AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Exhibit
10.7
AMENDED
AND RESTATED
THIS AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the “Agreement”) is dated as
of January 1, 2007, by and between EAST BOSTON SAVINGS BANK, a
corporation organized and existing under the laws of the Commonwealth of
Massachusetts (the “Bank”) and XXXXXX X. XXXXXXXX (the
“Executive”). The Agreement is an amendment and restatement of the
agreement by and between the Bank and the Executive dated January 29, 1985, as
amended by instruments dated February 10, 1994, and September 14, 1995, and as
amended and restated as of July 1, 1996 and December 1, 2003.
In
consideration of the mutual covenants herein contained, the parties hereby agree
as follows:
1. Definitions.
(a) “Actuarial
Equivalent” means a benefit of equivalent value when computed on the basis of an
interest rate of 6.5% and the 1983 Group Annuity Mortality Table, Unisex (50%
male, 50% female), with no setback; provided, however, that for purposes of
determining the value of a lump sum distribution, the following assumptions will
be used:
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Interest:
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Applicable
interest rate under Section 417(e)(3) of the Code, as determined for the
month of November of the preceding
year.
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Mortality: Applicable
mortality table under Section 417(e)(3) of the Code.
(b) “Accrued
Benefit” means 70% of the Executive’s Final Average Salary, offset by the SBERA
Pension Benefit and multiplied by the Executive’s Non-forfeitable Percentage set
forth in Paragraph 2(b) if the Executive has less than 20 years of
service.
(c) “Cause”
means the following:
(i) the
conviction of the Executive for any felony involving moral turpitude, deceit,
dishonesty or fraud;
(ii) a
material act or acts of dishonesty in connection with the performance of the
Executive’s duties, including without limitation, material misappropriation of
funds or property;
(iii) an
act or acts of gross misconduct (including sexual harassment) by the Executive
exposing the Bank to potential material liability or loss; or
(iv) continued,
willful and deliberate non-performance by the Executive of duties (other than by
reason of illness or disability) which has continued for more than 30 days
following written notice of non-performance from the Board of
Directors.
(d) For
purposes of this Agreement, a “Change in Control” means a change in control of
the Bank or Meridian Interstate Bancorp, Inc. (the “Company”) as defined in
Section 409A of the Internal Revenue Code of 1986 (the “Code”), as amended, and
rules, regulations, and guidance of general application thereunder, including
the following:
(i) Change in ownership:
A change in ownership of the Bank or the Company occurs on the date any one
person or group of persons accumulates ownership of more than 50% of the total
fair market value or total voting power of the Bank or the Company;
or
(ii) Change in effective
control: A change in effective control occurs when either (i) any one
person or more than one person acting as a group acquires within a 12-month
period ownership of stock of the Company possessing 35% or more of the total
voting power of the Company; or (ii) a majority of the Bank’s or Company’s Board
of Directors is replaced during any 12-month period by Directors whose
appointment or election is not endorsed in advance by a majority of the Bank’s
or Company’s Board of Directors (as applicable); or
(iii) Change in ownership of a
substantial portion of assets: A change in the ownership of a substantial
portion of the Company's assets occurs if, in a 12 month period, any one person
or more than one person acting as a group acquires assets from the Company
having a total gross fair market value equal to or exceeding 40% of the total
gross fair market value of the Company’s entire assets immediately before the
acquisition or acquisitions. For this purpose, “gross fair market value”
means the value of the Company’s assets, or the value of the assets being
disposed of, determined without regard to any liabilities associated with the
assets.
(e) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
(f) “Final
Average Compensation” means the average of the Executive’s annual base salary
(prior to any salary reduction contributions to any Section 401(k) plan or any
other pre-tax salary reductions), excluding bonuses, for the three calendar
years during the Executive’s employment with the Bank for which the Executive’s
annual base salary was the highest.
(g) “Normal
Form” means an unreduced life annuity with 50% spousal survivor
annuity.
