Document:

ex10-1.htm

Exhibit 10.1

 

 

ENERGY RECOVERY INC

ANNUAL INCENTIVE PLAN (AIP)

 

A.     SCOPE

 

This Annual Incentive Plan (the “Plan”) of Energy Recovery, Inc. (the “Company”) and its subsidiaries is effective as of January 1, 2015 and covers eligible employees designated by the Company and approved by the Compensation Committee (“Compensation Committee”) of the Board of Directors (the “Board”). The Plan shall continue until terminated in accordance with paragraph J. This Plan replaces and supersedes any and all other agreements for participants in this Plan, representations, or understandings (either written or oral) with respect to incentive compensation.

 

B.     PURPOSE

 

The purpose of the Plan is to encourage the performance and retention of eligible employees in recognition of individual achievement that contributes to the strategic and financial success of the Company.

 

C.     ELIGIBLE EMPLOYEES

 

Full-time and in certain cases part-time, regular employees, unless otherwise required by applicable law and who are employed as of October 1 of the applicable Plan Year (as defined below) are eligible to be selected as participants in the Plan (“Participants”). A committee comprised of the Company’s Chief Executive Officer, Chief Financial Officer, and Human Resources Vice President (“Plan Committee”), as administrator of the Plan, shall designate among the eligible employees of the Company and its subsidiaries described in the preceding sentence who are to be participants (the “Participants”) in the Plan for the applicable fiscal year (the “Plan Year”). Participation in the Plan in one Plan Year is not a guarantee of participation in a future Plan Year.

 

D.     INDIVIDUAL TARGETS

 

The Plan Committee will establish an incentive award target (“Individual Target”) for each Participant that shall be expressed as a percentage of such Participant’s annual base compensation. For exempt employees, the percentage will be of the Participant’s annual base compensation for the Plan Year, prorated as necessary, to adjust for date of hire, changes in salary, working hours, status, target percentage, and / or transfers. For non-exempt employees, the percentage will be of the Participant’s wages for the Plan Year, inclusive of regular wages, prorated as necessary, to adjust for date of hire, changes in salary, working hours, status, target percentage, and / or transfers. Individual Targets will be reviewed and approved by the Plan Committee on an annual basis, and the Compensation Committee will approve Individual Targets for all executive officers of the Company.

 

 

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E.     ANNUAL BONUS POOL

 

Except as may otherwise be set forth herein or as determined by the Plan Committee under certain circumstances, the aggregate amount allocated for payment of bonuses under the Plan is based on Company performance as measured by the actual attainment level of the Adjusted Operating Income (Loss) for the associated Plan Year (the “Annual Bonus Pool”). Through the annual budgeting process, the Board will approve the Company target for Adjusted Operating Income (Loss) (the “Profitability Target”), and the Annual Bonus Pool will be determined by comparing the actual Adjusted Operating Income (Loss) achieved during the Plan Year to the Profitability Target approved by the Board. The “Target Annual Bonus Pool”, which shall be equal to the aggregate amount of the Individual Targets for the entire population of Participants designated to participate with respect to a Plan Year, will become payable upon 100% achievement of the Profitability Target specified in the approved budget for the associated Plan Year. For actual performance below the Profitability Target, the Annual Bonus Pool will be calculated based on the formula described in Paragraph G below. The Company shall accrue for accounting purposes for payment of awards under the Plan on a monthly basis in accordance with the Plan Committee’s assessment of interim results as compared to the comparable Profitability Target. 

 

F.     ADJUSTED OPERATING INCOME (LOSS)

 

For purposes of this Plan, “Adjusted Operating Income (Loss)” shall be defined as “operating income (loss) before bonus expense and non-recurring items” of the Company for the Plan Year. Specifically, Adjusted Operating Income (Loss) shall reflect the consolidated operating income of the Company during the fiscal year, as determined by the Plan Committee in conformity with accounting principles generally accepted in the United States of America and contained in financial statements that are subject to an audit report of the Company's independent public accounting firm, but excluding:

 

(i) the accrued bonus expense under the provisions of this Plan;

 

(ii) transaction and financing costs associated with an acquisition or in anticipation thereof;

 

(iii) restructuring costs for an initiative approved by the Board;

 

