Exhibit 10.7
DIRECTORS' DEFERRED COMPENSATION PLAN
OF
WESTFIELD FINANCIAL, INC.
_____________________________
Adopted on December 20, 2005
Effective as of December 20, 2005
TABLE OF CONTENTS
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Article I
Definitions
Section 1.1 Acceleration Event 1
Section 1.2 Administrator 1
Section 1.3 Beneficiary 1
Section 1.4 Board 1
Section 1.5 Code 1
Section 1.6 Company 1
Section 1.7 Change in Control Event 1
Section 1.8 Cash Compensation 1
Section 1.9 Committee 1
Section 1.10 Compensation 1
Section 1.11 Disability 2
Section 1.12 Effective Date 2
Section 1.13 Equity Compensation 2
Section 1.14 Fair Market Value 2
Section 1.15 Investment Benchmark 2
Section 1.16 ISO Share 2
Section 1.17 Memorandum Account 3
Section 1.18 Memorandum Subaccount 3
Section 1.19 Non-Employee Director 3
Section 1.20 Option-Related Compensation 3
Section 1.21 Participant 3
Section 1.22 Participating Company 3
Section 1.23 Phantom Share 3
Section 1.24 Plan 3
Section 1.25 Previously Acquired Share 3
Section 1.26 Share 3
Section 1.27 Service Recipient 3
Section 1.28 Unforeseeable Emergency 4
Article II
Participation
Section 2.1 Election to Participate 4
Section 2.2 Election to Defer Cash Compensation 4
Section 2.3 Election to Defer Equity Compensation 5
Section 2.4 Election to Defer Option-Related Compensation 5
Section 2.5 Changes in Participation 5
Section 2.6 Revocability of 2005 Elections 6
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Article III
Accounting for Deferred Amounts
Section 3.1 In General 6
Section 3.2 Adjustments to Memorandum Accounts 7
Section 3.3 Vesting 8
Article IV
Trust
Section 4.1 Establishment of Trust 8
Section 4.2 Contributions to Trust; Investments 9
Section 4.3 Unfunded Character of Plan 9
Article V
Life Insurance
Section 5.1 Authority to Purchase Life Insurance 9
Section 5.2 Cooperation to Effect Purchases 9
Section 5.3 Ownership of Policies 10
Section 5.4 Effect of Termination of Participation 10
Article VI
Distributions
Section 6.1 Early Distributions 10
Section 6.2 Scheduled Distributions to Participants 11
Section 6.3 Distributions to Beneficiaries 12
Section 6.4 Mandatory Cashout of Small Balances 13
Section 6.5 Restrictions on Payments to Key Employees 13
Article VII
Administration
Section 7.1 Administrator 13
Section 7.2 Committee Responsibilities 14
Section 7.3 Claims Procedure 15
Section 7.4 Claims Review Procedure 15
Section 7.5 Other Administrative Provisions 16
Article VIII
Amendment And Termination
Section 8.1 Amendment by the Company 16
Section 8.2 Termination 17
Section 8.3 Amendment or Termination by Other Companies 17
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Article IX
Miscellaneous Provisions
Section 9.1 Notice and Election 18
Section 9.2 Construction and Language 18
Section 9.3 Headings 18
Section 9.4 Non-Alienation of Benefits 18
Section 9.5 Indemnification 19
Section 9.6 Severability 19
Section 9.7 Waiver 19
Section 9.8 Governing Law 19
Section 9.9 Withholding 19
Section 9.10 No Deposit Account 20
Section 9.11 Rights of Participants 20
Section 9.12 Status of Plan Under ERISA 20
Section 9.13 Successors and Assigns 20
Section 9.14 Non-dilution Provisions 20
Section 9.15 Compliance with Section 409A of the Code 21
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DIRECTORS' DEFERRED COMPENSATION PLAN
-------------------------------------
OF
WESTFIELD FINANCIAL, INC.
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Article I
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Definitions
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The following definitions shall apply for the purposes of this Plan unless
a different meaning is clearly indicated by the context:
Section 1.1 Acceleration Event means, with respect to a
Participant, any of the events described in section 6.1 on the basis of
which the Administrator may permit acceleration of the payment of the
balance credited to the Participant's Memorandum Account.
Section 1.2 Administrator means any person, committee, corporation
or organization appointed by the Committee to perform the responsibilities
assigned to the Administrator hereunder.
Section 1.3 Beneficiary means the person or persons designated by a
Participant under section 6.3 of the Plan.
Section 1.4 Board means the Board of Directors of the Company.
Section 1.5 Code means the Internal Revenue Code of 1986 (including
the corresponding provisions of any succeeding law).
Section 1.6 Company means Westfield Financial, Inc. or any
successor thereto.
Section 1.7 Change in Control Event means, with respect to a
Participant: (a) a change in ownership of the Participant's Service
Recipient; (b) a change in effective control of the Participant's Service
Recipient; or (c) a change in the ownership of a substantial portion of the
assets of the Participant's Service Recipient. The existence of a Change
in Control Event shall be determined by the Administrator in accordance
with section 409A of the Code and the regulations thereunder.
Section 1.8 Cash Compensation means the monetary compensation
payable to a Non-Employee Director for service as a member of the board of
directors of a Participating Company, including retainer payments and fees
for attendance at board and committee meetings.
Section 1.9 Committee means the Compensation Committee of the
Board.
Section 1.10 Compensation means, during any period, the
compensation payable to a Non-Employee Director by any Participating
Company that is reportable to the Internal Revenue Service as compensation
for such period on Form 1099 in the absence of an
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election to defer receipt thereof under the terms of this Plan.
Compensation shall include Cash Compensation, Equity Compensation and
Option-Related Compensation. Compensation shall not include amounts that
become payable under this Plan.
