CHANGE-IN-CONTROL
AND
RESTRICTIVE COVENANT AGREEMENT
FOR CERTAIN OFFICERS
OF ROCKVILLE BANK
PERSONAL AND
CONFIDENTIAL
Mr. John
T. Lund
Rockville Bank
1645 Ellington Road
South Windsor, CT 06074
Rockville Bank
(the “Bank”) and Rockville Financial, Inc. (the
“Company”) consider it essential to the best interests
of the Company’s stockholders to foster the continued
employment of key management personnel. In this connection, the
Boards of Directors of the Bank and the Company (the
“Board”) recognize that the possibility of a change in
ownership or control of the Bank or the Company may result in the
departure or distraction of such personnel to the detriment of the
Bank and the Company and its stockholders. As you are a skilled and
dedicated Bank executive with important management responsibilities
and talents, the Bank and the Company believe that their best
interests will be served if you are encouraged to remain with the
Bank.
The Bank and the
Company have determined that your ability to perform your
responsibilities and utilize your talents for the benefit of the
Bank and the Company, and the Bank’s ability to retain you as
an employee, will be significantly enhanced if you are provided
with fair and reasonable protection from the risks of a change in
ownership or control of the Bank or the Company. Accordingly, in
order to induce you to remain in the employ of the Bank, you, the
Bank and the Company agree as follows:
(a)
Generally . Except as provided in Section 1(b) hereof,
(i) this Agreement shall be effective as of January 2,
2009 and shall continue in effect through December 31, 2009,
and (ii) commencing on January 1, 2010, and each January 1
thereafter, this Agreement shall be automatically extended for one
additional year unless, not later than November 30th of the
preceding year, either party to this Agreement gives notice to the
other that the Agreement shall not be extended under this
Section 1(a); provided, however, that no such notice by the
Bank or the Company shall be effective if a Change in Control or
Potential Change in Control (both as defined herein) shall have
occurred prior to the date of such notice.
(b)
Upon a Change in Control . 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”).
2. Change
in Control; Potential Change in Control .
(a) A
“Change in Control” shall be deemed to have occurred
if, during the term of this Agreement:
(i) the
Company, or the mutual holding company parent of the Company,
whether it remains a mutual holding company or converts to the
stock form of organization (the “Mutual Holding
Company”), merges into or consolidates with another
corporation, or merges another corporation into the Company or the
Mutual Holding Company, and as a result, with respect to the
Company, less than a majority of the combined voting power of the
resulting corporation immediately after the merger or consolidation
is held by “Persons” as such term is used for purposes
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) who were stockholders
of the Company immediately before the merger or consolidation or,
with respect to the Mutual Holding Company, less than a majority of
the directors of the resulting corporation immediately after the
merger or consolidation were directors of the Mutual Holding
Company immediately before the merger or consolidation;
(ii) following
a conversion of the Mutual Holding Company to the stock form of
organization, any Person (other than any trustee or other fiduciary
holding securities under an employee benefit plan of the Bank or
the Company), becomes the “Beneficial Owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the resulting corporation representing
25% or more of the combined voting power of the resulting
corporation’s then-outstanding securities;
(iii) during
any period of twenty-four months (not including any period prior to
the Effective Date of this Agreement), individuals who at the
beginning of such period constitute the board of directors of the
Company, and any new director (other than (A) a director
nominated by a Person who has entered into an agreement with the
Company to effect a transaction described in Sections (2)(a)(i),
(ii) or (iv) hereof, (B) a director nominated by any
Person (including the Company) who publicly announces an intention
to take or to consider taking actions (including, but not limited
to, an actual or threatened proxy contest) which if consummated
would constitute a Change in Control or (C) a director
nominated by any Person who is the Beneficial Owner, directly or
indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company’s securities)
whose election by the board of directors of the Company or
nomination for election by the Company’s stockholders was
approved in advance by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute at least a majority thereof;
(iv) the
stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets;
or
(v) the
board of directors of the Company adopts a resolution to the effect
that, for purposes of this Agreement, a Change in Control has
occurred.
