SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT FOR EDWARD J. MERRITT
Exhibit 10.18
FOR
XXXXXX X. XXXXXXX
This Supplemental Executive Retirement
Agreement (the “Agreement”) is entered into effective as of the Merger Effective
Time (as defined below) by and between East Boston Savings Bank, a corporation
organized and existing under the laws of the Commonwealth of Massachusetts (the
“Bank” or “Employer”) and Xxxxxx X. Xxxxxxx (the “Executive”).
WITNESSETH
WHEREAS, pursuant to an Agreement and
Plan of Merger, dated as of July 20, 2009 (the “Merger Agreement”), between the
Bank, Meridian Interstate Bancorp, Inc., a Massachusetts corporation (the
“Company”), Meridian Financial Services, Incorporated, a Massachusetts mutual
holding company and Mt. Washington Cooperative Bank, a Massachusetts cooperative
bank (“MWCB”), MWCB shall, as of the Merger Effective Time (as defined in the
Merger Agreement), merge with and into the Bank, with the Bank being the
surviving entity (the “Merger”);
WHEREAS, the Executive is currently a
party to an amended and restated executive salary continuation agreement entered
into between MWCB and the Executive as of January 24, 2006 (the “MWCB SERP”) and
the Executive agrees to waive any amounts and benefits under the MWCB SERP in
consideration for entering into this Agreement;
WHEREAS, in order to induce the
Executive to enter the employ of the Bank, the parties desire to enter into this
Agreement, effective as of the Merger Effective Time; and
WHEREAS, to induce the Executive to
continue in the Bank’s employ to age sixty-five (65), the Bank proposes to
supplement the benefits payable to the Executive under the Bank’s 401(k) plan
and employee stock ownership plan.
NOW, THEREFORE, in consideration of the
premises and the mutual promises of the parties hereto, the parties agree as
follows:
PURPOSE
The purpose of this Agreement is to
provide the Executive with supplemental retirement benefits in order to provide
him with a reasonable level of retirement income which will assist him in
maintaining an appropriate standard of living in retirement. An
integral part of the Agreement is to encourage and induce the Executive to
remain as a full-time executive officer of the Bank until he attains the
retirement age of sixty-five (65) and to recognize his service to the
Bank. The parties intend that this Agreement shall at all times be
characterized as a “top hat” plan of deferred compensation maintained for the
Executive who is a highly compensated employee, as described under Sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act
of 1974 (the “ERISA”), and the Agreement shall at all times satisfy Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), and as enacted
under the American Jobs Creation Act of 2004. The provisions of the
Agreement shall
be
construed to effectuate such intentions. The Agreement shall be
unfunded for tax purposes and for purposes of Title I of ERISA.
1. Establishment of
Accumulation Account. An Accumulation Account shall be
maintained on the books of the Employer for the Executive with respect to this
Agreement. The Accumulation Account shall be utilized solely as a
device for the measurement and determination of the benefits, if any, payable to
the Executive pursuant to this Agreement. The Executive will be
one-hundred percent (100%) vested in the Accumulation Account at all
times. The amount of the Accumulation Account as of the Merger
Effective Time shall equal the amount accrued under the MWCB SERP for GAAP
purposes as of the Merger Effective Time (the “GAAP Accrual”).
2. Annual Credits to
Accumulation Account. Commencing as of the Merger Effective
Time and ending on the date of termination of the Executive’s employment, the
Board of Directors of the Bank shall credit the Executive’s Accumulation Account
with an amount equal to $50,000 (which is the amount equal to the product of (i)
1/15, times (ii) $750,000) for each full calendar year of Executive’s
employment, and for each partial calendar year of Executive’s employment, a pro
rated amount determined by dividing the number of days during such year prior to
termination of Executive’s employment by 365, and multiplying such quotient by
$50,000. The
Accumulation Account shall be credited as of each December 31st, and
in the event the Executive terminates employment prior to December 31st, his
pro rated amount for the year of termination of service will be credited to his
Accumulation Account within thirty days after termination of his
employment. The Executive may not make any contributions under this
Agreement.
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3.