Section 1.11 Disability means, with respect to a Participant, any
medically determinable physical or mental impairment which can be expected
to result in death or to last for a continuous period of at least twelve
(12) months and as a result of which either: (a) the Participant is unable
to engage in any substantial gainful activity or (b) the Participant has
been receiving income replacement benefits for a period of at least three
(3) months under an accident and health plan covering employees of the
Participant's employer. The existence of a Disability shall be determined
by the Administrator in accordance with section 409A and the regulations
thereunder.
Section 1.12 Effective Date means December 20, 2005.
Section 1.13 Equity Compensation means, with respect to any
Participant, that portion of the Participant's Compensation, other than
Option-Related Compensation, that is paid to him in Shares or the amount of
which is based upon the value, or increase in value, of a Share.
Section 1.14 Fair Market Value means, with respect to a Share on a
specified date:
(a) the final reported sales price on the date in question
(or if there is no reported sale on such date, on the last preceding
date on which any reported sale occurred) as reported in the
principal consolidated reporting system with respect to securities
listed or admitted to trading on the principal United States
securities exchange on which the Shares are listed or admitted to
trading; or
(b) if the Shares are not listed or admitted to trading on any
such exchange, the closing bid quotation with respect to a Share on
such date on the National Association of Securities Dealers Automated
Quotations System, or, if no such quotation is provided, on another
similar system, selected by the Committee, then in use; or
(c) if sections 1.14(a) and (b) are not applicable, the fair
market value of a Share as the Administrator may determine.
Section 1.15 Investment Benchmark means a hypothetical investment
classification in which a Participant's Memorandum Account shall be deemed
to be invested for purposes of crediting or charging earnings, losses,
appreciation or depreciation with respect to the Participant's Memorandum
Account, in accordance with section 3.2. The Investment Benchmark shall be
interest at an annual rate equal to the rate on the highest yielding
certificate of deposit issued by Westfield Bank during the year or any
other investment classification set as an option by the Committee for this
Plan.
Section 1.16 ISO Share means a Share acquired upon exercise of an
incentive stock option (within the meaning of section 422 of the Code).
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Section 1.17 Memorandum Account means, with respect to a
Participant, a bookkeeping account maintained by the Company to which is
credited the amount of the Participant's deferred Compensation, together
with any earnings and appreciation thereon, and against which are charged
any losses, depreciation or distributions thereof, pursuant to Article III.
Section 1.18 Memorandum Subaccount means, with respect to a
Participant, a portion of the Participant's Memorandum Account that is
separately accounted for by the Company due to the application of unique
provisions relating to the applicable distribution schedule or Investment
Benchmark(s).
Section 1.19 Non-Employee Director means a voting member of the
board of directors of a Participating Company who is not an officer or
employee of any Participating Company.
Section 1.20 Option-Related Compensation means, with respect to an
option to purchase Shares that is exercised by paying the entire exercise
price therefor by actual or constructive delivery of Previously Acquired
Shares, a number of Shares equal to the excess of (a) the total number of
Shares as to which the option is exercised, over (b) the number of Shares
actually or constructively delivered in payment of the exercise price.
Section 1.21 Participant means a Non-Employee Director or former
Non-Employee Director who has a Memorandum Account under the Plan.
Section 1.22 Participating Company means the Company, Westfield
Bank, and any other company which, with the prior approval of the Board,
may adopt this Plan.
Section 1.23 Phantom Share a unit of value that, at any relevant
date, corresponds to the Fair Market Value of a Share.
Section 1.24 Plan means the Directors' Deferred Compensation Plan
of Westfield Financial, Inc.
Section 1.25 Previously Acquired Share means, with respect to a
Participant on any date: (a) a Share (other than an ISO Share) that was
acquired by the Participant more than six (6) months prior to such date and
has been held by the Participant continuously since such acquisition and
(b) an ISO Share that was acquired by the Participant upon the exercise, at
least one year prior to such date, of an incentive stock option (within the
meaning of section 422 of the Code) that was granted to him at least two
(2) years prior to such date and has been held by the Participant
continuously since such acquisition.
Section 1.26 Share means a share of Common Stock, par value $.01
per share, of the Company.
Section 1.27 Service Recipient means with respect to a Participant
on any date: (a) the corporation for which the Participant is performing
services on such date; (b) all corporations that are liable to the
Participant for the benefits due to him under the Plan; (c) a corporation
that is a majority shareholder of a corporation described in section
1.27(a) or (b); or
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(d) any corporation in a chain of corporations each of which is a majority
shareholder of another corporation in the chain, ending in a corporation
described in section 1.27(a) or (b).
Section 1.28 Unforeseeable Emergency means, with respect to a
Participant, a severe financial hardship to the Participant resulting from
an illness or accident of the Participant, the Participant's spouse or a
dependent (within the meaning of section 152(e) of the Code) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant. The existence of an
Unforeseeable Emergency shall be determined by the Administrator in
accordance with section 409A of the Code and the regulations hereunder.
Article II
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Participation
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Section 2.1 Election to Participate.
Any Non-Employee Director may elect to become a Participant in the
Plan by submitting to the Administrator a written election, on a form
prescribed by the Administrator, to defer the receipt of all or any portion
of his Compensation; provided, however, that no Non-Employee Director shall
be permitted to defer receipt of Compensation that is required to be
withheld and remitted to any federal, state or local taxing authority
pursuant to any requirement for the collection of tax at the source or that
is required to fund any contribution or premium payment or co-payment
required of the Non-Employee Director as a condition of participation in
any employee benefit plan maintained by the Company or any other
Participating Company at the time the election is made. A Non-Employee
Director who elects to become a Participant may make separate deferral
elections with respect to Cash Compensation, Equity Compensation and
Option-Related Compensation. The Administrator may deny participation to
any Non-Employee Director whose initial election to become a Participant
does not contemplate the deferral of a minimum of $2,000 on an annualized
basis.
Section 2.2 Election to Defer Cash Compensation.