(b) A
“Potential Change in Control” shall be deemed to have
occurred if:
(i) the
Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
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(ii) any
Person (including the Company) 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 the Bank adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control
has occurred. `
(c)
Employee Covenants . You agree that, subject to the terms
and conditions of this Agreement, in the event of a Potential
Change in Control, you will remain in the employ of the Bank until
the earliest of (i) a date which is 180 days from the
occurrence of such Potential Change in Control, (ii) the
termination of your employment by reason of Disability (as defined
herein) or (iii) the date on which you first become entitled
under this Agreement to receive the benefits provided in Section
3(b) hereof.
(d)
Company Covenant Regarding Potential Change in Control or Change
in Control . In the event of a Potential Change in Control or a
Change in Control, the Bank or the Company shall, not later than
15 days thereafter, have established one or more rabbi trusts
and shall deposit therein cash in an amount sufficient to provide
for full payment of all potential obligations of the Bank and the
Company that would arise assuming consummation of a Change in
Control, or has arisen in the case of an actual Change in Control,
and a subsequent termination of your employment under
Section 3(b). Such rabbi trust(s) shall be irrevocable and
shall provide that neither the Bank nor the Company may, directly
or indirectly, use or recover any assets of the trust(s) until such
time as all obligations which potentially could arise hereunder
have been settled and paid in full or otherwise extinguished,
subject only to the claims of creditors of the Bank and the Company
in the event of insolvency or bankruptcy of the Bank or the
Company; provided, however, that if no Change in Control has
occurred within two years after such Potential Change in Control,
such rabbi trust(s) shall at the end of such two-year period become
revocable and may thereafter be revoked by the Bank.
(a)
Termination by the Bank for Cause, by You Without Good Reason,
or by Reason of Death or Disability . If during the Protected
Period your employment by the Bank is terminated by the Bank for
Cause, by you without Good Reason, or because of your death or
Disability, the Bank and the Company shall be relieved of their
obligation to make any payments to you 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 at the time such amounts are due.
(b)
Termination by the Bank Without Cause or by You for Good
Reason . If during the Protected Period your employment by the
Bank is terminated by the Bank without Cause or by you for Good
Reason, you shall be entitled to the compensation and benefits
described in this Section 3(b). If your employment by the 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,
your actual termination shall be deemed a termination occurring
during the Protected Period and covered by this Section 3(b),
your 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 the Bank
immediately prior to your actual termination. Your 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 3(b) are as follows:
(i) The
Bank shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination
is given, on the fifth day following the Date of Termination, and
you shall receive all other amounts to which you are entitled under
any compensation or benefit plan of the Bank, at the time such
payments are due in accordance with the terms of such compensation
or benefit plan.
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(ii) In
the payroll period next following the payroll period in which your
Date of Termination occurs, the Bank shall pay you, 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 two
times the sum of:
(A)
the greater of (I) your annual base salary in effect
immediately prior to the Change in Control or (II) your annual
base salary in effect at the time Notice of Termination is given;
and
(B)
the greater of (I) your annual target bonus for the year in
which the Change in Control occurs or, (II) if no such target
bonus has yet been determined for such year, the annual bonus
actually earned by you in the year immediately preceding the year
in which the Change in Control occurs.
(iii) In
the payroll period next following the payroll period in which your
Date of Termination occurs, in lieu of any annual incentive
compensation payable to you under any bonus or incentive plan (the
“Incentive Plan”) for the year in which your employment
is terminated, the Bank shall pay you an amount equal to the
portion of your annual target incentive compensation potentially
payable in cash to you (i.e., excluding the portion payable in
stock or in other non-cash awards) for the year of termination,
multiplied by a fraction the numerator of which is the number of
days you were employed in the year of termination and the
denominator of which is 365; provided, however, if you have
previously deferred any award payable under any such Incentive
Plan, the terms of the applicable Incentive Plan shall determine
the time of payment of the cash amount that is payable under this
Section 3(b)(iii) in lieu of such award.
