SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
Exhibit 10.7
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This Agreement is made and entered into as of 26th of February, 2015 by and between THE PROVIDENT BANK, a state-chartered savings bank organized and existing under the laws of The Commonwealth of Massachusetts (the “Bank”) and XXXXX X. XXXXX, a key employee and executive of the Bank (the “Executive”).
ARTICLE 1
1.1 Actuarial Equivalent shall mean a benefit of equivalent value to the benefit, computed on the basis of the discount rates, mortality tables (to the extent applicable), Applicable Interest Rate(s) and other assumptions expressed under Section 417(e) of the Internal Revenue Code of 1986, as it may be amended from time to time (the “Code”). For this purpose, the Applicable Interest Rate(s) are to be determined without regard to any transition adjustments under Section 417(e)(3)(D), and using the rates published for November prior to the calendar year in which the Payment Date occurs.
1.2 Beneficiary shall mean the person or persons designated by the Executive in accordance with Section 3.2 hereof to receive benefits under this Agreement after the death of the Executive.
1.3 Benefit Percentage shall be equal to twenty percent (20%) multiplied by a “Time at Bank Factor.” The Time at Bank Factor shall be a fraction, the numerator of which is the Executive’s years of employment (including partial years) from the Executive’s original date of hire by the Bank and the denominator of which is the difference in the number of years (or partial years) between the Executive’s Normal Retirement Age and the Executive’s original date of hire by the Bank; provided, however, that the Time at Bank Factor shall not exceed one (1). In the event of (i) the Executive’s death prior to his Separation from Service, (ii) the Executive’s Disability or (iii) a Change in Control, the Time at Bank Factor shall equal one (1), regardless of the Executive’s years of employment.
1.4 Calendar Year shall mean a calendar year from January 1 to December 31.
1.5 Change in Control. For purposes of this Agreement, Change in Control shall mean a change in control of the Bank or Provident Bancorp, Inc. (the “Company”), as defined in Section 409A of the Code, and the regulations promulgated thereunder, including the following:
1.5.3 Change in ownership of a substantial portion of assets: A change in the ownership of a substantial portion of the Bank’s or the Company’s assets occurs if, in a twelve (12)-month period, any one person or more than one person acting as a group acquires assets from the Bank or the Company having a total gross fair market value equal to or exceeding 40% of the total gross fair market value of the Bank’s or the Company’s entire assets immediately before the acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the Bank’s or the Company’s assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with the assets.
Notwithstanding anything herein to the contrary, conversion of the Bank’s mutual holding company to stock form or the issuance of common stock by the Company shall not be deemed to be a Change in Control nor shall any subsequent “second-step” conversion and stock issuance be deemed to be a Change in Control for purposes of this Agreement.
1.6 Compensation shall mean all compensation reported on the Executive’s Form W-2 (wages, tips, other compensation box) for a Calendar Year, including, but not limited to, any bonuses actually paid by the Bank to the Executive during the Calendar Year, but adding thereto any amount which is contributed by the Bank on the Executive’s behalf pursuant to a salary reduction agreement and which is not includable in the Executive’s gross income under Sections 125, 132(f) or 401(e)(3) of the Code, and excluding therefrom any payout from The Provident Bank Long Term Incentive Plan (Phantom Stock Plan), any taxable employee benefits of any kind (e.g., reimbursements of moving and relocation expenses; insurance premiums; automobile, health, medical, and dental expenses; the cost of group-term life insurance; compensation arising from the exercise of a nonqualified stock option or from a stock grant; and any fringe benefit which is not excluded from gross income under Section 132 of the Code) and excluding further any extraordinary, one-time payments made to the Executive in 2015.
1.7 Disability shall mean the Executive shall be considered to be “Disabled” (and to have a “Disability”), within the meaning of this Agreement and in accordance with Section 409A(a)(2)(c) of the Code and any regulations or other Internal Revenue Service guidance promulgated thereunder, when the Bank in its sole and absolute discretion has determined that the Executive is totally and permanently disable because the Executive is unable to engage in any substantial gainful 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 12 months or the Executive by reason of any medically determinable physical or mental impairment that can be expected to result in death. The Bank
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may, but is not required to, delegate its determination of whether the Executive is Disabled to its long term disability insurance policy carrier, if any, or to any other third-party.
1.8 Final Average Compensation shall mean the average of the Compensation of the Executive for the three (3) consecutive Calendar Years during her final ten (10) Calendar Years of employment (or number of years the Executive has been employed by the Bank, if less than ten) with the Bank during which her Compensation was the highest. For purposes of determining the Executive’s Compensation for any partial year under this Section 1.8, the amounts actually paid to or contributed on behalf of the Executive shall be annualized to determine the amount that would have been paid had the Executive been employed by the Bank for the entire Calendar Year.