An election to defer Cash Compensation shall specify the amount or
percentage of each payment of Cash Compensation to be deferred, shall be
made on or before the last day of any calendar year and shall be effective
for the calendar year following the calendar year in which such election is
made and all subsequent calendar years unless status as a Non-Employee
Director ceases or a change in the rate of deferral is elected pursuant to
section 2.5; provided, however, that an initial election to defer Cash
Compensation made by a Non-Employee Director and filed with the
Administrator during the thirty (30) day period immediately following the
later of the Effective Date of the Plan or the date the Non-Employee
Director first becomes eligible to participate in the Plan shall take
effect with the first payment of Compensation that relates to a period of
service that begins after such election is made, or such later date as the
Non-Employee Director shall specify in his election.
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Section 2.3 Election to Defer Equity Compensation.
An election to defer Equity Compensation shall specify the amount or
percentage of each payment of Equity Compensation that is to be deferred,
shall be made on or before the first day of the calendar year in which such
Equity Compensation will be paid and prior to the first day of the period
of service for which such Equity Compensation is earned, and shall be
effective for all subsequent calendar years and service periods, unless
status as a Non-Employee Director ceases or a change in the rate of
deferral is elected pursuant to section 2.5; provided, however, that an
initial election to defer Equity Compensation made by a Non-Employee
Director and filed with the Administrator during the thirty (30) day period
immediately following the later of the Effective Date or the date the Non-
Employee Director first becomes eligible to participate in the Plan shall
take effect with the first payment of Equity Compensation that relates to a
period of service that begins after such election is made, or such later
date as the Non-Employee Director shall specify in his election.
Acceptance of an election to defer Equity Compensation shall not be held or
construed as a guarantee that any conditions precedent to the payment
thereof (including but not limited to continued employment) will be met or
the amount to be deferred will in fact be earned. In the event the dollar
amount of Equity Compensation actually paid is less than the dollar amount
for which a deferral election has been made, the election shall be deemed
effective to defer the maximum permissible amount. Notwithstanding
anything in this Plan to the contrary, no person shall elect to defer
Equity Compensation until the Board shall permit such deferral by
resolution.
Section 2.4 Election to Defer Option-Related Compensation.
Notwithstanding anything in this Plan to the contratry, no person
shall elect to defer Option-Related Compensation until such time as the
Plan is amended to provide for such elections.
Section 2.5 Changes in Participation.
(a) An election by a Participant pursuant to section 2.2 shall
continue in effect until termination of status as a Participant; provided,
however, that the Participant may, by written election filed with the
Administrator, increase or decrease the portion of his Cash Compensation to
be deferred, or discontinue such deferral altogether. Such election shall
be effective with respect to Cash Compensation payable for services
rendered after the end of the calendar year in which such election is filed
with the Administrator; provided, however, that if an election provides for
the decrease or discontinuance of the Participant's deferral of Cash
Compensation and is made on account of Disability or an Unforeseeable
Emergency or an Acceleration Event, such election shall, to the extent
permitted under section 409A of the Code, be effective with respect to Cash
Compensation payable after the filing of such election.
(b) An election by a Participant pursuant to section 2.3 or 2.4
shall continue in effect until termination of status as a Participant;
provided, however, that the Participant may, by written election filed with
the Administrator, increase or decrease the portion of his Equity
Compensation to be deferred, or discontinue such deferral altogether. Such
election shall be effective with respect to Equity Compensation payable
after the calendar year in which, and on account of a period of service
that begins after, such election is filed with the Administrator;
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provided, however, that if an election provides for the decrease or
discontinuance of the Participant's deferral of Equity Compensation and is
made on account of Disability or an Unforeseeable Emergency or an
Acceleration Event, such election shall be effective with respect to Equity
Compensation, payable after the filing of such election.
(c) In the event that a Participant ceases to be a Non-Employee
Director or in the event that a Non-Employee Director ceases to defer
receipt of his Compensation, the balance in his Memorandum Account shall
continue to be adjusted in accordance with Article III. A Non-Employee
Director who has filed a written election to cease deferring receipt of any
portion of his Compensation may thereafter again file an election to defer
receipt of his Compensation in the manner described in sections 2.2 through
2.5.
Section 2.6 Revocability of 2005 Elections.
Notwithstanding anything in the Plan to the contrary, every election
under the Plan to defer Compensation earned and payable in 2005 shall, to
the maximum extent permitted and subject to the terms and conditions set
forth in Internal Revenue Service Notice 2005-1, be revocable at any time
during 2005. Such a revocation shall be effected by written notice given
to and actually received by the Administrator on or before December 31,
2005 and shall result in the distribution of the entire balance credited to
the Memorandum Account of the person revoking the election and in the
inclusion of the entire amount distributed in gross income for federal
income tax purposes in the 2005 taxable year.
Article III
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Accounting for Deferred Amounts
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Section 3.1 In General.
The Administrator shall maintain a separate Memorandum Account for
each Participant and may establish within such Memorandum Account two or
more Memorandum Subaccounts as may be necessary or appropriate to properly
administer the Plan, including, but not limited to:
(a) A separate Memorandum Subaccount for each portion of a
Participant's Memorandum Account to which a unique distribution
schedule is applicable;
(b) A separate Memorandum Subaccount for that portion of a
Participant's Memorandum Account that is attributable to Equity
Compensation or Option-Related Compensation that has been deferred;
and
(c) A separate Memorandum Subaccount for that portion of a
Participant's Memorandum Account that is required to be adjusted for
earnings and losses on the basis of an Investment Benchmark that is
different from the Investment Benchmark(s) applicable to other
portions of the Memorandum Account.
6
Credits, charges, and other adjustments to each Participant's Memorandum
Account and any Memorandum Subaccounts shall be made in accordance with
this Article III. Neither the Company nor any Participating Company shall
fund its liability for the balances credited to a Memorandum Account or
Memorandum Subaccount, but each shall reflect its liability for such
balances on its books.
Section 3.2 Adjustments to Memorandum Accounts.