(h) “SBERA
Pension Benefit” means the distributions to the Executive from the Savings Bank
Employees Association Pension Plan (“SBERA Plan”) that are attributable to Bank
contributions, assumed to grow at 5.5% per annum within an Individual Retirement
Account, and converted to an immediate single life annuity payable at age 65
using the assumptions set forth in Section 1(a) for purposes of computing the
benefit of equivalent value other than in the case of lump sum.
(i) “Separation
from Service” means a termination of the Executive’s services (whether as an
employee or as an independent contractor) to the Bank. Whether a
Separation from Service has occurred shall be determined in accordance with the
requirements of Section 409A of the Code based on whether the facts and
circumstances indicate that the Bank and the Participant reasonably anticipated
that no further services would be performed after a certain date or that the
level of bona fide services the Executive would perform after such date (whether
as an employee or as an independent contractor) would permanently decrease to no
more than twenty percent (20%) of the average level of bona fide services
performed (whether as an employee or an independent contractor) over the
immediately preceding thirty-six (36) month period.
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2.
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Payments to
Executive.
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(a) If
the Executive remains employed by the Bank from the date of his employment until
his termination of employment on or after 10 years of service, the Bank will pay
to the Executive annually, a benefit payable in the Normal Form in equal monthly
installments commencing on the first day of the month next following the
termination of the Executive’s employment, an amount equal to 70% of the average
of the Executive’s Final Average Compensation offset by the SBERA Pension
Benefit, adjusted as provided in clauses (b) and (c) of this Paragraph 2;
provided, the Executive’s termination constitutes a “Separation from Service”
for purposes of Section 409A of the Code.
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(b) The
Executive’s benefits under the Agreement shall become non-forfeitable in
accordance with the following schedule:
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Years of
Service 10 |
Non-forfeitable
Percentage 50 |
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55
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12
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60
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13
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65
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14
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70
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15
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75
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16
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80
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17
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85
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18
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90
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19
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95
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20
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100
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Notwithstanding
the foregoing, the Executive shall become fully vested immediately upon his
death prior to a Separation from Service, a Change in Control or upon any
involuntary termination of his employment by the Bank other than for
Cause.
(c) If
the Accrued Benefit is payable before the Executive’s 65th
birthday, the Accrued Benefit shall be reduced by 2.5% for each year benefits
commence before the Executive’s 65th
birthday. The foregoing 2.5% reduction shall be pro-rated for a
partial year. Notwithstanding the foregoing, the Accrued Benefit
shall not be reduced by the 2.5% increments after the Executive has completed
twenty-five (25) years of service with the Bank, or following a Change in
Control.
(d) In
lieu of the Normal Form provided by the foregoing provisions of this Paragraph
2, with the consent of the Bank, the Executive may elect an optional form of
payment which is the Actuarial Equivalent of the Normal Form to which the
Executive is entitled, which optional form of payment may be any optional form
provided under the SBERA Plan, including a lump sum. (The Executive
elected a lump sum payment prior to January 1, 2007). On or after
January 1, 2009, if the Executive wishes to change his payment election as to
the form of payment, the Executive may do so by completing a payment election
form approved by the Board of Directors, provided that any such election (i)
must be made prior to the Executive’s Separation from Service, (ii) must be made
at least 12 months before the date on which any benefit payments are scheduled
to commence, (iii) shall not take effect until at least 12 months after the date
the election is made, and (iv) for payments to be made other than upon death or
disability, must provide an additional deferral period of at least five years
from the date such payment would otherwise have been made (or in the case of any
installment payments treated as a single payment, five years from the date the
first amount was scheduled to be paid). For purposes of this
Agreement and clause (iv) above, all installment payments under this Agreement
shall be treated as a single payment. On or before December 31, 2008,
if the Executive wishes to change his payment election as to the form of
payment, the Participant may do so by completing a payment election form,
provided that any such election (i) must be made prior to the Executive’s
Separation from Service, (ii) shall not take effect before the date that is 12
months after the date the election is made, and (iii) made in 2008 cannot apply
to amounts that would otherwise be payable in 2008 and may not cause an amount
to be paid in 2008 that
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would
otherwise be paid in a later year. A lump sum payment shall be made
within sixty (60) days following the date the Participant becomes entitled to
receive a benefit under the Plan.