(iv) losses associated with the write-down of assets of a subsidiary, business unit, or division that has been designated by the Board as a discontinued business operation or to be liquidated;

 

(v) gains or losses on the sale of any subsidiary, business unit or division, or the assets or business thereof;

 

(vi) gains or losses from the disposition of material capital assets (other than in a transaction described in subsection (iii) through (v) above;

 

(vii) the refinancing of indebtedness, including, among other things, any make-whole payments and prepayment fees;

 

(viii) losses associated with the write-down of goodwill or other intangible assets of the Company due to the determination under applicable accounting standards that the assets have been impaired;

 

 

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(ix) any income statement effect resulting from a change in generally accepted accounting principles, except to the extent that the effect of such a change is already reflected in the Profitability Target; 

 

(x) any other material income or loss item, the realization of which is not directly attributable to the actions of current senior management of the Company; and

 

(xi) other non-recurring or unpredicted items proposed by the Plan Committee and accepted by the Compensation Committee. 

 

The Compensation Committee shall have final authority with respect to any determination by the Plan Committee regarding the definition of “Adjusted Operating Income (Loss)” and, in exercising such authority, may consult with the Company’s independent auditor and/or Audit Committee as it deems necessary and advisable.

 

G.     ANNUAL BONUS POOL DETERMINATION

 

At the onset of each Plan Year, the Compensation Committee shall determine the Profitability Target and Target Annual Bonus Pool. The actual amount that becomes payable under the Plan shall be determined upon calculation of Adjusted Operating Income (Loss) at the end of the Plan Year, subject to any adjustments required pursuant to Section F herein.

 

	 	
●
	
If Adjusted Operating Income (Loss) equals the Profitability Target, 100% of the Annual Bonus Pool will become payable.

	 	
●
	
If Adjusted Operating Income (Loss) exceeds the Profitability Target, the Annual Bonus Pool will be calculated based on the allocation curve as illustrated in Exhibit A, capped at 100%.

	 	
●
	
If Adjusted Operating Income (Loss) exceeds the Minimum Performance Threshold, but is less than 100%, of the Profitability Target, the Annual Bonus Pool will be calculated based on the allocation curve as illustrated in Exhibit A. 

	 	
●
	
If Adjusted Operating Income (Loss) is less than The Minimum Performance Threshold of the Profitability Target, the Annual Bonus Pool will be equal to minimum discretionary funding established and approved by the Compensation Committee; provided, however, that such minimum amount shall only be awarded to individual Participants for extraordinary performance as determined by the Plan Committee and approved by the Compensation Committee.

 

The “Allocation Ratio,” which is defined as the Annual Bonus Pool divided by the Target Annual Bonus Pool, will be applied for computation of individual bonus payments made to Participants. To derive the Allocation Ratio for the purposes of calculating individual bonus payments, the Company will use the allocation curve depicted in Exhibit A. The Compensation Committee, subject to any required approval of the Board, shall have the ability and authority to increase or decrease the amount of the Annual Bonus Pool calculated in accordance with the provisions of this Plan to reflect any extraordinary or unforeseen events or occurrences during the Plan Year. In addition, amounts payable are subject to adjustment at the sole discretion of the Plan Committee, and any amounts payable may be increased or reduced, including to zero. 

 

 

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H.     BONUS CALCULATION

 

A Participant’s bonus payment under this Plan shall be calculated using the following formula:

 

BONUS = .5 X BASE x IND TARGET x IND ACH x PRORATION

 

                                                             Plus

 

               .5 X BASE x IND TARGET x CORP PERF x PRORATION

 

Where: 

	 	
●
	
BASE represents the Participant’s base compensation as defined in Paragraph D;

	 	
●
	
CORP PERF represents Adjusted Operating Income versus budget and/or other metric as defined by Management and approved by the Compensation Committee 

	 	
●
	
IND TARGET represents the Participant’s Individual Target as defined in Paragraph D;

	 	
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ALLOCATION RATIO equals the Annual Bonus Pool divided by the Target Annual Bonus Pool and derived from the allocation curve in Exhibit A;

	 	
●
	
IND ACH represents the individual achievement for the Participant in question and is calculated from the supervisor’s assessment of the Participant’s performance against Measurable Business Objectives (“MBOs”) as documented in the Plan Year and approved by the Plan Committee; and

	 	
●
	
PRORATION represents the amount of time (in months) that the Participant worked for the Company during the Plan Year in an eligible position divided by twelve months.