(a) Each Participant's Memorandum Account and applicable Memorandum
Subaccount(s) shall be credited with amounts of Compensation deferred by
the Participant as of the date on which such Compensation would have been
paid to the Participant in the absence of a deferral election. For
purposes of this section 3.2(a):
(i) Equity Compensation consisting of Shares or other
property which would be taxable for federal income tax purposes
pursuant to section 83 of the Code that is being deferred shall be
credited as of the date on which such Shares or other property become
vested or, if later, the date on which such Shares or other property
are contractually required to be transferred to the Participant; and
(ii) Option-Related Compensation that is being deferred shall
be credited as of the earliest date on which all actions have been
taken and conditions satisfied to effectively exercise the related
options;
all as determined by the Administrator, whose determination shall be
conclusive and binding in the absence of manifest error.
(b) Each Participant's Memorandum Account shall be adjusted to
reflect the amount of earnings, losses, appreciation or depreciation, as
appropriate that would result if the balances credited to the Participant's
Memorandum Account, were actually invested in Investment Benchmarks
according to the following guidelines:
(i) That portion of a Participant's Memorandum Account that
is attributable to the deferral of Option-Related Compensation shall
at all times be deemed to be invested in Phantom Shares. The number
of Phantom Shares credited in connection with each deferral of
Option-Related Compensation shall be equal to the number of Shares
corresponding to the Option-Related Compensation that is being
deferred. Additional Phantom Shares shall be credited to account for
any stock dividends to holders of record of Shares in an amount equal
to the product of (A) the number of Shares issued as a stock dividend
to the holder of record of one Share, multiplied by (B) the number of
Phantom Units credited to the Participant's Memorandum Account as of
the record date for the stock dividend. Additional Phantom Shares
shall be credited to account for cash dividends paid to holders of
record of Shares in an amount equal to the quotient of (A) the cash
dividend per Share multiplied by the number of Phantom Shares
credited to the Participant's Memorandum Account as of the record
date for the cash dividend, divided by (B) the Fair Market Value of a
Share on the payment date for the cash dividend.
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(ii) That portion of a Participant's Memorandum Account that
is attributable to the deferral of Equity Compensation shall be
deemed to be invested in Phantom Shares for so long as the
Administrator may require.
(iii) Any portion of the Participant's Memorandum Account that
is not subject to section 3.2(b)(i) or (ii) shall be deemed to be
invested in such Investment Benchmarks as the Participant, by notice
given in such form and manner and subject to such terms, conditions
and procedures as the Administrator may prescribe, shall designate
from time to time. If one of the Investment Benchmarks is Phantom
Shares, such terms, conditions and procedures shall be designed to
prevent the occurrence of non-exempt short-swing transactions
described in section 16 of the Securities Exchange Act of 1934, as
amended, to assure compliance with the Company's securities trading
policy and applicable federal and state securities laws, and unless
otherwise determined by the Administrator, to permit the Company to
account for its liability with respect to such portion of the
Memorandum Account on the basis of EITF 94-6 or corresponding
guidance in subsequent accounting standards.
(c) The Memorandum Account established for each Participant shall
be adjusted from time to time, but in no event less frequently than
monthly, to reflect:
(i) credits of deferred Compensation;
(ii) credits reflecting income, dividends and appreciation
attributable to the applicable Investment Benchmarks;
(iii) charges for losses or depreciation attributable to the
applicable Investment Benchmarks; and
(iv) charges for payments to the Participant or his
Beneficiary.
Except to the extent otherwise provided by the Administrator, all such
adjustments in respect of activity during a month shall be made as of the
last business of each month.
Section 3.3 Vesting.
Subject to section 5.3, all amounts credited to a Participant's
Memorandum Account shall be 100% vested at all times.
Article IV
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Trust
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Section 4.1 Establishment of Trust.
The Company may establish a trust fund which may be used to
accumulate funds to satisfy benefit liabilities to Participants, former
Participants and their Beneficiaries under the Plan; provided, however,
that the assets of such trust shall be subject to the claims of the
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creditors of the Company in the event that it is determined that the
Company is insolvent; and provided, further, that the trust agreement shall
contain such terms, conditions and provisions as shall be necessary to
cause the Company to be considered the owner of the trust fund for federal,
state or local income tax purposes with respect to all amounts contributed
to the trust fund or any income attributable to the investments of the
trust fund. The Company shall pay all costs and expenses incurred in
establishing and maintaining such trust. Any payments made to a
Participant, former Participant or Beneficiary from a trust established
under this section 4.1 shall offset payments which would otherwise be
payable by the Company in the absence of the establishment of such trust.
Any such trust will conform to the terms of the model trust prescribed by
Revenue Procedure 92-64, as the same may be modified from time to time.
Section 4.2 Contributions to Trust; Investments.
If a trust is established in accordance with section 4.1, each
Participating Company shall make contributions to such trust in such
amounts and at such times as may be specified by the Committee or required
pursuant to the terms any trust agreement between the Company and the
trustee that has been authorized by the Committee.
Section 4.3 Unfunded Character of Plan.
Notwithstanding the establishment of a trust pursuant to section 4.1,
the Plan shall be unfunded. Any liability of the Company or another
Participating Company to any person with respect to benefits payable under
the Plan shall be based solely upon such contractual obligations, if any,
as shall be created by the Plan, and shall give rise only to a claim
against the general assets of the Company or such Participating Company.
No such liability shall be deemed to be secured by any pledge or any other
encumbrance on any specific property of the Company or a Participating
Company.
Article V
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Life Insurance
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Section 5.1 Authority to Purchase Life Insurance.
To assist it in meeting its financial obligations under the Plan, the
Company may purchase and hold, or may cause the trustee of a trust
described in Article IV to purchase and hold, insurance on the life or
lives of such Participant or Participants in such amounts as the Committee
may determine. By electing to defer Compensation under the Plan, a
Participant shall be deemed to have authorized and consented to such
purchase.