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Maximum Amount
Credited to Accumulation Account. All amounts credited
to the Accumulation Account shall not exceed the GAAP Accrual plus
$750,000. No further additions to the Accumulation Account will
be made when, and if, a total of $750,000 has been credited to the
Accumulation Account after the Merger Effective Time, excluding the GAAP
Accrual.
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4.
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Payment upon
Separation from Service.
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(a) Upon
a Separation from Service prior to the attainment of age sixty (60), the
Accumulation Account shall be paid to the Executive in one hundred and twenty
(120) equal monthly installments with interest equal to the one-year Treasury
xxxx as of the date of the Separation of Service, with the first payment
commencing on the first day of the month following the lapse of six months after
such Separation from Service. In the event of the Executive’s death
after such Separation from Service but prior to the completion of the one
hundred and twenty (120) installment payments described above, an amount equal
to the aggregate remaining unpaid installments shall be paid to the Executive’s
beneficiary (or estate, if there is no beneficiary) in a single lump sum payment
on the first day of the month following the occurrence of his
death.
(b) Upon
a Separation from Service on or after the attainment of age sixty (60), the
Accumulation Account shall be paid in the form of a single-life annuity (subject
to Section 18),
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with such
payments to be made in equal monthly installments (1/12th of
the annual annuity benefit) until the death of the Executive, with the first
payment commencing on the first day of the month following the lapse of six
months after such Separation from Service. The value of such
single-life annuity shall be the actuarial equivalent of the Accumulation
Account calculated in a manner that is no less favorable to the Executive (or
his beneficiary) than would be determined using the interest rates, mortality
tables and other assumptions expressed in Section 417(e) of the
Code.
(c) For
purposes hereof, Separation from Service shall mean a termination of the
Executive’s services (whether as an employee or as an independent contractor) to
the Company and the Bank for any reason other than Disability or
death. 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 Company, the Bank and the
Executive 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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5.
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Payment upon
Disability; Death.
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(a) Upon
the Disability of the Executive, which causes a Separation from Service, the
Accumulation Account shall be paid in the form of a single-life annuity
(calculated pursuant to Section 4(b) above, and subject to Section 18), with
such payments to be made in equal monthly installments (1/12th of
the annual annuity benefit) until the death of the Executive, with the first
payment commencing on the first day of the month following the
Disability.
(b) Upon
the death of the Executive (i) while actively employed by the Bank, or (ii)
after a Separation from Service to which Section 4(b) applies, but prior to the
Insured’s receipt of the first installment payment under such Section 4(b), the
Accumulation Account shall be paid to the Executive’s beneficiary in a single
lump sum payment on the first day of the month following the occurrence of
death.
(c) For
purposes hereof, Disability shall mean an Executive (i) is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve months; or (ii)
is, by reason of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a continuous
period of not less than twelve months, receiving income replacement benefits for
a period of not less than three months under an accident and health plan
covering employees of the Bank (or would have received such benefits if the
Executive was eligible to participate in such plan). If any question
shall arise as to whether during any period the Executive is Disabled, the
Executive may, and at the request of the Bank shall, submit to the Bank a
certification in reasonable detail by a physician selected by the Bank to whom
the Executive or the Executive’s guardian has no reasonable objection as to
whether the Executive is so Disabled, and such certification shall for the
purposes of this Agreement be conclusive of the issue. The
physician
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shall be
board-certified in the area of medicine applicable to the particular disability
involved. The Executive shall cooperate with any reasonable request of the
physician in connection with such certification. If such question shall arise
and the Executive shall fail to submit such certification (unless the failure
results from matters beyond the control of the Executive), the Bank’s
determination will determine the issue of whether the Executive is
Disabled.
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6.
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Payment upon
Termination of the Executive Without Cause or by the Executive for Good
Reason in connection with a Change in
Control.
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(a) Notwithstanding
anything in the Agreement to the contrary, in the event the Executive’s
employment shall be terminated by the Bank (which termination shall constitute a
Separation from Service), or its successor, without Cause, as provided in
Section 6(b), or by the Executive for Good Reason, as provided in Section 6(c),
concurrently with or within one (1) year of a Change in Control, as defined in
Section 6(d), and ending one year after consummation of such Change in Control,
the Executive’s Accumulation Account shall equal the GAAP Accrual plus $750,000
and shall be paid in a single lump sum payment to the Executive on the first day
of the month following the lapse of six months after such Separation from
Service.