1.9 Insurance Policy means such insurance policy or policies (if any) as the Bank, in its sole and absolute discretion, may choose to purchase to fund some or all of the benefits payable hereunder.
1.10 Normal Retirement Age shall mean the date on which the Executive attains age sixty-two (62).
1.11 Payment Date shall mean the date of Executive’s Separation from Service as defined at Section 1.13.
1.12 Rabbi Trust means such unfunded and unsecured trust or trusts (if any), established in conformity with the requirements of Internal Revenue Service Revenue Procedure 92-64, 1992-2 C.B. 422, as the Bank, in its sole and absolute discretion, may choose to establish to fund some or all of the benefits payable hereunder.
1.13 Separation from Service shall mean any termination of the Executive’s employment with the Bank pursuant to which the level of services provided by the Executive to the Bank (whether as an employee or as a consultant) is permanently reduced to a level of services that is 49% or less than the services provided in the immediately preceding 36 months and with respect for which the Bank and Executive reasonably anticipate that a significant reduction in the Executive’s services will lead to a cessation of services or a reduction to less than 20% of the Executive’s previous level of services. This definition is intended to comply with the definition of Separation from Service in Section 409A of the Code and the regulations issued thereunder.
1.14 Specially-Defined Cause shall have the meaning defined in Section 2.6.1.
1.15 Specified Employee means an individual who also satisfies the definition of “key employee” as that term is defined in Code Section 416(i) (without regard to paragraph (5) thereof). In the event Executive is a Specified Employee, no distribution shall be made to Executive upon Separation from Service (other than due to death or Disability) prior to the date which is six (6) months following Separation from Service.
1.16.1 Except as otherwise provided in Section 1.16.2, the Vested Percentage shall be 0% from the effective date of this Agreement until December 31, 2019, and be 100% on and after January 1, 2020.
1.16.2 Notwithstanding the provisions of Section 1.16.1, the following rule shall govern the determination of the Vested Percentage in the circumstance described below:
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A. The Vested Percentage shall be zero if the Executive’s employment with the Bank terminates for Specially-Defined Cause.
1.17 Yearly Benefit Amount shall mean an annual supplemental retirement benefit in an amount determined by:
1.17.1 multiplying (i) the Benefit Percentage times (ii) the Executive’s Final Average Compensation (determined as of the date of Separation from Service); and
1.17.2 then, multiplying such result by the Vested Percentage.
ARTICLE 2
2.6 Discharge for Specially-Defined Cause.
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any subsidiary or affiliate thereof; or (ii) conviction of a crime related to banking activity or moral turpitude; or (iii) gross and willful failure to perform (other than on account of a medically determinable disability which renders the Executive incapable of performing such services) a substantial portion of the Executive’s duties and responsibilities as an officer of the Bank, which failure continues for more than thirty (30) days after written notice given to the Executive pursuant to a two-thirds (2/3) vote of all of the members of the Board of Directors then in office, such vote to set forth in reasonable detail the nature of such failure; or (iv) the willful engaging by the Executive in illegal or gross misconduct which is materially and demonstrably injurious to the Bank or the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or a senior officer of the Bank, or based upon the advice of counsel for the Bank, shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Bank. Notwithstanding the foregoing, the Executive shall not be deemed to have been discharged for “Specially-Defined Cause” unless and until there shall have been delivered to her a copy of a certification by the Clerk of the Bank that two-thirds (2/3) of the entire Board of Directors found in good faith that the Executive was guilty of conduct which is deemed to be Specially-Defined Cause as defined in this Section 2.6 and specifying in particulars thereof, after reasonable notice to the Executive setting forth in reasonable detail the nature of such Specially-Defined Cause and an opportunity for her together with her counsel, to be heard before the Board of Directors in accordance with the provisions of Section 2.6.2.
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assets. If the Board of Directors properly sets the date of such meeting and if the Board of Directors (or a sufficient quorum thereof) attends such meeting and in good faith does not rescind its confirmation of Specially-Defined Cause at such meeting or if the Executive fails to attend such meeting for any reason, the Executive’s employment by the Bank shall, immediately upon the closing of such meeting and the delivery to the Executive of the notice of termination, be terminated for Specially-Defined Cause. If the Executive does not respond in writing to the Confirmation Notice in the manner and within the time period specified in this Section 2.6.2, the Executive’s employment with the Bank shall, on the thirty-first (31st) day after the receipt by the Executive of the Confirmation Notice, be terminated for Specially-Defined Cause under this Section 2.6.
