Exhibit 10.13

 



 

2013

EXECUTIVE

SHORT TERM INCENTIVE PLAN (ESIP)

 

Revised February 28, 2013

 

Original Plan Adopted January 28, 2010

 











 

2013 Executive Short-term Incentive Plan

 

Objectives

 

Primary objectives of the executive short-term incentive Plan are to motivate and reward executives for achieving specific Bank, department and individual goals that support the Company’s strategic plan.

 

Participants

 

CEO and EVPs are eligible to participate.  The participants are recommended by CEO and approved by the Compensation Committee of Berkshire Hills Bancorp, Inc.

 

Incentive Opportunity

 

Each participant will have a target incentive opportunity as a percentage of base salary.  Targets are based on competitive market practice for each role.  Targets are reviewed and updated in conjunction with the market review.

 

	
Tier
    	
 
    	
Incentive Opportunity
   (% of Base Salary)
    	
 
    
	
CEO
    	
 
    	
50
    	
%
    
	
EVP
    	
 
    	
35
    	
%
    


 

Trigger/Gate

 

Performance below 75% of Core Net Income target will result in the plan not being funded for that year.  Once the trigger/gate is achieved, the plan payouts will be determined based on performance measures as defined below.

 

Performance Measures

 

Incentive awards paid reflect a combination of the corporate financial performance, strategic plan implementation and individual performance.  Corporate financial results and achievement of the strategic business plan funds the incentive awards as follows:

 

	
Individual
   Incentive
   Target
   Opportunity
    	
x
    	
Corporate
   Financial
   Performance
   Scorecard
   (0% - 150%)
    	
x
    	
Strategic
   Multiplier
   (85% - 115%)
   Not to
   exceed 150%
    	
=
    	
Potential
   Incentive
   Opportunity
    


 

The corporate multiplier is determined formulaically based on achievement of predefined performance goals.  Strategic multiplier (+/- 15%) will be determined by the Compensation Committee based on its assessment of executives’ achievement of strategic goals during the year. In addition, the Committee will consider and discuss overall risk and can adjust the pool downward to reflect any risk or regulatory issues. Any discretionary modification of the pool will not exceed 150% total funding.

 

Individual performance will be measured in a “holistic” approach based on each participant’s individual scorecard, overall achievements and manager discretion.

 

Once each executive’s incentive opportunity is determined, the award can be adjusted to reflect individual performance.  Individual adjustments can be positive or negative, but total awards should not exceed the Funded Pool and Individual awards should not exceed 200% of target.

 

The table on the following page shows the Corporate Financial Performance Scorecard measures which will be used to determine funded individual incentives for 2013. Each corporate performance measure is treated independently and performance between threshold, target and stretch will be interpolated to reward incremental performance.  Performance below threshold will result in no award for that component.

 

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BERKSHIRE BANK 2013 CORPORATE FINANCIAL PERFORMANCE SCORECARD

 

	
Performance
   Measure
    	
 
    	
Definition*
    	
 
    	
Weight
    	
 
    	
Threshold
   (funds 50% of
   award/pool)
    	
 
    	
Target
   (funds 100% of
   award/pool)
    	
 
    	
Stretch
   (funds 150% of
   award/pool)
    	
 
    
	
Core Earnings
    	
 
    	
Total Core Net Income
    	
 
    	
50
    	
%
    	
$
    	
48,280,000
    	
 
    	
$
    	
53,645,000
    	
 
    	
$
    	
59,009,500
    	
 
    
	
Expense Management
    	
 
    	
Annual Core Efficiency Ratio
    	
 
    	
25
    	
%
    	
60.0
    	
%
    	
58.0
    	
%
    	
56.0
    	
%
    
	
Asset Quality
    	
 
    	
Criticized Assets (Tier 1 + ALLL)
    	
 
    	
25
    	
%
    	
43
    	
 
    	
41
    	
 
    	
39
    	
 
    
															


 

X

 

Strategic Plan Goals: Compensation Committee has the discretion to modify pool +/- 15% based on the level of achievement of strategic goals. Any discretionary modification of the pool will not exceed 150% total funding.

In addition, the committee will consider and discuss overall risk and can adjust the pool downward to reflect any risk or regulatory issues. 

 




*All financial measures are adjusted to reflect core operations and one time and/or extraordinary items are excluded.