(iv) Stock
options held by you at termination, if not then vested and
exercisable, will become fully vested and exercisable at the date
of such termination, and, in other respects (including the period
following termination during which such options may be exercised),
such options shall be governed by the plans and programs and the
agreements and other documents pursuant to which such options were
granted.
(v) Any
performance objectives upon which the earning of performance-based
restricted stock and 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 the
date of termination, and restricted stock and deferred stock
awards, including outstanding stock plan awards, and other
long-term incentive awards (to the extent then or previously
earned, in the case of performance-based awards) shall become fully
vested and non-forfeitable at the date of such termination, and, in
other respects, such awards, including the time of payment of such
awards, shall be governed by the plans and programs and the
agreements and other documents pursuant to which such awards were
granted.
(vi) The
Bank shall provide you with a cash allowance for outplacement and
job search activities (including, but not limited to, office and
secretarial expenses) in the amount of 20% of your annual base
salary and annual target bonus taken into account under
Section 3(b)(ii) hereof, provided that such cash
allowance shall apply only to those costs or obligations that are
incurred by you before the last day of the second calendar year
following the calendar year in which your Date of Termination
occurs. Payments of such cash allowance shall be made on the
fifteenth day following the submission of each receipt to the Bank
evidencing costs or obligations incurred by you in connection with
outplacement and job search activities, but in no event later than
the last day of the third calendar year following the calendar year
in which your Date of Termination occurs.
(vii) If
you elect after termination of employment continued coverage under
the Bank’s health plan in accordance with the applicable
provisions of the Consolidated Omnibus Reconciliation Act of 1985
(“COBRA”), the Bank will pay you on a monthly basis
during such COBRA continuation period an amount equal on an
after-tax basis to the total cost of such coverage.
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(c)
Reimbursements; Section 409A Exemptions; Delayed Payments
Under Section 409A .
(i) Any
reimbursements made or in-kind benefits provided under this
Agreement shall be subject to the following conditions:
(A)
the amount of expenses eligible for reimbursement or in-kind
benefits provided in any one taxable year shall not affect the
amount of expenses eligible for reimbursement or in-kind benefits
provided in any other taxable year;
(B)
the reimbursement of any expense shall be made each calendar
quarter and not later than the last day of the taxable year
following the taxable year in which the expense was incurred
(unless this Agreement specifically provides for reimbursement by
an earlier date);
(C)
the right to reimbursement of an expense or payment of an in-kind
benefit shall not be subject to liquidation or exchange for another
benefit.
(ii) Any
reimbursement under Section 3(b)(vii) for expenses for medical
coverage that are made during the period of time you are entitled
to continuation coverage under the Bank’s health plan
pursuant to COBRA shall be exempt from Section 409A of the
Code and the six-month delay in payment described hereinbelow
pursuant to Section 1.409A-1(b)(9)(v)(B) of the Treasury
Regulations.
(iii) Any
reimbursement under Section 3(b)(vi) relating to outplacement
expenses shall be exempt from Section 409A of the Code and the
six-month delay in payment described hereinbelow pursuant to
Section 1.409A-1(b)(9)(v)(A) of the Treasury Regulations and
shall not be subject to Section 3(c)(i) above.
(iv) Your
right to reimbursements under this Agreement shall be treated as a
right to a series of separate payments under
Section 1.409A-2(b)(2)(iii) of the Treasury
Regulations.
(v) It
is intended that: (A) payments made under this Agreement due
to your termination of employment that are paid on or before the
15 th
day of the third month following the
end of the taxable year in which your termination of employment
occurs shall be exempt from compliance with Section 409A of
the Code pursuant to the exemption for short-term deferrals set
forth in Section 1.409A-1(b)(4) of the Treasury Regulations
(the “Exempt Short-Term Deferral Payments”); and
(B) payments under this Agreement, other than Exempt
Short-Term Deferral Payments, that are made on or before the last
day of the second taxable year following the taxable year in which
you terminate employment in an aggregate amount not exceeding two
times the lesser of: (I) the sum of your annualized
compensation based on your annual rate of pay for the taxable year
preceding the taxable year in which you terminate employment
(adjusted for any increase during that year that was expected to
continue indefinitely if you had not terminated employment); or
(II) the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) of the Code for
the year in which you terminate employment shall be exempt from
compliance with Section 409A of the Code pursuant to the
exception for payments under a separation pay plan as set forth in
Section 1.409A-1(b)(9)(iii) of the Treasury Regulations.