ARTICLE 3
(i) Life Annuity, or
(ii) Joint and 50% Survivor Annuity or Joint and 100% Survivor Annuity
The Executive shall have the right within thirty (30) days upon becoming subject to the Plan to elect the form of payment in which her Benefit is to be paid. Prior to the Payment Date, the Executive may change the form of payment she has elected, provided, however, that such change must conform with the provisions of this Agreement and with any applicable requirements of Section 409A of the Code (and any other applicable tax law regarding deferral of income or avoidance of constructive receipt). Pursuant to Treasury Regulation Section 1.409A-2(b)(1), all such changes (other than those from one form of life annuity to an actuarially-equivalent form of life annuity) must be made at least one year before the Payment Date and must extend the Payment Date for an additional period of at least five (5) years (which means that payment of the benefit under this Agreement shall be made or commence on a date that is at least five years after the Payment Date).
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trust or other organization, any right title or interest in an Insurance Policy nor any rights, options, privileges or duties created under this Agreement.
3.8 Applicable Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of The Commonwealth of Massachusetts without regard to its principles of conflicts of laws.
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Administrator named above within sixty (60) days from the date payments are refused. The Plan Administrator shall review the written claim and, if the claim is denied, in whole or in part, it shall provide in writing within sixty (60) days of receipt of such claim its specific reasons for such denial, reference to the provisions of this Agreement upon which the denial is based and any additional material or information necessary to perfect the claim (“Denial Notice”). Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed to have been denied if the Plan Administrator fails to take any action within the aforesaid sixty (60) day period.
If claimants desire a second review, they shall notify the Plan Administrator in writing within ninety (90) days of the mailing of the Denial Notice. Claimants may review this Agreement or any documents relating thereto and submit any written issues and comments they may feel appropriate. In its sole discretion, the Plan Administrator shall then review the second claim and provide a written decision within sixty (60) days of receipt of such claim. This decision shall likewise state the specific reasons for the decision and shall include reference to specific provisions of this Agreement upon which the decision is based.
3.11.1 The parties agree to submit any dispute to final and binding arbitration administered by the American Arbitration Association (the “AAA”), pursuant to the Commercial Arbitration Rules of the AAA as in effect at the time of submission. The arbitration shall be held in Boston, Massachusetts before a single neutral, independent, and impartial arbitrator (the “Arbitrator”).
3.11.2 Unless the parties have agreed upon the selection of the Arbitrator before then, the AAA shall appoint the Arbitrator within thirty (30) days after the submission to AAA for binding arbitration. The arbitration hearings shall commence within fifteen (15) days after the selection of the Arbitrator. Each party shall be limited to two (2) pre- hearing depositions each lasting no longer than two (2) hours. The parties shall exchange documents to be used at the hearing no later than ten (10) days prior to the hearing date. Each party shall have no longer than three (3) hours to present its position, and the entire proceedings before the Arbitrator shall be on no more than two (2) hearing days within a two (2) week period. The award shall be made no more than ten (10) days following the close of the proceeding. The Arbitrator’s award shall not include consequential, exemplary, or punitive damages. The Arbitrator’s award shall be a final and binding determination of the dispute and sha11 be fully enforceable in any court of competent jurisdiction. Except in a proceeding to enforce the results of the arbitration, neither party nor the Arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.
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material contained in the subsection described as “Section 5.5.1”). The recitals hereto constitute an integral part of this Agreement. The headings and subheadings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words ‘‘include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words ‘‘without limitation.” The phrases “the date of this Agreement”, “the date hereof’ and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the Preamble to this Agreement.
The benefits provided by this Agreement are not part of any salary reduction plan or any arrangement deferring a bonus or salary increase. The Executive has no option to take any current payment or bonus in lieu of these benefits.
To the Bank:
The Provident Bank
0 Xxxxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Chief Financial Officer
To the Executive:
Xxxxx X. Xxxxx
[Address omitted]
[signature page follows]
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THE PROVIDENT BANK | ||
/s/ Xxxxxxx X. Xxxxxx | /s/ Xxxxx X. Xxxxxxxxx | |
Witness | By: Xxxxx X. Xxxxxxxxx | |
Title: Chief Executive Officer | ||
EXECUTIVE | ||
/s/ Xxxxxxx X. Xxxxxx | /s/ Xxxxx X. Xxxxx | |
Witness | Xxxxx X. Xxxxx |
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