 

For example, consider a Participant, hired on January 1st, 2015 with a base salary of $100,000 and an Individual Target of 10%. During the Plan Year, the Company achieves 75% Corporate Performance based on Adjusted Operating Income (Loss). Moreover, the Participant’s supervisor determines that the Participant achieved 90% of the targeted performance specified in his/her MBOs for the respective Plan Year. The bonus payment is calculated as follows:

 

BONUS CALCULATION

 

	 	
a)
	
MBO: 50% x $100,000 x 0.10 x [IND ACH of 90%] = $4,500, plus

 

	 	
b)
	
Adj. IO: 50% x $100,000 x 0.10 x [CORP PERF of 75%] = $3,750

 

Total Bonus = $8,250

 

To the extent permitted by applicable law, rules, and regulations, the Company reserves the right to prorate the bonus award of any Participant who was not in an eligible position for the entire applicable Plan Year, or was not actively working full-time throughout the applicable Plan Year. Plan bonus awards, if any, will generally be prorated based on the number of full months (rounded to the nearest full month) that a Participant is working in an eligible position; however, the Company reserves the right, in its sole discretion, to prorate bonuses based on hours of service, days, or on any other basis. For example, the proration factor for a Participant who is eligible for the entire applicable Plan Year will be 1.00; for a Participant who is eligible to participate in the Plan for one-half of the Plan Year, the proration factor will be 0.50. In summary, Participants in the following situations may have a proration factor that is less than 1.00, to the extent permissible by applicable law: (a) new hires and individuals who transfer into an eligible position during the applicable Plan Year; (b) individuals who transfer between an eligible position and a non-eligible position within the Company; (c) Participants who work less than the applicable full-time standard work week; (d) Participants who take a leave of absence, as described more fully below; (e) Participants who experience a change in salary during the applicable Plan Year; and (f) Participants who experience a change in target percentage during the applicable Plan Year.

 

 

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To the extent permitted by applicable law, rules, and regulations, Participants who take unpaid days off or leaves of absence that are not protected by statute or other applicable law will have their bonus awards, if any, prorated based by the number of full months that such Participant is actively working in an eligible position. 

 

 

I.     TIMING OF AWARDS

 

Eligible Employees must be designated as Participants as of October 1 in a Plan Year to be eligible to participate in, and receive payment of an award, under the Plan for that same year, unless otherwise required by applicable law. A Participant who is employed after January 1 but prior to October 1 of a Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was employed by the Company in an eligible position during the Plan Year. Awards for a Plan Year are payable annually in cash and shall be earned and paid in the first quarter of the calendar year following the end of the corresponding Plan Year. Participants must be an employee in good standing at the time of the bonus payment to earn or receive the same; except where prohibited by applicable law, participants who involuntarily or voluntarily resign or otherwise terminate employment for any reason before the time the awards are paid will not be eligible to earn or receive payment of the bonus, prorated or otherwise. 

 

J.     NATURE OF PLAN

 

This Plan is a statement of intent and is not a contract. There is no guarantee of an actual payout. Moreover, it is not a guarantee of employment. U.S. Participants’ employment with the Company remains “at will.” This Plan may be modified, suspended, or terminated at any time, and all awards are at the discretion of the Board or the Compensation Committee, subject to applicable law. This Plan may be changed during a Plan Year or prior to bonus payments without any obligation of the Company to pay for the elapsed part of the Plan Year in the manner described in the Plan, subject to applicable law. The decisions of Company management, the Plan Committee, the Compensation Committee, and/or the Board in administering and interpreting the Plan are final and binding on all Participants. Information regarding an employee’s annual incentive payment will be part of the employee’s personnel record.

 

 

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K.     WITHHOLDING TAXES

 

Whenever the payment of an award is made, such payment shall be net of an amount sufficient to satisfy federal, state, and local income and employment tax withholding requirements and authorized deductions as determined by the Plan Committee in its sole discretion.

 

L.     NONASSIGNMENT; PARTICIPANTS ARE GENERAL CREDITORS

 

Except as otherwise provided by the Plan Committee in its sole discretion, the interest of any Participant under the Plan shall not be assignable or transferable either by voluntary or involuntary assignment or by operation of law, and any attempted assignment shall be null, void, and of no effect. 

