counterparts.
      

     

    This
      Agreement may be executed in counterparts, each of which shall be deemed to
      be
      an original but all of which together will constitute one and the same
      instrument.

    


    18.  Entire
      Agreement.
      

     

    This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of
      the subject matter contained herein and during the term of this Agreement
      supersedes the provisions of all prior agreements, promises, covenants,
      arrangements, communications, representations or warranties, whether oral or
      written, by any officer, employee or representative of either party hereof
      with
      respect to the subject matter contained herein. No agreements or
      representations, oral or otherwise, express or implied, with respect to the
      subject matter hereof have been made by either party which are not expressly
      set
      forth in this Agreement. Notwithstanding anything to the contrary in this
      Agreement, the procedural provisions of this Agreement shall apply to all
      benefits payable as a result of a Change in Control (or other change in control)
      under any employee benefit plan, agreement, program, policy or arrangement
      of
      Bank.

    


    IN
      WITNESS WHEREOF,
      Bank
      has caused this Agreement under seal to be executed by a duly authorized
      officer, and Executive has executed this Agreement, as of the 18th day of May,
      2006.

     

    
      	 	
              COMMONWEALTH
                NATIONAL BANK

               

              By:
                /s/ Lawrence J. Glick

              -----------------------------------------------

              Name:
                Lawrence J. Glick

              Its
                Chairman of the Compensation Committee of the Board of
                Directors

            
	 	
               

              EXECUTIVE

               

              By:
                /s/ Charles R. Valade

              ------------------------------------------------

              Name:
                Charles R. Valade

            


    

     

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    ATTACHMENT
      A

     

    RELEASE

     

    We
      advise
      Executive to consult an attorney before Executive signs this Release. Executive
      has until the date which is seven (7) days after the Release is signed and
      returned to Commonwealth National Bank (“Bank”) to change Executive’s mind and
      revoke this Release. Executive’s Release shall not become effective or
      enforceable until after that date.

     

    In
      consideration for the benefits provided under Executive’s Change in Control
      Severance Agreement with Bank effective [ ] (the “Agreement”), and more
      specifically enumerated in Exhibit
      1
      hereto,
      by Executive’s signature below, Executive, for and on behalf of Executive,
      Executive’s heirs, executors, agents, representatives, successors and assigns,
      hereby releases and forever discharges Bank, its past and present parent
      corporations, subsidiaries, divisions, subdivisions, affiliates and related
      companies (collectively, the “Company”) and the Company’s past, present and
      future agents, directors, officers, employees, representatives, successors
      and
      assigns (hereinafter “those associated with the Company”) with respect to any
      and all claims, demands, actions and liabilities, whether in law or equity,
      which Executive may have against the Company or those associated with the
      Company of whatever kind, including but not limited to those arising out of
      Executive’s employment with the Company or the termination of that employment.
      Executive agrees that this release covers, but is not limited to, claims arising
      under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq.,
      Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the
      Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., the Fair
      Labor Standards Act, 29 U.S.C. § 201 et seq., the Employee Retirement Income
      Security Act of 1974, 29 U.S.C. § 1001 et seq., the Massachusetts Fair
      Employment Practices Act, M.G.L. c. 151B §1 et seq.; the Massachusetts Civil
      Rights Act, M.G.L. c.12 §§11H and 11I; the Massachusetts Equal Rights Act,
      M.G.L. c.93 §102 and M.G.L. c.214, §1C; the Massachusetts Labor and Industries
      Act, M.G.L. c. 149, §1 et seq .; and the Massachusetts Privacy Act, M.G.L.
      c.214, §1B, and any other local, state or federal law, regulation or order
      dealing with discrimination in employment on the basis of sex, race, color,
      national origin, veteran status, marital status, religion, disability, handicap,
      or age. Executive also agrees that this release includes claims based on
      wrongful termination of employment, breach of contract (express or implied),
      tort, or claims otherwise related to Executive’s employment or termination of
      employment with the Company and any claim for attorneys’ fees, expenses or costs
      of litigation. 

     

    This
      Release covers all claims based on any facts or events, whether known or unknown
      by Executive, that occurred on or before the date of this Release. Except to
      enforce this Release, Executive agrees that Executive will never commence,
      prosecute, or cause to be commenced or prosecuted any lawsuit or proceeding
      of
      any kind against the Company or those associated with the Company in any forum
      and agrees to withdraw with prejudice all complaints or charges, if any, that
      Executive has filed against the Company or those associated with the
      Company.

     

    Anything
      in this Release to the contrary notwithstanding, this Release does not include
      a
      release of: (i) Executive’s rights under the Agreement or Executive’s right to
      enforce the Agreement, including but not limited to any benefit or payment
      amount under Section 4; (ii) any rights Executive may have to indemnification
      under any agreement, law, Company organizational document or policy, or
      otherwise; (iii) except as expressly provided in the Agreement, any rights
      Executive may have to benefits under the Company’s benefit plans; or (iv)
      Executive’s right to enforce this Release. 

     

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    By
      signing this Release, Executive further agrees as follows:

     

    i. Executive
      has read this Release carefully and fully understands its terms;

     

    ii. Executive
      has had at least twenty-one (21) days to consider the terms of the
      Release;

     

    iii. Executive
      has seven (7) days from the date Executive signs this Release to revoke it
      by
      written notification to the Company. After this seven (7) day period, this
      Release is final and binding and may not be revoked;

     

    iv. Executive
      has been advised to seek legal counsel and has had an opportunity to do
      so;

     

    v. Executive
      would not otherwise be entitled to the benefits provided under Executive’s
      Agreement had Executive not agreed to execute and deliver this Release;
      and

     

    vi. Executive’s
      agreement to the terms set forth above is voluntary.

     

    IN
      WITNESS WHEREOF, Executive has executed and delivered this release under seal
      at
      Worcester, Massachusetts on the date indicated below.

     

    
      	
               

               

              Witness:_______________________

            	
               

               

              Name:____________________________________

               

              Signature:_________________________________   

              Date:_____________________________________

            


    

     

     

     

    17