(vi) Anything
in this Agreement to the contrary notwithstanding, payments to be
made under this Agreement upon your termination of employment which
are subject to Section 409A of the Code shall be delayed for
six months following such termination of employment if you are a
Specified Employee as defined in Section 3(f)(vi) on the date
of your termination of employment. Any payment or reimbursement due
within such six-month period shall be delayed to the end of such
six-month period. The Bank will adjust the payment or reimbursement
to reflect the deferred payment date by multiplying the payment or
reimbursement by the product of the six-month CMT Treasury Bill
annualized yield rate as published by the U.S. Treasury for the
date on which such payment or reimbursement would have been made
but for the delay multiplied by a fraction, the numerator of which
is the number of days by which such payment or reimbursement was
delayed and the denominator of which is 365. The Bank will pay
the
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adjusted
payment or reimbursement at the beginning of the seventh month
following your termination of employment. Notwithstanding the
foregoing, if calculation of the amounts payable by any payment
date specified in this Agreement is not administratively
practicable due to events beyond your control (or the control of
your beneficiary or estate) and for reasons that are commercially
reasonable, payment will be made as soon as administratively
practicable in compliance with Section 409A of the Code and the
Treasury Regulations thereunder. In the event of your death during
such six-month period, payment will be made in the payroll period
next following the payroll period in which your death
occurs.
(d)
Limitation on Change in Control Payments . In the event
that:
(i) the
aggregate payments or benefits to be made to you pursuant to this
Agreement, together with other payments and benefits which you have
a right to receive from the Bank, which are deemed to be parachute
payments as defined in Section 280G of the Code (the
“Termination Benefits”) would be deemed to include an
“excess parachute payment” under Section 280G of
the Code; and
(ii) if
such Termination Benefits were reduced to an amount (the
“Non-Triggering Amount”), the value of which is one
dollar ($1.00) less than an amount equal to three times your
“base amount”, as determined in accordance with said
Section 280G and the Non-Triggering Amount less the product of
the marginal rate of any applicable state and federal income tax
and the Non-Triggering Amount would be greater than the aggregate
value of the Termination Benefits (without such reduction) minus
(A) the amount of tax required to be paid by you by
Section 4999 of the Code and further minus (B) the
product of the Termination Benefits and the marginal rate of any
applicable state and federal income tax,
then the
Termination Benefits shall be reduced to the Non-Triggering Amount.
The reduction required hereby among the Termination Benefits shall
be allocated to the payments and benefits set forth in Section 3(b)
in the following order until the reduction is fully accomplished:
Section 3(b)(ii), 3(b)(iii), 3(b)(vi) and 3(b)(vii).
(e)
Notice . During the Protected Period, any purported
termination of your employment by the Bank or the Company or by you
shall be communicated by written Notice of Termination to the other
party hereto.
(f)
Certain Definitions . Except as otherwise indicated in this
Agreement, all definitions in this Section 3(f) shall be applicable
during the Protected Period only.
(i)
Disability . “Disability” shall have the meaning
provided in Section 409A of the Code and the Treasury
Regulations thereunder.
(ii)
Cause . “Cause” shall mean termination on
account of (A) the willful and continued failure by you to
substantially perform your duties with the Bank (other than any
such failure resulting from your incapacity due to physical or
mental illness or Disability or any failure after the issuance of a
Notice of Termination by you for Good Reason) which failure is
demonstrably and materially damaging to the financial condition or
reputation of the Company, th
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