(e) Notwithstanding
anything to the contrary set forth herein, in no event shall the Executive be
entitled to receive any benefits under this Agreement if he is terminated by the
Board of Directors of the Bank for Cause. A determination of whether
the Executive’s employment is terminated for Cause shall be made at a meeting of
the Board of Directors called and held for such purpose, at which the Board of
Directors makes a finding that in their good faith opinion an event set forth in
Section 1(c) of this Agreement has occurred and specifying the particulars
thereof in detail.
(f) Notwithstanding
any provision of this Agreement to the contrary, if the Executive is considered
a Specified Employee at Separation from Service under such procedures as
established by the Bank in accordance with Section 409A of the Code, benefit
distributions that are made upon Separation from Service may not commence
earlier than six (6) months after the date of such Separation from
Service. Therefore, in the event this Section 2(f) is applicable to
the Executive, any distribution which would otherwise be paid to the Executive
within the first six months following the Separation from Service shall be
accumulated and paid (with interest calculated at the Prime Rate reported in the
Wall Street Journal as of the date the benefit first became payable) to the
Executive in a lump sum on the first day of the seventh month following the
Separation from Service. All subsequent distributions shall be paid
in the manner specified under this Section 2 of the Plan with respect to the
applicable benefit. A Specified Employee means a key employee (as
defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of
the Bank if any stock of the Bank is publicly traded on an established
securities market or otherwise or if the Bank is the subsidiary of a
publicly-traded holding company.
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3.
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Death of the
Executive.
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(a) If
the Executive dies prior to the commencement of the payment of benefits under
this Agreement, the Bank will pay to the Executive’s surviving spouse a benefit
payable for her life assuming that the Executive had retired the day before his
death and had elected to receive his Accrued Benefit (as reduced by 2.5% each
year and pro-rated for a partial year if the death occurs before the Executive’s
65th
birthday and before the Executive has completed twenty-five (25) years of
service, as provided for in Section 2(c) of this Agreement) in the form of a
joint and 100% spousal survivor annuity. The surviving spouse may
elect to receive the death benefit in a lump sum or any other form on an
Actuarially Equivalent basis.
(b) If
the Executive dies following the commencement of the payment of benefits under
this Agreement, death benefits, if any, will be determined pursuant to the form
of benefit payment in effect at the time of death and paid to the beneficiary
designated by the Executive.
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4.
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Disability
Benefits.
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If the
Executive becomes permanently and totally disabled, as determined by a physician
mutually acceptable to the Bank and the Executive, from any cause while in the
employ of the Bank and prior to the commencement of payments under Paragraph 2
above, the Executive shall be entitled to receive the Accrued Benefit that would
be payable to the Executive pursuant to Paragraph 2 above if the Executive had
terminated his employment on the date of his disability with twenty (20) years
of service. Disability payments may be subject to a six (6) month
waiting period, in which case during such time the Bank shall continue to pay
the Executive his base salary. For purposes of this Agreement,
“Disabilities” shall mean the Executive is unable to engage in any substantial
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months.
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5.
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Claims
Procedure.
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(a) In
the event the Executive (or his beneficiary in the case of the Executive’s
death) or their authorized representative (hereinafter the “Claimant”) asserts a
right to a benefit under this Agreement which has not been received, the
Claimant must file a claim for such benefit with the Bank on forms provided by
the Bank. The Bank shall render its decision on the claim within 90
days after its receipt of the claim. If special circumstances apply,
the 90-day period may be extended by an additional 90 days; provided, written
notice of the extension is provided to the Claimant during the initial 90-day
period and such notice indicates the special circumstances requiring an
extension of time and the date by which the Bank expects to render its decision
on the claim. If the Bank wholly or partially denies the claim, the
Bank shall provide written notice to the Claimant within the time limitations of
the immediately preceding paragraph. Such notice shall set
forth:
(i) the
specific reasons for the denial of the claim;
(ii) specific
reference to pertinent provisions of the Agreement on which the denial is
based;
(iii) a
description of any additional material or information necessary to perfect the
claim and an explanation of why such material or information is
necessary;
(iv) a
description of the Agreement’s claims review procedures, and the time
limitations applicable to such procedures; and
(v) a
statement of the Claimant’s right to bring a civil action under Section 502(a)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), if
the claim denial is appealed to the Bank and the Bank fully or partially denies
the claim.