Section 5.2 Cooperation to Effect Purchases.
Each Participant shall take such actions (including but not limited
to submitting to such physical examinations, providing such medical
information and executing such applications, consents to the purchase of
insurance and other documents and instruments) as the Administrator may
reasonably request to facilitate the purchase of insurance authorized by
the Committee. Any person who fails or refuses to cooperate in the purchase
of such insurance may, in the discretion of the Committee, be denied the
right of future participation in the Plan, such
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denial to be effected in a manner that complies with the requirements of
section 409A of the Code. No person shall be denied eligibility to
participate in the Plan solely because he is deemed uninsurable by the
carrier or carriers designated by the Committee.
Section 5.3 Ownership of Policies.
The Company (or, if applicable, a trust described Article IV) shall
be the legal owner of any life insurance policies purchased under the Plan
and shall have and enjoy all of the incidents of ownership, including, but
not limited to, the right to cancel, surrender, extend or assign the policy
in whole or in part, the right to exercise borrowing privileges against the
cash value of the policy, the right designate the beneficiary of any death
benefit proceeds that may become payable thereunder, the right to receive
policy dividends, the right exercise voting rights with respect to all
matters on which the holder of the policy may vote, and, in the case of a
mutual insurance company, the right to participate in and receive and hold
any proceeds distributed in relation to the policy in connection with any
demutualization transaction. In no event shall the Participant, his
Beneficiary or his heirs, successors or assigns have any rights in, to or
under any such policy, including but not limited to the right to receive
any portion of any death benefit proceeds that may be payable upon the
death of the Participant. In the event that the Participant, his
designated Beneficiary or any of his heirs, successors or assigns attempts
to challenge the rights of the Company (or, if applicable, a trust
described Article IV), then, in addition to any other rights and remedies
that may be available, any balance credited to the Participant's Memorandum
Account that is then unpaid shall be forfeited.
Section 5.4 Effect of Termination of Participation.
Neither the cessation of a Participant's performance of services for
the Company or any Participating Employer, nor the cessation of a
Participant's deferrals of Compensation under the Plan, nor the complete
distribution of the balance credited to the Participant's Memorandum
Account shall have any effect on the authority of the Company (or, if
applicable, a trust described Article IV) to continue any life insurance
policy then in effect on the life of such Participants for such future
period as the Committee may determine, including but limited to the period
extending through the date of the Participant's death.
Article VI
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Distributions
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Section 6.1 Early Distributions.
(a) In the event that a Participant has suffered an Unforeseeable
Emergency, the Administrator may, in its sole discretion and to the extent
permitted under section 409A of the Code, allow such Participant to obtain
a lump sum withdrawal of an amount credited to his Memorandum Account that
does not exceed the amount necessary to alleviate the Unforeseeable
Emergency.
(b) In the event of a Participant's Disability, the Administrator
may, in its sole discretion and to the extent permitted under section 409A
of the Code, allow the Participant to obtain a lump sum withdrawal of the
entire balance credited to his Memorandum Account.
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(c) To the extent required to comply with the terms of a domestic
relations order (within the meaning of section 414(p) of the Code) directed
to and served upon the Plan, the Administrator may direct the payment of
all or any portion of the balance credited to a Participant's Memorandum
Account at any time or in accordance with any payment schedule set forth in
said order.
(d) To the extent necessary to effect compliance with a certificate
of divestiture (within the meaning of section 1043(b)(2) of the Code), the
Administrator may permit the distribution of all or a portion of the
balance credited to a Participant's Memorandum Account earlier than the
times determined under section 6.2.
Section 6.2 Scheduled Distributions to Participants.
(a) Upon a Participant's termination of service with the Company
and all Participating Companies, an amount equal to the balance credited to
such Participant's Memorandum Account shall be paid to the Participant in a
single payment within thirty (30) days after the end of the calendar year
in which such termination of service occurs; provided, however, that if a
Participant so elects in his initial election to participate or in any
subsequent deferral election, payment of balances attributable to amounts
deferred pursuant to such election may be made:
(i) in a single payment as of some other date specified by
the Participant in his election; or
(ii) in annual installments over such number of years (not to
exceed fifteen (15)) and payable beginning on such date (not earlier
than the first day of the calendar year following the calendar year
that includes the third anniversary of the effective date of the
election) specified by the Participant in his election. In the event
payment is to be made in installments, each installment shall be
equal to the balance credited to the Participant's Memorandum Account
(or, if applicable, Memorandum Subaccount) as of the last business
day of the month ending immediately prior to the date on which
payment is to be made, divided by the number of installment payments
remaining to be paid (including the payment then being computed).
Any portion of the balance credited to the Participant's Memorandum
Account with respect to which a payment has not been made shall
continue to be adjusted pursuant to Article IV, in accordance with
the Investment Benchmarks in which the Participant's Memorandum
Account is deemed to be invested, until a distribution with respect
to such amount has been made.
(b) Notwithstanding section 6.2(a), each Participant may, by
written election given in such form and manner as the Administrator may
prescribe, elect to change the time and manner of distribution of the
balance credited to any Memorandum Subaccount; provided, however, that
11
(i) Any such election shall not take effect until twelve (12)
months after it is received by the Administrator; and
(ii) In the case of an election to defer a payment to be made
on account of an event other than the Participant's death, Disability
or Unforeseeable Emergency, the first payment made under such
election shall not occur until at least five (5) years later than
such payment would otherwise have been made; and
(iii) In the case of an election to defer a payment to be made
on account of a Change in Control Event, such election shall be made
at least twelve (12) months prior to the date of the first payment
scheduled to be made on account of the Change in Control Event.