 

Amounts paid under the Plan shall be paid from the general funds of the Company, and each Participant shall be no more than an unsecured general creditor of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. Nothing contained in the Plan shall be deemed to create a trust of any kind for the benefit of any Participant or create any fiduciary relationship between the Company and any Participant with respect to any assets of the Company.

 

M.     SUCCESSORS AND ASSIGNS 

 

This Plan shall be binding on the Company and Participant and their respective successors, permitted assigns, executors, administrators, and legal representatives.

 

N.     CODE SECTION 409A 

 

The Plan and all Awards made hereunder shall be interpreted, construed, and operated to reflect the intent of the Company that all aspects of the Plan and the Awards shall be interpreted to be exempt from the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any regulations and other guidance thereunder. This Plan may be amended at any time, without the consent of any party, to avoid the application of Section 409A of the Code in a particular circumstance or that is necessary or desirable to satisfy any of the requirements under Section 409A of the Code, but the Company shall not be under any obligation to make any such amendment. Nothing in the Plan shall provide a basis for any person to take action against the Company or any affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any amount paid or Award made under the Plan, and neither the Company nor any of its affiliates shall under any circumstances have any liability to any Participant or his estate or any other party for any taxes, penalties, or interest due on amounts paid or payable under the Plan, including taxes, penalties, or interest imposed under Section 409A of the Code.

 

 

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O.     INTERPRETATION AND SEVERABILITY

 

In case any one or more of the provisions contained in the Plan shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of the Plan, but the Plan shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein.

 

P.     GOVERNING LAW

 

This Plan and all awards made and actions taken hereunder shall be governed by and construed in accordance with the laws of California excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Participants are deemed to submit to the exclusive jurisdiction and venue of the Federal or state courts of California to resolve any and all issues that may arise out of or relate to the Plan or any related award.

 

 

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Exhibit A

 

AIP Funding Curve

 

 

	 	 	 
	 	
●
	
Profitability Target = 2015 Budgeted Adjusted Operating Income (Loss) + Budget Annual Bonus Pool 

 

	 	
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Minimum Performance Threshold = Determined by the Board

 

	 	
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Minimum Discretionary Funding = Determined by the Compensation Committee

 

	 	
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Target Annual Bonus Pool = Dollar sum of the aggregate target percentage of base salaries for all budgeted Participants as of January 31, 2015

 

	 	
●
	
If Adjusted Operating Income (Loss) <= Minimum Performance Threshold, then Annual Bonus Pool = Minimum Discretionary Funding

 

	 	
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If Adjusted Operating Income (Loss) > Minimum Performance Threshold, then Annual Bonus Pool = 0.37*(Adjusted Operating Income (Loss) - Minimum Performance Threshold) + Minimum Discretionary Funding

	 	 	 

	 	
●
	
If Adjusted Operating Income (Loss) >= Profitability Target, then Annual Bonus Pool = Target Annual Bonus Pool

 

 

Page 8ex10-1_8k042915.htm

 COASTWAY COMMUNITY BANK

2015 AMENDED AND RESTATED

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

FOR WILLIAM A. WHITE

 

WHEREAS, this Supplemental Executive Retirement Plan for William A. White was originally adopted effective January 1, 2011, by Coastway Community Bank (the “Bank”) for the benefit of William A. White (the “Participant”) and was amended January 1, 2013 (as “amended, the “Plan”); and.

 

WHEREAS, the Bank and the Participant wish to again amend and restate the Plan in order to clarify permit the Participant to invest all or a portion of his Liability Reserve Account (as defined below) in common stock of Coastway Bancorp, Inc. (“Employer Stock”).

 

NOW THEREFORE, the Plan is hereby amended and restated as follows, effective March 31, 2015.

 

ARTICLE I

 

DEFINITIONS

 

When used herein, the following words shall have the meanings below unless the context clearly indicates otherwise:

 

1.1           “Beneficiary” means the person(s) designated by the Participant from time to time, using the Beneficiary Designation Form set forth as Appendix A, as the beneficiary(ies) to whom the deceased Participant’s account will be payable. If no beneficiary is so designated, then the Participant’s estate will be the Beneficiary.