 

Payout

 

Awards are calculated based on actual performance at the end of the year.  Results of the Corporate Financial Performance Scorecard and strategic goal achievement will be used to fund the pool. Achievement of strategic goals and overall risk are assessed by the Committee.

 

The Compensation Committee (with input from the CEO for his reports) can adjust the incentive award to reflect individual performance based on achievements of individual goals and a holistic assessment of overall performance.

 

Total awards should not exceed the pool and individual awards should not exceed 200% of the executive’s original target.  Payouts will be made in cash within 75 days after the closing of Bank financials each year.

 

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EXAMPLE

 

For the illustration, we assume an executive with $100k target incentive opportunity.

 

1.              The first step will evaluate performance based on the Corporate Scorecard and strategic goal achievement. The result of the Corporate Scorecard and strategic goal achievement funds individual incentives for all executives and the overall pool.

 

In the illustration below the funding is calculated as (50% x 100%) + (25% x 115%) + (25% x130%) = 111.25% for Corporate Financial Performance.

 

In this illustration, the strategic multiplier is determined to be 108%.

 

As a result, he total funding of the incentives is 111.25% x 108% = 120%.

 

	
Corporate Financial Performance Scorecard
    	
 
    	
x
    	
 
    	
 
    	
 
    	
=
    	
 
    	
120%
    
	
Performance
   Measure
    	
 
    	
Performance
   Goal
    	
 
    	
Weight
    	
 
    	
Actual
   Performance
    	
 
    	
Pool
   Allocation
    (0% - 150 %)
    	
 
    	
 
    	
Strategic
   Multiplier
    	
 
    	
 
    
	
Total Core Net
   Income
    	
 
    	
TBD
    	
 
    	
50%
    	
 
    	
Target
    	
 
    	
100%
    	
 
    	
 
    	
Upon the Committee’s evaluation of strategic goals achievement and   overall risk (85% - 115%) Not to exceed 150%
    	
 
    	
 
    
	
Annual Core
   Efficiency Ratio
    	
 
    	
TBD
    	
 
    	
25%
    	
 
    	
Above target
    	
 
    	
115%
    	
 
    	
 
    	
 
    	
 
    
	
Criticized Assets
   (Tier 1 + ALLL)
    	
 
    	
TBD
    	
 
    	
25%
    	
 
    	
Stretch
    	
 
    	
130%
    	
 
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
 
    	
 
    	
100%
    	
 
    	
111.25%
    	
 
    	
 
    	
108%
    	
 
    	
 
    


 

This executive’s funded incentive opportunity is now $120k (i.e. 100k x 120%) and the pool is the sum of all the total incentives for the top executives.

 

2.              Individual performance is considered to determine actual award.  Individual performance can adjust the incentive award up or down, although total awards cannot exceed the pool and no single award should exceed 200% of target (e.g. $200k for our example).

 

·                  If the executive did not meet all goals, the award may be adjusted down from $120k.

·                  If the executive exceeded all goals, the award may be adjusted above $120k

·                  This executive’s award should not exceed $200k

 

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TERMS AND CONDITIONS

 

Eligibility/Participation

 

CEO and EVPs are eligible to participate in the Top Executive Short-Term Incentive Plan (“EIP”).  The Compensation Committee of the Board of Directors of Berkshire Hills Bancorp, Inc. (the “Company”) approves participants based on recommendations from the CEO.  Participants must be employed or promoted by October 1st of the plan year and actively employed on the payout date to receive an award. In the event that an individual, who is due an incentive payout under the plan terminates their employment with the Bank between January 1, 2014 to the date the incentive is paid, that individual’s incentive will be included in the pool and allocated to other participants of the plan.

 

Payouts

 

Once the plan funding and modified award opportunity (% of Base Salary) are known, actual awards will be determined based on individual performance.  Awards are scheduled to be paid no later than March 15 after determining Berkshire’s financial results for the previous year.  Payouts are pro-rated based on date of hire or promotion after March 31.

 

Effective Date

 

This Plan is effective January 1, 2013 for the performance period of January 1, 2013 to December 31, 2013 and shall continue thereafter until modified by the Compensation Committee.  The Plan will be reviewed annually by the Compensation Committee to ensure proper alignment with Berkshire’s objectives.  Berkshire’s Compensation Committee retains the right as described below to amend, modify or discontinue the Plan at any time during the specified period.  The Plan will remain in effect until earned incentive compensation is paid to participants.