(c) Distributions shall be made, or commence, within 30 days after
the date the Participant becomes entitled to payment pursuant to this
section 6.2. Distributions of balances attributable to the deferral of
Option-Related Compensation shall be made in whole Shares (with cash paid
in lieu of fractional shares), distributions of the balances deemed to be
invested in Phantom Shares shall, unless the Administrator determines
otherwise, be made in whole Shares (with cash paid in lieu of fractional
Shares); and all other distributions shall be made in cash unless the
Administrator, in its discretion, permits other forms of distribution.
Section 6.3 Distributions to Beneficiaries.
(a) A Participant may designate a Beneficiary or Beneficiaries by
filing a written notice with the Administrator prior to the Participant's
death, in such form and manner as the Administrator may prescribe. A
Participant who has designated a Beneficiary or Beneficiaries may change or
revoke such designation prior to the Participant's death by means of a
similar written instrument.
(b) In the event that a Participant dies before receiving payment
of his entire Memorandum Account, payment of the value of the deceased
Participant's Memorandum Account shall be made in a lump sum to his
Beneficiary or Beneficiaries within ninety (90) days after the
Administrator receives satisfactory evidence of the Participant's death.
If no Beneficiary shall have been designated or if any such designation
shall be ineffective, or in the event that no designated Beneficiary
survives the Participant, payment of the value of the Participant's
Memorandum Account shall be made to the Participant's personal
representative, or if no personal representative is appointed within six
(6) months after the Participant's death or such longer period as the
Administrator deems reasonable in its discretion, to his surviving spouse,
or if he has no surviving spouse, to his then living descendants, per
stirpes, in the same manner and at the same time as the Participant's
Memorandum Account would have been paid to a Beneficiary. If any
Participant and any one or more of his designated Beneficiary(ies) shall
die in circumstances that leave substantial doubt as to who shall have been
the first to die, the Participant shall be deemed to have survived the
deceased Beneficiary(ies). The presence of substantial doubt for such
purposes shall be determined by the Administrator in its sole and absolute
discretion.
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Section 6.4 Mandatory Cashout of Small Balances.
Notwithstanding anything in the Plan to the contrary, except as
provided in section 6.5, if, as of December 31 of any calendar year
following a Participant's termination of service with all Participating
Companies, the balance credited to his Memorandum Account is $10,000 or
less, the entire balance credited to his Memorandum Account shall be
distributed in a single lump sum payment as soon as practicable during the
immediately following calendar year.
Section 6.5 Restrictions on Payments to Key Employees.
Notwithstanding anything in the Plan to the contrary, to the extent
required under section 409A of the Code, no payment to be made to a key
employee (within the meaning of section 409A of the Code) on or after the
date of his termination of service shall be made sooner than six (6) after
such termination of service.
Article VII
-----------
Administration
--------------
Section 7.1 Administrator.
The Administrator shall, subject to the responsibilities of the
Committee and the Board, have the responsibility for the day-to-day
control, management, operation and administration of the Plan. The
Administrator shall have the following responsibilities:
(a) To maintain records necessary or appropriate for the
administration of the Plan;
(b) To give and receive such instructions, notices,
information, materials, reports and certifications as may be
necessary or appropriate in the administration of the Plan;
(c) To prescribe forms and make rules and regulations
consistent with the terms of the Plan and with the interpretations
and other actions of the Committee;
(d) To require such proof or evidence of any matter from any
person as may be necessary or appropriate in the administration of
the Plan;
(e) To determine any question arising in connection with the
Plan, including any question of Plan interpretation, and the
Administrator's decision or action in respect thereof shall be final
and conclusive and binding upon all persons having an interest under
the Plan; provided however, that any question relating to
inconsistency or omission in the Plan, or interpretation of the
provisions of the Plan, shall be referred to the Committee by the
Administrator and the decision of the Committee in respect thereof
shall be final;
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(f) To review and dispose of claims under the Plan filed
pursuant to section 7.3 and appeals of claims decisions pursuant to
section 7.4;
(g) If the Administrator shall determine that by reason of
illness, senility, insanity, or for any other reason, it is
undesirable to make any payment to the person entitled thereto, to
direct the application of any amount so payable to the use or benefit
of such person in any manner that the Administrator may deem
advisable or to direct in the Administrator's discretion the
withholding of any payment under the Plan due to any person under
legal disability until a representative competent to receive such
payment in his behalf shall be appointed pursuant to law;
(h) To discharge such other responsibilities or follow such
directions as may be assigned or given by Committee or the Board; and
(i) To perform any duty or take any action which is allocated
to the Administrator under the Plan.
The Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Administrator may
resign only be giving at least 30 days' prior written notice of resignation
to the Committee, and such resignation shall be effective on the date
specified in such notice.
Section 7.2 Committee Responsibilities.
The Committee shall, subject to the responsibilities of the Board,
have the following responsibilities:
(a) To review the performance of the Administrator;
(b) To hear and decide appeals, pursuant to the claims
procedure contained in section 7.4 of the Plan, taken from the
decisions of the Administrator;
(c) To hear and decide questions, including interpretation of
the Plan, as may be referred to the Committee by the Administrator;
(d) To report and make recommendations to the Board regarding
changes in the Plan, including changes in the operation and
management of the Plan;
(e) To designate an alternate Administrator to serve in the
event that the Administrator is absent or otherwise unable to
discharge his responsibilities;
(f) To remove and replace the Administrator or alternate, or
both of them, and to fill a vacancy in either office;
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(g) To discharge such other responsibilities or follow such
directions as may be assigned or given by the Board; and
(h) To perform any duty or to take any action which is
allocated to the Committee under the Plan.
The Committee shall have the power and authority necessary or appropriate
to carry out its responsibilities. The Committee may take action under the
Plan by vote of a majority of the members present at any meeting of the
Committee at which a quorum is present or by unanimous written consent in
lieu of meeting. No member of the Committee shall participate in any
action or decision in which he has a personal interest unless all members
of the Committee voting on such matter are similarly interested. The
Committee may delegate to one of its members, to the Administrator or to
any Non-Employee Director of the Company or any other Participating Company
the power and responsibility, to the extent not expressly allocated under
the Plan to the Administrator, to sign instruments and other communications
in its behalf and to take appropriate action to implement the Committee's
decisions.