  1.2           “Board” means the Bank’s Board of Directors.

  1.3           “Cause” means that the Participant has:  (a) been absent from employment for an unauthorized period of more than one week; or (b) committed a material breach of this Agreement; or (c) been grossly negligent in the performance of his required duties; or (d) willfully failed to perform his obligations under this Agreement; or (e) committed unethical, dishonest, fraudulent, or criminal acts against the Bank; or (f) becomes unbondable.

 

1.4           “Change in Control” shall mean any of the following events: (i) a change in the ownership of the Company or Bank; (ii) a change in the effective control of the Company or Bank; or (iii) a change in the ownership of a substantial portion of the assets of the Company or Bank, as described below:

(a)           A change in ownership occurs on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Bank or the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Bank or the Company.

 

  

  

  

(b)           A change in the effective control of the Company or Bank occurs on the date that either (A) any one person, or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(vi)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company or Bank possessing 30% or more of the total voting power of the stock of the Company or Bank, or (B) a majority of the members of the Bank’s or the Company’s Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Bank’s or the Company’s Board of Directors prior to the date of the appointment or election, provided that this subsection is inapplicable where a majority shareholder of the corporation is another corporation.

(c)           A change in the ownership of a substantial portion of the Bank’s or the Company’s assets occurs on the date that any one person or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(vii)(C)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company or Bank that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company.  For purposes of this Agreement, “gross fair market value” means the value of the assets of the Company or Bank, or the value of the assets being disposed of, without regard to any liabilities associated with such assets.

 

(d)           For all purposes hereunder, the definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulations section 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.

 

  1.5           “Company” means Coastway Bancorp, Inc. or any successor thereto.

 

1.6           “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

1.7           “Disabled” or “Disability” means that the Participant: (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participant’s employer; or (c) is determined to be disabled by the Social Security Administration.

 

1.8           “Employer Stock” means the common stock of the Company.

 

1.9           “Liability Reserve Account” means the balance to the credit of the Participant in a bookkeeping account established and maintained by the Bank for the benefit of the Participant under this Plan.

 

1.10           “Normal Retirement Age” means the Participant’s attainment of age 67 (i.e., April 9, 2023).

 

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1.11           “Separation from Service” or “Separates from Service” means the Participant’s retirement or other termination of employment with the Company within the meaning of Code Section 409A.  No Separation from Service shall be deemed to occur due to military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months or, if longer, so long as the Participant’s right to reemployment is provided by law or contract.  If the leave exceeds six months and the Participant’s right to reemployment is not provided by law or by contract, then the Participant shall have a Separation from Service on the first date immediately following such six-month period.

 

Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Company and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 49% of the average level of bona fide services performed over the immediately preceding 36 months (or such lesser period of time in which the Participant performed services for the Company).  The determination of whether the Participant has had a Separation from Service shall be made by applying the presumptions set forth in the Treasury Regulations under Code Section 409A.

 

1.12           “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse or a dependent, 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, all within the meaning of Treasury Regulations Section 1.409A-3(i)(3).

 

ARTICLE II

 

ELIGIBILITY AND VESTING

 

2.1           Eligibility.  The Plan is only available to the Participant.  The Plan qualifies as a “top hat” plan as defined in ERISA.

2.2           Vesting.  As of January 1, 2011, the Participant shall be 50% vested in his Liability Reserve Account.  On each December 31 thereafter, the Participant shall become vested in an additional 5% of his Liability Reserve Account, such that the Participant shall be fully vested in his Liability Reserve Account after completing 10 years of vesting service, as set forth below.  All contributions made after December 31, 2020 are 100% vested when made.  Contributions are required under this Plan until April 9, 2023 (i.e., when the Participant attains age 67).

 

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Vesting Dates

	
Percentage of Interest Vested

	
December 31, 2011

	
55%

	
December 31, 2012

	
60%

	
December 31, 2013

	
65%

	
December 31, 2014

	
70%

	
December 31, 2015

	
75%

	
December 31, 2016

	
80%

	
December 31, 2017

	
85%

	
December 31, 2018

	
90%

	
December 31, 2019

	
95%

	
December 31, 2020

	
100%

Notwithstanding the foregoing, the Participant shall become fully vested in the Liability Reserve Account upon his death, Disability or upon the occurrence of a Change in Control.