(b) A
Claimant whose application for benefits is denied may request a full and fair
review of the decision denying the claim by filing, in accordance with such
procedures as the Bank may establish, a written appeal which sets forth the
documents, records and other information relating to the claim within 60 days
after receipt of the notice of the denial from the Bank. In
connection with such appeal and upon request by the Claimant, a Claimant may
review (or receive free copies of) all documents, records or other information
relevant to the Claimant’s claim for benefit, all in accordance with such
procedures as the Bank may establish. If a Claimant fails to file an
appeal within such 60-day period, he shall have no further right to
appeal.
(c) A
decision on the appeal by the Bank shall include a review by the Bank that takes
into account all comments, documents, records and other information submitted by
the Claimant relating to the claim, without regard to whether such information
was submitted or considered in the initial claim determination. The
Bank shall render its decision on the appeal not later than 60 days after the
receipt by the Bank of the appeal. If special circumstances apply,
the 60-day period may be extended by an additional 60 days; provided, written
notice of the extension is provided to the Claimant during the initial 60-day
period and such notice indicates the special circumstances requiring an
extension of time and the date by which the Bank expects to render its decision
on the claim on appeal. If the Bank wholly or partly denies the claim
on appeal, the Bank shall provide written notice to the Claimant within the time
limitations of the immediately preceding paragraph. Such notice shall
set forth:
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(i) the
specific reasons for the denial of the claim;
(ii) specific
reference to pertinent provisions of the Agreement on which the denial is
based;
(iii) a
statement of the Claimant’s right to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimant’s claim for benefits; and
(iv) a
statement of the Claimant’s right to bring a civil action under Section 502(a)
of ERISA.
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6.
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Violation of
Agreement.
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In the
event of the violation of any of any material terms of the Agreement by the
Executive, the Bank, in addition to any other rights which it may have, shall be
relieved of the liability to make any further payments under the Agreement to,
or on behalf of, the Executive so long as such violation continues, and shall
have the right to specific enforcement of the Agreement by proceedings in
equity.
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7.
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Nonassignable
Rights.
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Except as
otherwise provided by the Agreement, neither the Executive nor his surviving
spouse shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the right
thereto are expressly declared to be nonassignable and
nontransferable.
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8.
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Independence of
Agreement.
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The
benefits payable under the Agreement shall be independent of, and in addition
to, any employment agreement that may exist from time to time between the
parties hereto, or any other compensation payable by the Bank to the Executive,
whether as salary, bonus or otherwise. The Agreement shall not be
deemed to constitute a contract of employment between the parties hereto, and no
provision hereof shall restrict the right of the Bank to discharge the Executive
for adequate cause, or restrict the right of the Executive to terminate his
employment.
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9.
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General Obligation of
the Bank.
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The
benefits provided under the Agreement constitute a mere promise by the Bank to
make payments in the future, and the rights of the Executive hereunder shall be
those of a general unsecured creditor of the Bank. Nothing contained
herein shall be construed to create a trust of any kind or to render the Bank a
fiduciary with respect to the Executive. The Bank shall not be
required to maintain any fund or segregate any amount or in any other way
currently fund the future payment of any benefit provided under the Agreement,
and nothing contained herein shall be construed to give the Executive or any
other person any right to any specific assets of the Bank or of any other
person.
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10.
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Governing
Law.
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The
Agreement shall be construed under and governed by the laws of the Commonwealth
of Massachusetts.
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EXECUTED under seal as of the
day and year first above written, in the case of the Bank by its duly authorized
officer.
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EAST
BOSTON SAVINGS BANK
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ATTEST:
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BY:
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Name:
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Title:
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WITNESS:
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BY:
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Executive
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This
Agreement is joined in by Meridian Financial Services, Inc. for purposes of
fulfilling the obligations of the Bank under Paragraphs 2, 3 and 4
hereof.
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MERIDIAN
FINANCIAL SERVICES, INC.
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BY:
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Name:
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Title: Director
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