Section 7.3 Claims Procedure.
Any claim relating to benefits under the Plan shall be filed with the
Administrator on a form prescribed by it. If a claim is denied in whole or
in part, the Administrator shall give the claimant written notice of such
denial, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was
based;
(c) Any additional material or information necessary for the
claimant to perfect his claim and an explanation of why such material
or information is needed; and
(d) An explanation of the Plan's procedure for review of the
denial of the claim.
In the event that the claim is not granted and notice of denial of a claim
is not furnished by the 30th day after such claim was filed, the claim
shall be deemed to have been denied on that day for the purpose of
permitting the claimant to request review of the claim.
Section 7.4 Claims Review Procedure.
Any person whose claim filed pursuant to section 7.3 has been denied
in whole or in part by the Administrator may request review of the claim by
the Committee, upon a form prescribed by the Administrator. The claimant
shall file such form (including a statement of his position) with the
Committee no later than 60 days after the mailing or delivery of the
written notice of denial provided for in section 7.3, or, if such notice is
not provided, within 60 days after such claim is deemed denied pursuant to
section 7.3. The claimant shall be permitted to review pertinent
documents. A decision shall be rendered by the Committee and communicated
to the claimant not later than 30 days after receipt of the claimant's
written request for review.
15
However, if the Committee finds it necessary, due to special circumstances
(for example, the need to hold a hearing), to extend this period and so
notifies the claimant in writing, the decision shall be rendered as soon as
practicable, but in no event later than 120 days after the claimant's
request for review. The Committee's decision shall be in writing and shall
specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the decision is
based.
Any such decision of the Committee shall be binding upon the claimant and
the Participating Company, and the Administrator shall take appropriate
action to carry out such decision.
Section 7.5 Other Administrative Provisions.
(a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in section 7.4 prior
to initiating any claim for judicial review.
(b) neither the members of the Committee, the Administrator, nor
any Non-Employee Director or employee of a Participating Company to whom
responsibilities are assigned under the Plan shall be liable for any act of
omission or commission by himself or by another person, except for his own
individual willful and intentional malfeasance.
(c) The Administrator or the Committee may, shorten, extend or
waive the time (but not beyond 60 days) required by the Plan for filing any
notice or other form with the Administrator or Committee, or taking any
other action under the Plan; provided, however, that no such shortening,
extension or waiver shall be done that would cause any Participant to be in
constructive receipt of the balance credited his Memorandum Account prior
to the date on which such balance is scheduled to be paid.
(d) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to
the Plan.
(e) Any action taken or omitted by the Administrator or the
Committee or any delegate of the Committee with respect to the Plan,
including any decision, interpretation, claim denial or review on appeal,
shall be conclusive and binding on and all interested parties and shall be
subject to judicial modification or reversal only to the extent it is
determined by a court of competent jurisdiction that such action or
omission was arbitrary and capricious and contrary to the terms of the
Plan.
Article VIII
------------
Amendment And Termination
-------------------------
Section 8.1 Amendment by the Company.
The Company reserves the right, in its sole and absolute discretion,
at any time and from to time, by action of the Board, to amend the Plan in
whole or in part. In no event,
16
however, shall any such amendment adversely affect the right of any
Participant, former Participant or Beneficiary to receive any benefits
under the Plan in respect of participation for any period ending on or
before the later of the date on which such amendment is adopted or the date
on which it is made effective.
Section 8.2 Termination.
(a) The Company reserves the right, in its sole and absolute
discretion, by action of the Board, to terminate the Plan, but only in the
following circumstances:
(i) Within twelve (12) months of any Change in Control Event;
and
(ii) At such other time and in such other circumstances as may
be permitted under section 409A of the Code.
In such event, undistributed benefits attributable to participation prior
to the date of termination shall be distributed in lump sum payments as
soon as practicable following the effective date of termination.
(b) The Company reserves the right, in its sole and absolute
discretion, by action of the Board, to suspend the operation of the Plan,
but only in the following circumstances:
(i) With respect to Compensation to be earned and paid in
calendar years beginning after the date of adoption of the resolution
suspending the operation of the Plan; and
(ii) At such other time and in such other circumstances as may
be permitted under section 409A of the Code.
In such event, no further Compensation shall be deferred following the
effective date of the suspension and memorandum Accounts in existence prior
to such date shall continue to be maintained, and payments shall continue
to be made, in accordance with the provisions of the Plan.
Section 8.3 Amendment or Termination by Other Companies.
In the event that a corporation or trade or business other than the
Company shall adopt this Plan, such corporation or trade or business shall,
by adopting the Plan, empower the Company to amend or terminate the Plan,
insofar as it shall cover employees of such corporation or trade or
business, upon the terms and conditions set forth in sections 8.1 and 8.2;
provided, however, that any such corporation or trade or business may, by
action of its board of directors or other governing body, amend or
terminate the Plan, insofar as it shall cover employees of such corporation
or trade or business, at different times and in a different manner. In the
event of any such amendment or termination by action of the board of
directors or other governing body of such a corporation or trade or
business, a separate plan shall be deemed to have been established for the
employees of such corporation or trade or business, and any amounts set
aside to provide
17
for the satisfaction of benefit liabilities with respect to employees of
such corporation or trade or business shall be segregated from the assets
set aside for the purposes of this Plan at the earliest practicable date
and shall be dealt with in accordance with the documents governing such
separate plan.
Article IX
----------
Miscellaneous Provisions
------------------------
Section 9.1 Notice and Election.
The Administrator shall provide a copy of this Plan and the
resolutions of adoption to each Non-Employee Director who becomes eligible
to participate, together with a form on which the Non-Employee Director may
notify the Administrator of his election whether to become a Participant,
which form, if he so elects, he may complete, sign and return to the
Administrator.