ARTICLE III

 

FUNDING

 

3.1           Type of Plan.  The Plan is a nonqualified deferred compensation plan, where the Bank accrues amounts annually in order to fund a future stream of payments for the Participant.  The benefits provided under this Plan are not based on any salary reduction by the Participant.  The Participant does not have the option of receiving any current payment or bonus in lieu of the benefits provided under this Plan.

3.2           Funding.

(a)           The Bank shall account for the Plan benefits using the regulatory accounting principles of the Bank’s primary federal regulator.  The Bank shall establish an accrued liability reserve account (the “Liability Reserve Account”) for the benefit of the Participant into which appropriate reserves shall be accrued for the Participant until the Participant has attained Normal Retirement Age.

(b)           Notwithstanding the preceding sentence, the Participant, his Beneficiaries or any successor in interest to him shall be and remain simply a general creditor of the Bank in the same manner as any other creditor having a general claim for unpaid compensation. The Participant, his Beneficiaries, or any other person claiming through Participant, shall only have the right to receive from the Bank those payments as specified under this Plan.

(c)           The Bank reserves the absolute right, at its sole discretion, to either informally fund the obligations undertaken by this Plan by setting aside assets in a “rabbi trust,” within the meaning of Internal Revenue Procedure 92-64, or other vehicle pursuant to which assets are held solely in the name of the Bank or to refrain from funding the same and to determine the extent, nature, and method of such informal funding. The Bank may establish a rabbi trust into which the Bank may contribute assets which shall be held therein, pursuant to the agreement which establishes such rabbi trust.  The contributed assets shall be subject to the claims of the Bank’s creditors in the event of the Bank’s “insolvency” as defined in the agreement which establishes such rabbi trust, until the contributed assets are paid to the Participant or his Beneficiary(ies) in such manner and at such times as specified in this Plan.  Should the Bank elect to fund this Plan, in whole or in part, through the establishment of a rabbi trust, the Bank reserves the absolute right, in its sole discretion, to terminate such funding at any time, in whole or in part.

 

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(d)           At no time shall the Participant be deemed to have any lien nor right, title or interest in or to any specific funding investment or to any assets of the Bank. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Plan shall not be deemed to be held under any trust for the benefit of the Participant or his Beneficiaries, nor shall it be considered security for the performance of the obligations of the Bank. It shall be, and remain, a general, unpledged, and unrestricted asset of the Bank. The Participant or any Beneficiary under this Plan shall not have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or his Beneficiary, nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. In the event the Participant or any Beneficiary attempts assignment, communication, hypothecation, transfer or disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease and terminate.

 

ARTICLE IV

 

BENEFITS

 

4.1           Benefit Amount. Effective January 1, 2011 the Bank shall make an initial contribution to the Participant’s Liability Reserve Account of $450,000.00.  Each January 1 thereafter, until April 9, 2023 (i.e., when the Participant attains age 67), the Bank shall make a contribution of $72,000.00 to the Participant’s Liability Reserve Account.  If the Participant terminates employment before April 9, 2023, the Bank’s obligation to make such contributions shall cease as of the date of such termination of employment.

4.2           Investments. The Participant shall have the right to provide the Board with investment directions for the entire balance in his Liability Reserve Account.  Effective as of March 31, 2015, the Participant shall have the right to invest all or a portion of his Liability Reserve Account in Employer Stock, provided, however, that to the extent that the Participant elects to invest all or a portion of the Participant’s Liability Reserve Account in Employer Stock, the Participant cannot later liquidate such Employer Stock or exchange such Employer Stock for other investments.  Upon distribution of the Participant’s interest in his Liability Reserve Account, any amount invested in Employer Stock shall be distributed in-kind.  All earnings or losses as a result of such investments are the sole responsibility of the Participant, such that the Bank is not obligated to make up any losses incurred as a result of investment performance.