(b) Termination
by the Bank without Cause. The Executive’s employment may be
terminated by the Bank, or its successor, without Cause (which, for purposes of
clarification, shall not include a termination of Executive’s employment under
this Agreement due to Executive’s death or Disability) upon written notice to
the Executive. A determination of whether the Executive’s employment shall be
terminated without Cause will be made solely by the Executive Committee of the
Board of Directors.
(c) Termination
by the Executive for Good Reason. The Executive’s employment may be terminated
by the Executive by written notice to the Board of Directors within sixty (60)
days following an event constituting “Good Reason.” The Executive’s
termination of employment shall become effective on the thirty-first (31st) day
following such notice, provided the Bank, or its successor, has not remedied the
condition giving rise to the event of “Good Reason.” For purposes of
this Agreement, “Good Reason” shall mean:
(i) a
material diminution or other substantial adverse change, not consented to by
Executive, in the nature or scope of the Executive’s responsibilities or
authorities as set forth in the employment agreement between the Executive and
the Bank, including a change in the Executive’s line of reporting so that he no
longer reports directly to the Bank’s Chief Executive Officer;
(ii) the
assignment to Executive of any duties materially inconsistent with Executive’s
position, including any material change in status or duties, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad faith
and that is remedied by the Bank reasonably promptly after receipt of notice
thereof given by the Executive;
(iii) a
material reduction in the Executive’s base salary except for across-the-board
reductions similarly affecting all or substantially all
officers;
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(iv) involuntary
relocation of the Bank’s offices in which the Executive is principally employed
by more than 10 miles; or
(v) failure
of the Bank to comply with material terms of this Agreement.
(d) For
purposes hereof, “Change in Control” shall mean a change in the ownership of
Meridian Interstate Bancorp, Inc. or the Bank, a change in the effective control
of the Company or the Bank or a change in the ownership of a substantial portion
of the assets of the Company or the Bank, in each case as provided under Section
409A of the Code and the regulations thereunder.
(e) Notwithstanding
anything in this Agreement to the contrary, in no event shall the Merger, or the
reorganization of Meridian Financial Services, Incorporated, the Company or Bank
solely within its corporate structure constitute a “Change in Control” for
purposes of this Agreement, provided that there is no reduction in the
Executive’s compensation and benefits.
7. Designation of
Beneficiary. The Executive may from time to time, by providing
a written notification to the Employer, designate any person or persons (who may
be designated concurrently, contingently or successively), his estate or any
trust or trusts created by him to receive benefits which are payable under this
Agreement. Each beneficiary designation shall revoke all prior
designations and will be effective only when filed in writing with the
Employer’s Compensation Committee, or any successor thereto (the
“Committee”). If the Executive fails to designate a beneficiary or if
a beneficiary dies before the date of the Executive’s death and no contingent
beneficiary has been designated, then the benefits which are payable as
aforesaid shall be paid to his estate. If benefits to be paid to a
beneficiary commence and such beneficiary dies before all benefits to which such
beneficiary is entitled have been paid, the remaining benefits shall be paid to
the successive beneficiary or beneficiaries designated by the Executive, if any,
and if none to the estate of such beneficiary.
8. Claims
Procedure. The Executive or his designated beneficiary or
beneficiaries may make a claim for benefits under this Agreement by filing a
written request with the Committee. If a claim is wholly or partially
denied, the Committee shall furnish the claimant with written notice setting
forth in a manner calculated to be understood by the claimant;
(a) the
specific reason or reasons for the denial;
(b) specific
reference to the pertinent provisions of this Agreement on which the denial is
based;
(c) a
description of any additional material or information necessary for the claimant
to perfect his claim and an explanation why such material or information is
necessary; and
(d) appropriate
information as to the steps to be taken if the claimant wishes to submit his
claim for review.
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Such notice shall be furnished to the
claimant within ninety (90) days after the receipt of his claim, unless special
circumstances require an extension of time for processing his
claim. If an extension of time for processing is required, the
Committee shall, prior to the termination of the initial ninety (90) day period,
furnish the claimant with written notice indicating the special circumstances
requiring an extension and the date by which the Committee expects to render its
decision. In no event shall an extension exceed a period of ninety
(90) days from the end of the initial ninety (90) day period.