Section 9.2 Construction and Language.
Wherever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular,
and the masculine gender may be read as referring equally to the feminine
gender or the neuter.
Section 9.3 Headings.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings
and the text of the Plan, the text shall control.
Section 9.4 Non-Alienation of Benefits.
Except as may otherwise be required by law, no distribution or
payment under the Plan to any Participant, former Participant or
Beneficiary shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, whether
voluntary or involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void; nor
shall any such distribution or payment be in any way liable for or subject
to the debts, contracts, liabilities, engagements or torts of any person
entitled to such distribution or payment. If any Participant, former
Participant or Beneficiary is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge encumber or charge any
such distribution or payment, voluntarily or involuntarily, the Committee,
in its sole discretion, may cancel such distribution or payment or may hold
or cause to be held or applied such distribution or payment, or any part
thereof, to or for the benefit of such Participant, former Participant or
Beneficiary, in such manner as the Committee shall direct; provided,
however, that no such action by the Committee shall cause the acceleration
or deferral of any benefit payments from the date on which such payments
are scheduled to be made.
18
Section 9.5 Indemnification.
The Company shall indemnify, hold harmless and defend each
Participant, former Participant and Beneficiary, against their reasonable
costs, including legal fees, incurred by them or arising out of any action,
suit or proceeding in which they may be involved, as a result of their
efforts, in good faith, to defend or enforce the obligations of the Company
and any other Participating Employer under the terms of the Plan.
Section 9.6 Severability.
A determination that any provision of the Plan is invalid or unenforceable
shall not affect the validity or enforceability of any other provision
hereof.
Section 9.7 Waiver.
Failure to insist upon strict compliance with any of the terms,
covenants or conditions of the Plan shall not be deemed a waiver of such
term, covenant or condition. A waiver of any provision of the Plan must be
made in writing, designated as a waiver, and signed by the party against
whom its enforcement is sought. Any waiver or relinquishment of any right
or power hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 9.8 Governing Law.
The Plan shall be construed, administered and enforced according to
the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws principles thereof, except to the extent that such laws
are preempted by federal law. The federal and state courts having
jurisdiction in Hampden County, Massachusetts shall have exclusive
jurisdiction over any claim, action, complaint or lawsuit brought under the
terms of the Plan or in any way relating to the rights or obligations of
any person under, or the acts or omissions of the Company, the Board, the
Administrator, the Committee on any duly authorized person acting in their
behalf in relation to, the Plan. By electing to participate in this Plan,
the Participant, for himself and any other person claiming any rights under
the Plan through him, agrees to submit himself, and any such legal action
described herein that he shall bring, to the sole jurisdiction of such
courts for the adjudication and resolution of such disputes. Any payments
made pursuant to this Plan are subject to and conditioned upon their
compliance with 12 U.S.C. [SECTION] 1828(k) and any regulations promulgated
thereunder.
Section 9.9 Withholding.
Payments from this Plan shall be subject to all applicable federal,
state and local income withholding taxes. The Company, Westfield Bank, any
other Participating Company or the Committee shall have the right to
require any person entitled to receive a distribution in Shares under this
Plan to pay the amount of any tax which is required to be withheld with
respect to such Shares, or, in lieu thereof, to cancel without notice, a
sufficient number of Phantom Shares to cover the amount required to be
withheld.
19
Section 9.10 No Deposit Account.
Nothing in this Plan shall be held or construed to establish any
deposit account for any Participant or any deposit liability on the part of
the Company or any Participating Company. Participants' rights hereunder
shall be equivalent to those of a general unsecured creditor of each
Participating Company.
Section 9.11 Rights of Participants.
No Participant shall have any right or claim to any benefit under the
Plan except in accordance with the provisions of the Plan. The
establishment of the Plan shall not be construed as conferring upon any
Participant or other person any legal right to a continuation of service or
to any terms or conditions of service, nor as limiting or qualifying the
right of a Participating Company, its board of directors or its
stockholders to remove any Non-Employee Director or to fail to re-elect him
or her or decline to nominate him or her for re-election.
Section 9.12 Status of Plan Under ERISA.
The Plan is intended to be a non-qualified deferred compensation plan
maintained exclusively for non-employees. The Plan is not intended to
comply with the requirements of section 401(a) of the Code or to be subject
to Parts 2, 3 and 4 of Title I of ERISA. The Plan shall be administered
and construed so as to effectuate this intent.
Section 9.13 Successors and Assigns.
The provisions of the Plan will inure to the benefit of and be
binding upon the Participants and their respective legal representatives
and testate or intestate distributes, and each Participating Company and
their respective successors and assigns, including any successor by merger
or consolidation or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the assets and business of
any Participating Company may be sold or otherwise transferred.
Section 9.14 Non-dilution Provisions.
In the event of any merger, consolidation, or other business
reorganization involving the Company, and in the event of any stock split,
stock dividend or other event generally affecting the number of Shares held
by each person who is then a holder of record of Shares, and in the event
of any other occurrence which, in the judgment of the Committee warrants an
adjustment to avoid unintended enhancement or dilution of the rights of one
or more Participants under the Plan, the number of Phantom Units credited
to each Participant's Memorandum Account, and the unit value thereof, shall
be adjusted to account for such event. Such adjustment shall be effected
in such manner as the Committee shall determine to e appropriate in order
to prevent the enlargement or diminution of any Participant's rights under
the Plan.
20
Section 9.15 Compliance with Section 409A of the Code.
The Plan is intended to be a non-qualified deferred compensation plan
described in section 409A of the Code. The Plan shall be operated,
administered and construed to give effect to such intent. In addition he
Plan shall be subject to amendment, with or without advance notice to
Participants and other interested parties, and on a prospective or
retroactive basis, including but not limited amendment in a manner that
adversely affects the rights of participants and other interested parties,
to the extent necessary to effect such compliance.
21