 

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4.3           Normal Retirement Benefit. Upon Participant’s Separation from Service on or after attaining age 67, the Bank shall pay the Participant’s Retirement Benefit in 10 approximately equal annual installments on the first business day of January immediately following the Participant’s Separation from Service, provided, however, that in the event the Participant dies before receiving 10 annual installments, the Bank shall pay the remainder of the Participant’s Liability Reserve Account the Participant’s Beneficiary as a lump sum no later than the first day of the second calendar month following the Participant’s date of death.  The amount of the Retirement Benefit shall equal the then-current value of the Participant’s vested Liability Reserve Account, divided by the number of payments remaining to be made to the Participant.  For example, if the Participant has a Separation from Service on December 31, 2019, the first payment owed to the Participant will equal the value of the Participant’s vested Liability Reserve Account on January 1, 2020 divided by 10.  The second payment owed to the Participant (payable on January 2, 2021) equals the value of the Participant’s vested Liability Reserve Account on January 1, 2021 divided by 9.  The third payment owed to the Participant (payable on January 2, 2022) equals the value of the Participant’s vested Liability Reserve Account on January 1, 2022 divided by 8, etc.  Notwithstanding the foregoing, to the extent that the Participant has Employer Stock in his Liability Reserve Account, the Participant can select whether such Employer Stock will be distributed in one or more of the installments and the order of the installments in which it is distributed (i.e., first, last or some other order), subject only to the requirement that the installments be approximately equal.

4.4           Disability.  If a Participant becomes Disabled before reaching his Normal Retirement Date, the Participant shall be entitled to a lump sum payment of the Participant’s Liability Reserve Account, determined as of the date the Participant became Disabled.  Such payment shall be made no later than the first day of the second calendar month after the date the Participant became Disabled.

4.5           Death Before Normal Retirement Age.  If a Participant dies before reaching his Normal Retirement Age, the Participant’s Beneficiaries shall be entitled to a lump sum payment of the Participant’s Liability Reserve Account, determined as of the Participant’s date of death.  Such payment shall be made no later than the first day of the second calendar month after the date the Participant died.

4.6           Separation from Service Before Normal Retirement Age or For Cause.  In the event of the Participant’s Separation from Service prior to Normal Retirement Age for reasons other than death, Disability, or Separation from Service due to Cause, the Participant shall be paid the vested portion of the Participant’s Liability Reserve Account (which shall be fully vested in the event of a Separation from Service in connection with or following a Change in Control) in a lump sum no later than the first day of the second calendar month following the date of the Participant’s Separation from Service, unless the Participant is a “specified employee” under Code Section 409A, in which case such payment shall be made on the first day of the seventh month after such Separation from Service.  In the event the Participant’s employment is terminated for Cause, the Participant shall forfeit all benefits under this Plan.

4.7           Unforeseeable Emergency.  A Participant may apply to the Board for an Unforeseeable Emergency distribution.  Such distribution shall be paid no later than 90 days after the Board determines that the Participant has suffered an Unforeseeable Emergency.  The amount of the distribution shall be limited to only the vested portion of the Participant’s Liability Reserve Account and no more may be paid to the Participant than the amount that is reasonably necessary to satisfy the Participant’s Unforeseeable Emergency, including payment of any taxes that are owed due to the distribution.  A distribution may not be paid under this Section to the extent the Unforeseeable Emergency is or may be relieved:

 

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(a)           through reimbursement or compensation by insurance, or otherwise;

 

(b)           by liquidation of Participant’s assets, to the extent such liquidation would not in itself cause financial hardship; or

 

(c)           by cessation of elective deferrals under the Bank’s tax-qualified retirement plans.

 

ARTICLE V

 

ADMINISTRATION

 

5.1           Administrator. The Board shall be the named fiduciary and administrator of this Plan.  As administrator, the Board shall be responsible for the management, control and administration of the Plan as established herein. The Board may delegate to others certain aspects of the management and operational responsibilities of the Plan, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

 

5.2           Claims Procedure.  In the event that benefits under this Plan are not paid to Participant (or to his Beneficiary in the case of Participant’s death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Board within 60 days from the date payments are refused. The Board shall review the written claim and, if the claim is denied, in whole or in part, they shall provide in writing within 60 days of receipt of such claim their specific reasons for such denial, reference to the provisions of this Plan upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired.

 

5.3           Appeal.  If claimants desire a second review, they shall notify the Board in writing within 60 days of the first claim denial. Claimants may review the Plan or any documents relating thereto and submit any issues, in writing, and comments they may feel appropriate. In its sole discretion, the Board shall then review the second claim and provide a written decision within 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 the Plan upon which the decision is based.