A claimant may request the Committee to
review a denied claim. Such request shall be in writing and must be
delivered to the Committee within sixty (60) days after receipt by the claimant
of written notification of denial of claim. A claimant or his duly
authorized representative may:
(a) review
pertinent documents, and
(b) submit
issues and comments in writing.
The Committee shall notify the claimant
of its decision on review not later than sixty (60) days after receipt of a
request for review, unless special circumstances require an extension of time
for processing, in which case a decision shall be rendered as soon as possible,
but not later than one hundred twenty (120) days after receipt of a request for
review. If an extension of time for review is required because of
special circumstances, written notice of the extension must be furnished to the
claimant prior to the commencement of the extension. The Committee’s
decision on the review shall be in writing and shall include specific reasons
for the decision, as well as specific references to the pertinent provisions of
this Agreement on which the decision is based.
9. Statement of Accumulation
Account. Within 90 days after the close of each calendar year,
the Committee shall submit to the Executive a statement in such form as the
Committee deems desirable setting forth the balance as of the last day of the
calendar year in the Accumulation Account maintained for the
Executive.
10. Withholding. To
the extent required by the law in effect at the time payment of the Accumulation
Account is made, the Bank shall withhold from such payment any taxes or other
amounts required by law to be withheld.
11. Unsecured
Promise. Nothing contained in this Agreement shall create or
require the Employer to create a trust of any kind to fund the benefits payable
hereunder. To the extent that the Executive or any other person
acquires a right to receive payments from the Employer, such individual shall at
all times remain an unsecured general creditor of the Employer.
12. Assignment. The
right of the Executive or any other person to the payment of benefits under this
Agreement shall not be subject to alienation, assignment, garnishment,
attachment, execution or levy of any kind, and any attempt to cause such
benefits to be so subjected shall not be recognized by the
Employer.
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13. Employment. Nothing
contained herein shall be construed to grant the Executive the right to be
retained in the employ of the Employer or any other rights or interests other
than those specifically set forth.
14. Amendment, Suspension or
Termination. This Agreement shall be binding upon and inure to
the benefit of the Employer and the Executive. The Employer shall
have the right to suspend, terminate or amend this Agreement only with the
mutual consent of the Executive; provided, however, no such suspension,
termination or amendment shall adversely affect the rights of the Executive or
any beneficiary to the funds and benefits which have accrued as of the date of
such action.
15. Successors. This
Agreement shall be binding upon and inure to the benefit of the Employer, its
successors and assigns and the Executive and his heirs, executors,
administrators, and legal representatives.
16. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
17. Entire Agreement.
This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all understandings
or representations relating to the subject matter hereof, including the MWCB
SERP.
18. Alternate Form of
Annuity. For purposes of Sections 4(b) or 5(a), the Executive
may, upon request made prior to commencement of payment of the benefit, elect to
have the Accumulation Account paid in the form of a joint and 50% survivor
annuity or a joint and 100% survivor annuity rather than a single-life annuity,
provided that such alternate form of annuity is the actuarial equivalent of the
annuity described in Section 4(b), for purposes of Section 409A of the Code and
Reg. 1.409A-2(b)(2)(ii).
19. Effectiveness. Notwithstanding
anything to the contrary contained herein, this Agreement shall be subject to
consummation of the Merger in accordance with the terms of the Merger Agreement,
as the same may be amended by the parties thereto in accordance with its
terms. In the event the Merger Agreement is terminated for any
reason, this Agreement shall be deemed null and void and the MWCB SERP shall
remain in effect in accordance with its terms.
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IN WITNESS WHEREOF, this
Agreement has been executed as of the date first above written.
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EAST
BOSTON SAVINGS BANK
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BY:
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/s/
Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx
X. Xxxxxxxxx
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Chief
Executive Officer
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EXECUTIVE
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By:
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/s/
Xxxxxx X. Xxxxxxx
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Xxxxxx
X. Xxxxxxx
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This SERP
is joined in by Meridian Interstate Bancorp, Inc. for purposes of fulfilling the
obligations of the Bank under the SERP.
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MERIDIAN
INTERSTATE BANCORP, INC.
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By:
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/s/
Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx
X. Xxxxxxxxx
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Director
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