 

Plan Authorization and Oversight

 

This Plan is authorized by the Compensation Committee of the Board of Directors.  The Committee has the sole authority to interpret the Plan and to make or nullify any rules and procedures, as necessary, for proper administration. Any determination by the Committee and/or Board of Directors will be final and binding.  The Compensation Committee may, in its sole discretion, terminate or modify any aspect of the Plan.  However, no Plan amendment or termination will adversely affect an outstanding award.

 

Plan Changes or Discontinuance

 

Berkshire has developed the Plan on the basis of existing business, market and economic conditions; current philosophy and staff assignments. If substantial changes occur that affect these conditions, philosophy, assignments, or forecasts, Berkshire may add to, amend, modify or discontinue any of the terms or conditions of the Plan at any time.  The Compensation Committee may, at its sole discretion, waive, change or amend any of the Plan features as it deems appropriate.

 

Termination of Employment

 

If a Plan participant is terminated by the Company or resigns, no incentive award will be paid.  (See exception for death, disability and retirement below.)

 

Death, Disability and Retirement

 

In the event of Death, Disability and Retirement, the Committee may, in its sole discretion, approve a pro rata payout to such Participant.

 

Ethics and Interpretation

 

If there is any ambiguity as to the meaning of any terms or provisions of the Plan or any questions as to the correct interpretation of any information contained therein, the interpretation expressed by the Compensation Committee will be final and binding.

 

The altering, inflating, and/or inappropriate manipulation of performance/financial results or any other infraction of recognized ethical business standards, will subject a participant to disciplinary action up to and including termination of employment.  In addition, any incentive compensation under the Plan to which the participant would otherwise be entitled will be revoked.

 

Participants who have willfully engaged in any activity, injurious to Berkshire, will upon termination of employment, death, or retirement, forfeit any incentive award or payment earned during the Plan year in which the termination occurred.

 

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Withholding of Taxes

 

Incentive awards will be subject to applicable federal (including FICA), state and local tax withholding requirements.  The Bank shall have the right to deduct from the incentive awards paid in cash or from other wages paid to the participant any federal, state or local taxes required by law to be withheld with respect to such incentive awards.  In the case of incentive awards paid in Bank stock, the Bank may require the participant or other person receiving such shares to pay to the Bank the amount of any such taxes that the Bank is required to withhold with respect to such awards, or the Bank may deduct from other wages paid by the Bank the amount of any withholding taxes due with respect to such awards.  If the Compensation Committee so permits, a participant may elect to satisfy the Bank’s income tax withholding obligation, with respect to awards paid, in Bank stock by having shares withheld up to an amount that does not exceed the participant’s minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities.  The election must be in a form and manner prescribed by the Compensation Committee.

 

Clawback

 

In the event the Company or Berkshire Bank (the “Bank”) is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws as a result of misconduct (as determined by the members of the Board of Directors who are considered “independent” for purposes of the listing standards of the NYSE), of the each of the executive officers and any other person who intentionally engaged in the misconduct that created the necessity of the accounting restatement, shall reimburse the Bank for part of or the entire incentive award made to such executive officer or person on the basis of having met or exceeded specific targets for such performance period.  For purposes of this policy, (i) the term “incentive awards” means awards under this Plan, the amount of which is determined in whole or in part upon specific performance targets relating to the financial results of the Company; and (ii) the term participants means the CEO and his direct reports, who are eligible to participate in this Plan.

 

Risk

 

In order to help insure the Company’s safety and soundness, the committee reserves the right to modify or adjust payments to reflect material regulatory findings and/or asset quality deterioration. A portion of the company’s strategic initiative concerns asset quality soundness. A review/comparison of the company’s asset quality results vs. trends, tolerance level ranges and the peer group will be provided to the committee prior to payout.

 

Miscellaneous

 

The Plan will not be deemed to give any participant the right to be retained in the employ of Berkshire, nor will the Plan interfere with the right of Berkshire to discharge any participant at any time.

 

In the absence of an authorized, written employment contract, the relationship between executives and Berkshire is one of at-will employment. The Plan does not alter the relationship.

 

The Plan and the transactions and payouts hereunder shall, in all respect, be governed by, and construed and enforced in accordance with the laws of the State of Massachusetts.

 

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