 

5.4           Arbitration.  Any controversy or claim arising out of or relating to this Plan, or the breach thereof, shall be settled by arbitration in the State of Rhode Island administrated by the American Arbitration Association in accordance with its rules.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

 

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ARTICLE VI

 

AMENDMENT OR TERMINATION

 

6.1           Amendment.  This Plan may not be altered, amended, changed, modified, revised, supplemented, or terminated at any time except by means of the mutual written agreement of the Participant and the Board.

 

6.2           Termination. The Bank reserves the right to terminate the Plan at any time.  Upon Plan termination, the Board shall determine whether all payments of benefits shall be made in accordance with the normal distribution schedule set forth under the Plan or if payment of benefits shall be accelerated in order to wind down the Plan.  To the extent any benefits under the Plan are subject to Code Section 409A, any acceleration of the payment of such benefits due to Plan termination shall comply with the following.  The termination of the Plan with accelerated payment of benefits may not be undertaken if such termination is proximate to an economic downturn of the Bank.  Such termination must also satisfy the following conditions and any other requirements of Code Section 409A

 

(a)           all arrangements sponsored by the Bank that would be aggregated with this Plan under Treasury Regulations Section 1.409A-1(c)(2) if the Participant covered by this Plan was also covered by any of those other arrangements are also terminated;

 

(b)           no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within 12 months of the termination of the arrangement;

 

(c)           all payments are made within 24 months of the termination of the arrangements; and

 

(d)           the Bank does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations Section 1.409A-1(c)(2) if the same Participant participated in both arrangements, at any time within three years following the date of termination of the arrangement.

 

ARTICLE VII

 

MISCELLANEOUS

 

7.1           No Effect on Employment Rights.  Nothing contained herein shall confer upon the Participant the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with Participant without regard to the existence of this Plan.

 

7.2           Governing Law.  The Plan is established under, and will be construed according to, the laws of the State of Rhode Island, to the extent that such laws are not preempted by ERISA.

 

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7.3           Severability.  In the event that any provision of this Plan is held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in such provision, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

 

7.4           Tax Withholding.  The Bank may withhold from any benefit payable under this Plan all federal, state, city, income, employment or other taxes as shall be required pursuant to any law or governmental regulation then in effect.

 

7.5           Entire Agreement.  This Plan sets forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and any previous Plans or understandings between the parties hereto regarding the subject matter hereof are merged into and superseded by this Plan.

 

7.6           Acceleration of Payments.  Except as specifically permitted herein or in other sections of this Plan, no acceleration of the time or schedule of any payment may be made hereunder.  Notwithstanding the foregoing, payments may be accelerated hereunder by the Bank, in accordance with the provisions of Treasury Regulation Section 1.409A-3(j)(4) and any subsequent guidance issued by the United States Treasury Department.  Accordingly, payments may be accelerated, in accordance with requirements and conditions of the Treasury Regulations (or subsequent guidance) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the Federal government; (iii) in compliance with ethics laws or conflicts of interest laws; (iv) in limited cash-outs (but not in excess of the limit under Code Section 402(g)(1)(B)); (v) in the case of certain distributions to avoid a non-allocation year under Code Section 409(p); (vi) to apply certain offsets in satisfaction of a debt of the Participant to the Bank; (vii) in satisfaction of certain bona fide disputes between the Participant and the Bank; or (viii) for any other purpose set forth in the Treasury Regulations and subsequent guidance.

 

  7.7           Required Provision.  Any payments made to the Participant pursuant to this Plan, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. § 1828(k) and any regulations promulgated thereunder.

IN WITNESS WHEREOF, the Participant and a duly authorized officer of the Bank have signed this Plan on the date set forth below.

 

	  	 	
COASTWAY COMMUNITY BANK

	  	 	  
	  	 	  
	  	 	  
	
 April 23, 2015

	 	
 /s/ Mark E. Crevier

	  Date	 	
By: Mark E. Crevier, Chairman of the Board of Directors

	  	 	  

 

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PARTICIPANT

	  	 	  
	  	 	  
	  	 	  
	
 April 23, 2015

	 	
 /s/ William A. White

	  Date	 	
William A. White

	  	 	  

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